MOVING? THE CAP ON YOUR HOMESTEAD IS PORTABLE

by Grant W. Kehres* | Posted 09/15/2014

Property taxes in the State of Florida are calculated on the assessed value of one’s home. In the early 1990’s, during a prosperous housing market, homeowners were faced with a problem. If a homeowner purchased a home for $300,000, he or she would expect to pay property taxes on that amount. If the home suddenly appreciated in value to $400,000, the homeowner may not have been able to pay the proportionate increase in taxes. As a result, many people actually had to sell their homes because the market was performing too well.

In response to this problem, Florida voters passed “Save Our Homes,” an Amendment to the Florida Constitution. Under Save Our Homes, and as codified in the Florida Statutes [1], the increase in assessed value of a homestead property is capped at the lesser of either: 1) 3% from the previous year, or 2) the percentage change of the Consumer Price Index [2].

While this Amendment remedied one problem, it created another. Homeowners became protected by a capped assessment, which enabled them to remain in their homes while their values were escalating. However, this Amendment made homeowners reluctant to move to a new residence because of the cost associated with giving up their tax savings that the cap provided.

In 2008, the Florida Constitution was once again amended to allow for the portability of all of a homeowner’s accumulated savings, via the cap on increases in assessment value of homestead property [3]. A homeowner is entitled to “port” their assessment tax benefits to a new purchased home as long as the new homestead is established within two (2) years of abandoning the previous homestead.  Using the above example, assume that your $300,000 house is assessed at only $200,000, due to the Save Our Homes cap on assessments. Before the 2008 Amendments, a homeowner would be hesitant to move and give up those tax benefits afforded. Under the 2008 Amendment, the homeowner may now purchase a new property and the $100,000 differential (between the $300,000 value of the house and the $200,000 assessed value) is transferred to the new property. In other words, if the homeowner purchases a new house for $600,000, the homeowner can transfer the $100,000 differential to create an assessment value of $500,000 on the new property. This, of course, is provided that the homeowner establishes the new homestead within the two year allowable period.

Where it gets tricky, however, is when a homeowner moves into a less expensive new property. If a homeowner is moving from the $300,000 home (which is assessed at $200,000 under the 1995 Amendment) and into a $150,000 home, the homeowner is not afforded a $100,000 differential. Instead, the homeowner is afforded the same ratio of its previous difference in assessment. In this example, the first home is assessed at two-thirds of its value ($200,000 on a $300,000 house), so the new home will be assessed at two-thirds of its value, or $100,000 on the new $150,000 home.

Our office possesses extensive experience in assisting clients with homestead issues and routinely assists clients in establishing first homestead properties and with advice on portability in regard to new homestead properties. For of your homestead needs, we invite you to tap into our 34 years of Florida real estate law knowledge and experience.

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[1] Section 193.155 of the Florida Statutes, Homestead Assessments, as amended from time to time.

[2] Section 193.155 (1) (b) of the Florida Statutes defines “Consumer Price Index” as the percentage change in the Consumer Price Index for All Urban Consumers, U.S. City Average, all items 1967=100, or successor reports for the preceding calendar year as initially reported by the United States Department of Labor, Bureau of Labor Statistics.

[3] Those specific rules regarding portability are set forth in Florida Statute 193.155(8)

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*Grant Kehres is Board Certified by the Florida Bar Board of Legal Specialization as a Real Estate Law Specialist.  He holds a doctorate in jurisprudence from Vanderbilt University, an MBA (finance) from Babson College and a dual undergraduate degree in Investments and Economics from Babson College.  Admitted to The Florida Bar in 1978, he has handled more than 10,000 closings for more than 8,000 clients.  For more information on our services and what distinguishes our office from other law firms and title companies, call (561) 392-5200 or e-mail us at info@bocaclosings.com.

 


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MAINTAINING ACCURATE CORPORATE MINUTES CREATES PROTECTION UNDER THE BUSINESS JUDGMENT RULE

by Grant W. Kehres* | Posted 09/02/2014

Over the past decade, Florida Courts have transitioned into adopting the Business Judgment Rule. The Business Judgment Rule creates a layer of protection for corporate directors and protects a director or board member against personal liability lawsuits in the event that a director(s) makes a decision which leads to a lawsuit.

The Business Judgment Rule[1], as applied by several Florida Courts[2], provides that a corporate director is protected against personal liability lawsuits resulting from the director’s decision, as long as the decision of the director is made within the scope of his or her authority and that decision is reasonable. The question, then, is what makes a decision reasonable, and thus a protected decision under the Business Judgment Rule.

In Tiffany Plaza Condo. Ass’n v. Spencer, a Condominium Association sought to assess fees to all condominium unit owners for their prorated cost of constructing a rock revetment in a beachfront area defined as a common element of the condominium. At an annual meeting of the Condominium Association, the Association voted on whether to assess these fees to the owners, a measure which passed. This annual meeting included the preparation of corporate minutes, documenting the vote approving the measure.

A unit-owner sued to prevent collection of fees by the Association, arguing that the revetment was not an “alteration or improvement of a common element,” the only type of assessments to common elements that were permitted under the Declaration of Condominium, the rules governing the Condominium Association’s actions.

The Court, in reaching its decision, applied the Business Judgment Rule and determined that the Association is protected against the owner’s lawsuit, without deciding whether the rock revetment was an alteration or improvement. The Court explicitly stated that it did not matter whether the construction of the rock revetment was actually an improvement or necessary to protect the beachfront from erosion or damages, but whether the Condominium Association’s determination was reasonable.

Ultimately, the Condominium Association was awarded a complete defense under the Business Judgment Rule due in large part to the corporate minutes[3], which documented the Condominium Association’s decision process and its official vote on the matter. Preparation of corporate minutes are incredibly important and necessary, and in the event that a director or board members of a Corporation are sued, the corporate minutes can be used to show that the decision process and to illustrate that sound judgment took place. By keeping corporate minutes up to date and accurate, corporate directors and board members are often protected from personal liability lawsuits.

Our office routinely assists corporate clients with compliance, corporate formation and other business law issues.

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[1] Florida case law provides four elements which must be present for the business judgment rule to act as a shield to director liability:  (a) the decision under review must be a business decision; (b)  the director must not receive a personal benefit from the transaction ; (c) the director must exercise due care; and (d) the director must exercise good faith.  F.D.I.C. v. Stahl, 854 F. Supp. 1565, 1570-1571 (S.D. Fla. 1994).

[2] Hollywood Towers Condominium Ass’n v. Hampton, 40 So. 3d 784, 787 (Fla. 4th Dist. Ct. App.  2010);

Farrington v. Casa Solana Condo. Ass’n, 517 So. 2d 70, 72 (Fla. 3d Dist. Ct. App. 1987);

Tiffany Plaza Condo. Ass’n v. Spencer, 416 So. 2d 823, 826 (Fla. 2d Dist. Ct. App. 1982.

[3] Section 607.0701 of the Florida Statutes requires that all corporations conduct an annual shareholder meeting. The time and place for an annual shareholder meeting is mandated in a corporation’s bylaws, adopted by the corporation when it was formed.

Section 607.1601 of the Florida Statutes requires that minutes of all corporate meetings be prepared and kept as part of the corporation’s permanent records. Subsection (4)(d) specifically mandates that minutes of all shareholders’ meetings be kept by the corporation for the prior three years.

 


*Grant Kehres is Board Certified by the Florida Bar Board of Legal Specialization as a Real Estate Law Specialist.  He holds a doctorate in jurisprudence from Vanderbilt University, an MBA (finance) from Babson College and a dual undergraduate degree in Investments and Economics from Babson College.  Admitted to The Florida Bar in 1978, he has handled more than 10,000 closings for more than 8,000 clients.  For more information on our services and what distinguishes our office from other law firms and title companies, call (561) 392-5200 or e-mail us at info@bocaclosings.com.

 


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BROKER BEWARE! PERSONAL PROPERTY, REAL ESTATE CONTRACTS AND SALES TAX

Is sales tax due when personal property is separately broken out on a real estate contract?

by Grant W. Kehres* | Posted 03/25/2014

From time to time we see some real estate purchasers, and an occasional real estate seller, manipulate the real estate contract and artificially allocate a portion of the sales/purchase price to furniture or other personal property.  In the shadows of this contract manipulation lurks the government and criminal liability for the seller, purchaser and real estate broker.

The purchasers believe the county real estate property appraiser will rely on the lowered  real estate price allocation and award the purchaser a lower valuation for county ad valorem taxes.   The occasional real estate seller that does so is usually either a foreign seller on the cusp of a $300,000.00 sales price trying to qualify for the “$300,000.00 and under FIRPTA exemption”[1] or trying to fool the Florida Department of Revenue into accepting lower-than-otherwise documentary stamps on the transaction.[2]

Florida Real EstateAs a practical matter, the actions of the purchasers and sellers in these situations are either unsuccessful, criminal, or both; and in some cases sales tax is due on the amount allocated to the furniture or other personal property.  If the real estate broker fails to collect and remit the sales tax, the real estate broker faces fines and imprisonment!

Say what you will about Florida’s county property appraisers, they are anything but naive or without resources to determine the true value of real estate.  The amount of the documentary stamps attached to the deed is only one of many factors the property appraiser uses in reaching the annual valuation for tax purposes.[3]   The manipulation may have a small effect on the valuation the first year after the sale.  But in future years, the property’s “purchase price” becomes less relevant in determining the annual valuation.  In short, the purchaser gets away with very little, while becoming exposed to the risk of criminal prosecution (along with the seller) for conspiracy to defraud the county government of county tax revenue and the state government of state documentary tax revenue, not to mention the Internal Revenue Service when Federal tax issues are involved.

Sadly, most buyers don’t realize they can get the same temporary favorable property valuation treatment without manipulating the purchase price because the county property appraisers send to purchasers, shortly after the purchase closes, a questionnaire asking if any extraordinary personal property was involved in the transaction.  A “yes” and the buyer’s estimate of value must be taken into consideration by the property appraiser.  In those situations where the property appraiser fails to ask, the taxpayer has the right to bring the fact to the attention of the property appraiser, and the property appraiser must take the value of personal property into consideration.[4]

The foreign FIRPTA manipulator is similarly foolish.  The exemption from withholding under FIRPTA is not an exemption as to the payment of any tax due the United States, nor is it an exemption from the obligation to file a tax return with the Internal Revenue Service.  Granted, shortly after the closing the foreign seller might be safe from the long arms of the IRS behind the borders of their home nation; but what about the US purchaser that conspired with the foreigner?  It is the buyer that has the obligation to withhold under FIRPTA, and the IRS knows where you are.

In summary, there’s more gristle than gravy for Sellers and Buyers to artificially adjust the sales price of real estate by allocating part of the transaction’s price to personal property. But how about the real estate broker?  Should the broker care?

Turns out, the real estate broker is liable for collecting sales tax on the value of the personal property separately allocated on the real estate contract or bill of sale!  This rule is equally applicable to the legitimately and illegitimately allocated personal property sales price allocation.

Florida law provides that a tax is levied on every person that engages in the business of selling tangible personal proprety at retail[5], and the tax is 6% of the sales price of each item[6].

Business” is statutorily defined as any activity engaged in by any person with the object of gain[7].   Excluded from the definition of “business” is the occasional or isolated sale or transaction involving tangible personal property who does not hold himself or herself out as engaged in business, the so called “yard sale” or “casual sale” exemption.

The Florida Administrative Code specifically provides that the isolated sales exemption does not apply to the sale of tangible personal property by or though an auctioneer, agent, broker or any other person required to be registered as a dealer to collect and remit tax on such sales[8].  The term “dealer” is broadly defined[9] and includes real estate brokers.

Bottom line: When personal property is separately broken out on a real estate contract on a transaction wherein a real estate broker is involved[10], the real estate broker is required to collect and remit sales tax on the amount allocated to the personal property.  The failure to collect and remit sales tax carries with it interest, civil penalties and criminal liability.  Florida law states that, depending upon the amount involved, any person who, with intent to unlawfully deprive or defraud the state of its moneys can be convicted of various criminal  offenses  ranging from a misdemeanor to a felony in the first degree[11].  First degree felony convictions carry imprisonment of up to 30 years[12], and a fine of up to $10,000.00[13] or twice the amount of the tax, whichever is greater[14]. Obviously, the State is serious about sales tax on the sale or furniture and other personal property.  Maybe you should be, too!

 

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[1]FIRPTA is the Foreign Investment in Real Property Tax Act of 1980, 26 USC Section 1445, which generally requires a purchaser to withhold from a foreign seller of a US real property interest, 10% of the purchase price, and remit those funds to the US Treasury as security for the payment by the foreign person of any tax due as a consequence of the sale.  The government determined, as a matter of tax administration policy, that cost of administering small non-commercial transactions was not worth the tax benefit and exempted purchasers from compliance provided the transaction was $300,000.00 or less and the purchaser has definite plans to use the property for its own use more than half the time the property is intended to be used over the next two (2) years.

[2]Florida Statutes Section 201.02(1)(a) (2013) imposes a tax on deeds at the rate of 70 cents per $100.00 or fraction thereof of the consideration paid or agreed to be paid.

[3]For an excellent discussion of the factors considered by Florida county property appraisers in valuing real estate for the ad valorem tax, see The Florida Real Property Appraisal Guidelines, a 58 page pamphlet published November 26, 2002 by the Florida Department of Revenue under its Tax Administration Program.

[4]See Article VII, Section 4, Florida Constitution.  See also Bystron v. Witman, 488 So2d 520 (Fla. 1986).

[5]F.S. 212.05(1)(a) (2013)

[6]F.S. 212.05(1)(a)1.a. (2013)

[7]F.S. 212.02(2) (2013)

[8]Rule 12A-1.037(2)(a)5, F.A.C. and Rule 12A-1.037(5), F.A.C.

[9]F.S. 212.06 (2) (2013)

[10]The definition of a “dealer” under F.S. 212.06(2) (2013) is so broad that it could be easily argued the Seller who happens to be a real estate broker is not entitled to the casual sale exemption, even when there is no other real estate broker involved in the transaction.

[11]F.S. 212.15 (2013)

[12]F.S. 775.082(3)(b) (2013)

[13]F.S. 775.083(1)(b) (2013)

[14]F.S. 775.083(1)(f) (2013)

 


*Grant Kehres is Board Certified by the Florida Bar Board of Legal Specialization as a Real Estate Law Specialist.  He holds a doctorate in jurisprudence from Vanderbilt University, an MBA (finance) from Babson College and a dual undergraduate degree in Investments and Economics from Babson College.  Admitted to The Florida Bar in 1978, he has handled more than 10,000 closings for more than 8,000 clients.  For more information on our services and what distinguishes our office from other law firms and title companies, call (561) 392-5200 or e-mail us at info@bocaclosings.com.

 


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CONDO ASSOCIATION BEATS BANK IN RACE FOR TITLE

by Grant W. Kehres* | Posted 02/24/2014

It’s rare that a bank’s mortgage is wiped out by a condominium association.  Condominium Association of La Mer Estates, Inc. v. The Bank of New York Mellon Corporation[1] decided by Florida’s Fourth District Court of Appeals on February 19, 2014 proves that with the right facts, a little timing and the right court, winning the lottery is possible.

This case turns on the distinction between a judgment that is void, and one that is merely voidable.

real_estate_pic2

The owners of a condominium in La Mer Estates executed a mortgage in 2006.  By 2008, they had stopped paying both the mortgage and the condominium association.  The condo association filed a claim of lien for unpaid condominium maintenance, filed an action to foreclose its claim of lien, and as the only bidder at the condominium lien foreclosure sale, received a certificate of title to the condominium unit.

After the condominium association received title, the bank continued to sit on its mortgage and in addition made no payments to the condo association.  The condo association wrote to the bank offering to convey to it the title to the condominium unit, but the bank did not respond.  Several months later the condo association filed a suit to quiet title, alleged that the bank’s mortgage constituted a cloud on its title, and that the bank had no bona fide interest or claim to the property.[2]

The bank was served with the quiet title suit but failed to respond.  The clerk of the court entered a default against the bank, and the condo association filed its motion for entry of final judgment against the bank to quiet title.  The bank was given notice of the motion but failed to appear at the hearing.  The court entered the final judgment against the bank on February 10, 2011, and the bank was given notice of the entry of the judgment but did nothing until over a year later[3].

On August 31, 2012, the bank finally shows up and moves the court to vacate the judgment quieting title pursuant to the court rule that a judgment may be vacated if the judgment is void, no matter how late the movant comes to the party.  The bank claimed that the judgment was void due to some technical pleading rules that the condo association failed to follow.

Although the bank was probably correct in its analysis of the condo association’s pleadings, the Fourth District Court of Appeals found that the quiet title judgment was not void but merely voidable, and that a voidable judgment may not be overturned more than a year after it is entered, even if incorrect, absent some fundamental failure of due process.  The court followed the Florida Supreme Court holding in Malone v. Meres[4] that if a court has the authority to rule on the subject matter before it and has jurisdiction of the parties, a judgment that is entered by error or due to irregularities or even wrongdoing in the proceedings is not void but only voidable as long as the adverse parties were given an opportunity to be heard.

In this case, even thought the quiet title judgment might have been obtained by the condo association by mistake, the court had jurisdiction of the subject matter and the bank.  The fact that the bank sat on the results of the quiet title judgment for over a year prevented it from overturning the mistakenly obtained quiet title judgment.

The result of this case, however, conflicts with similar decisions from both the First District Court of Appeals as well as the Third District Court of Appeals.  Because of the importance of this issue to the finality of judgments and the stability of property titles based upon those judgments, the Florida Supreme Court has jurisdiction to resolve the conflict between the Districts.  I expect we will be hearing further on this case by the Supreme Court.  But until then, at least in the Fourth District with the right facts and a little luck, timing once again is everything, and a condo association can beat a bank and wipe out its mortgage!


[1]Condominium Association of La Mer Estates, Inc. v. The Bank of New York Mellon Corporation, No. 4D13-17 (Fla. DCA February 19, 2014)

[2]Of interest to lawyers and layman alike, there is no rule against making an incorrect statement of law, fact or legal conclusion in a court pleading so long as it is not done in bad faith.  When one thinks about it, at least one of the party’s pleadings in every case is always (after the fact) determined to be incorrect on one of these points.

[3]The one year is significant because of under Rule 1.540(b) of the Florida Rules of Civil Procedure, a voidable judgment may not be attacked after it has been entered for more than a year.

[4]Malone v. Meres, 109 So. 677 (Fla. 1926)


*Grant Kehres is Board Certified by the Florida Bar Board of Legal Specialization as a Real Estate Law Specialist.  He holds a doctorate in jurisprudence from Vanderbilt University, an MBA (finance) from Babson College and a dual undergraduate degree in Investments and Economics from Babson College.  Admitted to The Florida Bar in 1978, he has handled more than 10,000 closings for more than 8,000 clients.  For more information on our services and what distinguishes our office from other law firms and title companies, call (561) 392-5200 or e-mail us at info@bocaclosings.com.

 


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TAX DEED PURCHASER BEATS HOMEOWNERS’ ASSOCIATION LIENS

by Grant W. Kehres* | Posted 01/10/2014

Some say you can’t beat the HOA unless you are the bank.  Lunohah Investments[1], decided by Florida’s Fifth District Court of Appeals on December 27, 2013, demonstrates that along with certain mortgage lenders there’s a new protected player in town.

Foreclosure

In 2007, the Florida legislature amended the Florida homeowners’ association statute to allow homeowners’ associations to impose liability on a parcel owner for all unpaid assessments due up to the time of transfer of title.[2]  In 2008, a safe harbor provision was added to the law that limited that liability for a first mortgagee who acquired title by foreclosure or deed in lieu of foreclosure to the lesser of twelve months of unpaid HOA fees or 1 percent of the original mortgage amount.[3]  Thanks to Lunohah Investments, LLC v. Gaskell, tax deed purchasers can now defeat the HOA for pre-tax deed assessments.

Lunohah Investments, LLC acquired title to a parcel of real estate by tax deed and initiated a suit to quiet title against the prior owner and two homeowners’ associations holding liens on the property for unpaid HOA assessments.  The HOA’s asserted that Lunohah remained liable for the HOA liens by virtue of Section 720.3085(2)(b), F.S. (2011) which imposes joint and several liability on a parcel owner for unpaid assessments that came due up to the time of transfer of title.  Lunohah countered that the lien and liability to pay the unpaid assessments were extinguished upon issuance of the tax deed by virtue of Sections 197.552 and 197.573(2), F.S. (2011) which provide that covenants creating any debt or lien upon property or requiring the grantee of the tax deed to expend money for any purpose do not survive the issuance of a tax deed.

The Court observed that the tax deed statutes preserve the validity of covenants that control the use of the property but extinguish all such covenants, upon issuance of the tax deed, to the extent they authorize a lien for unpaid assessments or require the grantee to expend money.  The HOA statute is a more general statute that imposes liability on any grantee for unpaid assessments without specific reference to the manner by which the grantee acquires title.  The Court held that when two statutes embrace the same subject and produce contradictory results, the law requires that the specific statute be given effect over the general statute.

From this case we learn the homeowners’ association statute that imposes joint and several liability on a parcel owner for unpaid assessments does not apply to a parcel owner that acquires title by tax deed.  As a practical matter, tax deed purchasers, who might have limited their interest in a property “encumbered” by a substantial unpaid HOA assessment no longer have to factor this into their bid.  Although this case addressed only the HOA statute, the result for a condominium association assessment would likely be similar.

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[1] Lunohah Investments, LLC v. Gaskell, No. 13-1175 (Fla. DCA December 27, 2013)

[2] Section 720.3085(2), F.S. (2007)

[3] Section 720.3085(2)(c), F.S. (2008)


*Grant Kehres is Board Certified by the Florida Bar Board of Legal Specialization as a Real Estate Law Specialist.  He holds a doctorate in jurisprudence from Vanderbilt University, an MBA (finance) from Babson College and a dual undergraduate degree in Investments and Economics from Babson College.  Admitted to The Florida Bar in 1978, he has handled more than 10,000 closings for more than 8,000 clients.  For more information on our services and what distinguishes our office from other law firms and title companies, call (561) 392-5200 or e-mail us at info@bocaclosings.com.

 


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TRUSTS AND FLORIDA HOMESTEAD: NOT WHAT THEY APPEAR TO BE!

by Grant W. Kehres* | Posted 02/28/2012

What can we learn from Aronson v. Aronson1?

Revocable living trusts are popular in Florida, suggested by many practitioners as the preferred way to a) avoid probate (it doesn’t always work…more on that in a future commentary), b) protect against creditors (also doesn’t work), and c) eliminate postmortem litigation between beneficiaries (didn’t work in this case!).  When funded with Florida homestead real estate, the case of Aronson v. Aronson decided by Florida’s Third District Court of Appeals this month demonstrates that living trusts can have unintended consequences, disappointing all but the attorneys who get paid to litigate the issues.

In 1996, Hillard Aronson, a resident of Massachusetts, created a revocable living trust and deeded his Florida condominium to the trust.  The plan of the trust was to provide the use of the trust assets for his wife for her life; and upon her death, the remainder to his children from a previous marriage. In addition, Mrs. Aronson had the right to require the trustees to annually distribute to her an additional 5% of the trust or $5,000, whichever was greater.2   Several years later, Mr. and Mrs. Aronson sold their Massachusetts home and permanently moved into the Florida condominium.  A year later, Mr. Aronson passed away.  At that time, the only asset in the trust was the condominium.

real_estate_pic4

The successor trustees, who were Mr. Aronson’s sons from a prior marriage, formulated a plan to sell the condominium so they could annually distribute the 5 by 5 appointments demanded by their step mother.

The Court held a) the condominium was the homestead of Mr. Aronson as of the time of his death, b) the homestead may not be devised if the owner is survived by a spouse or minor child, and c) this restriction on homestead applies equally to property held in a revocable trust.

Because the condominium was Mr. Aronson’s homestead and he was survived by his wife, the condominium was not subject to disposition through the trust.  At the moment of his death, Florida law reached into the trust, pulled the condominium out of the trust and passed it, outside of the trust to his wife for her life, with the remainder to his children, leaving the trust an empty shell and Mr. Aronson’s Massachusetts estate plan destroyed.

From this case we learn that a) Floridians with out-of-state estate plans should consult a Florida attorney to see if their estate plan documents achieve their objective under Florida law, b) Florida homestead property does not loose it’s character by placing it into a trust, and c) assets that are nominally in a trust are not necessarily in the trust!   Title to property that was once a decedent’s homestead may be vested in someone other than the apparent public record owner, an implication suggesting that if your title company or title attorney does not have a thorough understanding of Florida homestead and estate law, title to your home might not be as secure as your title insurance policy suggests.


*Grant Kehres is Board Certified by the Florida Bar Board of Legal Specialization as a Real Estate Law Specialist. He holds a doctorate in jurisprudence from Vanderbilt University, an MBA (finance) from Babson College and a dual undergraduate degree in investments and economics from Babson College. Admitted to The Florida Bar in 1978, he has handled nearly 10,000 closings for more than 6,000 clients. For more information on our services and what distinguishes our office from other law firms and title companies, call (561) 392-5200.

Posted 02-28-2012


1Aronson v. Aronson, — So.3d —, 2012 WL 280565 (Fla. 3d DCA February 1, 2012)

2Known as 5 by 5 powers, these rights are commonly found in certain estate planning documents.

 


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FLORIDA’S NEW POWER OF ATTORNEY ACT

by Grant W. Kehres* | Posted 11/03/2011

Effective October 1, 2011, the Florida legislature created the Florida Power of Attorney Act which established requirements for creating powers of attorney. Unless the new requirements are met, a power of attorney will be useless. Master these concepts and you will have a good handle on the new Act:

POWER-OF-ATTORNEY

  1. Powers of attorneys executed prior to October 1, 2011, if valid at the time of their execution, will remain valid after October 1, 2011.
  2. The Act applies to all powers, both durable and nondurable, except military powers of attorney and proxies.
  3. Powers executed after the effective date of the Act must be signed by the principal and by two subscribing witnesses and be acknowledged by the principal before a notary public.
  4. A power of attorney is suspended when a petition to determine the capacity of the principal has been filed; but the suspension is not effective if the agent acts in good faith and without knowledge of the suspension.
  5. A power of attorney is terminated when
    a) the purposes for the power is accomplished, or
    b) upon a date specified in the power of attorney, or
    c) if the principal revokes it or dies, or
    d) if a power is not durable, when the principal loses capacity, or
    e) if a power is durable, upon an adjudication of incapacity, or
    f) when the agent’s authority terminates and the power does not provide for an alternate agent.
  6. Springing powers are no longer authorized after the effective date of the Act, but those in existence prior to the effective date will continue to be recognized.
  7. Photocopies or electronically transmitted copies of an original power of attorney have the same effect as the original, but an original may still be required for public record recording on real estate transactions.
  8. An agent may not
    a) perform duties under a contract that requires personal services of the principal,
    b) make an affidavit as to the principal’s personal knowledge,
    c) vote on behalf of the principal in a public election,
    d) execute or revoke the principal’s will or codicil; or
    e) exercise powers or authority held by the principal in a fiduciary capacity.This last restriction is very important. It is very common for an agent holding a durable power of attorney to believe that he or she has authority to manage or transfer assets titled to the principal’s revocable trust. Only the acting trustee of the trust has authority over the trust assets, who may not necessarily be the agent.
  9. Certain banking and investment powers may be incorporated by reference. The banking powers are found in Section 709.2208(1), Florida Statues. The investment powers are found in Section 709.2208(2), Florida Statutes.
  10. The power to create, amend, modify or revoke any document or other disposition effective at the principal’s death or transfer assets to an existing trust created by the principal are considered “superpowers” and must be specifically authorized by the power of attorney, and the principal must sign or initial next to each specific enumeration of the authority.

Although the new Act has the greatest impact on estate planning, many of its provisions can be a trap that might otherwise hinder a successful real estate transaction or result in a title that is defective or uninsurable. I am happy to review your power of attorney before your real estate transaction or draft you a new one that qualifies under the Act.

Our office is committed to providing our clients and the real estate agents that work with us the assistance and experience needed to help them safely close their real estate transactions. For your real estate closing needs, we invite you to tap into our 34 years of Florida real estate law knowledge and experience.


*Grant Kehres is Board Certified by the Florida Bar Board of Legal Specialization as a Real Estate Law Specialist. He holds a doctorate in jurisprudence from Vanderbilt University, an MBA (finance) from Babson College and a dual undergraduate degree in investments and economics from Babson College. Admitted to The Florida Bar in 1978, he has handled nearly 10,000 closings for more than 6,000 clients. For more information on our services and what distinguishes our office from other law firms and title companies, call (561) 392-5200.

Posted 11-03-2011

New RESPA Amendments Affect Consumers and Real Estate Agents

by Grant W. Kehres* | Posted 11/01/2010

Since January 1, 2010, the public and real estate professionals have experienced significant changes in the Federal Real Estate Settlement Procedures Act (RESPA) which regulates every residential real estate transaction in the United States involving a federally related mortgage loan. The new rules are designed to protect consumers from unnecessarily high settlement costs by requiring disclosures related to mortgage settlement costs. The Federal department of Housing and Urban Development has revised the form of the required Good Faith Estimate and the HUD-1 Settlement Statement.

The GFE is now a three-page document. It must be provided to qualified borrowers within three business days of the borrower’s application. The focus on the new GFE is how much a charge for a settlement service may or may not change. If the charge exceeds the permissible or maximum amount, there is a tolerance violation. The lender has 30 days after the closing to correct the tolerance violation or risk facing fines and penalties for a RESPA violation.

The New HUD-1 consists of three pages, one more than the previously required version. The first page of the new HUD-1 is not significantly different from before. But page two and three are different in that page two ties the settlement charges into the GFE and page three provides a comparison chart between the estimated charges from the GFE to the actual charges, thereby testing whether there is a tolerance violation.

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The effect these new regulations will have on settlement charges remains unknown and whether or not the consumer will ultimately benefit. Some have suggested the new regulations will result in higher compliance costs, which will be passed on to the consumer, and greater lender-related closing delays. What is known is that there will be a substantial learning curve for real estate professionals who must use and explain these documents to the consuming public.

If you need help with the new RESPA, HUD and GFE rules, feel free to contact our office.


*Grant Kehres is Board Certified by the Florida Bar Board of Legal Specialization as a Real Estate Law Specialist. He holds a doctorate in jurisprudence from Vanderbilt University, an MBA (finance) from Babson College and a dual undergraduate degree in investments and economics from Babson College. Admitted to The Florida Bar in 1978, he has handled nearly 10,000 closings for more than 6,000 clients. For more information on our services and what distinguishes our office from other law firms and title companies, call (561) 392-5200.

Posted 11-01-2010

2010 FAR/BAR: ARE YOU READY?

by Grant W. Kehres* | Posted 09/28/2010

The 2010 version of the FAR/BAR contract has made its debut. A number of changes from previous FAR/BAR versions are noted, and there are some important points to keep in mind when drafting or responding to an offer involving this form, including:

• The Buyer is entitled to an automatic extension of the closing date (up to 7 days) to allow for Truth In Lending Act compliance.

• If the Buyer’s mortgage loan fails to fund due to the financial failure of the lender, the Buyer is excused from performance and receives the return of the deposit.

• The Buyer now bears the responsibility to determine during the inspection period if there are any open or expired building permits or unpermitted improvements.

• By definition, municipal lien searches are distinguished from open or expired building permit searches. In Miami-Dade and Broward counties, the Seller pays for the municipal lien search; but the contract is silent as to which party bears the responsibility in other counties.

• Buyers may cancel the contract within 20 days of the Effective Date if the property is in a Special Flood Hazard Area or Coastal High Hazard Area.

• Disputes must be first submitted to mediation. The mediator must be certified or must have experience in the real estate industry. If the dispute is not resolved through mediation, only then may it be pursued in court.

• Real estate brokers now enjoy a limited hold harmless and indemnity for a number of common transactional problems, including misstatements made by either of the parties and inaccurate information in the public records.

Every transaction and every client is unique, so if you need help with the new FAR/BAR contract, feel free to contact our office. We are committed to providing the assistance needed to custom modify the new form contract whenever necessary to meet our client’s unique and special needs.


*Grant Kehres is Board Certified by the Florida Bar Board of Legal Specialization as a Real Estate Law Specialist. He holds a doctorate in jurisprudence from Vanderbilt University, an MBA (finance) from Babson College and a dual undergraduate degree in investments and economics from Babson College. Admitted to The Florida Bar in 1978, he has handled nearly 10,000 closings for more than 6,000 clients. For more information on our services and what distinguishes our office from other law firms and title companies, call (561) 392-5200.

Posted 09-28-2010

Refinancing: Whom Can You Trust?

by Grant W. Kehres* | Posted 09/18/2010

A great article appeared in this weekend’s edition of The Wall Street Journal that concludes the refinance tools on most banks, mortgage broker and “lead generator” websites are filled with conflicts of interest or simplistic formulas that lead to refinance sooner and at higher cost than optimal for their prospective customers. (See Real Estate Myth #4)

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These websites typically take a simplistic approach, apply rules of thumb, and fail to consider the factors that make you an individual, such as your tax rate, inflation expectations, how long you plan to live in the house and the opportunity cost of paying closing costs rather than investing in stock, bonds or other investments. Their “one size fits all” approach often leads to refinance prematurely at higher rates than you might otherwise if a more sophisticated analysis were applied.

The best refinance calculator appears to have been devised by two economists from the Federal Reserve and one from Harvard University, professor David Laibson. Their analysis is based upon a formula using stochastic calculus and takes into account loan size, your marginal income tax rate, the expected inflation rate over the life of the loan, how long you intend to remain in the house and other sophisticated factors.

Stochastic calculus not your strong suit? For an unbiased analysis of whether or not its time to refinance, call our office for a free analysis of your situation. We’ve never been owned or controlled by any bank, mortgage broker or real estate company. For more than 32 years, the independence of our office and our fiduciary duty to our clients has been putting your best interests first.

Posted 09-18-2010