Articles Posted in Real Estate

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key-2114044__340-300x169Generally, before the estate of a decease person can sell real estate, the individual(s) named as executor in the will must probate and be formally appointed as executor.  If there is no will, then the closest heir at law must apply to the surrogate’s court to be appointed as administrator of the estate.  An administrator would follow the same steps as an executor in order to sell real estate.

Estates with a value in excess of $5,450,000 are subject to federal estate tax pursuant to IRC Section 6324.  IRS estate tax liens automatically attach to real property (“real estate”) which was owned by a decedent on her date of death.  In order to have this tax lien discharged, the seller must follow these steps in order to close on the sale of the property and have the federal estate tax lien discharged:

The executor of the estate must complete and file IRS Form 4422 and provide the required supporting documents.  In order to compete this form you must know the value of all estate assets and expenses.  And you must have the required supporting documentation including: the last will and testament, the contract for sale of the real estate, the closing statement or proposed closing statement for the sale (which shows all payments, credits, expenses and offsets), the federal estate tax form 706 and documentation reflecting the value of all the estate’s assets.  With Form 4422 the executor must also submit for 8821, a tax information authorization form.  Additionally, IRS Form 4422 must be filed at least 45 days prior to the closing of the sale of the real estate.

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keys-1317391__340-300x279Our transactional attorneys handle many types of commercial and real estate transactions, from closings on homes, office buildings, factories, to commercial transactions including the sale of all or part of a business. The overwhelming majority of these transactions require the purchaser to take out a loan to finance the purchase. Whether a buyer qualifies for the loan is one of the main contingencies in the transactions.

In many instances the purchasers will have already obtained financing before they talk to us about the transaction. However, once we are involved in the transaction one of the things we stress most, based on long experience, is that the application for the loan must be one hundred percent honest. Anything less than perfect honesty with the bank is a crime. The days when “Liars Loans” was acceptable are now over – in fact, that day existed only in fiction. Our transactional attorneys’ extensive experience in New Jersey real estate and business transactions has convinced us that honesty with the bank is the only way to go.

Federal law makes it a felony to “execute a scheme… to defraud a financial institution.” More particularly, the federal statute states that:

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Thumbnail image for foreclosure.jpgIn New Jersey, every municipality is required by law to hold sales of unpaid property taxes at least once each year. The municipalities sell the tax liens to obtain the tax revenue which they should have been paid by the property owner. The municipal tax collector conducts the sale which allows third parties and the municipality itself to bid on the tax sale certificates (this is the document evidencing the taxes due and owing). The successful highest bidder then pays the outstanding taxes to the municipality and become the tax sale certificate holder. Then the holder records the tax sale certificate with the county clerk, who records the tax sale certificate as a lien against the property.

Purchasing the tax sale certificate is merely the first step. The tax sale certificate holder does not own the property, but merely has a lien against the property. The amount of the lien is the amount paid for the tax sale certificate plus interest (which normally accrues at a rate of 18%), costs and fees, including the certificate holder’s attorneys fees. The tax sale certificate holder must foreclose on the tax lien in order to become the owner of the property. The certificate holder has priority over any other liens against the property, including mortgages and other lien holders. The certificate holder must wait a statutorily proscribed period after the date of the sale of the certificate to initiate a foreclosure action. A municipality which purchased the certificate must wait six months; any other purchaser must wait two years.

Non-municipal tax sale certificate holders must provide thirty days written notice of their intention to foreclose before they can begin the foreclosure process on the certificate. This notice must include the amount which the delinquent property owner can pay to redeem the tax sale certificate and have the lien released. The notice must be sent by certified mail return receipt to all owners and to the municipal tax collector.

Then, if the property owner does not redeem the tax sale certificate within that 30 day period, the certificate holder is permitted to file its complaint for foreclosure. The complaint must name everyone who has a recorded interest in the property, which includes all mortgage and lien holders. The complaint must identify the property, the property owner and state the redemption amount. It must be served by certified mail return receipt. The property owner continues to have the right to redeem the tax sale certificate up until date of the final judgment. If the certificate is redeemed after a foreclosure action has been commenced, the property owner should file an Affidavit of Redemption and the foreclosure action will be dismissed by entry of an Order.
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When you purchasing a foreclosed property, you often get a property which seems to be worth more than you are paying for it. One of the reasons you are getting a bargain is because most selling banks will only accept your offer if you will agree to accept insurable title. They will not guarantee that you will get marketable title. If you are purchasing a property in foreclosure in New Jersey, it is important to understand the distinction and know what you are getting.

The selling bank will often add an addendum to the contract for your purchase specifically stating that the bank will often provide only “insurable” title at closing, as opposed to the standard contract provisions requiring a seller to provide “marketable” title. The bank will further offer to pay for all or part of the costs to obtain title insurance if the buyer obtains the insurance from the title insurance company designated by the seller. While this can result in significant savings, it is important to understand what you will get (and what you will not get) as part of this bargain.

Prior to issuing a policy of title insurance, a title insurance company will conduct numerous searches on the property to determine if there are any clouds on the property’s title, if there are issues with the deed, the ownership status of the property, any tax liens against the property, the status of property tax payments, and judgments, etc. The question is, will you be satisfied with receiving insurable title, as opposed to marketable title?

“Marketable” title means that the chain of ownership to a particular piece of property is clear and free from defects. It can be sold without additional effort by the seller or potential buyer to “clear” the property’s title. To transfer marketable title, a seller must cure or repair any defects found during the title search, such as, for example, paying off liens and/or having them discharged as of record.
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house1.bmpBuyers and sellers often think that they will be closing on the purchase or sale of a house on the closing date written in the contract for sale. However, in New Jersey, the closing date is not an “essential” term of the contract. Either party may request, and must be afforded a reasonable extension of the closing date. This can cause angst for buyers or sellers who believe that the contract date is set in stone.

The closing date in the contract is an estimated date for the closing rather than a “hard date”. If the parties agree to a “time of the essence” closing date, it can enforceable. It is, however, unlikely that attorneys for either party would agree to make the closing date an essential term, because it could subject their client to liability for breach of the contract if, even due to circumstances beyond their control, they were not able to close on the date stated in the contract. If time is of the essence, then failure to close on the date specified in the contract would constitute a material breach of the contract and subject the party to liability.

As an example for this discussion, let’s assume that the date closing is not made an essential term in the contract. Once the closing date specified in the contract has passed, the party who is ready to close can then set a new date for the closing and declare that that closing on that date is “time is of the essence,” provided the legal requirements to do so are met. At that point, if the non-declaring party does not close on the new date (usually two weeks after the declaration of time being of the essence), they will be in breach of the contract and subject to liability for that breach. The non-breaching party can seek remedies including specific performance, which compels the breaching party to proceed with the contract, or they can receive monetary compensation for the breach.
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house.bmpFinding a home you want to buy and making an offer which is accepted by the seller is only the beginning of the process to purchase a home in New Jersey. The next step is signing a contract to purchase the home. The contract is a written agreement outlining the parties’ rights and responsibilities. If your contract was prepared by a realtor, it will be subject to a three day attorney review period which allows three business days for the contract to be reviewed by the parties’ respective attorneys. Either attorney may invalidate the contract for any reason whatsoever within the three day period or either attorney may request amendments to the original contract. The amendments will be in the form of a letter addendum or rider to the contract and will require both the sellers’ and the buyers’ signatures which signify their agreement to the amendments.

After attorney review of the contract has been completed, you now have a valid and binding contract to purchase the home. The next step is to make arrangements for a home inspection as soon as possible and within the time period specified in the contract. Contracts are usually subject to home inspections (structural, water, septic, termite, etc.) and mortgage contingencies. Most purchasers prefer to have a licensed home inspector inspect the premises for defects. This is highly recommended since purchasing a house is a substantial investment. You should select the inspection company and have the realtor arrange for an appropriate time to inspect the house. The attorney will not usually be involved with the selection of the inspection firm nor the scheduling of the inspection. However, if the inspection discloses any problems which need to be addressed, the lawyer will negotiate a resolution with the seller’s attorney.

While the inspection process is proceeding, you should select a lender and begin the mortgage application process as soon as possible since the contract only provides for a certain number of days to arrange for a mortgage. If you do not obtain a written mortgage commitment from your lender within the time specified in the contract, the transaction could be placed in jeopardy because you would need to either cancel the contract or proceed knowing that you risk being forced to go through with the purchase even if you cannot get a mortgage loan. A representative of your lender should be able to inform you at the time the application is made how long you can expect the lender to take in issuing a mortgage commitment. You can expect the lender to require at least 30 days from submission of the loan application to issue a commitment.

When you receive your mortgage commitment, read it carefully and in its entirety before signing. Your signature indicates your acceptance of the terms of the commitment. This is a contract made between you and the lender. It outlines the terms of your mortgage; consequently, be sure you understand it before you sign. The mortgage commitment will state a time period or a date after which the commitment is no longer valid. This is a most important date, particularly if you are “locked-in” at an interest rate during a period of rapid interest changes, since your purchase and financing must have taken place by that time.
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A law known as “Chapter 91” allows municipal property tax assessor’s to request income and expense information from a New Jersey property owner in order to assist in determining property “values” for its tax assessment. While this, standing alone, does not seem overly burdensome, if the property owners fail to respond to the assessor’s request pursuant to Chapter 91, property owners are barred from appealing their property tax assessment.

However, the law has strict provisions which must be followed by municipal assessors and taxpayers. The municipal assessor must send the request for income and expense information in writing, and the request must be sent via certified mail. The assessor must include a copy of the applicable statute with the written request. Moreover, the assessor’s request can only be made for properties which are producing income. The property owner must respond in writing to the assessor’s request within 45 days, and if he fails to do so, will not be permitted to file an appeal of the assessment. However, if the taxpayer fails to respond, the municipal assessor is still required to determine the full and fair market value of the property utilizing all available information. Additionally, the statute does include an exception, wherein if the property owner had good cause for being unable to provide the requested information, the applicable county tax board may take that into consideration.

Courts have construed the requirements imposed on the municipal tax assessor very strictly, due to the property owner’s resultant loss of the right to appeal if she fails to respond. New Jersey’s Tax Court has ruled that if the assessor does not comply with every requirement of the statute, “renders the statute inapplicable.” SAIJ Realty, Inc. v. Town of Kearny, 8 N.J.Tax 191, 197 (Tax 1986), including the provisions requiring the request be sent by certified mail and that a copy of the statute be included with the request. However, if the municipality meets the requirements of the law, the burden shifts to require the property owner to strictly comply with her obligations under the law, particularly responding in writing within 45 days.

New Jersey courts have consistently construed the law against property owners even in situations where it seems unjust. For example, even if the assessor’s request is overbroad or illegal, as long as the assessor has met the statute’s requirements, a property owner’s failure to respond can still result in loss of the right to appeal. The taxpayer is then required to respond to those requests which are not objectionable and advise the municipal assessor as to why the remaining requests are improper. Moreover, a property owner must still respond the properly sent request even if the request is made of a non-incoming producing property. The Tax Court has even held that failure to respond to a request, even when the request is made as to non-income producing property, will result in the taxpayer’s loss of its right to appeal the assessment. Furthermore, the Appellate Division of New Jersey’s Superior Court upheld the loss of the right to appeal where the taxpayer sent a response after the 45 days had expired. The Appellate Division also ruled that an appeal was properly dismissed where the requested information was provided to the attorney for the municipality, but not the assessor. These decisions were all justified because of the important governmental interest and the statute’s mandatory wording.
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Thumbnail image for watching-time-860275-s.jpgIf you own property in Monmouth County the property tax appeal deadline has changed. While the new date in the rest of the state remains April 1st, Monmouth County has volunteered to test out a new law changing the appeal date to January 15, 2014 or within 45 days of the bulk mailing of the municipal assessments, whichever is later. If your property is in Monmouth County and you did not file your petition to appeal your property tax assessment on or before January 15th, you will not be able to file and appeal this year unless the notice was mailed within the last 45 days or there was a town-wide revaluation.

New legislation was enacted and the governor signed into law, P.L. 2013, c. 15, creating a demonstration program which allows up to four counties to opt into the new law, two in the first two years and two more in the following two years. At the present time, only one county has opted in, Monmouth County.

This is a significant change because the deadline to file a petition to appeal a property tax assessment in the rest of the state of New Jersey remains April 1, or within 45 days of the bulk mailing of the property tax cards, whichever is later. While property tax cards are traditionally been mailed out in February, most Monmouth County municipalities have already mailed out their property tax cards. The appeals hearings in participating counties are expected to be conducted by the end of April.

The stated purpose of the new law is to establish a collaborative system of property assessment between the county board of taxation and the municipal assessors which it is hoped will result reductions in cost and increases in accuracy and consistency of assessments. The stated purpose of the change in the appeal deadline is to assist in municipal budgeting and to more evenly distribute tax losses to municipalities which result from tax appeals across the various governmental entities on whose behalf taxes are collected (i.e. school, county). However, the change appears suspiciously timed to limit property owners’ right to challenge their assessments and make more money for the towns.
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Thumbnail image for property tax.jpgNow is the time to start thinking about appealing your property taxes.

The amount of property taxes a homeowner pays under New Jersey property tax law is determined by the municipal assessment. The lower the assessment, the lower the property taxes. While you cannot actually appeal the taxes you owe, New Jersey law allows you to appeal the assessment. The tax assessment of your property should reflect the fair market value of your home, which is adjusted by the municipality’s equalization ratio. The municipality is allowed a margin of error of fifteen percent. So, if your assessment is more than 15% over the equalized fair market value of your property, you should appeal your property taxes.

The first step is determining if your equalized assessment is more than fifteen percent above fair market value. First, you need a good approximation of the fair market value of your property – perhaps you know the sales prices of similar homes in your neighborhood, or a local realtor may be able to give you a rough estimate of the fair market value of your house, then you have a place to start. Next, you will receive a property assessment notice from the municipality which includes the assessed value of your property. Then, you need to check the equalization ratio for your municipality. Your assessment must then be equalized by applying the correct equalization ratio. Once you have applied the equalization ratio to the assessed value, you will know what the municipality believes is the fair market value of your property. If that number is more than fifteen percent above what you believe the fair market value to be, you should proceed to file a tax appeal petition.

At this point, you will need evidence to back up your assertion of your property’s fair market value. The best evidence is an appraisal by a certified appraiser who, if necessary, could testify at the tax appeal hearing. You can attempt to appeal your property taxes supported only by evidence of comparable recent sales, but the municipality can much more easily dismiss that evidence based on distinctions between your property and the each recent sale, or based upon facts surrounding the sale. For instance, it may have been a distressed sale where the seller was forced to accept a lower than market value price.
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Community associations are an important part of New Jersey’s housing environment. There are three main types of community associations in New Jersey: condominium associations, cooperative boards (“co-ops”), and homeowners associations. Condominium associations are the most common.

When a person buys a condominium, they are buying title to the property unit, such as an apartment or townhouse. However, title to the “common elements,” such as the land, the building exterior, recreational facilities, and parking lots or spaces, are held by the buyer together with all the other owners in common throughout the condominium association. When an new owner buys a unit, she automatically becomes a member of the condominium association, which exists to maintain the common elements. This membership is typically not optional.

The association is responsible for the administration and management of the condominium property, meaning the areas and activities of common interest to the unit owners. The operations of the condominium association are run by its board of trustees, made up of owners who are elected by the association membership. The association must maintain accounting records in accordance with generally accepting accounting principles and must be made available for inspection by unit owners at reasonable times. When a condominium association is first created, owner-control of the board is phased in during development of the property, and the owners take after 75 percent of the units are sold.
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