Civility in a Florida Real Estate Closing

GOT CIVILITY? There are numerous panels addressing civility in the legal profession and “GOT CIVILITY?” is the tag line. It’s cute but kind of sad that it has to be “a thing”, especially in the transactional world of the purchase and sale of real estate.

Business, Deal, Smile, Cheerful, Smiling

In researching this article, I discovered that there is a Florida Supreme Court Commission on Professionalism and Civility.  Is it really that bad out there? The short answer is, yes. Since I started practicing law in Florida in 1989, I have witnessed professionalism and civility deteriorate.

In a real estate transaction, presumably, the end goal is the same for all involved, the transfer of property. When the property is transferred, everyone wins. The thing is that over my almost 30 years in the business, I have seen the unnecessary arguments and push to get things done fast, rather than correctly, increase.  The path to the closing table has changed and it seems that some of that change has resulted in lack of civility.

Perhaps because most professionals involved in a real estate transaction do not get paid unless and until the transaction closes, perhaps because people just like to argue, perhaps because technology has sped up all of our lives, perhaps because people want the best deal possible, perhaps because the process has generally been heavy in negotiation. (Always ask more than you want, never pay list price, the dance is that 3-5 offers get passed along before the parties get to a number that they really wanted from the beginning)…that custom of negotiation has somehow seemed to morph into an argumentative stance.

Background of the transfer of real estate:

Delineation: Somehow, sometime, humans started delineation of land. It was no longer to be shared. We somehow came to mark and own and defend “our property”. We built rock walls, fences, planted stakes, engaged in war, created survey lines and became territorial. The earth was no longer shared by all of us.

Feoffment and seisen: One of my favorite professors in law school taught this concept. It was the process of transferring possession and ownership of land. It was often a transfer from the Feudal Lord to his Servant after the Servant earned it. I also remember that the Ceremony of Feoffment involved the transferor picking up a handful of the dirt and placing it into the hands of the transferee.  The image of that ceremony has always stuck with me. It seems such a romantic and significant way to fully and ceremoniously represent the transfer of the use of the earth.

Changes in use:  From cooperative to separatist.  From rural to urban, and then suburban sprawl, then to gentrification and there has always been a small movement back to cooperative living. In the 60s, they were hippies in communes. Now they are scholars and scientists studying and experimenting with sustainability of our natural resources. They are residents of condominiums and cooperative apartments. I suppose the changes in use have been human reaction to our harsher demand that we make on the earth. We didn’t always have electricity, running water, and packaging, to name a few. These comforts create a need for more space and have created waste.  With electricity, more humans move about the planet 24 hours a day.  Running water and indoor plumbing requires a sophisticated infrastructure, from getting the water to the people to taking away the waste. The shopping that we do and the fungibility of goods and anti-theft and anti-fragile packaging has created a ridiculous amount of waste.

We have one earth, no more is getting made. In fact, some would say that we are actually losing it (erosion, global warming, and flood projections). The earth is precious. We transfer little bits of it to each other every day, not with the respect that it deserves and as the caretakers that we should be, but as a disposable commodity, to make money.

There is no longer the ceremony of Feoffment. I do not even think that the ceremony made its way to America. We rarely even sit at a closing table anymore. The sellers and buyers rarely ever meet each other and sometimes never speak to each other.

When I started, in the late 80s, realtors, lawyers and the parties still worked together to do their best to make sure that the property was well suited for the customer and that title was clear. The days between contract execution and closing were utilized to make sure that the details of the transaction were attended to and all “Is” were dotted and “Ts” were crossed…..that the parties were protected on the largest monetary investment that people make in their lives. That we would have a CLOSING and move on.  Now, lawyers are brought in when things go “sideways” unless one of the parties insists upon their lawyer’s representation.  Most transactions utilize form templates obtained through various organizations and the internet, title searches, municipal searches, surveys, appraisals and more are obtained online. Documents are executed online or via email, documents are recorded via electronic means. All of these advances are amazing and have created immense efficiency but we have lost the ceremony for the customer. The players making the deals happen just want to get to the finish line fast! Close the deal, send the wires and move on. The parties are often dealing with faceless realtors, title companies and lenders. This creates a hard bargainer attitude and sometimes an air of distrust.   It is much easier to be less civil to a faceless entity than it is to another person. It is much harder to trust a faceless entity than a person.

Vestiges of my father’s days as a real estate attorney remained, but not for long. The things that I used to enjoy about a closing, watching it unfold, watching the people enjoy the process and having a pot of coffee or tea at a morning closing or a bit of scotch or champagne at an afternoon closing are almost gone as well. These moments at the closing table made the people in the transaction feel better able to move into the new responsibility and out of the home that they lived in, often for years. We must all remember, a house is more than that, it has been home for the seller, perhaps the place where they raised their children and had other happy moments. For the buyer, the house represents a place to make a new home, a place to create memories and dreams.

Adult, People, Woman, Sit

Through all of our haste and all of the wonderful technology, don’t forget about the human element, for the buyer and seller most of all, but also for each of us in the industry. We are not in the industry to make people feel distrustful or look greedy due the high volume and lack of personal contact. We do not intend to offend. Just be mindful that in our haste, we can be perceived as that faceless uncaring entity. With all of the time that technology has allowed us to save, let’s focus on the human connection.

Do it right, utilize technology and every resource available to conclude this expensive and sometimes complex transaction, but remember to keep it simple and keep it civil. In fact, make it joyous. We are all participating in the temporary exchange of the earth.

Treat the earth well: it was not given to you by your parents, it was loaned to you by your children. We do not inherit the Earth from our Ancestors, we borrow it from our Children.

—Ancient Indian Proverb

Written by Amy McGrotty, Esq.

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HOA Liens: How “Super” is Super Priority?

Because of their “super” status, Homeowners Association liens are a particular form of confusion and frustration for Mortgage servicers and their attorneys. The content covers legal and process issues that affect a servicer’s ability to assert their position in a property and any other relevant subtopics.superman

Super-priority is more or less the circumvention of the traditional legal concept of “first in time, first in right,” meaning first to notice, file, or record is first in right, meaning that an association’s lien has higher priority over previously recorded liens. Currently, twenty-one states require the foreclosing lender to pay between six months and twelve months, or some variation of periodic assessments to the association at some point during the lender’s foreclosure process.[i] Depending on the state, the beneficiary of the super-priority liens are either condominiums or homeowners associations, or both. As of November 2017, four out of the top five states with the highest foreclosure rate have super-priority HOA statutes.[ii]

In Florida, associations must be named in the foreclosure process as a subordinate lienholder and interested party[iii] and the foreclosing lender cannot assign the bid to a third-party before the sale[iv] in order to qualify for the allowable statutory “safe harbor” provisions.[v] The 2008 Florida statutes were amended to allow an association’s lien to “relate back to the date on which the original declaration of the community was recorded”[vi] reserving a caveat for pre-2008 mortgages.[vii]

Nevada has recently disrupted the lending industry with a shocking decision in SFR Investments Pool 1 v. U.S. Bank.[viii] In this 2014 decision, the court clarified the differences between “true lien priority” and “payment priority” and held that associations hold a “true lien priority” which can unequivocally extinguish a first mortgage upon following the proper foreclosure procedures. [ix]

In Washington, a COA’s lien maintains a limited priority over a mortgage, subject to a relatively recent statute.[x] That limited priority mandates the lender to pay six months of assessments to the COA prior to the foreclosure sale date.[xi]

 

Other Jurisdictions

  • While not a designated “super” priority state, Arkansas recognized that a first mortgage does not entirely extinguish an association’s interest in delinquent assessments.[xii]
  • The District of Columbia[xiii] and Rhode Island[xiv] held that a first mortgage is subordinate to an association lien and the association could extinguish the first mortgagee’s interest.
  • On the more extreme end of the “super” priority spectrum, Massachusetts allows for multiple successive liens (every six months), all of which can be contemporaneously enforced.[xv]
  • Vermont extends its super priority status to assessments that have accrued during the first mortgagee’s foreclosure action plus the prior six months of assessments.[xvi]

In order to preserve the first mortgagee’s lien enforcement rights, some options include: (i) paying off the association’s lien, (ii) keeping the borrower’s account current with the association, (iii) redeeming the property in the association’s foreclosure, (iv) reviewing potential lien priority issues at the loan origination stage, (v) including language in mortgages requiring escrow of association assessments to ensure timely payment, (vi) timely participation in association lien enforcement actions, (vii) referring lien priority determination files to their foreclosing attorneys in each jurisdiction, (viii) requiring an assignment or proxy designation of borrower-owner association voting rights, (ix) requiring assessment invoices, billing statements, and periodic notices be sent to the lender to ensure timely payment or, at least, to allow the lender to monitor the status of an account, and (x) revising the terms of a mortgage to include non-payment of super-priority eligible associations’ assessments be considered a default under the terms of the mortgage.

Overall, lenders and associations must jointly navigate the same laws. While super priority may not be the fairest or the easiest resolution to the problems legislatures face in protecting all interests in real estate properties, it is certainly one solution. In order to properly and effectively navigate these complex laws, lenders should consult with their relevant jurisdiction’s attorney for a case-specific strategy on (i) how best to enforce the terms of the mortgage in case of a default and (ii) how best to preserve its lien in the case of an association foreclosure.

[i] Priority Lien for Collecting Delinquent Assessments. https://www.caionline.org/Advocacy/StateAdvocacy/PriorityIssues/PriorityLien/Pages/default.aspx (Alabama, Alaska, Colorado, Connecticut, Delaware, District of Columbia, Florida, Hawaii, Illinois, Maryland, Massachusetts, Minnesota, Missouri, Nevada, New Hampshire, New Jersey, Oregon, Pennsylvania, Puerto Rico, Rhode Island, Vermont, Washington, West Virginia)

[ii] U.S. Real Estate Trends & Market Info: Foreclosure Trends. http://www.realtytrac.com/statsandtrends/foreclosuretrends (Alabama 1/2286, Alaska 1/4259, Colorado 1/4170, Connecticut 1/1391, Delaware 1/875, District of Columbia 1/1876, Florida 1/2361, Hawaii 1/3626, Illinois 1/1196, Maryland 1/981, Massachusetts 1/1862, Minnesota 1/3772, Missouri 1/2226, Nevada 1/1407, New Hampshire 1/3894, New Jersey 1/734, Oregon 1/3135, Pennsylvania 1/1723, Puerto Rico (unknown), Rhode Island 1/2324, Vermont 1/7176, Washington 1/5206, West Virginia 1/9372)

[iii] Fla. Stat. 720.3085(2)(c)(2)

[iv] Bay Holdings, Inc. v. 2000 Island Boulevard Condominium Association, 895 So.2d 1197 (Fla. 3d Dist. App. 2005) (holding that a title holder by virtue of a Certificate of Title whom was an assignee of a foreclosure final judgment did not qualify as a first mortgagee, successor, or assignee under Fla. Stat. 718.116(1) and therefore did not qualify for the safe harbor protections.)

[v] Under this statute, the foreclosing lender only has to pay the super-priority portion of the HOA’s lien to a certain degree – the lessor of (i) the past twelve months of regular assessments or (ii) one percent of the original mortgage debt. This statute is still triggered if a Deed in Lieu of Foreclosure is utilized as an alternative to a traditional judicial foreclosure.

[vi] Fla. Stat. 720.3085(1) (2008-2017)

[vii] Id.

[viii] SFR Investments Pool 1 v. U.S. Bank, 334 P.3d 408 (Nev. 2014); Prior to this decision, Nevada’s prior version of the controlling statute was found to have violated the Fourteenth Amendment’s Due Process Clause. See Bourne Valley Court Trust v. Wells Fargo Bank, 832 F.3d 1154 (9th Cir. 2016)

[ix] NRS 116.3116(2); This was later adopted by the Uniform Common Interest Ownership Act (UCIOA) (2014) §3-116 cmt. 2

[x] The Washington Condominium Act of 1989 governs the rights of condominium associations, including the lien priority over lender’s mortgages. While it is effective only for condominiums created after July 1, 1990. A COA lien is considered superior to a mortgage, unless the mortgage is recorded before the declarations of the condominium or before the assessments become delinquent.

[xi] Only periodic assessments for the annual COA’s budget for common expenses are specifically granted the limited super priority over mortgages, while capital improvement assessments and attorney fees and costs from collection efforts are examples of the limitations to the COA lien’s super priority status. See Summerhill Village Homeowners Association v. Roughley, 289 P.3d 645 (Wash. Ct. App. 2012)

[xii] First State Bank v. Metro.District Condos Property Owner’s Association, Inc., 432 S.W. 3d 1 (Ark. 2014)

[xiii] Chase Plaza Condo. Ass’n, Inc. v. JP Morgan Chase Bank, N.A. 98 A.3d 166 (D.C. 2014)

[xiv] Twenty Eleven, LLC v. Botelho, 127 A.3d 897 (R.I. 2015)

[xv] Drummer Boy Homes Association, Inc. v. Britton, 47 N.E. 3d 400 (Mass. 2016)

[xvi] Bank of America, N.A. v. Morganbesser, 2013 WL 9792479 (Vt. 2013)

Written By:  Jessica Skoglund Mazariego, Esq., Attorney
             Gilbert Garcia Group, P.A., a Florida Law Firm

 

 

What Millennials Want When Purchasing a Home

Design elements are vital when selling your home to the millennial demographic.

Millennials are quickly becoming the largest segment of homebuyers.  It’s vital for homesellers and their real estate agents to know their design preferences when purchasing a home. Thanks to the 2017 Taylor Morris Consumer Survey, the infograph below shows what recent and prospective millennial homebuyers are into.

The Pros and Cons of The Tiny House Fad

Written By Ashley L. Hobson, Esq.

small-wooden-house-906912_640

One of the most recent movements in real estate is the concept of the “tiny home”. We’ve had many Realtor friends ask about how to consult their clients when it comes to buying the perfect home.  There is a lot to be said about changing your lifestyle to fit a new environment- it shouldn’t be a decision made lightly. It is important to consider certain issues before jumping into the tiny house movement. Below we take a look at some of the Pros and Cons of the tiny house fad.

Ownership and Investing in your Future

Home ownership can be both rewarding and draining. In today’s market, millennials are projected to be the next big target for home buying. Having equity in your home is one of the best ways to invest in your future. Additionally, the tax benefits of owning a home are beneficial as well. On the other hand, while renting might be an appealing option- it doesn’t have monetary return.  In a time where the market is finally becoming more stable, the opportunity to own a home is becoming a more attainable goal.

Resale Issues

While owning your own home is surely an investment, you will reap the benefits of this investment when it comes time to sell. Where Tiny Home are proving to differ from standard residences is in resale value. According to an article in Forbes Magazine entitled “5 Reasons Buying a Tiny House Is a Mistake”, tiny homes are actually less marketable. There is a small concentration of individuals that a tiny home would actually work for. It seems that you would be hard pressed to find a buyer who didn’t want to entertain house guests at some point. The pool of individuals truly interested in tiny homes shrinks even smaller due to lending institution restrictions. In the same Forbes Magazine article, the author notes that lenders often have square footage requirements that must be met. This means that buyers have to be ready to pay with cash. It might be easy to make an “in the moment” decision, but you really should consider the long term value of your investment.

The Appeal

Since millennials are a large target for home buying- it is likely many may consider “going tiny”. In a time where we can’t go five minutes without checking our texts, or social media and email accounts- the thought of cutting out clutter and living cleaner can be appealing. The idea of being mobile and picking up and moving whenever you want might appeal to those who love to travel. For those who don’t want to be tied down to one location forever, but still want to invest in real estate- this concept may work for you. Making the “tiny home” purchase has taken the hassle of shopping for a home away- it’s now as easy as clicking a button on Amazon. Student loans do not make the idea of owning a home appealing to many millennials; debt often gets in the way of getting loan approval.  The tiny home movement does have its appeal when it comes to targeting the millennial crowd.

Space- is it really feasible?

While living simply might appeal to you in theory- it might not actually work in practice. Can you really part with 75% of your possessions? If you have a bike, cooking equipment, or shoe collection- this could prove to be difficult. Individuals interested in tiny homes should really consider what they can truly part with before going through with the purchase. If there are big items you can’t part with- will they fit in your tiny home? If you cannot answer this for certain, maybe hold off on the purchase.

The Benefit of Having a Real Estate Attorney Involved in the Closing Process

By: Ashley Hobson, Esq. Picture1

Buying or selling a home can be both a stressful and exciting time. Many individuals may have no idea what to expect as they are entering into this process for the first time. The closing process can be confusing or overwhelming since there are many moving parts and documents with unfamiliar legal terms and conditions.

Sapphire Title has attorneys on staff to oversee the entire closing process and handle whatever legal issues may arise during your transaction, many times without any additional fees. Having an attorney review title searches, lien searches, surveys and closing disclosures eliminates much of the risk for items being missed or overlooked. If an issue does arise, whether it be with a party to the transaction or on the title and lien searches, it can be resolved on site and monitored closely by our team. An additional benefit to having attorney oversight is that issues can be resolved through dispute resolution, mediation, or court action if necessary. Attorneys can handle legal matters through avenues that other individuals do not have access to. The ability to simultaneously resolve legal issues and clear title in order to close on time or with as little delay as possible is a huge benefit to agents and their clients.

Many agents admit that they are not equipped to handle legal matters or settle any disputes that can arise and come to us for assistance in resolving issues for their clients. We strive to be a positive and reliable resource for our Real Estate Agent clients- this is a professional relationship that we value. Individuals sometimes find that they have to deal with an unforeseen issue prior to closing.

While the closing process can be intimidating- it doesn’t have to be. You quite literally place all of your trust in your selected title company. With our trusted closing team and attorney oversight, we are happy to be your guide through this time.