Showing posts with label legal. Show all posts
Showing posts with label legal. Show all posts

Monday, September 6, 2010

Legal Issues Landlords Should Consider, to Avoid Lawsuits and Prevent Liability

By R. Brooks Whitehead, JD-MBA, Esq., The Burton Law Firm

Whether you are a seasoned Landlord, or looking to lease your property for the first time, you know it is important to stay up to date on legal issues affecting your rental. However, it is likely that some duties, obligations, and strategies will escape you, even when you try your best to stay current. Even lawyers will acknowledge that the sheer amount of information to learn, know, and retain can be intimidating. Rather than explore one topic in depth, this article will discuss a broad range of legal issues you may want to consider at different stages of the rental process.

Stage 1: Prepping the Property for Rent

So you have a house, condo, or other property – let’s put it on the rental market! Not so fast. There is actually a lot to consider before even listing your property. Do you have adequate insurance? Not just fire and casualty, but depending on the area, flood insurance may be advisable. Is the structure up to code, including those do-it-yourself projects you completed last summer? There is no better way to have your renter rightfully refuse to pay their rent than habitability issues. Have you had your home screened for asbestos or other hazardous materials? Nothing says “landlord liability” like toxic materials used in the construction of homes. In conclusion, make sure to cover your bases before actually putting the property up for rent – it can literally be a lifesaver.

Stage 2: Getting a Tenant

Now that the property is ready to go, should you lease to the first person to call? No – not a good strategy. Even though you may be anxious to get a lease signed and see those rent checks coming in, nothing will cause you bigger headaches than renting to a problematic tenant. It is important to select your new tenant only after a thorough screening process that includes a detailed questionnaire and background check. Make sure to hit important points such as credit, eviction reports, rental history, income, etc. At the same time, be sure to familiarize yourself with the requirements of the Fair Housing Act (and similar laws) to ensure that you do not step on the rights of potential tenants. In addition, make sure you have an appropriate lease agreement that is fair, but protective of your rights. If that sounds like a lot to know and do, that’s because it is. Involving an attorney or hiring a professional property management company may be a better route for those without the time, background, or desire to handle the selection and sign-up process.

Stage 3: During the Lease

If you have gone with a property management company, sit back and watch the professionals work. However, if you’ve decided to go it alone, there are some things you should know and consider. First, your tenant has legally enforceable property rights, including the right of quiet use and enjoyment of the premises. Translation: do not pop over unannounced for Sunday brunch, even if you bring the mimosas. Second, the government has enforceable rights against your property if your tenant is performing illegal acts on the premises. This can include seizure of the rental for sale at auction. Translation: check up every so often on the property, provided that you’ve given proper notice. Third, if the place needs repairs, arrange for them to be made in a timely manner by an experienced and insured independent contractor. Translation: it may be cheap in the short-term to have your cousin do electrical work, but the legal bills will stack up if something goes wrong.

Stage 4: Life After the Lease

So you have come to the point where your tenant’s lease is up and that security deposit is looking awfully attractive – don’t touch it just yet! Make sure that any charges you make against the deposit are proper, that those deductions are itemized and provided to your tenant, and that you cut your tenant a remainder check within the legally required timeline. If your tenant is refusing to leave, or is behind in rent, make sure to strictly follow all unlawful detainer procedures (definitely a time to consult your legal counsel or rely on the expertise of your property manager). Be aware that special laws apply if your tenant has filed bankruptcy – an unfortunate scenario that more and more Landlords may face while the economy still struggles.

Stage 5: Bonus Round

For those of you looking for some more in-depth advice on more complicated issues, your best bet is to consult an attorney, CPA, or both. They will be able to guide you through the mine field. For now consider these bonus points: (1) If you are not actively involved in the management of the property, special “passive activity” tax rules may apply, which affect your ability to write off losses on your rental, (2) If you are mildly concerned with asset protection, or you intend to acquire multiple rentals, you may want to consider creating a “blind trust” for purchasing your properties that provides privacy and some creditor protection. (3) If you are very concerned with strong asset protection, consider a limited liability company (LLC) that will minimize your personal liability in the event of a judgment against you and can play into your estate planning goals.

Conclusion: The issues discussed in this article may sound daunting, but they are all manageable provided you stay involved, informed, and vigilant. However, if any questions or uncertainties arise, you can rarely go wrong with consulting a professional.

Reviewing Your Estate Plan

By Thomas D. Reid, JD, The Burton Law Firm

While many individuals have created an estate plan to protect their family and assets, it is advisable to review an estate plan periodically to ensure one’s needs and wishes will be met upon one’s passing.

Although an estate plan is designed to take care of one’s wishes, certain provisions of the plan may need updating or review to ensure the plan’s effectiveness. Whether one’s appointed representatives have passed away, a change in family relationship, such as a divorce, has occurred, or the birth of a child or grandchild takes place, it is crucial that these provisions are reviewed periodically to ensure the updates in a person’s life are reflected in their estate plan.

There is no set time during which an estate plan review should be conducted. However, it is advisable to review one’s plan when a major change occurs in one’s life, or alternatively, every three years. Failure to review an estate plan regularly can result in, among other things, an agent serving the estate that has fallen out of favor with the Settlor, distributions of the estate against the Settlor’s intent and wishes, contingent guardianship of a newborn not being established, or assets left outside of the trust requiring the courts to probate the estate to change title to the assets.

Our firm is dedicated to ensuring that our clients’ estate planning needs and wishes are met at all times. As such, we ask that if you or anyone you know would like to review your estate plan, give us a call to set up an appointment to meet with our attorneys to ensure you and your family are protected.

For a more in-depth review of this subject, please see: www.lawburton.com news/resources.

The Burton Law Firm
555 University Avenue, Suite #275
Sacramento, CA 95825
Phone: (916) 570-2740 Fax: (916) 570-2744
www.lawburton.com
info@lawburton.com

Sunday, May 18, 2008

Tenancies in Common for Today’s Real Estate Investor

By The Burton Law Firm

This article is for informational purposes only. Nothing in this article should be understood as legal advice, and no attorney-client relationship is created by it or the information it contains. Consult with a licensed attorney if you require assistance in a legal matter. This article is protected by United States copyright law and may not be reproduced, distributed, transmitted, displayed, published or broadcast without the prior written permission of The Burton Law Firm. You may not alter or remove any trademark, copyright or other notice from copies of the content.

The tenancy in common (TIC) can be a very useful form of co-ownership. Tenancies in common are the “default” form of joint property ownership in California, so if the title documents do not specify a different form of joint ownership, it is generally presumed that a tenancy in common exists. However, a person who owns land outright may create a TIC in order to pass the property to another person for estate planning purposes.

Features of Tenancies in Common


A tenancy in common is one way of taking title to real property. In a TIC, multiple owners each hold title to an undivided interest in the whole property. Each owner has a right to use and enjoy the entire property. So if one owner holds 1% of the entire title, that owner may utilize the entire property for his business. However, that owner may not destroy or ruin the value of the land or its utility for other co-owners. If he or she does so, that owner may be liable to the other co-owners. Tenants in common do not have a right of survivorship with one another. Thus, if one co-tenant dies, the deceased co-tenant’s interest passes by testamentary instrument or operation of law to the co-tenant’s beneficiaries or heirs. The other co-tenants do not automatically acquire the interest, as would occur in a joint tenancy with right of survivorship.

TICs in Estate Planning

TICs can be used as an estate planning device. In this context, TICs let a donor transfer a low-value interest in high-value property to another person during the donor’s lifetime. With careful planning, this can reduce the donor’s taxable estate at death while minimizing gift tax consequences during life.

The TIC works in the following manner. The donor already owns a piece of property and wants to pass it on, usually to a family member. The donor would give a tenancy in common interest to a new owner (the donee). A tenancy in common interest is not as valuable as a fee simple interest in the entire property due to the reduced marketability of the interest, the limited freedom of use of the property, and potential limitations on transferring the interest to a third party. By creating a tenancy in common interest valued under the annual gift tax exclusion amount, the donor may transfer the TIC interest without incurring gift taxes. And since the value of the gift is lower than the value of the piece of property actually transferred, the donor is removing a large portion. Therefore, the donor transfers a low-value interest in a high-value property.

For a rough example, assume that D wants to transfer a TIC interest in real property to D’s grandchildren. The property is worth $250,000. D creates ten TIC interests, one for each grandchild, and ensures that each interest has a discounted value equal to the annual gift tax exclusion amount ($12,000 in 2007). D gives all ten interests to the grandchildren, which totals $120,000 in gifts. But due to the devaluation of TIC interests, the ten TIC interests actually dispose of a much higher value of property, perhaps around $180,000. Therefore, D has reduced his taxable estate by $180,000 while only making $120,000 in gifts and not incurring any gift tax. Using the TIC has allowed the donor to pass on property which has been assigned a greatly discounted value.

There are some disadvantages to using a TIC, however. First, the donor gives up control over the portion of the property transferred as a TIC interest. If the donor desires the interest back, he or she must purchase it from the donee. Second, once the donee receives his or her interest, the donee is free to treat the property as the donee sees fit. The donee could use the property for a purpose not intended or even contemplated by the donor. Third, the donee is free to transfer the TIC interest to a third party. This could prove a rude surprise for the donor, who no longer is dealing with a trusted donee, and instead must now deal with a complete stranger. Fourth, the donee could sue for partition of the property and a court could order that the property be either physically separated, with each co-tenant receiving his or her share and dissolving the tenancy, or that the property be sold and the proceeds divided according to the respective interests of the co-tenants. Finally, the donor may recognize taxable gain on the value of the property transferred to the donee, and thus gift taxes may be owed. However, by utilizing the annual gift tax exclusion amount, this need not be of great concern to the donor.

Conclusion

You should speak with an attorney before creating a tenancy in common to serve your tax or estate planning legal needs. Although a TIC might be right for your situation, other legal options will often provide greater flexibility for you and your family while still meeting your planning objectives.


For a more in depth review of this subject, please see: www.lawburton.com, news/resources.

The Burton Law Firm
555 University Avenue, Suite #275
Sacramento, CA 95825
Phone: (916) 570-2740 Fax: (916) 570-2744
www.lawburton.com
info@lawburton.com

Disability Guidelines - Part 2 (Who must comply and who does and does not qualify as disabled)

In our last article we began discussion of the May 17, 2007 Department of Justice disability guidelines. The new guidelines state that “Any person or entity engaging in prohibited conduct – i.e., refusing to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford a person with a disability an equal opportunity to use and enjoy a dwelling – may be held liable unless they fall within an exception to the Act’s coverage. Courts have applied the Act to individuals, corporations, associations and others involved in the provision of housing and residential lending, including property owners, housing managers, homeowners and condominium associations and others involved in the provision of housing and residential lending, including property owners, housing managers, homeowners and condominium associations, lenders, real estate agents, and brokerage services. Courts have also applied the Act to state and local governments.
Under specific exceptions to the Fair Housing Act, the reasonable accommodation requirements of the Act do not apply to a private individual owner who sells his own home so long as he (1) does not own more than three single-family homes; (2) does not use a real estate agent and does not employ any discriminatory advertising or notices; (3) has not engaged in a similar sale of a home within a 24-month period; and (4) is not in the business of selling or renting dwellings. The reasonable accommodation requirements of the Fair Housing Act also do not apply to owner-occupied buildings that have four or fewer dwelling units.”

Who qualifies as a “person with disability”

In the new guidelines it states that “The Act defines a person with a disability to include (1) individuals with a physical or mental impairment that substantially limits one or more major life activities; (2) individuals who are regarded as having such an impairment; and (3) individuals with a record of such an impairment.
The term ‘physical impairment’ includes, but is not limited to, such diseases and conditions as orthopedic, visual, speech and hearing impairments, cerebral palsy, autism, epilepsy, muscular dystrophy, multiple sclerosis, cancer, heart disease, diabetes, Human Immunodeficiency Virus infection, mental retardation, emotional illness, drug addiction (other than addiction caused by current, illegal use of a controlled substance) and alcoholism.
The term ‘substantially limits’ suggests that the limitation is ‘significant’ or ‘to large decree.’
The term ‘major life activity’ means those activities that are of central importance to daily life, such as seeing, hearing, walking, breathing, performing manual tasks, caring for one’s self, learning and speaking. This list of major life activities is not exhaustive.”

Who does not qualify

The Act states that “juvenile offenders, sex offenders, by virtue of their status, are not persons with disabilities protected by the Act. Similarly, while the Act does protect persons who are recovering from substance abuse, it does not protect persons who are currently engaging in the current illegal use of controlled substances. Additionally, the Act does not protect an individual with a disability whose tenancy would constitute a ‘direct threat’ to the health or safety of other individuals or result in substantial physical damage to the property of others unless the threat can be eliminated or significantly reduced by reasonable accommodation.
The Act does not allow for exclusion of individuals based upon fear, speculation, or stereotype about a particular disability or persons with disabilities in general. A determination that an individual poses a direct threat must rely on an individualized assessment that is based on reliable objective evidence (e.g. current conduct, or a recent history of overt acts). The assessment must consider (1) the nature, duration, and severity of the risk of injury; (2) the probability that injury will actually occur; and (3) whether there are any reasonable accommodations that will eliminate the direct threat. Consequently, in evaluating a recent history of overt acts, a provider must take into account whether the individual has received intervening treatment of medication that has eliminated the direct threat (i.e. significant risk of substantial harm). In such a situation, the provider may request that the individual document how the circumstances have changed so that he no longer poses a direct threat. A provider may also obtain satisfactory assurances that the individual will not pose a direct threat during the tenancy. The housing provider must have reliable, objective evidence that a person with a disability poses a direct threat before excluding him from housing on that basis.”

Gary Link, Attorney, is President of the Law Office of Gary L. Link, Inc. Since 1979, Mr. Link has represented landlords in over 35,000 eviction cases and litigated over 10,000 eviction trials. He is a member of the California Apartment Association, the Rental Housing Association, as well as a member of the local, state, and national bar associations.

For questions relating to this article, call the law office at 916-447-8101. The information in this article is applicable as of 2007.

Tuesday, August 14, 2007

Disability Guidelines - Part One (Department of Justice Disability Guidelines)

On May 17, 2004, the United States Department of Justice presented guidelines regarding landlords (housing providers) making reasonable accommodations available to tenants and others under the Fair Housing Act (the “Act”). The Department of Justice and the Department of Housing and Urban Development (HUD) are jointly responsible for enforcing the federal Fair Housing Act which prohibits discrimination in housing on the basis of race, color, religion, sex, national origin, familial status, and disability. One type of disability discrimination prohibited by the Act is the refusal to make reasonable accommodations in rules, policies, practices, or services when such accommodations may be necessary to afford a person with a disability the equal opportunity to use and enjoy a dwelling.
Prohibited acts: The guidelines state that “The Act prohibits housing providers from discriminating against applicants or residents because of their disability or the disability of anyone associated with them and from treating persons with disabilities less favorably than others because of their disability. The Act also makes it unlawful for any person to refuse to make reasonable accommodations in rules, policies, practices or services, when such accommodations may be necessary to afford persons with disabilities equal opportunity to use and enjoy a dwelling. The Act also prohibits housing providers from refusing residency to persons with disabilities, or placing conditions on their residency, because those persons may require reasonable accommodations. In addition, in certain circumstances, the Act requires that housing providers allow residents to make reasonable structural modifications to units and public/common areas in a dwelling when those modifications may be necessary for a person with a disability to have full enjoyment of a dwelling.”
In Part Two of this continuing series of articles regarding disability accommodations, we will discuss who is responsible for complying with the Act.

By Gary Link, Attorney at Law

Gary Link, Attorney, is President of the Law Office of Gary L. Link, Inc. Since 1979, Mr. Link has represented landlords in over 35,000 eviction cases and litigated over 10,000 eviction trials. He is a member of the California Apartment Association, the Rental Housing Association, as well as a member of the local, state, and national bar associations. For questions relating to this article, call the law office at 916-447-8101. The information in this article is applicable as of 2007. Because laws may change please contact the law office to affirm continuing validity of the contents of this article.

For more information regarding RNB Property Management, Inc. please call
916-435-2424 or visit us online at www.RNB2day.com or
Property Management Rocklin

Friday, July 13, 2007

When the Rent is Unpaid, Act Immediately!

The legal process of evicting a tenant in California for non-payment of rent is among the most streamlined of legal proceedings however, starting that process is often delayed by the hesitancy of the landlord in serving a "Three Day Notice to Pay Rent or Quit" upon the tenant.

When a tenant has not paid the rent when due, landlords are confronted with a difficult decision as to whether a "Three Day Notice to Pay Rent or Quit" should be served immediately or not. Although it is a troublesome decision to make, I recommend that the "Three Day Notice to Pay Rent or Quit" be served upon the tenant right away!

The failure to serve the notice immediately may result in a tenant claiming at the eviction trial that the landlord "waived" the right to receive rent on the first day of the month,
that the landlord and the tenant
verbally "worked a deal" for rent to be
paid later in the month, or that
the landlord should be "estopped" (prevented) from demanding that the rent was due on the first day of the month because the landlord has often accepted rent late. Judges may listen to these "phantom" defenses because they have heard many cases where the landlord waited for the problem to just "go away"
or that the landlord did
indeed work out some type
of verbal "deal" with the tenant.

Prompt service of the "Three Day Notice to Pay Rent or Quit" will hopefully eliminate the possibility of the tenant claiming a defense at a trial, set a precedent for the future that the landlord will be insisting upon prompt and timely payment of rent, and most importantly place the landlord in control of the rental payment duty of the tenant.

Gary Link, Attorney, is President of the Law Office of Gary L. Link, Inc. Since 1979, Mr. Link has represented landlords in over 35,000 eviction cases and litigated over 10,000 eviction trials. He is a member of the California Apartment Association, the Rental Housing Association, as well as a member of the local, state, and national bar associations. For questions relating to this article, call the law office at 916-447-8101. The information in this article is applicable as of 2007. Because laws may change please contact the law office to affirm continuing validity of the contents of this article.

For more information regarding RNB Property Management, Inc. please call
916-435-2424 or visit us online at www.RNB2day.com or
Property Management Rocklin