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GCAAR 2006

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Title: GCAAR 2006


1
GCAAR 2006
  • Legislative Update
  • Roy Kaufmann

2
Agent Recommends Home Inspector
  • Selling Agent recommends a particular home
    inspector
  • Inspector gives favorable report
  • Buyer removed inspection contingency and closes
  • Rear Wall later collapses

3
Buyer Alleges 2 Claims
  • First Violation of DC Consumer Protection
    Procedures Act by recommending the services of an
    inspector which proved to be of deficient
    quality.
  • (28 DC Code 3901) It shall be a violation
    for any person to (d) represent that goods or
    services are of particular standard, quality,
    grade, style, or model, if in fact they are of
    another 

4
Buyers Second Claim
  • Agent violated DC law governing fiduciary duties
    of real estate agents to clients.
  • 47-2853.192 says a) A licensee engaged by a
    buyer shall 2) Promote the interests of the
    buyer by Disclosing to the buyer material facts
    related to the property and (4) Exercise
    ordinary care

5
Proving Negligence at Trial
  • Expert Testimony
  • to show the degree of learning and skill
    ordinarily possessed by an agent practicing in
    this geographic area
  • To use the care and skill ordinarily used in like
    cases by reputable agents under similar
    circumstances and to use reasonable discretion
    and best judgment.

6
In this case
  • Plaintiff decided not to produce expert
    testimony. Instead, plaintiff relied upon the two
    laws we looked at
  • Consumer Protection by participating in the
    misrepresentation of the qualifications of the
    inspector
  • Duty to exercise ordinary care.

7
Court of Appeals Finds
  • Consumer Protection Act does not make a guarantor
    out of the person who recommends a service
    provider

8
Court Also Finds
  • DC Law governing fiduciary duty does NOT present
    a meaningful standard of care.
  • At trial, Buyer failed to present expert
    testimony about standard of care expected of
    agents and how the agent was supposed to have
    breached that standard.

9
Agent Prevails
  • Because the Court found that
  • A) a person who refers a service provider is not
    a guarantor and
  • B) no breach of standard of care shown
  • Claims NOT proved against Agent
  • 901 A.2d 174

10
Word to the Wise
  • Negligence is when you fail to maintain the
    standards of the industry
  • Standards Change
  • Resources Change
  • Ive always done it this way wont work

11
GWUs Expansion
  • GWU sought to expand its campus
  • DC Board of Zoning Adjustment (BZA) issues
    limitations which GWU ignores
  • Neighbors file suit to enforce BZA order

12
Court Finds
  • Neighbors do not have a property interest in
    asking BZA to enforce its order
  • 441 F. Supp 2d 84 (2006)

13
Lis Pendens
  • Lets file a lien against the property
  • Latin for "a suit pending," a written notice that
    a lawsuit has been filed which concerns the title
    to real property or some interest in that real
    property.

14
Lis Pendens
  • Suit has to be filed first
  • Title or Interest (not liability)
  • Recorded at Recorder of Deeds
  • Clouds Title
  • Suit for improper use

15
Foreclosures
  • At time of a regular settlement, 2 documents
    executed
  • Note
  • Deed of Trust
  • Two Remedies available in event of default
  • Sue on the note and forget about the property
  • Foreclose on the Deed of Trust

16
Foreclosure on Deed of Trust
  • Non-judicial foreclosure (no one goes to court)
  • Advertisement, Auction, Right to redeem
  • Judicial Foreclosure
  • Go to Court and have the court supervise the
    foreclosure process
  • Rarely used in DC because more expensive and
    slower, but sometimes required

17
Tax Sales
  • July Auction
  • 5 must be in the kitty must be augmented
    through auction
  • Bid starts with amount in newspaper ad one
    years taxes
  • Increments are surplus (no interest earned)

18
Tax Sales
  • Its an Industry
  • Very specific statutory requirements
  • Title search
  • Suit filed within one year
  • File Lis Pendens
  • Posting
  • Service of Process

19
Tax Sales
  • Owner and some interested parties have right to
    redeem until the end
  • The only effective way to stop a tax sale is to
    redeem.
  • Redemption pay all taxes and costs of suit
  • Could be multiple foreclosure actions
  • New law versus old

20
Note that Law Requires Filing the Lis Pendens
  • In olden days, if you filed a lawsuit in DC
    Superior Court and added the words Real
    Property or initials RP, there was imputed
    notice to the public that there is a lawsuit
    pending.
  • Common law lis pendens
  • Title Abstractors would search for these when
    doing title search

21
Lawsuit
  • Tax Sale Foreclosure
  • Plaintiff relied upon old system and put RP on
    the Complaint, but did not record a Lis Pendens.
  • Property owner entered into a contract with a
    third party during foreclosure
  • Third party searched ROD (Recorder of Deeds)
    records and found no Lis Pendens

22
Issue of Case
  • Was the filing of the lawsuit with the
    designation of RP enough to invoke the common
    law theory of Lis Pendens?
  • Answer no The statutes over-ride common law.
    The statute is clear that Lis Pendenses have to
    be filed at ROD to be effective. 905 A.2d 181
    (D.C. 2006)

23
US Supreme Court Weighs In
  • Notice of Tax Sale mailed to owner by certified
    mail
  • Returned to government as undelivered
  • Court holds that 14th Amendment (Due Process)
    requires the government to take additional
    reasonable steps to provide notice if the
    original notice is returned.

24
DC Meets That Standard
  • Government mails two notices
  • Newspaper advertisement
  • After suit is filed
  • Posting on property of the summons
  • Newspaper Order of Publication
  • Personal service
  • Court may consider Service by Publication

25
What is this Document?
26
Its Not a Survey, its a LOCATION DRAWING!
27
Title Insurance Wouldnt Help the Buyer with the
Shed
  • Exclusion Encroachments, overlaps, boundary line
    disputes, variations in area, party walls, roads,
    ways, streams, easements or other matters which
    would be disclosed by an accurate survey of the
    land and which are not shown by public records.

28
Additional Exclusion
  • Rights of parties in possession (as to shed)
  • This should have been ascertainable upon visual
    inspection.

29
Lesson to Learn
  • You and client should understand difference
    between a location drawing, survey and ALTA
    Survey
  • Reviewing the land with location drawing in hand.
  • Initialing drawing at closing
  • Requesting deletion of survey exception.

30
Law Change Recordation Transfer Taxes
  • 2.2 for residences under 400,000 (includes both
    taxes)
  • All other transfers 2.9
  • On non-exempt deeds of trust 1.45 (mostly
    applies to commercial or construction loans)
  • Effective this past October 1.

31
Exemptions from Recordation/Transfer Taxes
  • Recordation to RECORD the deed (usually paid by
    purchaser)
  • Transfer Tax usually paid by Seller
  • 2 taxes are equal in dollars
  • Exemptions from these 2 taxes are found in
    different volumes of the DC Code and are not
    parallel (though, the dissimilarities are often
    ignored)

32
Exemption from Recordation Tax
  • Between H W/Domestic partners or between
    children IF no consideration paid
  • Between former H/Ws if incident to a divorce
  • Deeds from a Personal Representative under a
    will, distributing the property (if there is a
    sale, there will be a recordation tax).

33
Exemptions from Recordation Tax
  • Deeds involved with Lower Income Abatement
    Program
  • Application must accompany filing of deed
  • 3 benefits
  • Buyer pays no recordation tax
  • Buyer pays no real estate taxes for 5 years
  • Buyer receives a CREDIT for the transfer tax

34
Exemptions from Recordation Tax
  • No tax on a mortgage filed simultaneously with
    deed, unless the mortgage exceeds purchase price,
    i.e. construction to permanent
  • Deeds INTO a revocable trust
  • Deeds out of a revocable trust ARE taxed unless
    due to death of Grantor
  • From General Partnership to LLC

35
New DC Tax Credit
  • For installation of an alternative energy source
    or energy saving measures (i.e. 25 of the cost
    of substituting double-paned windows, caulking of
    windows, etc.). Effective this year.

36
Percentages Vary
  • High-efficiency hot water heater or heater or
    insulation of duct work, thermal windows 25
  • Insulation of walls, floors, ceiling 20
  • High-energy appliances or ceiling fans 20
  • Energy-efficient lighting 15
  • Programmable Thermostat 10

37
Tax Credit is Limited
  • Annual credit cannot exceed 500 (2,000 if new
    construction) BUT, you can carry forward any
    unused credit over 5 years.
  • 47 DC Code 1806.11

38
Rent Control Ceilings Abolished
Old Law New Law
Ceilings Complex, labor-intensive Abolished
Rent increases Every 180 days Once a year
Cap Per Ceiling (no cap) Generally, 2 CPI
39
Rent Control Abolished
Old Law New Law
Caps on Vacant Units OK to raise to rent charged for substantially similar unit No more than 30 of rent charged for vacant unit


40
Non-Titled Spouses and Domestic Partners
  • Dower Abolished in 2001
  • Prior to that, spouses had to be found
  • Trouble, cost, inconvenience, delays
  • When dower was abolished this requirement was
    relaxed by the title industry

41
Requirements Resurfaces
  • 15 DC Code 502 reset the requirement of
    signatures on deeds of trust of spouses and
    domestic partners who may reside in the
    property.
  • Again, inconvenience
  • What does reside mean?
  • Dual residences, military, FSO
  • Intrusive questions

42
New Law Proposed Write to your Councilperson!
  • Bill 16-671 will fix this by correcting 15-502
    to eliminate the need for spousal/domestic
    partner signatures unless s/he is on title.
  • Take a moment to write your councilmember to
    support Bill 16-671.

43
New Office of Tenant Advocate
  • Provides Education to Tenants
  • Ambulance chasing
  • Represent interests of tenants in legislative,
    executive and judicial issues, including
    advocating changes and reviewing landlord
    petitions representing the tenants interests.
  • Advising Tenants on filing complaints against
    landlords, organize tenant participation in
    building-wide inspections
  • Representing tenants in court or administrative
    proceedings.

44
The Bear TOPA (Tenant Opportunity to Purchase
Act)
  • 1980 Originates to address
  • Housing crisis
  • Severe shortage of rental housing
  • Condo Conversion depletes rental housing stock
  • Lower Income, elderly most affected

45
Have the Objectives Been Achieved?
  • Statistics seem to show that the law has not
    affected the rental housing stock at all.
  • When a tenant group partners with a developer,
    usually the units do not remain rental (elderly,
    disabled excepted)
  • Is purpose to retain rental stock or assist
    first-time buyers?

46
Practical Results
  • Sellers have uncertainty and time delays for 5
    or more units, tenants have 420 days from date of
    notification to negotiate and close
  • For single family, it can be up to 195 days and
    2-4 units, up to 277 days.
  • Even after these periods pass, the tenants may
    not be able to close and 3rd party contract is
    lost.

47
2005 Amendment
  • 95/5 tightened up, as the definition of sale
    was broadened.
  • Exemptions were developed to a sale that
    triggers TOPA rights
  • If the landlord/seller wants to claim an
    exemption, he generally has to fill out a special
    form available from DCRA
  • DCRA has no forms

48
Specifics Definition of Tenant
  • Definition of tenant a tenant, subtenant,
    lessee, or other person entitled to the
    possession, occupancy or benefits of a rental
    unit.
  • Problem with definition besides those who have a
    lease, who else is included? What are benefits
    of a rental unit?

49
  • If the names of 2 or more persons appear on a
    rental agreement, those persons shall determine
    which person may exercise a vote under this Act.
  • Note are we talking now about a rental
    agreement having to exist? What happens if there
    is a disagreement between the two people? With
    whom does seller have to negotiate?

50
Task Force Suggests
  • Tenant is the head of household rather than
    waiting for a vote of the occupants

51
Conversion Tax
  • 5 of sales price
  • Lien recorded at time of filing of condo
    declaration
  • DC has no form
  • Penalty for underestimating the 5
  • If a unit has not closed within 2 years of filing
    of lien, you owe the tax anyway and must pay it.

52
Definition of a Housing Accommodation
  • Current definition any structure containing 1 or
    more rental units, excluding hotel, motel,
    rooming house IF the landlord has been paying the
    hotel sales tax IF the occupant has been there
    for less than 15 days.
  • Obvious problem

53
Task Force Suggestion
  • Delete the 15 days language
  • Add foreign government properties, nursing homes,
    hospitals, university dormitories, etc.
  • Task force decided to KEEP single family
    dwellings as subject to TOPA

54
Exclusions from Sale
  • To decedents estate, even if for consideration
    (i.e. money paid by heirs), only if
  • To spouse, domestic partner, children or lineal
    descendants.
  • consideration is given to charity.
  • Query What if no consideration is paid? Cannot
    leave property to my mother? My nieces? My death
    triggers TOPA rights?

55
Exclusions from definition of Sale
  • Life-time transfer without consideration to wife
    . Parents, grandparents
  • Query If I am alive, I can transfer to my
    mother without worrying about TOPA. If I die,
    that is a problem. Any transfer to nieces or
    lifelong friends triggers TOPA

56
Exclusions
  • Exempt if caused by change in the form of an
    entity owning the property, if without
    consideration
  • Partnership to LLC, etc.
  • Transfers in and out of a revocable trust
  • Transfer pursuant to court order

57
What is NOT Excluded
  • Transfers among the existing owners (i.e. buying
    out another persons interest)
  • Transfers to non-immediate family members
  • Transfers to charities

58
Task Force Recommends
  • Exclude any transfers under a Will
  • Changes in form of entity only if operational
    control of the entity is not changed
  • Exclude charities (only 501-c-3s), transfers
    among co-owners

59
How to Claim Exemption?
  • Must Send Special Notice on DCRA Form to tenants
    and to DCRA
  • DCRA has no forms
  • If you forget to send the forms (for example, if
    you are dead), there is a presumption that the
    transfer is not exempt. (I.e. that you are not
    dead.)

60
Title Companies Need Certainty
  • Title insurance insures that no tenants have any
    rights (i.e. to purchase the property) and that
    the purchaser has clean title.
  • Need to know if tenants have exercised rights, or
    have rights lapsed because of deadlines.
  • DCRA supposed to issue a form signifying whether
    any notices from tenants have been received.
  • No forms designed by DCRA yet.

61
Time Frames Law versus Task force 1 Rental Unit
Current Proposed
Response to Offer of Notice 30 days 15 days
Negotiation 60 days plus 15 days right of first refusal 30 days 15
Time to Close 60 days plus 30 days if financing needs it same
Maximum 190 days 90-105

62
Time Frames Law versus Task force 2-4 Units
Current Proposed
Response to Offer of Notice 15 days jointly, 7 days indiv. 30 days
Negotiation 90 days plus 30 if not jointly plus 15 days right of first refusal 90 days 15
Time to Close 90 days plus 30 days if financing needs it 90-120
Maximum 277 days 225-255

63
Task Force Recommends
  • Single Unit Class
  • 2-4
  • 5-21
  • More than 21 units

64
Resources
  • dcgis.dc.gov
  • Then Real Property

65
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DC Site (top) vs. Google Earth
69
Newsletter
  • www.JacksCamp.com
  • RKaufmann_at_Jackscamp.com
  • Roy Kaufmann
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