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Lost Mortgage Docs

April 7, 2016/in Real Estate Law /by CCLM Law

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: What happens if the lender trying to foreclose cannot produce the original loan documents?

A: In February, the appeals court governing our region of the state ruled against a mortgage company trying to “reestablish” a lost promissory note.* Because debt is often sold several times, national banks have cumbersome files, or otherwise, lenders lose with surprising frequency the original promissory note that creates evidence of the mortgage debt. The loss of that note creates a hurdle to the lender proving it is owed anything, but the greater concern is that the current owner of the note is the only one who can enforce it. So, if a transfer of the note occurred, the original owner of the note does not have the right to collect. If the note is “endorsed in blank”, even without a formal transfer, whoever is in possession of the note may be able to enforce and collect upon it. Courts do not want to enter, and homeowners do not want to endure, a foreclosure judgment only to find someone else holds the note and claims that the full amount of the note is still due.

To avoid such a scenario, but to prevent banks from losing out on repayment of the loan, the Florida legislature has created a process that allows the bank to “reestablish” a lost note. Not surprisingly, the bank must prove the existence and right to enforce the debt. A bank might try to comply with a combination of the mortgage, other closing documents, and repayment history. A bank also has to provide a lost note affidavit, which, among other things, swears to the fact that the note has not been transferred.

The subject of the court case mentioned above, however, was adequate protection. The court must evaluate what reasonable means will avoid or protect the homeowner in the scenario where someone else pops up claiming a right to sue under the promissory note. The statute does not provide specific guidance on what is reasonable or adequate, and in fact it appears from the case law that a court could make the finding that no protection is needed under the circumstances. The problem in the recent appeal was that the court did not address the issue at all. A court might require a written indemnification agreement in the final judgment, a posted bond, a letter of credit, or some other security.

These issues should be considered and addressed if you face a lawsuit where the foreclosing lender has failed to produce the original loan documents.

The April 21^st edition of “The Law” will discuss the appointment process and role of state and federal Supreme Court justices.

Questions can be submitted online to thelaw@clarkcampbell-law.com

* The recent case discussed above is Blitch v. Freedom Mortgage Corporation, with an opinion filed by the Second District Court of Appeal on February 5, 2016. The case was remanded for the trial court to address the issue of adequate protection.

Foreign Investment in Real Property Tax Act

March 24, 2016/in Blog, Real Estate Law /by CCLM Law

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: I am interested in purchasing property owned by a foreign person. What do I need to know?

A: During the past few years, there has been an influx of foreign investors from Canada, Europe, and South America purchasing property in Florida. While purchasing property in Florida can be a wise investment for a foreign person, anybody buying property from a foreign person should proceed with caution.

The Foreign Investment in Real Property Tax Act (FIRPTA) was enacted by Congress in 1980 to require foreign persons pay taxes on gains when selling property located in the United States.

Under FIRPTA, the buyer, and not the foreign seller, is required to withhold a certain percentage of the purchase price at closing and remit that amount to the Internal Revenue Service shortly after the closing. In most closings, the buyer usually enlists the services of the attorney handling the closing to handle the withholding and remit the withholding along with certain required forms directly to the IRS on behalf of the buyer.

FIRPTA does not apply to a resident alien if the resident alien meets what is known as the “Green Card Test,” which, as the name implies, requires the foreign person possess a Green Card, or the “Substantial Presence Test,” which requires determining how long the foreign person has been present in the U.S. over a certain period of time prior to the closing.

A foreign person includes a nonresident alien, foreign corporation, foreign partnership, foreign trust, foreign estate, and any other person that is not a U.S. person.

Recently some changes have been made to FIRPTA, and effective February 16, 2016, in some cases, the standard 10% withholding amount has been increased to 15%.

Most types of U.S. income received by a foreign person are subject to a federal tax of 30%, but a reduced rate or exemption may apply if there is a tax treaty between the foreign person’s country of residence and the U.S. If the amount withheld exceeds the amount eventually due from the foreign person, the foreign person may obtain a refund from the IRS.

In some cases, if the buyer intends to use the property as the buyer’s personal residence, no withholding is necessary. However, a buyer should beware of any foreign seller who is pressuring the buyer to claim the personal residence exception in order to avoid withholding if that is simply not true. Under FIRPTA, the buyer’s liability can be up to the amount of tax to be withheld plus interest. Furthermore, if the buyer willfully fails to withhold or notify the IRS, the buyer commits a felony and could face imprisonment up to five years and a $10,000 fine.
If you plan to purchase property owned by a foreign person, make sure the attorney handling the closing is familiar with FIRPTA, asks all of the right questions, and handles the withholding aspect if necessary.

The April 7^th edition of “The Law” will discuss how courts are handling foreclosures when banks lose the original mortgage documents.

Overtime Law

March 10, 2016/in Blog, Corporate Law /by Dan Rich

By: Dan Rich
Clark, Campbell, Lancaster & Munson, P.A.

Q: What impact will proposed federal overtime changes have on me?

A: In the summer of 2015, the Department of Labor proposed and began taking comments on widespread changes to federal overtime laws. The Department of Labor has until July of this year to issue a final rule. The proposed rule would raise the income level at which employees can automatically qualify for overtime eligibility and marks the first time the government has drastically addressed this issue since 1975.

Currently, employees who automatically qualify for overtime pay are those earning $23,660 or less and any others who do not fall within the so-called “white-collar exemption.” The white-collar exemption provides that salaried workers who fall above the current limit are entitled to overtime pay only if they are not classified as administrators, executives, or professionals. Statistically, the current $23,660 overtime limit figure covers less than 8% of full-time salaried employees and falls below the poverty level for a family of four.

The new rule would mandate that all salaried employees, regardless of title or duties, are eligible for overtime if they earn $50,440 or less. The Department of Labor estimates that approximately 4.6 million employees who are currently exempt would receive overtime protection under the new law. The Obama administration proclaims that the new limit is necessary in order to compete with inflation, which has increased while the overtime threshold has remained the same.

Opponents of the law say that it will lead employers to, among other things, reclassify salaried workers as hourly employees or cut employee wages and bonuses or reduce hours to avoid paying overtime. But the biggest criticism is that the new overtime law will hurt small and mid-sized business who will struggle to absorb the increased labor costs.

Proponents of the change say that raising the salary threshold will help give employees more power and flexibility over their labor and fairer compensation for their increased productivity. Supporters also allege that the proposed overtime threshold change will increase employment, not decrease it, because employers are likely to add jobs or spread hours to underemployed workers to avoid paying overtime wages.

Putting both arguments aside, one thing is clear: raising the overtime threshold for automatic coverage would mean that earning overtime would no longer be contingent on what kind of work or the label your boss gives you. Regardless of title or duties, all employees earning a salary of $50,440 or less would potentially now be entitled to overtime compensation.

The March 24^th edition of “The Law” will discuss potential pitfalls of buying property from foreign persons.

Dan Rich is an associate attorney with the law firm Clark, Campbell, Lancaster & Munson, P.A. Questions can be submitted online to thelaw@clarkcampbell-law.com

Construction Defects Damage

February 25, 2016/in Blog, Real Estate Law /by CCLM Law

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: How much can I recover from construction defects in my home?

A: Construction defects commonly arise from a contract relationship between a homeowner and builder. Florida law regarding contracts generally allows a person harmed by poor performance to choose between getting his money back while returning or subtracting any valuable benefit that he actually received (sometimes called “going pre-contract”) or obtaining the expected benefit or value of the contract (sometimes called “going post-contract”). An example of going pre-contract is when you buy a lemon of a car and obtain a refund for what you paid in exchange for giving the car back to the seller.

For construction defect cases, you are often better off going post-contract so that you can get the project completed and enjoy your home. For example, if a contractor leaves you with a leaky sink, you typically just want the sink fixed. This would be going post-contract. So, under Florida law for construction defects, a homeowner can sue and get a judgment against the contractor for the reasonable cost of construction and completion according to the original deal.

But what if a defect causes the house to be practically worthless? That is what happened to Angela Gray of Hillsborough County, who represented herself in a case that led to a jury verdict in her favor of $168,000 (the construction price for the entire house). But the judge knocked the verdict down to $16,000, which was the price that the homeowner paid for the replacement of a balcony, apparently because the homeowner had not shown any other concrete amounts paid or damages sustained from the leaky and rotting house. In an appeal, this time with Ms. Gray having retained the assistance of an attorney, the jury’s verdict was reinstated, because the jury could have reasonably concluded from the testimony of a general contractor (not the original builder), a real estate agent, and a structural engineer that the house was better bulldozed than repaired. The homeowner did not even have to attempt to prove the cost to repair. Instead, where construction and completion according to the original deal would be economically wasteful, the homeowner could seek and get a judgment for the difference between the value of the product sought and the value of the performance received. As the performance received was worthless according to the jury, it is reasonable to say that the construction price was roughly the value of the performance Ms. Gray expected to receive.

This construction defect case is unique not just because there was a determination that a homeowner received a worthless house, but also because there was no need for extensive evidence on the value of performance received or the cost to remedy. Most construction defect cases benefit from having the right legal counsel and expert testimony to establish damages with relative certainty.

The March 10^th edition of “The Law” will discuss proposed changes that could provide more workers with rights to overtime pay.

Questions can be submitted online to thelaw@clarkcampbell-law.com

Emotional Support Animals

January 28, 2016/in Animal Law, Blog /by Dan Rich

By: Dan Rich
Clark, Campbell, Lancaster & Munson, P.A.

Q: What is an emotional support animal, and how does it differ from a service animal?

A: Have you ever walked into a restaurant to see a teacup Chihuahua locking eyes with you from across the room? If so, you probably were wondering how this precious little guy’s owner was able to bring an animal into an eating establishment. It may be because this Chihuahua has been labelled as his owner’s emotional support animal, or “ESA”. Americans commonly treat their pets as another member of the family. But while most keep their pets at home, some bring their pets everywhere they go, including local businesses.

While ESAs are recognized under federal law, they do not have unfettered access. Federal law currently requires accommodations for ESAs in housing decisions and when traveling on an airplane. A claim that an ESA has a right to be in a public place is misguided, because an ESA differs from a service animal. A service animal is “individually trained to do work or perform tasks for the benefit of an individual with a disability,” whereas an ESA “provides a therapeutic benefit to an individual with a mental disability.” Under federal law, a service animal is permitted to go anywhere, including public places.

When a business is faced with a pet owner attempting to make reservations for himself and his dog, the business must quickly decide whether it is dealing with a service animal or an ESA. To help decide, the law permits the business to ask the following, and only the following, two questions:

Whether the animal is required because of a disability; and
What “work or task” the animal has been trained to perform.

Under Florida law, if access is denied and the animal was in fact a service animal, a public establishment can face criminal penalties. Most businesses prudently open the floodgates to most pets with legally sufficient answers to the above questions, because doing so is safer then facing criminal prosecution.

While emotional support from an animal can be a wonderful and necessary thing, it causes a rift among the service animal community. Mislabeled ESAs can be disruptive and disobedient, in turn stigmatizing service animals and their disabled owners.

Affected businesses should consider investing resources to train their employees to properly address requests for animal accommodation.

The February 11th edition of “The Law” will discuss the tax benefits of a 1031 exchange when buying and selling real estate.

Dan Rich is an attorney with the Lakeland law firm Clark, Campbell, Lancaster & Munson, P.A. Questions can be submitted online to thelaw@clarkcampbell-law.com.

REEP Credit

January 13, 2016/in Blog, Tax Law /by Justin Callaham

By: Justin P. Callaham, LL.M.
Clark, Campbell, Lancaster & Munson, P.A.

Q: Planning ahead for my 2016 taxes, can I get tax credits or deductions for installing energy efficient products in my home?

A: Yes, at least two federal tax credits are available for such installations during 2016. The federal Protecting Americans from Tax Hikes Act of 2015 extended the Residential Energy Efficient Property (“REEP”) credit through 2021. The REEP credit is equal to 30% of all qualified solar electric and solar water heating property expenditures made during the year. Solar electric expenditures are incurred purchasing or installing devices using solar power to generate household electricity. Solar water heating expenditures require that the device heats water used in your home and derives at least half of its energy from the sun. For example, if during 2016 you pay $6,000 to purchase and install solar panels at your home and an additional $4,000 for a pool heater deriving at least half of its energy from the sun, you would be entitled to a $3,000 (or 30% of the $10,000 total expense) REEP credit against your 2016 federal income taxes. To receive the full benefit of the REEP credit program, you must make the qualified expenditures before the end of 2019, as the applicable credit will be reduced to 26% in 2020 and 22% in 2021.

In addition to the REEP credit, Congress also extended the non-business energy property credit. Under that program, you will receive a credit equal to 10% of all amounts paid for qualified energy efficient improvements, which can include insulation, exterior windows, skylights, exterior doors, and certain roofs. To qualify, the improvements must meet or exceed Version 6.0 of the Energy Star program requirements set by the Environmental Protection Agency. Generally, a product’s packaging will list their Energy Star rating. This credit is nonrefundable and cannot exceed $500 during all taxable periods, and no more than $200 of the credit may be attributable to windows. This credit was retroactively extended, meaning that you also receive a credit for qualifying expenditures made during 2015.

The January 28th edition of “The Law” will discuss so-called “emotional support animals”.

Justin Callaham is an attorney with the Lakeland law firm Clark, Campbell, Lancaster & Munson, P.A. Questions can be submitted online to thelaw@clarkcampbell-law.com.

Federal Tax Liens

December 31, 2015/in Blog, Tax Law /by CCLM Law

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: The IRS has filed a tax lien against me, and I would like to sell my home. What should I do?

A: If a person does not pay his taxes, the IRS will usually record a Notice of Federal Tax Lien in the public records of the county in which the taxpayer resides. The Notice creates a lien against any property owned by the taxpayer in that county. The Notice is valid for 10 years and 30 days after the tax is assessed unless the IRS re-records the lien in the public records or the statutory period for collection has been extended. After that period expires, the federal tax lien is “self-released.”

While the lien is in effect, the taxpayer has a few options to address the Notice of Federal Tax Lien. The first option would be to pay off the taxes owed and receive a Certificate of Release of Federal Tax Lien.

The second option would be to request from the IRS provide a “property-specific” release by a Certificate of Discharge of Property from Federal Tax Lien. This option is feasible in a short sale in which the seller will take no net proceeds at closing. But if the taxpayer takes title to the property after the Certificate of Discharge of Property from Federal Tax Lien is issued, the Certificate becomes void. This prevents the taxpayer from fraudulently obtaining a discharge, typically by conveying the taxpayer’s home to a friendly third party and then having the third party convey the property back to the taxpayer free from the federal tax lien.

The IRS may also withdraw the Notice of Federal Tax Lien based upon various grounds such as if the filing of the Notice was premature or otherwise not in accordance with administrative procedures, or if the IRS and the taxpayer enter into an installment payment plan.

Unlike most debts, a federal tax lien can be enforced against homestead property, and a federal tax lien against one spouse can be enforced against that spouse’s interest in the property both during and after that spouse’s lifetime.

If you are confronted with a federal tax lien and would like to sell your home, it may be wise to consult with an attorney to help you navigate through the issues to ensure your interests are protected and your closing goes smoothly.

The January 14^th edition of “The Law” will focus on planning ahead for your 2016 taxes.

Selective Enforcement

December 17, 2015/in Blog, Real Estate Law /by CCLM Law

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: Is it important for homeowners associations to consistently enforce restrictive covenants and association bylaws and rules, especially when such covenants or rules are no longer desirable?

A: Homeowners associations and other “deed restricted” developments are communities with restrictive covenants and rules regarding use of property within the community. Generally, within these communities, an association is created with authority to enforce these restrictive covenants. If you live in a deed restricted community, and you would like to build a fence around your house, but the restrictive covenants prohibit construction of a fence, then even though it is your property, you cannot, excluding certain exceptions, construct a fence.

However, what happens if the association fails or selectively enforces its rules? The association consists of the property owners within the community, and its board consists of elected owners. Generally, these individuals are not attorneys with expansive knowledge of Florida law, or even their own declaration of covenants. Further, as time goes on, communities change, and restrictive covenants or rules that were desirable when the community was formed are no longer wanted or needed. As such, a community’s restrictive covenants, whether intentionally or otherwise, are oftentimes not enforced, or if they are, only sporadically and selectively.

While it may be tempting to ignore certain restrictive covenants, or provide exceptions to the same, associations should resist such actions. If an association fails to enforce a restrictive covenant, or if it enforces it only against certain owners, such restrictive covenant may become unenforceable. Therefore, if an association permits one property owner to build a cosmetically appealing fence in violation of the restrictive covenants, it may be prohibited from preventing another homeowner from constructing a fence that is much less appealing.

If there are certain restrictive covenants or rules that the association and its property owners no longer want to enforce, or at the very least want to lessen such rule’s restrictions, the better avenue, as opposed to simply ignoring these rules, is to amend the community’s covenants to reflect the desires of its owners. This will allow the association to continue to enforce its rules, while amending the rules to better conform to expectations and desires of property owners. Therefore, if a community desires to allow fences, but wants to limit types and dimensions of such fences, the association should amend its restrictive covenants to allow fences, and specifically provide for the types and dimensions of fences that are permitted.

The December 31st edition of “The Law” will discuss federal tax liens and their effect on the sale of real estate.

Quasi Public Records

November 19, 2015/in Blog, Litigation /by CCLM Law

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: When can private entities working in concert with the government be subject to public records requests?

A: A Florida appellate court recently reversed a trial court’s ruling that the Space Coast’s Economic Development Commission is subject to public records laws. Florida has made great strides to bring the government “into the sunshine” with rules that sweep even certain casual encounters between government officials into the “open meetings” category and pull certain semi-private entities into public scrutiny. The Attorney General’s Office has spoken as to economic “councils” being within the purview of public records laws when they serve, as they generally do, an advisory role to the government.

It therefore surprised some when the appellate court reopened the question as to whether an economic development commission must respond to public records requests. The real reason for reversal was that the trial court applied the wrong test. The trial court used a “delegation of functions” test to determine that economic development activities having been delegated to the commission made it as though the commission was stepping into the shoes of the government. Where there is clear and complete delegation of function, the court said, the private agency is subject to public records laws. The appellate court did not reject that test but said that the test was misapplied, because the commission was left without some economic development functions, such as job training, and could not make binding decisions on tax incentives and abatements.

Absent complete delegation of function, the appellate court held that a “totality of factors” test applied. Factors include public funding (in this case, about half of the entity’s budget), commingling of public and private funds, conducting of business on public property, whether the services are integral to governmental decision-making, performance of a function the government would otherwise perform, extent of governmental control over the entity, creation of the entity by the government, substantial financial interest in the entity by the government, and operation of the entity for the public’s or government’s benefit. Undoubtedly, some of these factors appear to weigh in favor of treating an economic development commission as public enough to respond to public records requests. But the fact that the commission at issue received substantial investor funding, sat dozens of investors and few governmental appointees on its board and committees, and lacked final decision-making power for much of its advisory role made the appellate court question whether the public records laws applied. Absent a rehearing or another appeal, the trial court will now have to apply the totality of factors test to determine whether the commission is public enough.

When a quasi-public entity refuses your requests for public records, it is important to conduct an investigation, often with the assistance of an attorney, as to whether there is a good argument that the refusal is unwarranted, in which case you could have remedies to pursue in court.

The December 3^rd edition of “The Law” will cover end of year tax tips.

Questions can be submitted online to thelaw@clarkcampbell-law.com.

What is a Land Trust

November 5, 2015/in Blog, Real Estate Law /by CCLM Law

By: Clark, Campbell, Lancaster & Munson, P.A.

Q: Should I use a land trust when purchasing property?

A: Land trusts first appeared in the United States in Illinois in the 1890s. Land trusts were codified in Florida law in 1963. During the past few decades, land trusts have grown in popularity among real estate investors purchasing property.

A Land Trust Agreement creates a land trust and vests title to real property in a trustee by a publicly recorded Deed conferring on the trustee certain powers and authority.

The buyer is the beneficiary of the land trust and chooses the trustee. Usually the buyer’s close friend, family member, business associate, or attorney serves as the trustee. Pursuant to the Land Trust Agreement, the beneficiary retains the power of direction to instruct and direct the trustee to act in accordance with the beneficiary’s wishes, and the trustee serves in a ministerial capacity.

A buyer may choose to use a land trust to keep his name out of the public records. The Land Trust Agreement can be kept confidential and prohibit the trustee from disclosing the details of the Land Trust Agreement without the beneficiary’s consent or court order.

In a land trust, the interest of the beneficiary is usually treated as personal property. This allows for easier transfer of the beneficiary’s interest by way of an Assignment of Beneficial Interest without the need for witnesses and public recording of a Deed.

A buyer may choose to use a land trust for liability avoidance reasons as well. According to law, the beneficiary of a land trust, solely by being a beneficiary, is not personally liable for any judgment, decree, or court order for a debt, obligation, or liability of the land trust.

If there are multiple buyers or a group of investors, each buyer or investor may own a percentage of the beneficial interest in the land trust property, and beneficiaries may own their interests as tenants in common, joint tenants with right of survivorship, or tenants by the entireties (i.e., husband and wife). Corporations, limited liability companies, and limited partnerships may also be beneficiaries under a Land Trust Agreement. In the event there are multiple beneficiaries, a Beneficiary Agreement should be implemented to govern the relationship among the beneficiaries in the event there is a disagreement or a beneficiary passes away.

The November 19^th edition of “The Law” will review the standards and recent case law regarding whether private entities that work in concert with the government are subject to public records laws.