Avoid Hidden Surprises When Purchasing a Condominium

So you’re buying a condominium and the seller provides you with all of the required documentation – among them the declaration of condominium, articles of incorporation, bylaws and rules. Now what?  Do you just keep these items in a safe place in case they are ever needed?  The answer to this should be no. As the buyer of a condominium, it is very important that you make sure to review all of the documentation provided to you regarding the condominium in which you are purchasing.

Your condominium documents will explain what parts of the condominium you are responsible for, what the association is responsible for, your voting rights and how rules are promulgated or changed. They will also include important information about restrictions such as rental restrictions, parking restrictions or restrictions on improvements that you can make to the condominium.

It is important to be aware that condominium documents are not all the same and you should be familiar with the specific rules and restrictions related to yours to avoid potentially costly issues in the future. For example, a new condominium owner decides to renovate their kitchen.  They hire a licensed contractor and pull all appropriate permits. The homeowner spends their savings building the kitchen of their dreams. During the process, the condominium owner receives a letter notifying them that they did not abide by the appropriate approval process required by the condominium bylaws to approve their new kitchen and they are subject to expensive fines as well as having to immediately undo all of their renovations at their own expense.

A situation like this can be avoided by a thorough review and understanding of all elements of your condominium documents. Whether you are just purchasing a condominium or you have already purchased one but have not thoroughly reviewed the documents, we encourage you to do so to familiarize yourself and avoid running into potentially costly issues or disputes in the future.  If you need assistance reviewing or understanding your condominium documents, please contact your local real estate attorney.

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by Jessica Stewart, Esq. jstewart@berlinpatten.com

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged. 

www.berlinpatten.com 

SARASOTA

1819 Main Street, Suite 1000, Sarasota, FL 34236   P (941) 954-9991  F (941) 954-9992

VENICE

247 South Tamiami Trail, Suite 201, Venice, FL 34285  P (941) 955-9991  F (941) 484-9992

LAKEWOOD RANCH

8130 Main Street, Suite 206, Lakewood Ranch, FL 34202   P (941) 907-9022  F (941) 907-9024

Getting to the Clear to Close Under the New TRID Rule

There’s a new sheriff strolling into town, and its name is “TRID.” Unless you have not been paying close attention to the latest buzz in real estate, you are most likely familiar with the TILA-RESPA Integrated Disclosure rule (“TRID”), which is scheduled to take effect on October 3, 2015 (that is if the CFPB doesn’t delay implementation again). If you recently purchased a home (or helped a client purchase or home), you have most likely noticed that mortgage lending standards have become much more stringent, even for well qualified borrowers. Well, get ready to saddle up, because things are going to get a little more difficult once TRID strolls into town.  Before we get into that, let’s take a trip down memory lane.

Relics of the Past

At the peak of the “boom years,” mortgage borrowing appeared to be, and for the most part was, fairly easy.  Generally if you were breathing or could “fog a mirror” you were qualified. Remember, there were “no income documentation” loans, “stated income” loans, and “no asset verification” loans. In the “boom years,” borrowers and agents became accustomed to short loan processing and a real sense of entitlement to loan approval developed. Well, it seems we have come full circle as the CFPB has pulled back the reins on lenders.

The Rise of TRID

Welcome to a new dawn, the rise of TRID. With TRID, the lender will be running the show and the borrower will have to jump through each and every “hoop” the lender sets in front of them before issuing the elusive “clear-to-close.”  The CFPB is the enforcement arm carrying the big stick and lenders are loath to miss that un-dotted “i” or un-crossed “t”, not to mention the wave of new documentation that is coming at us like a freight train in the form of the “Closing Disclosure.” Buyers, sellers, realtors, attorneys, and title agents need to be mindful now more than ever, that there is no “absolute right” to a loan approval. As a result, patience has become a necessary commodity and will be in even greater demand as we approach October 3rd.

So, What Can You Do?

Special attention needs to be given in preparing Contracts to permit sufficient time for lenders and mortgage originators to process loan applications. We believe it is fairly safe to say that in the context of Contracts with financing, gone are the days of 30 day closings. Mortgage originators have their own agendas and timetables to follow; rarely will they mesh with the agendas and timetables of the borrower. What is important to understand is that the lender is not required to make a loan, and is not a party to the Contract – the lender is in no manner, shape, or form bound to meet an Inspection Date, a Financing Date, or a Closing Date specified in a real estate contract.

As a consequence, it behooves us all to draft Contracts that provide sufficient time to obtain that precious Clear to Close. Better to allow too much time, than too little. Like lenders, sellers are not contractually obligated to agree to extensions. Prudence, at least until the industry has a firm grip on TRID, would appear to dictate that mortgage contingency dates go out 45 days, and closings in 60 days. Should you have any questions regarding the foregoing we urge you to consult with your real estate attorney.

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by Mark Hanewich, Esq.  mhanewich@berlinpatten.com

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged. 

www.berlinpatten.com 

SARASOTA

1819 Main Street, Suite 1000, Sarasota, FL 34236   P (941) 954-9991  F (941) 954-9992

VENICE

247 South Tamiami Trail, Suite 201, Venice, FL 34285  P (941) 955-9991  F (941) 484-9992

LAKEWOOD RANCH

8130 Main Street, Suite 206, Lakewood Ranch, FL 34202   P (941) 907-9022  F (941) 907-9024

How To Take Title In Same-Sex Marriages

On June 26, 2015 the United States Supreme Court ruled that same-sex couples have a constitutional right to marry nationwide, in a historic decision that invalidates gay marriage bans. This outcome resolves decades of Supreme Court litigation over marriage, and gay rights generally. Prior to the Supreme Court’s decision title underwriters preferred titling for same-sex marriage to either read as “joint tenants with rights of survivorship” or “tenants in common” as there was still federal uncertainty. Now the Supreme Court’s ruling removes any ambiguity on how to treat same-sex marriage real estate transactions from a titling standpoint. How does this decision potentially impact your clients?

  • When both same-sex spouses are going into title, the deed should reflect their marital status (e.g., Mary Smith and Samantha Smith, as wife and wife).
  • Title underwriters now recognize any indication of marriage (i.e., husband and wife, husband and husband, wife and wife, etc.) as entireties property.
  • Under a tenancy by the entirety, judgments against one same-sex spouse will not attach property they hold as a married couple.
  • If only one spouse is on title it will require the other spouse to join in on a mortgage or deed for homestead rights.

Should you have any questions regarding how to take title, which can have important legal and/or tax implications, we urge you to please consult with your local real estate attorney.

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by Jamie Ebling, Esq. jebling@berlinpatten.com

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged. 

www.berlinpatten.com 

SARASOTA

1819 Main Street, Suite 1000, Sarasota, FL 34236   P (941) 954-9991  F (941) 954-9992

VENICE

247 South Tamiami Trail, Suite 201, Venice, FL 34285  P (941) 955-9991  F (941) 484-9992

LAKEWOOD RANCH

8130 Main Street, Suite 206, Lakewood Ranch, FL 34202   P (941) 907-9022  F (941) 907-9024

Does the Subdivision Require Your Buyer to Be Approved By the Homeowner’s Association?

Typically, subdivisions created in the last twenty (20) years now require buyers to be approved by the homeowner’s association prior to purchasing a property in the subdivision. This application requirement can be found in the subdivision’s recorded Declaration of Restrictions or Bylaws. The application requirement sets forth the application process and timing requirements.  Buyers purchasing property in such subdivision need to make sure they comply with the application process, including timely submitting their application for approval. This is especially important since it seems to now be a common practice for some homeowner’s associations and/or respective management companies not to release the homeowner’s association estoppel certificate to the closing agent until the buyer has submitted an application for approval to the homeowner’s association.

This is true despite the fact that the aforesaid homeowner’s association’s approval requirement and the issuance of estoppel certificate are typically two (2) legally independent processes. The estoppel process can be found in Florida Statute 720.30851 which provides that the homeowner’s association, or designee, has 15 days from receipt of the estoppel request to issue the estoppel certificate. You will note that there is no exception to the aforesaid 15 day rule. Regardless, buyers should be encouraged to submit their application for approval to the homeowner’s association earlier rather than later.

In addition to the buyer timely making application for approval, it is important to make the contract contingent upon the buyer being approved by the homeowner’s association when required by the subdivision restrictions. Unfortunately, the FR/BAR Homeowner’s Association Rider B only contains the disclosure summary required by Florida Statute 720.401 and does not address what happens if the buyer is not approved by the homeowner’s association.  In contrast, the Florida Realtor’s CRSP-13 Homeowner’s Association Rider J, Section 1 contains the following provision:

“If the Association documents give the Association the right to approve Buyer as a

purchaser, this Contract is contingent on such approval by the Association.  Buyer will

apply for approval within  ______ days (5 days if left blank) after Effective Date and use

diligent effort to obtain approval, including making  personal appearances and paying

related fees if required.  Seller and Buyer will sign and deliver any documents required

by the Association to complete the transfer.  If Buyer is not approved, this Contract will

terminate; and Buyer’s deposit(s) will be refunded unless this Contract provides otherwise.”

Currently, the FR/BAR Attorney Realtor Joint Committee is in the process of reviewing and revising Rider B to include a similar provision in addition to other changes.  However, until the FR/BAR Rider B has been revised, you should make your contract contains a similar provision to the aforesaid provision when you have a buyer purchasing in a subdivision that requires such approval process.

As always, if you have any questions concerning the foregoing, we urge you to consult with your real estate attorney.

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by Julie Horstkamp, Esq.  jhorstkamp@berlinpatten.com

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

www.berlinpatten.com 

SARASOTA

1819 Main Street, Suite 1000, Sarasota, FL 34236   P (941) 954-9991  F (941) 954-9992

VENICE

247 South Tamiami Trail, Suite 201, Venice, FL 34285  P (941) 955-9991  F (941) 484-9992

LAKEWOOD RANCH

8130 Main Street, Suite 206, Lakewood Ranch, FL 34202   P (941) 907-9022  F (941) 907-9024

Seller Disclosure Obligations and Liability

Recently, we have been encountering an increased number of claims from buyers after a closing that the seller failed to disclose a latent defect in the property.  As a result of this increase, we also noticed that, while most real estate professionals have a general understanding of a seller’s duty to disclose, a few misconceptions exist as to what is required under Florida law.

As you probably know, the landmark case in this area of law is the Florida Supreme Court case Johnson v. Davis.  In Johnson, the Court made it clear that a seller must disclose any known latent defects which materially affect the value of the property, and which are not readily observable to the buyer, before signing any contract.  Below are some important points to be aware of regarding this duty to disclose:

1.      The standard for liability is whether the seller had actual knowledge of the defect.  This is the area where we encounter the most confusion, because merely discovering a major defect that was not disclosed is not enough to prevail on a failure to disclose claim.  The buyer must prove that the seller knew the defect existed.  It is not enough to prove that the seller should have known of the defect, or that any reasonable person would have known of the defect.  This means that the buyer must find evidence of the seller’s knowledge, such as recent patching over an area, or a neighbor who says plumbers were constantly called to the property over drainage issues.

2.      A seller cannot avoid liability for failing to disclose a latent defect by executing an “As Is” contract or including a broad “as is” clause in a contract.

3.      The duty to disclose only applies to residential property.  There is no duty to disclose in commercial real estate transactions; however, sellers of commercial real estate can still be held liable for fraud if the seller actively conceals a defect or intentionally misrepresents facts to the buyer.

4.      If a defect is discovered prior to closing, and the seller hires a contractor to correct the problem, the buyer should have the repair work inspected by a third party.  Moreover, it may be prudent for the buyer to get the seller to certify in writing that the repairs were properly completed and the defect fully remediated.  This is because the seller is not liable for improperly completed work unless s/he actually knew the repairs were incomplete or improper.

5.      While many sellers complete and provide potential purchasers with the form “Seller’s Real Property Disclosure Statement,” sellers are not required to do so under Florida law.  Buyers are encouraged to request a seller’s disclosure form from the seller before signing any contract.

6.   The duty of disclosure extends to the seller’s real estate broker.  This means that a real estate broker can be sued by a buyer for failure to disclose.  Therefore, any broker representing a seller should fully advise the seller to disclose all latent defects and cooperate in disclosing any defects to potential purchasers.  The listing agent may desire to take the additional precautionary measure of having the seller sign a document certifying that s/he has disclosed all defects to the listing agent.

It is often challenging to bring a successful failure to disclose claim because of the difficulty in finding evidence that the seller actually knew of the defect.  For this reason, we strongly encourage any buyer to conduct comprehensive, thorough and professional inspections of the property before purchase in order to avoid any potential claim after closing. As always, should you have any questions regarding the foregoing we urge you to consult with your local real estate attorney.

Sincerely,

Berlin Patten Ebling, PLLC

Article Authored by Michelle Champion, Esq.  mchampion@berlinpatten.com

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

www.berlinpatten.com 

SARASOTA

1819 Main Street, Suite 1000, Sarasota, FL 34236   P (941) 954-9991  F (941) 954-9992

VENICE

247 South Tamiami Trail, Suite 201, Venice, FL 34285  P (941) 955-9991  F (941) 484-9992

LAKEWOOD RANCH

8130 Main Street, Suite 206, Lakewood Ranch, FL 34202   P (941) 907-9022  F (941) 907-9024

Escrow Disputes, Are They Really Worth It?

Have you ever been involved in a nasty escrow dispute? Whether we like it or not, the reality is that not every deal closes. And in some of those cases, the seller is, to put it mildly, upset. That doesn’t mean that the seller should automatically resort to the dreaded “claim on the deposit.” There are a number of factors a seller should consider when doing so:

1.       Remember most contracts provide for prevailing party attorneys fees. If the seller is wrong, they could be subject to attorneys fees. THERE IS RISK TO THE SELLER!

2.       Does the seller really want to be embattled in an escrow dispute, the result of which could be a lawsuit in court?  Remember, in most instances, the buyer has no choice but to resort to the legal process to get their money back. That process is both time consuming and expensive (and see number one above).

3.       Does the seller have any culpability for the failure to close?  In some cases, the seller is not entirely blameless. Did the seller perform perfectly under the contract.  Were they ready, willing and able to close?  Did they do everything that was required of them to facilitate the closing or otherwise put the buyer on notice of the buyer’s anticipatory breach? And if the seller is even remotely at fault (or if the seller did not follow the letter of the contract perfectly and prove they did all they could to close timely), that escrow dispute could result in a much bigger problem, namely an aggressive real estate lawyer tying up the property legally until the dispute is resolved.

4.       Is the seller comfortable keeping the property off the market until the dispute is resolved? Generally it is unwise to market (or even execute contracts) until (a) either an escrow dispute is resolved and the contract properly terminated, or (b) the seller gets a legal opinion that there is no chance that the buyer might attempt to cloud the seller’s title legally (see 3 above).

5.       Is the deposit amount significant enough to even justify the hassle and risks set forth above?

6.       Does the Seller understand that they may not be entitled to the full amount of the deposit and that third parties, such as agents, may be entitled to portions of the deposit?

For these, and possibly other reasons, we would caution any seller to think very carefully before they refuse to execute that release and cancellation of contract. In many cases, it’s best just to move on (particularly in this market). As always, we strongly advise any seller to consult with their real estate attorney before they decide to engage in an escrow dispute.

Sincerely,

Berlin Patten Ebling, PLLC

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged. 

www.berlinpatten.com 

SARASOTA

1819 Main Street, Suite 1000, Sarasota, FL 34236   P (941) 954-9991  F (941) 954-9992

VENICE

247 South Tamiami Trail, Suite 201, Venice, FL 34285  P (941) 955-9991  F (941) 484-9992

LAKEWOOD RANCH

8130 Main Street, Suite 206, Lakewood Ranch, FL 34202   P (941) 907-9022  F (941) 907-9024

The New Closing Disclosure Form is Coming…Are You Ready? (Part II)

In follow-up to our last Blog regarding the TILA-RESPA INTEGRATED DISCLOSURE (“TRID”), a new closing statement form called the Closing Disclosure (the “CD”) is coming soon and it will be used for most loan applications taken on new residential mortgages beginning August 1st, 2015.  In a continued effort to help educate our readers, we have prepared the following bullet point list which highlights some, but not all, of the key provisions that we believe will be helpful come August 1st, 2015.

  • The Closing Agent will no longer have control over the delivery of the CD (at least for now) as the Lender will (in most cases) be preparing and delivering the CD to the Buyer.
  • The Buyer’s Agent will not likely receive an advance copy of the CD before it is delivered to the Buyer and the Closing Agent will not be permitted to send a copy of the CD to the Buyer’s Agent due to privacy laws and ALTA Best Practices policies.  Going forward, the Buyer’s Agent will now need to request a copy of the CD directly from the Buyer.
  • Due to the new minimum 3-day delivery requirement, as referenced in our last Blog on the topic, we recommend multiple walk-throughs in case there are property related issues that affect the value of the property, which could trigger a new 3-day delivery requirement.  For example, the first inspection should be 7 to 10 days in advance of the closing and the second inspection on day of closing.
  • The Florida Realtors/Florida Bar Joint Committee have been working on revising the Florida Realtors/Florida Bar Contract (“Contract”) in anticipation/preparation of August 1st, 2015.  We expect the new Contract changes to be released in the next few weeks and we will, of course, provide our readers with a thorough review and explanation of the changes, so stay tuned!

As always, Berlin Patten Ebling, PLLC will continue to provide updates and helpful tips as the implementation of the new rule approaches in an effort to continue to raise everyone’s awareness of the upcoming changes to the closing process. Should you have any questions regarding the new Closing Disclosure, we urge you to consult with your local real estate attorney.

Sincerely,

Berlin Patten Ebling, PLLC

This communication is not intended to establish an attorney client relationship, and to the extent anything contained herein could be construed as legal advice or guidance, you are strongly encouraged to consult with your own attorney before relying upon any information contained herein.

All rights reserved. This copyrighted material may not be re-published without permission. Links are encouraged.

www.berlinpatten.com 

SARASOTA

1819 Main Street, Suite 1000, Sarasota, FL 34236   P (941) 954-9991  F (941) 954-9992

VENICE

247 South Tamiami Trail, Suite 201, Venice, FL 34285  P (941) 955-9991  F (941) 484-9992

LAKEWOOD RANCH

8130 Main Street, Suite 206, Lakewood Ranch, FL 34202   P (941) 907-9022  F (941) 907-9024