Real Estate Taxes

Governor Baker Approves New Short Term Rental (Airbnb) Law and Taxes

by Rich Vetstein on January 1, 2019

in Condominium Law, Landlord Tenant Law, Leasing, Massachusetts Real Estate Law, Real Estate Taxes, Rental Housing, Short Term Rentals

New Occupancy Tax, Statewide Registry, Insurance Requirements, and Inspections

At the very end of 2018 without much fanfare, Governor Baker signed into law a bill regulating and taxing short-term rentals. The new law provides for new taxes, a statewide registry, insurance requirements, and inspections varying by town/city. It becomes effective on July 1, 2019.

Overview of Requirements
The new law expands the state’s hotel and motel tax to include the short-term rental of homes (condominiums, single family, multifamily, etc.). This applies to Airbnb, VRBO, and all other short term rental platforms. The tax applies to all rentals for a period of 31 days or less, regardless of whether the rental is for recreational, vacation, personal, or business use. The burden is on the owner to collect and remit the taxes to their local town/city and the Mass. Dept. of Revenue, which is expected to issue guidance later in the year.

Tax Structure
The short-term rental rate varies by locality and is the total of the following rates:

  • State: 5.7%
  • Local: up to 6% (Boston 6.5%)
  • Cape Cod & Islands: includes additional 2.75% to fund Cape Cod and Islands Water Protection Fund
  • A community impact fee of up to 3% may be assessed locally on professionally managed properties (Owners of two or more units in one town).

The law requires regulations to minimize the administrative burden on tax filings for those who only rent their unit five (5) months or less each year.

Are there any exemptions in the law?
The tax imposed by the new law does not apply to properties rented for fewer than fourteen (14) days per calendar year. It is important to note that these properties are still subject to the other requirements of the law, such as insurance and registration.

When will this law take effect? 
July 1, 2019

What about the 2019 rentals I already booked? 
The law exempts from tax any 2019 rental that is booked on or before December 31, 2018. Rentals booked on or after January 1, 2019 for stays on or after July 1, 2019 will be subject to the tax. We anticipate that the Department of Revenue will issue guidance on how to handle the tax on bookings made on or after January 1, 2019.

Does this apply to the units I rent? 
As stated above, the new law applies to all rentals for a period of 31 days or less. Ordinary rentals, such as an annual lease or a tenancy-at-will are not covered. The new law applies regardless of whether the owner rents the property themselves, hires a rental agent to rent the property, or uses an online platform to facilitate the rental.

Do I need to collect the tax? 
Most likely, yes. The law requires intermediaries (which includes rental agents who post the property for rent online) who enter into a written agreement with the owner or operator to collect rent or facilitate the collection or payment of rent on behalf of the operator to collect and remit the tax. The Department of Revenue will issue regulations to clarify how often the tax should be remitted to the Department. This also means that an agent who does not collect or facilitate the collection of rent on behalf of the owner or operator does not need to collect and remit the tax.

Do I need to carry insurance for the listed properties?
Yes. Owners are required to maintain $1 million dollars in liability insurance to cover each short-term rental. The coverage is required to defend and indemnify the owner or operator and any tenants in the building for bodily injury and property damage. Realtors may elect to offer insurance coverage as part of their services but are not required to.

Before offering a property for short-term rentals, a hosting platform (including Realtors) must provide notice to the owner or operator that standard homeowners or renters insurance may not cover property damage or bodily injury to a third-party arising from the short-term rental.

Do the properties need to be registered with the state or city/town? 
Each rental unit will need to be listed with the state short-term rental registry. Additionally, each city and town is permitted to create a registration requirement for short term rentals. Check with your municipal government office for details.

Are there any inspections required? 
Cities and towns may implement a health and safety inspection requirement and set the frequency of inspections. Short-term rental operators are required to cover the cost of inspections and will likely face a fee to cover registration costs as well.

What are some best practices I can apply as the new law gets implemented? 

  • Owners and rental agents should disclose to prospective renters that any booking made on or after January 1, 2019 may be subject to a tax and that the tax rate may change before the rental period.
  • Develop a policy to verify the number of units owned by each client in a municipality and that those units are properly insured.

The Mass. Association of Realtors has provided the following documents to help manage short-term rentals: an updated Short-Term Rental Lease, a Community Impact Fee Form, a 14-day Exemption Form, and a required Insurance Disclosure Form. These documents can be found at marealtor.com/ShortTermRentals

{ 0 comments }

From The Assessor’s Office | Massachusetts Real Estate Tax Assessments and Abatement Basics

by Rich Vetstein on January 8, 2018

in Assessments, Real Estate Taxes, Taxes

“From the Assessor’s Office” — A New Regular Column by Jonathan Steinberg, MAA, MACR, Chief Assessor, Town of Westborough

Along with the celebration of the holidays comes the moment of truth when communities with quarterly tax billing send out the new Fiscal Year’s tax bills. Often there is an emotional response of frustration and anger. However, take a deep breath before contacting the Assessor’s office and ask yourself two questions: “Is it my assessment that’s too high or are my taxes simply too high? Could I sell my house for the assessed value?” If your assessment seems reasonable, but you think your taxes are too high, my recommendation is to go vote at Town Meeting or contact your City Councilmen, and get involved in your local government. Don’t contact your Assessor. If your assessment is too high, it’s worth considering filing for an abatement.

There are a few things to know before picking up the phone to call the Assessor’s Office.

Most importantly, applications for abatement must be postmarked by February 1st . After that deadline, the Board of Assessors has no authority to grant abatements for the Fiscal Year.

How are real estate taxes calculated and what do these bills represent?

The Fiscal Year begins on July 1st and runs until June 30th. The first two tax bills received on July 1st and October 1st are preliminary tax bills based upon the prior year’s values and tax rate. The new Fiscal Year’s assessments are set in the fall, the community determines if there will be a split or single rate and a tax rate set by mid-December. The tax bills sent by January 1st represent the Actual bills for the Fiscal year. These bills use the new Fiscal Year’s assessment and tax rate to determine the total year’s taxes due. The preliminary amounts are subtracted. The remaining amount is divided by two for the third and fourth quarters. This calculation results in the four quarters not being the same.

Ex. Fiscal 2017 assessment of $450,000 and rate of $17.80/$1000

Fiscal 2018 Preliminary bills $450,000 x $17.80/$1000= $8,010 /4 quarters = $2,002.50

Fiscal 2018 Q1 = $2,002.50   :     Q2= $2,002.50 Total Preliminary Paid = $4,005.00

Fiscal 2018 Value set at $465,000 and rate $18.25

Fiscal 2018 taxes: $465,000 x 18.00/$1000 = $8,370.00

Less Preliminary Bills: $8,370.00 – $4,005.00 = $4,365.00

Fiscal 2018 Q3 & Q4 Bills: $4,365.00/2 = $2,182.50

The total increase in taxes is $360.00

Many take the recent tax bill just received, multiply by four. In the example above, that would represent an increase of $720.00. You can take some consolation in that the next July’s bill should be less than the bills just received.

Understanding Your Assessment

Assessed values for Fiscal 2018 are as of January 1st, 2017. They are based upon the calendar 2016 sales of similar properties. The property that sold in your neighborhood last month is not considered in the current assessments. Unlike a “Fee Appraisal” for a mortgage, Assessor’s utilize “Mass Appraisal”. Assessors analyze an entire year’s sales, looking at assessment to sales ratios and different property characteristics. The analysis compares similar properties comparing factors such as size, location, style, age, quality and condition. Utilizing a CAMA (Computer Assisted Mass Appraisal) system, they apply this analysis equitably across all the properties in Town. The effectiveness of this relies on accurate data to evaluate that people paid X for Y.

A word of caution, before proceeding. When filing for an abatement, assessments can go up if errors are found that need to be corrected.

Procedures for Filing an Abatement

The first step is to get a copy of your property record card and review the information for accuracy. Look at the measurements and details such as acreage, bath count, fireplaces, finished basement, central air, etc. Next, review the grade rating, quality and condition of the dwelling compared to other similar properties. It is key to look only at similar properties. Don’t compare your newer colonial to a 1950’s cape. Inequitable valuation is a difficult case to support since the same valuation model is applied to all properties. If there are differences in value between you and your neighbor, it will be the result of differences in data. Correct or incorrect.

Don’ts:

  • Don’t cherry pick sales and properties throwing out anything that doesn’t support your argument. Assessor’s won’t overlook these. If other properties need correction, it doesn’t make your property value wrong.
  • Don’t compare your newer colonial to a 1950’s cape. Even if the property is next door, similar properties need to be compared. If you find data errors, filing for an abatement may be worth your time.
  • Don’t simply divide the assessment by the living area and compare $/square foot. This is not an accurate comparison. Factors are not linear. This calculation does not take into account differences in acreage and interior details.
  • Don’t bring a Zillow value into the Assessor’s office as support. Zillow can be a decent tool for lists of sales, but it falls short when it comes to analysis. Any information provided from online sources should be evaluated independently rather than relying on their values. There are simply too many variables that impact value that can’t be captured by these sites. Information about comparable sales can also be found through brokers or in the Assessor’s office.
  • Don’t bring in a bank appraisal that was done on your property within the last six months. It will use comparables that are after the January 1, 2017 effective date of the assessment.
  • Don’t refuse an inspection.

Do’s:

  • Fill out the application completely and submit it prior to the deadline.
  • Clearly explain any issues with the data on the record card.
  • Select and present comparable sales that are prior to the January 1, 2017 effective date of this assessment.
  • Select comparable sales that are actually comparable. They should be similar location, age, style, size etc.
  • Provide a reasonable opinion of value that is supported by your explanation.
  • Make yourself available for an inspection within the schedule of the Assessor’s. While you are never required to allow Assessor’s into your property, denying an inspection when applying for an abatement can almost guarantee a denial regardless of the reason for application. Don’t delay the inspection. Bear in mind, that this is something you have applied for so do your best to be accommodating for the Assessor’s inspection schedule.

After the Board of Assessors has acted on your application and you’ve received notice, if still unhappy with the outcome, the next step is an appeal to the Appellate Tax Board.

In closing, remember the February 1st filing deadline, assessments can go up if other errors are found(review your record card carefully), and go back and review the “Don’ts” above before sending in your application.

Jonathan Steinberg, MAA, MACR, is the Chief Assessor, Town of Westborough

The views contained in this article are the personal views of the author, not the Town of Westborough or the Commonwealth of Massachusetts.

{ 0 comments }

Tax Reform Alert: IRS Issues Guidance On Pre-Paying Real Estate Taxes Before Year-End

by Rich Vetstein on December 28, 2017

in Massachusetts Real Estate Law, Real Estate Taxes

Taxpayers Rushing To Claim Deductibility Of Real Estate Taxes — Prepayment Should Be OK 

As I wrote in my overview of the recently signed Tax Cuts & Jobs Act of 2017 (Tax Reform Act), for 2018, Massachusetts property owners will only be allowed to deduct $10,000 of real estate taxes and state income taxes. As a result, taxpayers have been rushing to pre-pay their real estate tax bills before year-end, in order to claim full deductibility on their 2017 tax returns.

The IRS has just issued an Advisory: Prepaid Real Property Taxes May Be Deductible in 2017 if Assessed and Paid in 2017.  The Advisory states:

The IRS has received a number of questions from the tax community concerning the deductibility of prepaid real property taxes. In general, whether a taxpayer is allowed a deduction for the prepayment of state or local real property taxes in 2017 depends on whether the taxpayer makes the payment in 2017 and the real property taxes are assessed prior to 2018. A prepayment of anticipated real property taxes that have not been assessed prior to 2018 are not deductible in 2017. State or local law determines whether and when a property tax is assessed, which is generally when the taxpayer becomes liable for the property tax imposed.

I’ve spent this morning attempting to break this down as it applies to the complex byzantine world of Massachusetts real estate property taxes.

The Massachusetts real estate tax system operate on the Fiscal Year system, running from July 1 through the following June 30. January 1 is the property tax assessment date for each fiscal year. We are now in the middle of Fiscal Year 2018 which ends on June 30, 2018. The 2018 fiscal tax bill is based on the property value assessment as of January 1, 2017. Taxpayers receive four (4) bills per year, due on August 1, November 1, February 1, and May 1. The first two quarterly bills are typically “estimates” with the subsequent two quarterly bills “actual” bills.

With respect to the Tax Reform Plan, taxpayers are attempting to pay their fiscal year 2018 third and fourth quarter bills (due 2/1/18 and 5/1/18) prior to year-end.

My assessment is that this (paying 3rd and 4th quarter tax bills before year-end) should be acceptable under the IRS Guidance because the tax obligation was “assessed” as of January 1, 2017, i.e, prior to Jan. 1, 2018. On the other hand, real estate taxes due after May 1, 2018 will likely not qualify for deductibility — even if paid in 2017.

Many tax collector offices are only accepting pre-payments on or before December 29th, so hurry up and pay!

{ 1 comment }

Tax Cuts and Job Act of 2017 Impact On Massachusetts Real Estate

by Rich Vetstein on December 20, 2017

in Commercial Real Estate, Landlord Tenant Law, Leasing, Massachusetts Real Estate Law, Mortgages, Real Estate Taxes, Refinances, Rental Housing, Taxes


Tax Reform Act Not Nearly As Bad As Feared For Massachusetts Homeowners

With Paul Ryan and Mitch McConnell and their minions burning the midnight legislative oil, the Tax Cuts and Jobs Act of 2017 is set to pass with President Trump’s signature before Christmas. (Updated: President Trump signed the bill into law on Dec. 22).  Everyone is asking me the same question. How will the biggest change in US tax policy in 30 years affect the Massachusetts real estate market and homeowners? There’s been a ton of commentary that the Act is the second coming of the Apocalypse for the real estate market, but I’m not convinced. While I do have many concerns with the overall bill (bloating the deficit, etc.), my opinion is that it will be a small net positive for the real estate industry.

(Disclaimer: I am neither a tax attorney nor a CPA, and I don’t play one on TV, so consult your own tax professional for any tax advice).

Capital Gain Exclusion on Sale of Primary Residence – No Change 

Excellent news here. The long-standing rule has been that the gain (increase in value) of the sale of a primary residence is non-taxable up to $250,000 for a single person and up to $500,000 for a married couple, if you occupied the home for 2 out of the last 5 years. This provision has been a huge incentive for home sales for many years. In prior GOP tax reform bill drafts, the exemption was increased so that owners needed to reside in the home for 5 out of the 8 years preceding the sale. The National Association of Realtors argued that this change would have resulted in a 10% drop in home sales. In response to the NAR’s intense lobbying, the final bill does not include any changes to the capital gains exclusion.

So the current rule stays in place – you can exclude up to $250,000 as a single filer and $500,000 for joint married filer in capital gain on the sale of your primary residence if you lived there for 2 out of the last 5 years. This is really great news for the Massachusetts real estate market.

SALT – Real Estate Taxes and State Income Taxes — $10,000 Cap

This change is a “loss” to homeowners, especially those with high value properties and in wealthy towns. Currently, all real estate taxes paid in Massachusetts are 100% tax deductible if you itemize your deductions. In Massachusetts, those real estate tax bills can be quite large.

Under the Act, there is now a deductibility cap of $10,000 — which includes not only local real estate taxes but all state and local income taxes. This will be a huge hit to taxpayers in wealthy towns with high real estate tax bills. Going forward, taxpayers will only be allowed to deduct $10,000 of all real estate taxes and state/local income taxes. This is definitely a major “loss” for Massachusetts homeowners, especially those in towns with high real estate taxes. This change, however, may be offset by the increase in the standard deduction ($12,000 for single, $24,000 for married) and the boost in child tax credits, but if you live in Weston or Boston, for example, this is likely going to hurt.

Tax Tip:  If your real estate tax bill is over $10,000, consider pre-paying your real estate tax bill before 12/31/17, so you can still deduct it. According to the Boston Globe, most town assessors around the state are accepting such payments. Update (12/28/17): The IRS has issued a Formal Advisory on Real Estate Tax Pre-Payments. Click to read my full review here.

Mortgage Interest Deduction – Deductible Up to $750,000. No Deductions For HELOC/Vacation Homes 

Again, due to the NAR’s strong lobbying efforts, the GOP kept the mortgage interest deduction intact for the most part, but with caps, and equity lines and second mortgages losing their deductibility. I would say this is a net “win” for homeowners. Starting in 2018, homeowners can keep the mortgage interest deduction on a loan of up to $750,000, down from the current law’s limit of $1 million.

Individuals who take out home equity (HELOC) loans, however, will no longer be able to deduct that interest under the new bill. The same is true for second mortgages and vacation homes. No more interest deductions for those. So this change may impact the vacation home market, particular down the Cape and Islands. However, a rental property owner could offset this loss by renting out the home for a few weeks, per the new benefits for rental housing discussed below.

Importantly, these new rules only apply to new mortgages applied for after Jan. 1, 2018. Existing mortgages incurred on or before Dec. 15, 2017 will remain fully tax deductible. There is some IRS guidance on these new rules, so consult your CPA.

Rental Property Owners/Landlords — Thumbs Up! 

As Bloomberg News reports, the Tax Reform Act will be very good for rental property owners and landlords if they do business via pass-through entities — real estate investment trusts, partnerships, limited liability companies, and S corporations — all of which are set to get big tax breaks in the Act. Under the new rules, all pass through income for qualified entities will enjoy a 20% deduction on the owner’s individual 1040 return. For landlords who have greater than $157,500 (single) or $315,000 (married filing jointly) in qualified taxable income, they can select an alternative deduction of (i) the greater of 50% of all W–2 wages, or (ii) the sum of 25% of the W–2 wages plus 2.5% of the unadjusted basis immediately after acquisition of all qualified property.

Attorney’s Advice: I’ve always counseled clients to set up an LLC to hold title to rental property, both from a liability and tax planning standpoint. With the Tax Reform Act giving even greater benefit to pass-through entities, it makes even more sense to set up that LLC. If you need assistance setting up an LLC, please email me at [email protected].

Also for depreciation rules, the depreciable life term has been reduced — from 27.5 years to 25 years for residential property and from 39 years to 25 years for nonresidential property. In addition, while most other businesses will find their interest deduction limited under the Senate bill, that limitation doesn’t apply to landlords, who can continue to deduct their mortgage interest in full.

There are other rules also favoring rental property owners, so definitely consult your CPA to prepare for 2018.

Thoughts and Comments?

As an attorney who has handled thousands of residential purchases and refinance loans, I’ve never been one to ascribe to the notion that the tax code has a ultimate determinative effect on whether a buyer is going to purchase a home or not. I’ve always believed that tax implications are one factor out of many in the home buying and selling equation. In my opinion, income, job security and consumer confidence play a larger role. I would doubt that the young couple searching for a starter home in Medway is going to say “geez, now that the SALT deduction is limited to $10k, let’s scrap this whole home buying idea.” If people have decided they want to buy a house, they will usually do so.

Overall, I think the Tax Cuts and Jobs Act of 2017 will have a net positive effect on the national and Massachusetts real estate market, despite the SALT cap and changes to HELOC/second mortgage deductibility. I’m hopeful that the increase in standard deductions and child tax credits will offset the mortgage deductibility and real estate tax changes. The no-change to the capital gain rules was critical and we have the NAR to thank for that. That was a game changer. And lastly, the rental and investment property market will get a big boost.

Rick Moore, Senior Mortgage Advisor with Zenith Mortgage Advisors in Holliston, is one local loan officer who is happy with the Tax Reform Act, both personally and professionally. “I think it’s a historic day, and I’m happy to have the extra money for some home improvement projects. Overall, if the economy will get a boost as expected by the administration, then that’s good for me as a loan officer. I’m looking forward to a very prosperous 2018!”

I do, however, worry about the addition of some 1.5 Trillion to the federal deficit as a result of the tax reform act. This is never good for long term stability of the economy and the housing market. It’s probably a safe bet to say that interest rates are going to rise to keep inflation at bay. I’m concerned that in exchange for some short term gain, we may be setting ourselves up for some long term pain. Only time will tell, but I hope Rick is right!

Feel free to post your comments below and on Facebook.

{ 6 comments }

TRID Rules Expected To Delay and Disrupt Closings

by Rich Vetstein on July 31, 2015

in Closings, Consumer Financial Protection Bureau, Fannie Mae, FHA, Massachusetts Real Estate Law, Purchase and Sale Agreements, Real Estate Taxes, Realtors, RESPA, TRID, Truth in Lending

TRID-1

Major Change To Current Practices | Expect Delays and Bumpy Road Starting Oct. 3

I just finished yet another closing where a national lender issued the closing documents the morning of the closing, and worse, issued a revised TIL (Truth in Lending) disclosure during the middle of the closing! Under the new TILA-RESPA Integrated Disclosure Rules (TRID) set to start on October 3, this too-common practice would have resulted in a closing delay of up to 7 days, to the dismay of everyone in the transaction.

The new TRID rules are game-changing regulations which threaten to disrupt and delay closings across the country. The new rules, already pushed back once due to industry outcry, go into effect in about 60 days on Oct. 3. I am very worried that lenders, Realtors and closing attorneys are not at all prepared for one of the most significant changes in how we do business. Experts are predicting that closings will be delayed, 60 day loan approvals will be the new normal, and new forms will bewilder buyers. “Expect a one- to two-week delay in closings,” said Ken Trepeta, director of real estate services of the government affairs branch for the National Association of Realtors, when describing the impact of TRID.

Check out my latest article: Best Practices In A New TRID World

Currently, we are finishing one of the strongest spring markets in a decade, but I’m quite concerned that come Fall, the new TRID rules will put the fall market into an ice bath. The best thing that every real estate professional can do is get educated and get prepared now for these changes. August is typically a slow month, so use it to get ready. My team will be doing a roadshow Powerpoint seminar to any local real estate office to explain the new changes. Contact me at [email protected] for more info.

New Closing Disclosure Replacing the HUD-1 Settlement Statement: 3 Day Rule

Under TRID, there will be a new settlement statement called a Closing Disclosure, which must be issued to the borrower at least 3 days prior to closing. If that does not occur, the closing will be delayed for up to 7 days. We are hearing that lenders will require that the information contained in the Closing Disclosure (all fees, closing costs, taxes, insurance, escrows, credits, etc.) be finalized as early as 20 days prior to closing, to give them enough time to generate the new Closing Disclosure in a timely fashion and to account for delays.

What does that mean for us professionals? It means that everything will need to be pushed up and done faster than before. That goes for titles, CPL’s, broker commission statements, invoices for repairs, insurance binders, condo fees, recording fees, title insurance, everything. And it means we can all expect delays as everyone adjusts to the new timetables and rules.

Practice Pointer: Click here to get my new TRID addendum/rider. 

What Forms Will Be Signed At Closing?

Lenders will require the new Closing Disclosure (embedded below) be signed by the borrower at closing. However, although the Closing Disclosure was intended to replace the current HUD-1 Settlement Statement, the geniuses at CPFB neglected to put a signature line for the sellers on the new Closing Disclosure. I’m not making this up. And we are no longer supposed to use the “old” HUD-1 Settlement Statement. Thus, our title insurance companies are telling us that there may be three settlement statements signed at closing: a Closing Disclosure for the buyer, a Closing Disclosure for the seller, and a combined Closing Disclosure. ALTA has created a new Combined Settlement Statement which can be found here.

Bank of America was asked whether it would require the use of the ALTA model forms, and it stated in a June 9 memo that it prefers the ALTA model if a closing attorney chooses to use a settlement statement to supplement the Closing Disclosure (CD), but specified that the settlement statement figures must reconcile to the CD and a copy of the settlement statement must be provided to the bank. The bank also stated that all revisions to fees and costs will require bank approval and an amended CD. In other words, closing attorneys will not be allowed to revise fees and costs by simply supplementing the CD with a settlement statement.

60 Day Approvals/Closings The New Normal?

With any historic change to how lenders disclose fees and approve loans, there’s going to be a steep learning curve — and delays. You can count on that. Industry insiders say the days of 30 and even 45 day loan approvals may be over, at least temporarily. Sixty (60) day approvals may be the new normal, and agents should build the longer timeframe into their offers and purchase and sale agreements and educate their buyers and sellers accordingly.

Repairs and Walk-Throughs

Since lenders will require all fees and credits finalized 7-10 days prior to closing, this will significantly impact how we handle repairs and credits. Agreed upon repairs also affect how the appraisal is conducted which will further impact the timelines. Experts are suggesting that Realtors consider doing walk-throughs at least 14-21 days prior to closing instead of the typical day before or day of walkthrough, because all repair issues and credits should be set in stone at least 7-10 days prior to closing and changes in fees and credits on the day of closing will not be permitted by the lender. Some experts are even saying that agents should do two walkthroughs, one within the TRID timelines and one immediately prior to closing. Also, under TRID paid outside closing (POC) items will be discouraged by lenders.

Take-away:  Realtors should be warned that repairs contained in the purchase and sale agreement will have the potential to delay closings under the TRID rules. Ensure that any repairs are completed 14-21 days prior to closing. Better yet, don’t have the seller make repairs at all; use closing cost credits instead. 

No More Back to Back Closings?

Due to the high potential for delays caused by TRID, back-to-back or piggyback closings may be a thing of the past, at least for now. A delay with a closing obviously has a domino effect on a back to back closing. The best practice, at least for the first few months of the new TRID era, is to schedule closings at least 3 days apart. Seller/buyers will have to prepare for this reality with bridge loans, use and occupancy agreements, or temporarily staying with your nearest relatives.

1416821334979Partner with Trusted and Verified Providers

Now more than ever, Realtors are going to want to partner with lenders and closing attorneys who have been vetted and verified as fully compliant with the TRID rules, so there will be minimal disruption and delay on their transactions. Realtors and loan officers should ask their closing attorneys whether they are compliant with the ALTA (American Land Title Association) Best Practices, which is quickly becoming the standard for TRID compliance. Under the ALTA Best Practices, the attorney will have passed an intensive initial due-diligence screening, a third-party internal audit, background and credit check, extensive review of applicant’s experience, business model and policy loss history, and licensing verification. The closing attorney should also have secure document encryption capabilities and privacy/technology policies in place. My office has been vetted and verified by Stewart Title which has a comprehensive website on the TRID rules. If your buyer wants to use his personal attorney who does not specialize in real estate, explain to him or her why that is a mistake which could ultimately delay the closing. 

Bumpy Road Ahead?

In my opinion, the TRID rules are the biggest change to the industry in 20 years, and will be much more difficult to implement than the new GFE and 3 page HUD of several years ago. As discussed above, my team will be doing a roadshow Powerpoint seminar to any local real estate office to explain the new changes. Contact me at [email protected] to schedule your complementary seminar.

More information:

Mass. Ass’n of Realtors Webinar on TRID with Ruth Dilingham, Special Counsel
National Ass’n of Realtors Webinar with Phil Schulman
Old Republic Title FAQ on TRID
CFPB Monitor TRID FAQ
CFPB Webinar Rebroadcast May 2015

CFPB Closing Disclosure by Richard Vetstein

{ 10 comments }

It’s All A Write Off! Tax Deductions For Massachusetts Real Estate Sellers and Buyers

by Rich Vetstein on March 30, 2013

in Closings, Condominium Law, Massachusetts Real Estate Law, PMI, Real Estate Taxes, Taxes

Tax Reform Act Alert: The Tax Cuts & Jobs Act of 2017 has dramatically changed the tax treatment of real estate taxes and mortgage interest. Please review my overview of the new Tax Act here.

One of my favorite Seinfeld episodes is the one where Kramer tries to explain to Jerry how tax write-offs work. “It’s all a write-off!” exclaims Kramer who, not surprisingly, had no idea what he was talking about. I’ve embedded the Youtube video below.

With the April 15 tax deadline quickly approaching, let’s talk about some of the taxes, deductions, and “write-offs” arising out of a Massachusetts residential real estate purchase and sale. (Disclaimer: I am neither a CPA nor tax attorney, so consult your own tax professional for specific questions).

Real Estate Property Taxes

Every Massachusetts municipality levies a real estate property tax on residential property. Indeed, the real estate tax is the primary revenue producer for most towns with a limited commercial tax base. The real estate tax rate is set by the local board of assessors and is keyed to the assessed value of your land and home, which is often less than the true market value.

Real estate taxes are generally tax deductible if you itemize your deductions on IRS Form 1040, Schedule A. At closing, the closing attorney will ensure that all real estate taxes are paid up and allocated between buyer and seller as of the closing date. If the end of the fiscal quarter is approaching, most lenders will require that the buyer pay the upcoming real estate tax bill in advance.

Most lenders these days require an escrow account for the payment of real estate taxes, and the mortgage company will actually send the payment to the assessor. However, the homeowner should check the actual property tax bill to calculate the exact amount of real estate taxes paid for the year.

Rich’s Advice: It’s very important to keep a copy of your HUD-1 Settlement Statement on file (and for your tax preparer). Also, get a copy of your loan amortization schedule for reasons I’ll discuss later.

Mortgage Interest Tax Deduction

The mortgage interest tax deduction is typically the largest tax deduction taken by a typical homeowner. The deduction applies to interest paid on a qualifying mortgage for both a principal residence and a second home. It also applies to home equity lines and second mortgages subject to some limitation, discussed below.

If you paid any points for getting a mortgage, they may also be tax deductible, either the year paid or over the life of the loan. This applies to both purchase loans and refinances. (Check your HUD-1 Settlement Statement). The same is true for PMI — mortgage insurance premiums. They remain tax deductible for 2012 and 2013 thanks to the Fiscal Cliff Bill.

Cash out refinances and equity lines have some special rules. If you use the money for a car, a vacation, college tuition, etc., then you can deduct your interest on loan amounts up to $100,000. If you borrow more than $100,000, the interest on the excess is not deductible. However, if you use the money to make improvements on your home, then the money is treated for tax purposes as though it’s part of your home mortgage … so you can deduct all the interest, along with your mortgage interest, as long as the total amount you’ve borrowed doesn’t exceed $1 million plus $100,000.

Consult IRS Publication 936 for more information on the mortgage interest deduction.

Rich’s Advice:  At closing, I advise new buyers to speak to their accountant about whether they should recalculate their W-4 withholdings in light of their new mortgage and corresponding tax deductions. This is where that loan amortization schedule comes in very handy. New buyers often have substantially more tax deductions than before becoming homeowners, and thus, they can adjust their withholdings so they can keep more of their take home pay every week, instead of giving Uncle Sam an interest free loan!

Massachusetts Property Transfer Tax

Sometimes called deed stamps, transfer tax or excise tax, Massachusetts home sellers must pay a tax on selling their property. For every Massachusetts county except Barnstable and the Islands, the tax is $4.56 per thousand of the purchase price on the deed. So for a $500,000 sale, that’s a whopping $2,280 tax bill. There is considerable debate among tax professionals as to whether this tax is deductible on your federal and state return. It’s best to consult your tax preparer.

Capital Gains On Sale

If you sell your home for more than you paid for it, you have a capital gain, and in theory you have to pay capital gains tax. However, in most cases, you don’t have to pay taxes on the first $500,000 of capital gain on a home (or $250,000 if you’re married and filing separately). To get this special treatment, you have to have owned the home and lived in it as your primary residence for two years out of the last five years prior to the sale. Even if you didn’t own and live in the home for two full years, you might still be able to exclude some or all of your capital gain; you just won’t be eligible for the full $500,000 exception.

Other Closing Costs

Unfortunately, most of the typical real estate closing costs are not tax deductible. This includes lender origination fees, credit report, flood certification, homeowner’s insurance, appraisals, attorney fees, title abstract, title insurance, county recording fees, and real estate commissions.

__________________________________________

RDV-profile-picture-larger-150x150.jpgRichard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney who helps people buy, sell and finance residential real estate. If you need assistance, please contact him at 508-620-5352 or at [email protected].

{ 3 comments }

Fiscal Cliff Bill Saves Home Mortgage Interest Tax Deduction and PMI Tax Deduction

by Rich Vetstein on January 2, 2013

in Condominium Law, PMI, Real Estate Taxes, Tax Credit, Taxes

mortgage-interest-deductionBoon for Massachusetts Homeowners

More good news for Massachusetts homeowners coming out of Congress’ late night passing of the Fiscal Cliff Bill. The mortgage interest tax deduction — which was reportedly on the Congressional chopping block — was untouched by Congress, leaving it in place. This is huge for the middle class, and especially for house-poor Massachusetts homeowners who tend to have larger mortgages than the rest of the country.

Congress also extended the tax deduction for private mortgage insurance (PMI) payments through December 31, 2013. Homeowners who were not able to put 20% down must typically pay for private mortgage insurance which protects lenders in case of a borrower default. PMI payments remain tax deductible for 2013 under the Fiscal Cliff bill, providing another tax break for Massachusetts homeowners.

_________________________________________________________

100316_photo_vetstein (2)Richard D. Vetstein, Esq. is a Massachusetts real estate attorney who writes frequently about new legislation concerning the real estate industry. He can be reached at [email protected].

{ 2 comments }

Leaving With Keys and Carpal Tunnel: Why Do Buyers Sign So Many Closing Documents?

by Rich Vetstein on June 19, 2012

in Closings, Deeds, Disclosures, Fannie Mae, FHA, HUD, Insurance, Massachusetts Real Estate Law, Mortgages, Real Estate Taxes, RESPA, Safety, Title Insurance, Truth in Lending

Real Estate Crash Has Resulted In Many More Forms and Disclosures

These days buyers are leaving closing rooms with not only their keys but a mild case of carpal tunnel syndrome! The reason for sore forearms and wrists is the voluminous stack of closing documents which are now required to be signed and notarized at every Massachusetts real estate purchase or refinance closing.

One of my opening “break the ice” lines at closings is to suggest that the buyers start massaging their writing hands. Then I show them the 2 inch stack of documents they must review and sign, and they usually say, “Are you serious? We have to sign all that?” Yep, I reply. You can thank Fannie Mae and the real estate collapse for that! All the new rules and regulations passed in the last 5 years have resulted in, you guessed it, more forms. Do you think the Feds and state ever eliminate old or out-dated forms? Nope.

Let me quickly go over some of the more important — and less important — documents signed at a typical Massachusetts real estate closing.

The Closing Documents

  • HUD-1 Settlement Statement. This is arguably the most important form signed at closing. It breaks down all the closing costs, lender fees, taxes, insurance, escrows and more. We did a full post on the HUD-1 and all the closing costs you can expect to pay here. Under the newer RESPA rules, most closing costs must be within 10% tolerance of the Good Faith Estimate provided by the lender (which you will also re-sign at closing).
  • Promissory Note & Mortgage. These two documents form what I like to call the “mortgage contract.” The promissory note is the lending contract between borrower and lender and sets the interest rate and payment terms of the loan. It is not recorded at the registry of deeds. The Mortgage or Security Instrument is a long (20+ page) document and provides the legal collateral (your house) securing the loan from the lender. The Mortgage gets recorded in the county registry of deeds and is available to public view. Read a full explanation of the Note and Mortgage in this post.
  • Truth in Lending Disclosure (TIL). The Truth in Lending should really be called “Confusion In Lending,” as the federal government has come up with a confusing way to “explain” how your interest rate works. This is a complex form and we’ve written about it extensively in this post. Your closing lawyer will fully explain the TIL form to you at closing.
  • Loan Underwriting Documents. With increased audit risk on loan files, lenders today are requiring that borrowers sign “fresh” copies of almost all the documents they signed when they originally applied for the loan. This includes the loan application, IRS forms W-9 and 4506’s.
  • Fraud Prevention Documents. Again, with the massive mortgage fraud of the last decade, lenders are requiring many more forms to prevent fraud, forgeries, and straw-buyers. The closing attorney will also make a copy of borrowers’ driver’s licenses and other photo i.d. and submit the borrower’s names through the Patriot Act database. They include Occupancy Affidavit (confirming that borrowers will not rent out the mortgaged property), and the Signature Affidavit (confirming buyers are who they say they are or previously used a maiden name or nickname).
  • Escrow Documents. Unless lenders waive the requirement, borrowers must fund an escrow account at closing representing several months of real estate taxes and homeowner’s insurance. This provides a cushion in case borrowers default and the taxes and insurance are not paid.
  • Title Documents. For purchase transactions, Massachusetts requires that the closing attorney certify that a 50 year title examination has been performed. Buyers will counter-sign this certification of title, as well as several title insurance affidavits and documents which the seller is required to sign, to ensure that all known title problems have been disclosed and discovered. Of course, we always recommend that buyers obtain their own owner’s title insurance which will provide coverage for unknown title defects such as forgeries, boundary line issues, missing mortgage discharges, etc.
  • Property Safety Disclosures. In Massachusetts, buyers and sellers will sign a smoke/carbon monoxide detector compliance agreement, lead paint disclosure, and UFFI (urea formaldehyde foam insulation) agreement. These ensure that the property has received proper certifications and will absolve the lender from liability for these safety issues.
  • Servicing, EOCA and Affiliated Business Disclosures. Chances are that your lender will assign the servicing rights to your mortgage to a larger servicer, like JP Morgan Chase or CitiMortgage. You will sign forms acknowledging this. You will be notified of the new mortgage holder usually within 30-60 days after closing. In the meantime, the closing attorney will give you a “first payment letter” instructing you where to send your first payment if you don’t hear from the new servicer. You will also sign forms under the federal and state discrimination in lenders laws and forms disclosing who the lender uses for closing services.

Well, those are most of the documents that buyers will sign at the closing. Sellers have a slew of their own documents to be signed at closing, and I’ll cover that in a future post. As I said, at your closing, massage your signature hand, grab a comfy pen, and sign your life away!

_________________________________________________

Richard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney. He can be reached by email at [email protected] or 508-620-5352.

{ 4 comments }

Massachusetts Real Estate Tax Payments And Mortgage Escrows Explained

by Rich Vetstein on April 5, 2012

in Closings, Massachusetts Real Estate Law, Mortgages, Real Estate Taxes

Massachusetts Real Estate Taxes

The Massachusetts closing attorney is responsible for verifying the correct amount of real estate taxes assessed against the property, collecting sufficient amounts to pay for any outstanding and/or upcoming tax bills, and to adjust between buyer and seller any payments already made by the seller. The way in which Massachusetts real estate tax bills are due and payable, however, often creates confusion for parties at the closing.

For most Massachusetts cities and towns, real estate tax bills are mailed and taxes are collected on a quarterly basis. The fiscal year for property tax is July 1 to June 30. The schedule of mailings, due dates, and the three months each payment covers is outlined on the following chart:

Quarter    Mailed By  Due Date    Payment is For
1st June 30 Aug 1 July, Aug. Sept.
2d Sept. 30 Nov. 1 Oct., Nov, Dec.
3rd Dec. 31 Feb. 1 Jan, Feb., March
4th March 31 May 1 April, May, June

 

 

 

 

The confusion is caused because most folks are not aware that the tax bill which is due on Aug. 1 covers taxes due for the preceding month of July and the following month of September.

So, if you are closing on March 1 and the seller has already paid the tax bill due on Feb. 1, the buyer will be responsible for an adjustment due the seller for the 31 days of March.

Now, here’s the kicker. As part of the mortgage escrow account requirement, explained below, the lender will most likely require the borrower to pay the real estate taxes due May 1 in advance, thereby requiring the borrower to bring a lot more to closing than he or she was expecting. The lender wants to ensure that all real estate taxes are paid in advance so no tax lien gets filed on the property. This is very common, but not often explained by the loan officer ahead of time, thereby falling on the closing attorney to break the “bad news.”

Mortgage Escrows

All lenders are now requiring that borrowers establish an escrow account for the payment of real estate taxes, homeowner’s insurance, and mortgage insurance (if lower than 20% down payment). The escrow account is like an insurance policy to ensure that real estate taxes, insurance and PMI is paid by the homeowner. The escrow account will typically be funded with up to 3-4 months of payments in advance, paid at closing. Some lenders will allow for a waiver of the escrow account, but often with an increase in the interest rate.

____________________________________

Richard D. Vetstein, Esq. is an experienced Massachusetts real estate attorney. They can be reached by email at [email protected] or 508-620-5352.

{ 0 comments }

2012 Massachusetts Real Estate Market Survey

by Rich Vetstein on January 22, 2012

in Massachusetts Property Values, Real Estate Taxes, Realtors, Refinances

January in the real estate industry is typically the time for the new year market outlook. For this coming year many of us have seen the template on the macro-economic data which most impacts the real estate industry: 8.5 % unemployment in the latest report, 30 year mortgage rates at record lows at or below 4.0%, and 15 year mortgage rates at or below 3.25%.

Rather than run a standard metrics-based market forecast this year, I decided to survey a cross-section of Massachusetts real estate realtors and mortgage professionals to hear from them on the upcoming spring and the 2012 real estate market in its entirety. Overall, each of the real estate professionals I contacted were optimistic. They tend to see the low interest rates and improving economy as the drivers of a busy 2012 housing market. Thus, here is a compendium of professionals I surveyed:

“I am optimistic that interest rates will remain low at least until the presidential elections. The uncertainty that has constrained spending and lending will keep things from taking off until there is a clearer picture of what policies will be in place (intervention and regulation vs. deregulation and free markets).

The increasing debt woes of EU members creates short term demand for our mortgage bonds and treasuries which drives down interest rates. This won’t be fixed overnight.

The housing collapse hangover continues to cause problems. The economy and in particular the housing market is still too weak to suffer increased interest rates. Rates will remain low until the cash on the sidelines is invested, employment improves and housing sees some recovery. The Fed has shown that they will move to buy mortgage backed securities and treasuries if we see rates start to rise and I can’t see them sitting on their hands if rates rise and threaten to derail this slow economic recovery.

This is an incredible time to buy a home with prices low and the cost of money so low as well.”

–Loan Officer, Bank of Canton, Boston, Brookline and Route 128 suburbs

 “I expect the 2012 real estate market in the greater Boston area to be stable. Overall, buyers will continue to have the upper hand but I don’t think we are going to see any precipitous drop in either sales prices or the number of sales. If interest rates remain low it continues to be a good time to get into the market knowing that you are getting in somewhere close to the bottom.”

–Realtor, Keller Williams, Cambridge,

 “As we embark on the new year there are many reasons to be optimistic. Rates are expected to remain at all time lows for the next 12 months and there is plenty of inventory for home buyers. More importantly, we are starting to see better listing prices from sellers who are clearly more realistic about what to expect. Contrary to what the media would have consumers believe, there is plenty of financing available for qualified buyers – and it doesn’t always require 20% down. First time buyers are surprised to see how affordable it is to own their own home, and with programs available with as little as 3% down and no PMI I expect to see a big surge in this demographic.”

–Loan Officer, Fairway Mortgage, Route 128 Suburbs

 “I see a slow start to the Spring, but a steady stream of inventory equal to purchasers. The best place to be is in a move-up, as buyers will find a greater gain on their more expensive home in spite of possibly losing a bit on the sale side. It seems that there are more foreclosures on the horizon with stable amounts of short sales, another way for a buyers to make immediate gains. Buyers will still dictate values, relative to condition and inventory. The mortgage guidelines have become stricter, so getting a pre-approval from a reputable lender is increasingly important. Sellers should request to see one immediately from a prospective buyer and buyers should be educated about the borrowing and the buying process.”

–Realtor, Realty Executives, Framingham,

 “I have an above normal number of pre-approvals for January.  I’m starting to see movement in the market.  A lot of high-end buyers.”

–Loan Officer, Citizens Bank, Route 128 Suburbs,

“Brookline real estate should receive a spike upwards during the spring market like it always does. It looks like the economy has improved slightly which could also help the confidence of the buyers.”

–Realtor, Coldwell Banker, Brookline

 “I see purchases up 40% for the year, and refinances down slightly.”

–Loan Officer, Mortgage Network, Route 128 Suburbs

 “With 2011 now behind us, real estate agents and others related to the housing industry are hoping that 2012 will bring a significant improvement to the number of units sold and at least stabilization, if not an increase in the median sales price.”

2011 ended with a nice up-tick in sales according to the National Association of Realtors, however, sales remain depressed, as are several of the realtors I spoke with in the Metrowest and Central Massachusetts areas. Central Mass, in particular, seems to have borne the brunt of the home sales price reductions and sales lag. Unit sales within the Route 128 belt have held up nicely, although many homes have experienced a 5-10% appraised value drop, year over year.

Interest rates have held steady at near record lows. While this is good news for first-time home-buyers and relocating workers, as home affordability is better than at any time in recent memory, many sellers are frustrated.

As home prices continue to drop, more sellers are finding themselves with little or no equity in their homes.  This not only makes them reluctant to price their home to market and sell quickly, for many of them, current rules on Loan to Value, are making them unable to take advantage of today’s low interest rates and refinance.

So what will 2012 bring?  A slight improvement in unit sales, and perhaps a bottom in home prices (I hope!).  Here are my reasons for this conclusion:

  1. Job creation – Over the past several months, it appears that the job market is improving.  The Massachusetts unemployment rate dropped to 6.8% in December.
  2. Continued Low Interest Rates – While we may see an increase in 30 year fixed rates during the next couple of months, as the national economy shows signs of improvement, I do not expect a dramatic rise in rates.
  3. Helping Underwater Homeowners –
  4. Homebuilder Sentiment – Nationally, homebuilding company optimism is making a strong recovery.  Locally, several builders I have spoken with think 2012 will be their best year ever.  Prices may be down, but in many cases so are cost of materials and labor.

There are a few other reasons for optimism including an increase in household formation, as well as talk of programs to rent REO properties, which may help reduce vacant homes and stabilize prices.

–Loan Officer, Greenpark Mortgage, Metrowest and Worcester County

We have a lack of inventory in the greater Franklin area. More buyers and renters than properties on the market. A lot of sellers I talk to are waiting “until later in the year” to list. They need to get started on their preparations now because “later in the year” will be here before you know it!

–Realtor, Hallmark Sotheby’s, Franklin/495 Area

“I feel that the market will be very good for buyers and sellers this spring.

Buyer can take advantage of the great rates and prices. It’s a great time to upgrade to a bigger and better home. It’s also a great time to buy an investment property since rents are on the way up.

On the listing side we need more inventory since most of the homes on the market now are stale and overpriced. I’m a strong believer that if the home is priced well it will sell fast.”

–Realtor, Keller Williams Realty

__________________________________________

Marc E. Canner, Esq. is an experienced Massachusetts real estate attorney with offices in Needham and Bedford, Mass. He is a principal of TitleHub Closing Services LLC and the Law Offices of Marc E. Canner.

{ 5 comments }

Death and Taxes: Estate Sales & Probate Issues In Massachusetts Real Estate Practice

by Rich Vetstein on October 13, 2011

in Deeds, Massachusetts Real Estate Law, Probate, Purchase and Sale Agreements, Real Estate Taxes

Benjamin Franklin once said famously that “the only certainties in life are death and taxes.” That’s certainly true in real estate practice. Today, I will go over how real estate passes when the owner dies  –  with a will or without a will – and how the probate process affects the real estate process.

Tenancy by the Entirety

Married couples in Massachusetts are recommended to hold real estate as “tenants by the entirety.” It’s a special form of joint tenancy for married couples. If one spouse dies, the surviving spouse succeeds to full ownership of the property, by-passing probate. By law, tenants by the entirety share equally in the control, management and rights to receive income from the property. Property cannot be “partitioned” or split in a tenancy by the entirety. A tenancy by the entirety also provides some creditor protection in case one spouse gets into financial distress as creditors cannot lien the non-debtor spouse’s interest in the property.

Death Without A Will—Intestacy Laws

Clients were often surprised to learn that when one spouse dies without a will, the law of intestacy in Massachusetts leaves a portion of the estate to the surviving spouse and a portion to the decedent’s children. This is changing as of January 2012 with Massachusetts’ adoption of the Uniform Probate Code. Under the “UPC,” if a spouse with children of the marriage dies, the surviving spouse gets the entire estate, including the marital home. If there’s no surviving “descendant,” or child, of the deceased, but a surviving parent of the deceased, the surviving spouse gets the first $200,000 of the estate, plus 75% of the balance of the estate. The laws of inheritance remain rather complicated to explain fully here. A good guide to the new Uniform Probate Code can be found here.

Death With A Will — Testate

The basic rule is that if the owner dies with a will, which includes a power to sell real estate, the executor or administrator of the estate is generally authorized to convey title without further authority from the probate court. If the will does not provide for a power of sale, the executor will have to obtain a license to sell from the probate court.  If a final account has been filed and allowed, the heirs (in the case of an intestacy) or devisees (in the case of a will) are able to convey title.

Missing Probates

If the title examination turns up an interest that is not accounted for by a probate, and the death of the interested party occurred less than 25 years ago, a probate may need to be opened to convey the property. Deaths over 25 years old where a special affidavit has been filed, may pass without probate.

Federal & Massachusetts Estate Tax Liens

A federal and state estate tax lien arises immediately upon death and attaches at the time of death to the gross estate of the decedent. The gross estate includes all property, wherever situated, that the decedent owned or in which the decedent had an interest at the time of death. The threshold for federal gross estates for 2011 and 2012 is $5 Million for an individual and $10 Million for a couple. The Massachusetts estate threshold remains at $1 Million. For estates below those amounts, the executor must merely file a simple Affidavit of No Estate Tax Due. Estates over the thresholds must file the more complicated release of lien from the Department of Revenue which requires the filing of a full estate tax return.

Bought A House? Get A Will!

Julie Ladimer, Esq. Danielle Van Ess

After every closing, I always have a chat with my new buyers about setting up a will and other estate planning vehicles. It’s very important on all fronts. For those in the MetroWest area, I recommend Julie McQuade Ladimer, Esq. of Framingham (email: [email protected]; Tel: (508) 788-0028. For those on the South Shore, I recommend Danielle Van Ess, Esq. in Hingham (email: [email protected]; Tel: 781.740.0848. Both are very good and well regarded estate planning attorneys.

____________________________________

Richard D. Vetstein, Esq. is an experienced real estate attorney who’s handled over 1,000 closings. Please contact him if you need legal assistance purchasing residential or commercial real estate.

{ 0 comments }

The Massachusetts Land Court: One Stop Shopping For All Your Real Estate Needs

by Rich Vetstein on June 12, 2011

in Foreclosure, Massachusetts Real Estate Law, Mortgages, Permitting/Zoning, Real Estate Litigation, Real Estate Taxes, Title Defects, Zoning

220px-OldSuffolkCoCtThe Real Estate Specialty Court

Established in 1898 and still staffed with only a handful of judges, the Massachusetts Land Court is the smallest of all the Massachusetts trial courts. But for real estate practitioners, it is the most important court in the Commonwealth.

The Land Court is known for its real estate expertise, and is the starting place for almost all foreclosures. Its judges, most of whom were practicing real estate attorneys, are widely regarded as experts in the intricacies of Massachusetts real estate law. Indeed, the diminutive Land Court has recently been at the forefront of national foreclosure law with Judge Keith Long’s seminal decision in U.S. Bank v. Ibanez which made national front page news for several days.

Registered Land

The Land Court was originally established to oversee the Massachusetts land registration system. Approximately 15-20% of all property in Massachusetts is registered land. Non-registered land is referred to as recorded land.

The purpose of the registered land system — modeled after the Australian Torrens system — is to make land titles as clear and defect-free as possible. To register land, property owners have to go through a fairly rigorous process where a land court title examiner searches and certifies title and a formal plan of the land is approved. All defects and title issues are fully vetted and resolved, if possible, and upon registration, the land is deemed free of defects except noted by the examiner, including claims of adverse possession.

Registered land is freely transferable, and there is no discernible difference in examining title to registered land, other than recording which involves a few more steps than non-registered land.

Foreclosures

The Land Court is widely known as the starting point for the vast majority of foreclosures in Massachusetts. Although Massachusetts is considered a “non-judicial” foreclosure state — that is, where a mortgage holder does not need a court order to foreclosure — the state has held onto the U.S. Soldier’s and Sailor’s Civil Relief Act which gives military members protections against foreclosure. In Massachusetts, mortgage holders bring a “Soldier’s and Sailor’s Act” proceeding in the Land Court to ensure that the property owner is not an active military member. Once the Land Court issues a judgment, the foreclosure can move forward. A Soldier’s and Sailor’s proceeding is not the forum in which to challenge a foreclosure. A homeowner needs to file a separate lawsuit in Superior Court or Land Court to do so.

Quiet Title, Partition and Title Disputes

In the last 20 years, lawmakers have widely expanded the Land Court’s jurisdiction to hear more types of cases. Today, the Land Court regularly hears cases involving zoning and subdivision appeals, quiet title and actions to try title, disputes involving mortgage priorities, tax takings, adverse possession, real estate contract disputes, petitions to partition, and more. I do most of my litigation work in the Land Court’s civil session.

Strategically, certain cases are better off in the Land Court and vice-versa. An important distinction with Land Court is that there are no jury trials. Thus, if you want a jury trial, the case should be filed in Superior Court, not Land Court. For cases which are based on the interpretation of contractual language or complex real estate legal issues, Land Court is probably a good choice. For cases which have an “emotional” component and less complex, a Superior Court jury session is probably the better choice.

New Permitting Session

Most recently, in 2007, the Legislature created a special Land Court permitting session to hear zoning and subdivision appeals for larger projects involving over 25 units or over 25,000 square feet of gross floor area. With the goal to expedite zoning disputes which have roadblocked development, cases in the new session will be assigned to a single judge for the life of the case and will be assigned one of three expedited tracks. For the first time, these tracks provide deadlines for both getting to trial (ranging from six to 12 months) and for receiving a decision after trial or summary judgment (ranging from two months to four months).

Land Court decisions aren’t widely available, but recent rulings can be found here.

If you have a complicated real estate dispute, your attorney should always seriously consider bringing the claim in the Land Court where the judge will understand the issues and keep tight control over the case.

___________________________________

Richard D. Vetstein, Esq. is an experienced Massachusetts Land Court Attorney who has litigated numerous cases in the Massachusetts Land Court. For further information you can contact him at [email protected].

{ 5 comments }

Massachusetts Real Estate Values Down, But Real Estate Taxes Continue To Rise

by Rich Vetstein on August 22, 2010

in Abatement, Massachusetts Real Estate Law, Real Estate Taxes

Benjamin Franklin once famously said, “There is nothing certain in life but death and taxes.” And this is most certainly true for real estate taxes in Massachusetts which continue to rise despite declining home values.

As reported in the Boston Globe today:

Despite dropping home values, Massachusetts property tax bills continued to rise last year. Revenue-hungry cities and towns, looking for money to pay for new buildings and to maintain services, have continued to push up local taxes, often asking voters to approve property tax overrides even as real estate values drop further.

The double whammy of lower home values and higher taxes — a phenomenon that has hit Massachusetts homeowners for several years — frustrates taxpayers as they endure the rocky economy.

Massachusetts home values, after peaking in 2007, have dropped about 4.6% last year to an average of $373,702. Yet the average tax bill on a single-family home in fiscal 2010 increased about $140, a 3.3 % increase, according to figures released this month by the state Department of Revenue. The average tax bill for a single-family home was $4,390.

Taxpayers want to know why, and many have had enough. Part of the problem is that assessed values, which municipal assessors use to calculate real estate taxes, lag behind “true” market value. Rick Henderson, the assistant director of assessing in Dedham, points out that assessed values for fiscal 2010 are based on a home’s worth on Jan. 1, 2009, which was determined by home sales in 2008 in that community. A home’s actual value — different from its assessed value — might have declined significantly over the last two years, he said.

Taxpayers can file for an abatement to petition for a lower assessed value. Abatements are due within 30 days of the mailing of the tax bill, and are subject to very strict deadlines, so consult an experienced real estate attorney about an abatement.

The other problem is that local boards of assessors have consistently increased the municipal tax rates to bridge the shortfall in expected collections. For example, in Sudbury, the local assessors raised the residential tax rate from $14.27 in 2008, to $15.29 in 2009, to $16.08 in 2010. During the same period, average home assessed values dropped $33,000, so property taxes continued to rise. Proposition 2 1/2 does not limit the ability of assessors to increase tax rates; it only limits the aggregate tax levy brought in by a town. With the passage of local overrides of Prop 2 1/2, tax bills have increased dramatically in the last 10 years. In Sudbury, the average tax bill in 2000 was nearly $6,000. In 2010, it is $10,460–a 74% increase in 10 years time, or an average of 7.4% per year.

{ 1 comment }