Dear Fellow Readers,
We recently published an article on Lexis Nexis about The Importance of Fences in Adverse Possession:
It is often said that tall fences make good neighbors. In the world of adverse possession, the presence of a fence can often be the difference between winning or losing.
You may view the full article by clicking here:
Thank you,
Dickson Law Group
Dear Fellow Readers,
We recently published on article on Lexis Nexis about Fixing the Location of a Floating Easement:
An express easement is the written form of a nonpossessory right to use another party’s real property. (This is unique compared to prescriptive, necessary, and implied easements which form by the contextual use of property or by the relative ownership positions of the property owners.) For express easements to be valid they typically must describe the portion of the burdened property with reasonable certainty. For instance, it is typical to see an easement for ingress and egress to reserve the “northern 10 feet of Lot X for a driveway for ingress/egress for Lot Y.”
You may view the full article by clicking here:
Thank you,
Dickson Law Group
Dear Fellow Readers,
We recently published on article on Lexis Nexis about the Legal Description Specificity and the Statute of Frauds in real estate:
The statute of fraud and deed rules work in concert. Typically, these laws mandate that certain deeds, leases, agreements, and other property transfers, be written and contain specific components. Statute of frauds issues most common touch upon real property transfers. In virtually every jurisdiction in the United States, the law requires that for a transfer of real property to be valid, it must be done in writing and contain the signatures of the granting/transferring parties.
You may view the full article by clicking here:
Thank you,
Dickson Law Group
A question recently arose when dealing with a client facing the loss of a distressed property: “how am I taxed if I should allow the property to go through the foreclosure process? Am I taxed on the balance of the loan that is not collected as a result of the foreclosure.” The short answer is that yes, you’re probably exposed to some tax liability. (This also goes for short sales and deeds-in-lieu of foreclosure when the bank elects to waive whatever deficiency it could have obtained.)
Typically, when debt is cancelled by a creditor, it results in ordinary income to the debtor. For instance, if you owe someone $50,000 and they simply forgive that debt, then you’ll be responsible for income of $50,000 for the year that the forgiveness took place. There are other tax considerations that offset this impact potentially, but the general rule applies.
However, there are nuances in the tax code when it comes to foreclosure. According to the IRS, if your loan is a non-recourse loan (meaning that the lender’s ONLY remedy in the case of default is to foreclose/repossess the property), then any deficiency above and beyond that amount is not considered taxable. So, is Washington a “non-recourse” state? It is and it isn’t – but for tax purposes, it does not matter. According to RCW 61.24.100(1), a bank cannot obtain a judgment for the deficiency after a typical non-judicial foreclosure. One would assume that this means that Washington law supports the idea that its home loans are non-recourse. But it isn’t that simple.
Washington law affords the lender two pathways to foreclose on property and collect against a homeowner in the event of a breach: a non-judicial foreclosure (where the bank forecloses through the Deed of Trust law, which is by far the most common), or judicial foreclosure (where the bank actually sues the homeowner and compels sale of the property through a Sheriff’s sale). It is this option between the two methods of foreclosure which is key to why homeowners are likely taxed for the deficiency in the event of a foreclosure.
The IRS’s guide described it thus:
A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral.That is, the lender cannot pursue you personally in case of default. Forgiveness of a non-recourse loan resulting from a foreclosure does not result in cancellation of debt income.
So, while there is a temptation to think that if a bank cancels whatever remaining debt that results from a judicial foreclosure (short sale, deed-in-lieu), one escapes having to report the cancellation as income, it is not the case. Because the banks have the option to pursue either a judicial or non-judicial foreclosure at the time the agreement was entered into, it is likely that the homeowner will be subject to taxation of whatever deficiency was waived or cancelled.
(Please note that this firm is not an accounting firm, nor does it specialize in tax law. The US tax code is complex and the debt cancellation issue is one that is impacted by many other factors which are not discussed here. If you believe you may be facing such an issue, our advice would be to consult with a tax attorney or certified public accountant for clarification.)
The Tacoma News Tribune reports that CNN Money outlined Tacoma as a large metro area that will see as much as “11.5%” growth in housing value in the coming months. The article, however, utilizes data that some call questionable.
One of the most depressing things to experience as a property owner, is the realization that your rights to property are junior to a third party’s.
In a few recent cases involving condominium parking, parties were locked into a dispute regarding who had rights to particular parking spaces. To a casual observer, this may not see like a big deal, but to a condo-owner, parking spaces are vital to any future rental opportunities. (Who wants to live in an apartment where you have no parking space?)
When developers complete condo construction projects, they usually draft and record covenants, conditions and restrictions (CC&Rs) that govern the units overall. Contained within these document are usually tables that outline specific parking assignments. However, often times the developers also reserve the right to change those parking assignments to meet the specific needs or wants of prospective property owners. This allows for not only a degree of flexibility in establishing the parking, but it offers a way for the developer to sweeten the sale of a particular condo by offering specific (usually more convenient) parking spaces. Once those units are sold, however, and a valid statutory warranty deed is transferred to the buyer of the property, those parking spaces become part of the ownership of that particular condo. Therefore, any subsequent purchasers of the property cannot claim rights to those parking spaces, regardless of what is contained in the CC&Rs.
In general, the way that you determine whether your title has superiority to another is twofold. First, if your title was recorded before the other title was recorded, then you have priority. Second, the transfer of the property MUST be valid! In other words, even if you record your deed to the property, the property you receive must have been transferred to you from someone who has the actual ownership rights to do so.
In a recent case, I encountered an interesting issue regarding deposits held by landlords. Specifically, what happens to a tenant’s deposit once the landlord/tenant relationship has ended (either the tenant has moved out or abandoned the property, or, the landlord has removed him or her)? In the Landlord-Tenant Act, RCW 59.18.280 outlines what needs to happen —
“Within fourteen days after the termination of the rental agreement and vacation of the premises or, if the tenant abandons the premises as defined in RCW 59.18.310, within fourteen days after the landlord learns of the abandonment, the landlord shall give a full and specific statement of the basis for retaining any of the deposit together with the payment of any refund due the tenant under the terms and conditions of the rental agreement. No portion of any deposit shall be withheld on account of wear resulting from ordinary use of the premises. The landlord complies with this section if the required statement or payment, or both, are deposited in the United States mail properly addressed with first-class postage prepaid within the fourteen days.
The notice shall be delivered to the tenant personally or by mail to his last known address. If the landlord fails to give such statement together with any refund due the tenant within the time limits specified above he shall be liable to the tenant for the full amount of the deposit. The landlord is also barred in any action brought by the tenant to recover the deposit from asserting any claim or raising any defense for retaining any of the deposit unless the landlord shows that circumstances beyond the landlord’s control prevented the landlord from providing the statement within the fourteen days or that the tenant abandoned the premises as defined in RCW 59.18.310. The court may in its discretion award up to two times the amount of the deposit for the intentional refusal of the landlord to give the statement or refund due. In any action brought by the tenant to recover the deposit, the prevailing party shall additionally be entitled to the cost of suit or arbitration including a reasonable attorney’s fee.
Nothing in this chapter shall preclude the landlord from proceeding against, and the landlord shall have the right to proceed against a tenant to recover sums exceeding the amount of the tenant’s damage or security deposit for damage to the property for which the tenant is responsible together with reasonable attorney’s fees.”
The important thing to remember is that the landlord has a mere 14 days to provide either an explanation of why the deposit has not been tendered (or to ask for more time). After that 14-day window, the landlord is functionally barred from making any defenses to keeping the money and may actually have to pay more. So, to all those landlords out there: be sure to take care of the deposit issue within that 14-day deadline.
For people experiencing severe financial difficulties and who are overwhelmed with debt, bankruptcy may be an important option. Whether difficult times are brought on by job loss, medical problems, family breakups, or even financial irresponsibility, bankruptcy can grant you much desired relief. Understanding some basic principles of consumer bankruptcy, however, is imperative in knowing which form of bankruptcy is appropriate.
Within bankruptcy law, there are several different “chapters.” Each “chapter” is specifically designed to help either individuals or businesses in eliminating, resolving, and/or repaying their debts. Selecting which bankruptcy chapter to proceed under, depends on the individual’s or business’s specific circumstances. For individuals (“consumers”) who are seeking relief through the bankruptcy process, two chapters are available: Chapter 7 and Chapter 13. These two bankruptcy chapters differ significantly and offer different results.
Chapter 7 Bankruptcy
Chapter 7 is commonly referred to as “liquidation bankruptcy.” When an individual proceeds under Chapter 7, a trustee is appointed by the bankruptcy court. The trustee then gathers all of the individual’s property (except any property that is exempt), sells (“liquidates”) it, and distributes the proceeds of the sale to the individual’s creditors. At the end of this process, any outstanding debts are discharged (eliminated). The creditors then chalk-up their losses and move on, while the individual must start anew with very little assets leftover. The Chapter 7 process generally takes about four to six months.
Not everyone is allowed to proceed under Chapter 7, however. To be eligible under Chapter 7, an individual must pass the “means test” (a mechanical formula that is used to determine who can and cannot repay some debt.) If it is determined by the court that the individual’s “current monthly income” is above a certain amount and the individual has the ability to repay some debt, the individual may be denied Chapter 7 relief and may be forced to proceed under Chapter 13. Most people who meet the eligibility requirements proceed under Chapter 7 because, unlike Chapter 13, Chapter 7 takes less time to complete and does not require the individual to pay back any portion of his or her debts.
Chapter 13 Bankruptcy
Chapter 13 differs significantly from Chapter 7’s liquidation method. Commonly referred to as an “Adjustment of Debt” or “Wage Earner’s Plan,” Chapter 13 focuses on using the individual’s future earnings, rather than liquidated property, to pay creditors. When an individual files under Chapter 13, a court-approved plan allows the individual to keep all of his or her property, but the individual must pay a portion of all future income to the creditors. This payout plan lasts for three to five years, depending on the circumstances and the court-approved plan. When the individual has completed the agreed payout plan, any remaining obligations are discharged.
Naturally, eligibility to proceed under Chapter 13 requires that an individual must prove that he or she is capable of paying a portion of his or her future monthly income to creditors for a period of three to five years. If the individual’s income is not regular or is too low, Chapter 13 may be denied. Likewise, if the individual’s total amount of debt is too high, the court may deny Chapter 13. Unlike Chapter 7, Chapter 13 takes much more time to complete. However, the major benefit of Chapter 13 is that the individual is allowed to keep his or her property.
Understanding the main differences between Chapter 7 and Chapter 13 can assist you in knowing which form of bankruptcy will most likely work best for you. Keep in mind, however, that because the bankruptcy process is complex and oftentimes requires professional knowledge to be successful, seeking professional help is your best bet.
One of my favorite websites I visit to keep a pulse on the Puget Sound residential real estate market is the Seattlebubbleblog. Its founder and editor is Seattle resident named Timothy Ellis who goes by the blog name “The Tim.” http://seattlebubble.com/blog/
The blog has daily posts which include some great graphs, charts and analysis of the Puget Sound real estate market. What makes the posters on the Seattle Bubble Blog unique is their credibility. They were one of a few vocal media sources in Washington State that consistently and loudly predicted the current real estate crash before it happened. In addition to good posts and analysis by “The Tim,” the comment section provides a lively discussion about Puget Sound real estate issues. *Be aware homeowner: many of the comments made are from bloggers who predict continued steep declines in the Puget Sound real estate – so the blog isn’t for the faint of heart.
The effect of local and federal laws as they relate to the residential real estate market in the Puget Sound area are also frequently discussed by the blog posters and authors with links to news articles and additional resources.