|
|
By: Marc B. Bergoffen
Bregman, Berbert, Schwartz & Gilday, LLC
As a new member on the Section Council, I am pleased to be
taking the reins from Ron Deutsch as the editor of Ground Rules.
So far this year, the economic climate has been rather stormy,
especially in the real estate field; and it remains to be seen
whether the coming months will bring more April showers than May
flowers. In this spring edition, we feature articles on the
General Assembly's new tax on the transfer of controlling
interests in real property entities, a recent foreclosure case
from the Court of Appeals, mold issues facing owners of real
property, as well as others. We hope you enjoy this edition and
if you have a topic of interest, please feel free to submit an
article for the next edition.
[View
Article Online]
|
 |
RECORDATION
AND TRANSFER TAXES TO BE IMPOSED ON A TRANSFER OF A
“CONTROLLING INTEREST” IN A “REAL PROPERTY ENTITY”
|
By: Bruce L. Benshoof
Ballard Spahr Andrews & Ingersoll,
LLP
Although Maryland's recordation and
transfer taxes were originally imposed in exchange for the
numerous legal benefits derived from recording deeds and other
instruments in the public records, such taxes soon will apply to
a type of transfer that does not avail itself of those benefits.
legislature Under §7 of the Tax Reform Act of 2007 (2007 Special
Session, Ch. 3), beginning July 1, 2008, recordation and
transfer taxes will be imposed on the consideration payable of
any transfer of a "controlling interest" in a "real property
entity." Depending on the county or counties in which the real
property is located, the aggregate tax can range from
approximately 1.2% to 3% of the "consideration payable" for such
transfers. The stated intent of the new law is to close what the
General Assembly has viewed as a loophole in the law by taxing
the transfer of ownership of an entity which owns real property
in the same manner as if the transfer was accomplished by
conveying by deed the real estate owned by such entity. The
following summarizes the key parts of the new law:
[View
Entire Article Online]
|
|
|
MARYLAND
COURT HALTS A CHANGE TO THE STATE STATUTE… FOR NOW
|
|
By: Ronald S. Deutsch
Cohn, Goldberg & Deutsch, LLC
In a potentially landmark case, the Maryland Court of Appeals
has decided not to change the foreclosure rules in the State.
Specifically, in the recent case of Atta-Poku v. Friedman, 403
Md. 47 (2008), the Court ruled that a lender may foreclose on a
home when the lender allegedly had possession of the funds to
pay-off the mortgage through a settlement company; and that a
homeowner can not successfully appeal a foreclosure when he or
she has failed to make efforts to stay the proceedings and also
failed to file a required bond. In general, the ability to
appeal, and preserve claims against a lender continues to be
difficult once a sale has been ratified and the property
transferred.
The facts presented were as follows: Kwaku “Richard” Atta-Poku
emigrated from Ghana in 1992. He attended computer classes in
New York and subsequently relocated to Maryland, where he began
a taxi cab business. On October 11, 2000, Atta-Poku purchased a
townhouse in Columbia, Maryland and obtained a mortgage in the
amount of $97,750.00. In March, 2001 he contacted his lender to
refinance that mortgage, solely to obtain a lower rate,
receiving no cash out. The original lender was a bank, while the
refinancing lender was a so called home loan corporation. Both
the bank and the home loan corporation bore the same name but at
the time were separate free standing institutions with separate
addresses and corporate identities. The settlement documents
show that the Home Loan Corporation paid a fee to mortgage
broker 1st Service Mortgage, Inc. who in turn directed Atta-Poku
to a settlement company to conduct the refinance settlement.
Settlement occurred but the Bank was never paid off. Although a
copy of a “pay-off” check in the amount of $96,599.74 was
produced, the reverse side of the check did not show that the
check was ever negotiated. The settlement agent later went to
federal prison for embezzlement (unrelated to this case).
[View
Entire Article Online]
|
|
|
DISTINGUISHED
MARYLAND REAL PROPERTY PRACTITIONER
|
|
NOMINATE THE MARYLAND ATTORNEY DESERVING OF THE
DISTINGUISHED MARYLAND REAL PROPERTY PRACTITIONER
For 2007-2008
Visit the Real Property Section Website
and complete your nomination.
www.msba.org
[View
Article Online]
|
|
|
REPORT
ON THE REAL PROPERTY RECORDS IMPROVEMENT FUND OR WHAT ARE
WE DOING WITH YOUR $20.00? |
By: Mark D. Dopkin
Tydings & Rosenberg LLP
As most of you know, the Real Property Records Improvement Fund
(the “Fund”) was created in 1991 to aid the operation of the
Clerks’ Offices to eliminate the backlog in recording and
indexing documents in the Land Records. The 1991 enabling
legislation provided the Fund only could be “used to repair,
replace, improve, modernize and update office equipment and
equipment-related services to the Land Records Office of the
Clerk of the Circuit Court for each county.” It had a limited
life span of five years and was to sunset in 1996. Since its
inception, under the direction of the Administrative Office of
the Courts (“AOC”), millions of dollars have been spent not only
to eliminate the backlog in recording, but to computerize the
process. In addition, with the exceptional assistance of the
Archives, we now have web access to indexes from approximately
1972 forward, as well as access to almost all documents recorded
in the Land Records and Plat Records in all of the counties and
Baltimore City. As of this writing, 234,161 land record and index
books are now available on line. This represents 167,335,768
images. The Fund is now financing the AOC’s pilot program for
electronic filing of land record documents.
For the first half of the current fiscal year the Fund collected
$13,000,000. The balance on December 31 was $77,898,000. However,
the prospects for the Fund are not without concerns. The 1995
Budget Reconciliation and Financing Act substantially expanded
the Fund’s limited purpose. Thereafter, the Fund was to be used
“to pay the operating expenses of the Land Records Offices of the
Clerks of the Circuit Courts.” The original five-year sunset was
extended and an Oversight Committee was mandated. The sunset was
extended to June 30, 2009, and the fee was raised from $5.00 to
$20.00 per instrument. (The Oversight Committee is comprised of
one representative from the Maryland State Bar Association, the
Maryland Land Title Association, the Clerks of Court and the
Maryland Archives and charged with reviewing the status of the
Fund and its operation by the Administrative Office of the
Courts).
[View
Entire Article Online]
|
|
|
IS IT
POSSIBLE TO DEFER GAIN ON A PRIMARY RESIDENCE?
|
Shawn A. Goldfaden, Esq.
Division Manager for Asset Preservation, Inc.
Maryland State Counsel for Stewart Title Guaranty Company
Although IRC Sec. 121 permits taxpayers to exclude up to
$250,000 if single and $500,000 if married filing jointly of the
capital gain on the sale of the taxpayers primary residence if
at least one of the homeowners has used the property as their
primary residence for 24 out of the last 60 months, homeowners
are increasingly seeing proceeds from sales in excess of such
exemption. As such, homeowners must look for ways to defer the
tax on gain. One method of accomplishing this goal would be for
the taxpayer to establish a new primary residence, convert the
existing property into an investment opportunity and hold on to
it for the requisite period before utilizing a §1031 exchange
(most tax advisors believe that renting the property for one or
two years is sufficient). Once the one or two year rental term
expires, the taxpayer can segregate their tax liability by using
IRC §121 and §1031 to exclude the first $250,000 or $500,000 and
defer taxes on the remainder of the proceeds by using the excess
proceeds in a §1031 exchange transaction (ex.: home bought for
$500,000, sold for $2 million, §121 exclusion on $500,000 and
§1031 deferral on remaining $1 million). Of course the couple
will have to follow the required rules of §1031 exchanges in
order for them to leverage their capital gain tax deferral,
substituting their property with a “like-kind” asset which will
hopefully be worth considerably more than the tax on their gain.
Another opportunity exists for those taxpayers who own property
as a home and as a business proportionately appurtenant. For
instance, a duplex in which the owner resides in one section of
the property, by rents out the remainder or uses that portion as
a home office may qualify for a segregated §1031 exchange. IRS
private letter ruling 2005-14 makes it clear that the exchange
of a home can qualify for both the Code §121 home sale exclusion
and Code §1031 like-kind exchange deferral. This can occur where
the property was used as a principal residence and a business
consecutively (e.g., use as a principal residence followed by
rental of the property) or concurrently (a portion of the home
used as a principal residence and a portion used as a home
office). Make sure your clients understand that an accountant is
generally needed to determine the value allocated to the
residence portion and to the remaining units held for
investment. A tax professional may use factors such as the
square footage or the quality and value of improvements to each
unit in determining what percentage is considered the primary
residence and what percentage is allocated to the exchange
portion. [Note: Proper closing techniques must also be applied.
Caveat: Private letter rulings are based upon very specific
scenarios and are not to be interpreted or applied broadly.
[View
Entire Article Online]
|
|
|
THE
TROUBLE WITH MOLD |
|
By: Raymond Daniel Burke
Ober|Kaler
When mold was discovered in part of the Hilton Hawaiian Village
in Honolulu, it ultimately resulted in the closing for more than
a year of an entire 453-room 25-story tower. It is reported that
Hilton spent some $20 Million on consulting and investigation
costs, and an additional $35 Million in the remediation. This is
one notable example among many of how the presence and growth of
mold in homes and commercial buildings has developed into a
serious issue that has potentially far-reaching consequences for
residential and commercial property owners and managers, as well
as for the construction and insurance industries.
Several states have established task forces to study mold and
its effect on buildings and indoor air quality. However, the
intelligent dialogue required for the development of proper
standards for mold exposure and remediation has, in large part,
been drowned out by extreme voices. On the one hand are those
who summarily dismiss the issue as the fabricated product of a
conspiracy between tort lawyers and a developing cottage
industry of mold remediation consultants. On the other are those
readily prepared to broadly attribute a wide variety of medical
conditions to the unhealthy environment of “sick buildings.”
While it is true that mold is an ancient life form that has,
throughout history, been the constant companion of humanity, its
recent prominence as an indoor health issue is explained by two
features of modern building techniques – the use of materials
containing high concentrations of cellulose and other fibers
upon which molds feed, and the employment of insulating
materials and methods that restrict ventilation. Given the
inviting food source provided by present day building material,
all that is required for vigorous mold growth and amplification
is the presence of water and a building assembly that prevents
the moisture from escaping or drying out.
One need not establish any causal connection between the
presence of mold and health issues in order to recognize the
need for proper mold removal. Indeed, putting health matters
entirely aside, molds deteriorate the building materials on
which they feed, necessitating the repair of affected
components. Where structural elements are involved, this can
become a matter of building stability as well as function.
Additionally, because of the manner in which they digest
materials, molds give off undesirable odors and diminish
aesthetic appearance, thereby degrading the indoor environment
and decreasing property values.
[View
Entire Article Online]
|
|
|
WHAT
IS THE RELATIONSHIP BETWEEN TRAFFIC AND ZONING?
|
By: Jeff Zyontz, Esq.
Legislative Counsel for the Montgomery County Council
What is the relationship between traffic and zoning? Traffic
issues have actually predated the promulgation of the first
zoning laws by more than a century. As early as 1812, the courts
have found that the obstruction of the King's highway
constituted a public nuisance and was therefore indictable at
common law. A nuisance is something that can be avoided by the
use of a locality’s power to act on behalf of its health,
safety, and general welfare. In 1889, traffic congestion which
caused a traffic obstruction was determined to be a nuisance by
the New York Court of Appeals. The zoning power grew out of a
locality’s authority to abate public nuisances through its
police powers. Through the zoning power, localities have
attempted to regulate the impacts that traffic has on the use of
land. Although
How is traffic considered when rezoning land?
Maryland courts have been particularly concerned about traffic
when rezoning or special exception issues are presented. Traffic
concerns may be a material consideration in any rezoning
decision. When traffic considerations were ignored by the
decision maker, courts have overturned the decision. The
decision maker’s conclusion must be fairly debatable to avoid
being arbitrary. The amount of evidence required to make an
issue fairly debatable is not great. In one often cited case,
witness testimony of long traffic queues and traffic accidents
was sufficient to support a decision to deny a rezoning. In
another case, evidence of dangerous traffic conditions and
traffic counts by one witness was sufficient to warrant a denial
of the requested rezoning.
Although an increase in traffic should be considered in rezoning
cases, it is not controlling in all cases. More weight can be
given to some testimony on the effect of a rezoning on traffic
conditions than simply an allegation of increased traffic.
[View
Entire Article Online]
|
|
