Posts Tagged ‘loan modification agreement’

CC&Rs Govern Unless Amended by HomeownersIn Arizona

December 2, 2011

A family’s back yard in a beautiful Ahwatukee subdivision is adjacent to the community park owned by the subdivisions homeowners’ association (“HOA”). Recently, the HOA planted three large ficus trees in the community park without any notice to them. The large ficus trees now obstruct their view of the community park. According to Arizona real estate law, does the HOA have the right to plant these large ficus trees in the community park without any notice to the neighboring homeowners?

The answer is probably. First off, there is no statute or court decision which grants a homeowner a view easement. A view easement, like any other easement, needs to be in writing and recorded. In other words, if the HOA wanted to grant this family a view of the community park, a view easement in writing and recorded would be required. Second, the Covenants, Conditions, and Restrictions (“CC&Rs”) of the community probably authorized the HOA to plant the three large ficus trees. Therefore, this family should review the CC&Rs carefully. If they were to determine that the CC&Rs authorized the planting of the three large ficus trees, CC&Rs generally can be amended by the written agreement of a percentage of the homeowners, e.g., sixty per cent of the homeowners.


Prepaying a Year of Rent to Landlord?Use Caution

December 2, 2011

Due to of the collapse of the Arizona real estate market an Arizona couple has some bad credit problems. Unfortunately, they are losing their Scottsdale home to foreclosure before long, but they want to rent a home in the same neighborhood for one year. But, because of their bad credit, they are having issues renting any homes in their same neighborhood. They have the funds to pay all of the rent for one year in advance. Is it possible to pay rent in advance for one year? If so, will they forfeit any of this prepaid rent if the landlord loses the home to foreclosure in the next year?

The first thing you should know is, the Residential Arizona Landlord-Tenant Act generally prohibits a landlord from charging a security deposit, including any prepaid rent, of more than one and-a-half month’s rent. A.R.S. §33-1321. If the tenant, however, “voluntarily” pays more than one and-a-half month’s rent (usually for winter rentals when the tenant pays the entire three or four month’s winter rent in advance), the landlord can accept this additional security deposit. Therefore, if the couple is “voluntarily” prepaying one year’s rent due to credit problems, the landlord can accept this one year of prepaid rent.

Secondly, if the couple does pre-pay rent for one year, and the landlord loses the home to foreclosure, under a 2009 federal law the renters are generally entitled to stay in the home for the remainder of the lease term. If the new landlord after the foreclosure never receives any of the prepaid rent, however, the protection under the 2009 federal law is unclear. Therefore, as an Arizona real estate attorney, it is recommended that the tenants and the landlord deposit the one year of prepaid rent into an escrow account, to be distributed monthly to the landlord, or to any subsequent landlord after any foreclosure.

Serious Penaltiesfor Filing False Liens

December 1, 2011

A gentleman was awarded hisGlendale family home in his divorce buthis ex-wife had the right to live in the home until it was sold. A buyer for the home was found and the closing sale of the home was scheduled. However, just prior to thehome’s closing, the ex-wife recorded a document saying that she was owed $50,000 from the sale of the home. Because of the document, the title company refused to close the sale of the home. Understandably, the buyer was upset and purchased a different home. The woman is emotionally unstable and just does not want to move out of the home. She has apologized but the homeowner is concerned that when another buyer is found she will record some “bogus” claim against the home again. Is there anything the homeowner can do to prevent her from recording a wrongful lien against the home?

According to Arizona real estate law, if a lien is wrongfully recorded against a home or other real property there are sanctions, namely, $5,000 or treble actual damages, whichever is greater, plus attorneys fees and court costs. A.R.S.’ 33-420(A). If these monetary sanctions do not deter you’re the ex-wife from recording a wrongful lien, a court can order her not to record any wrongful liens against the home. If your she were to violate this court order, she could be held in contempt of court with serious penalties, including jail time.

Note: If a wrongful lien is recorded in the name of an unidentifiable person or entity, e.g., invalid address or a non-existent limited liability company, a title company will generally require a quiet title lawsuit to determine that the lien is invalid. This quiet title lawsuit could be expensive, primarily due to the requirement of service of process by publication because the individual or entity is unidentifiable.

Even As-is Properties Require a Disclosure of Any Defects

September 19, 2011

A couple purchased an “as-is” a home in Show Low last summer. They had a home inspection which was satisfactory to them at the time. However, in the fall when they turned on the furnace they discovered that there was no ductwork leading from the furnace to the vents. They contacted the seller to complain and he said that he never used the furnace because he knew that the home had no ductwork. He said that he relied on the fireplace and space heaters during the winter months. They told the seller that they wanted to use the furnace and that expected him to pay for the ductwork, the seller said that they purchased the home “as-is.” The cost to install the ductwork will be approximately $1,500. Are there any Arizona real estate laws regarding this? Does the seller have any liability to us for the $1,500?

They seller in fact does have liability for the costs. Even though a home is being sold “as-is”, a seller is still required to disclose any known latent defects in the home. The lack of ductwork from the furnace to the vents was a known latent defect. They buyers should file a complaint against the seller in the Small Claims division of Justice Court. The Small Claims division has jurisdiction of disputes up to $2,500, and is similar to Judge Judy‘s television courtroom with no Arizona real estate attorneys and no appeals.

“Show Me the Note” Defense in the Foreclosure of Home Rejected byAZ Court of Appeals

September 19, 2011

In Hogan v. Washington Mutual Bank, CV 10-0383 (July 26, 2011), the Arizona Court of Appeals rejected the argument that Arizona real estate law requires “presentation of the original note before commencing foreclosure proceedings” against a home.

This Hogan decision is the first Arizona appellate decision rejecting the “show me the note” defense of borrowers, and is consistent with several Arizona federal court decisions.

Note: Although this Hogan decision was originally an unpublished decision, the lender filed a motion for publication which the Court of Appeals granted. The significance of publication is that this Hogan decision now can be cited by Arizona real estate attorneys and judges as legal authority.

Should You Establish Multiple Trusts for Your Estate?

September 17, 2011

Recently, a couple attended an estate planning seminar in Scottsdale. The Arizona attorney presenting the seminar talked to them after the seminar and recommended a revocable living trust for their personal residence and other assets, and an irrevocable trust for their insurance policies. The husband thinks that the attorney is trying to make more money by charging for two trusts when one trust would be sufficient. Are two trusts necessary?

A revocable living trust is designed to avoid probate and permit the owner of the asset to retain control of the asset, e.g., the asset at any time can be transferred back from the trust to the owner. In addition, the tax status of the asset generally remains the same. For example, if a personal residence is transferred to a revocable living trust the $250,000 single / $500,000 family capital gain exemptions on the sale of a principal residence are still available.

On the other hand, the purpose of an irrevocable trust is primarily to avoid estate taxes on substantial assets such as life insurance policies. In their estate planning situation they may need both trusts, but if theydo not have confidence in this attorney you should seek a second opinion from another attorney or a financial planner.

Note: At least until the end of 2012 when estate tax provisions will be reviewed by Congress, the current $5,000,000 single / $10,000,000 couple, estate tax exemptions mean that estate tax planning is necessary for less than 1% of American taxpayers.

New Regulation Helping Consumers with Loan Modifications and Short Sales

September 17, 2011

A couple wants to do a short sale of their Mesa home. They are both licensed real estate agents in Wisconsin and would like to list and sell the home themselves. A real estate agent in our community advertises “experience as short sale negotiators.” Neither of them have ever done a short sale before and would like to hire this real estate agent to handle the short sale negotiations. However, when they contacted her, she said that she could only do the short sale negotiations if she gets the listing on the home. Why can’t they hire this real estate agent to do the short sales, and still list the home themselves?

The Federal Trade Commission enacted a rule effective January 29, 2011, regulating “mortgage assistance relief services” (“MARS”) such as short sales and loan modifications. There are numerous disclosures and other requirements imposed by MARS. A real estate agent can list and negotiate the short sale of a home, provided that there is compliance with the MARS requirements and the real estate agent receives no additional compensation for negotiating a short sale. In other words, a real estate agent cannot charge the seller a 7% commission and a $2,500 fee for negotiating a short sale. If the real estate agent does not have a listing for the short sale of the home, however, the real estate agent can only receive compensation for short sale negotiations if, in addition to compliance with MARS requirements, the real estate brokerage firm has a loan originator (mortgage broker) license.

Note: A MARS provider cannot receive any advance compensation, and cannot receive any compensation at all unless the seller and seller’s lender agree on the terms of the closing of the short sale. Unfortunately, although this MARS rule is salutary and pro-consumer, this MARS rule illustrates the maxim of “locking the barn door after the horse has bolted.” Several years ago there were numerous firms receiving upfront fees of $2,500-$5,000 based on deceptive advertising, and not doing anything to assist owners of distressed homes. Due to consumer awareness and the threat of criminal prosecution, almost all of these firms are now out of business.

Is Real Estate License Needed To Negotiate Short Sales or Loan Modification?

April 28, 2011

Loan Modifications

A real estate license is not required to negotiate a loan modification agreement for a client because the typical loan modification does not involve the sale of real property. See A.R.S. § 32-2101(47). In addition, a mortgage broker’s license is not required to negotiate a loan modification if the loan is already funded, the parties to and the security for the loan are the same, and no additional funds are advanced. See A.A.C. R20-4-102. However, Arizona did adopt legislation that required loan modification negotiators to be licensed and regulated under the mortgage brokerage statutes by July 2010.

Short Sales

A real estate license is generally required to represent a client in a “transaction calculated or intended to result in the sale . . . of real estate.” See A.R.S. § 32-2101(47). Therefore, any directing or assisting in the negotiations for a short sale on behalf of a seller and for compensation is an activity requiring a real estate license. See also A.R.S. § 32-2122(D).

Combs Law Group (CLG)as a law firm exempt from real estate license requirements is uniquely qualified to represent clients and assist brokers in short sale transactions. There is no program, whether sponsored by the government or a private lender, which fits every client’s circumstance. CLG’s attorneys evaluate each client’s circumstances, educate the client regarding the law, provide the client with all of the options that are available, and work with the lender to close the short sale transaction prior to closing. All short sale clients receive a thorough review of their short sale documents by a CLG attorney to ensure that their best interests are protected and promoted.

Check Your CC&Rs as HOA May Regulate Placement of Solar Panels

March 30, 2011
Question: I purchased a home in Gilbert that was in extremely poor condition at a foreclosure sale about six months ago. We have spent almost $40,000 refurbishing and repairing this home, which included the installation of solar heating panels on the roof. We just received a letter from our homeowner’s association (“HOA”) stating that the solar heating panels in the roof must be removed. If clean energy is the current goal of our society, why do we have to remove the solar heating panels from our roof? Can the HOA make us remove these solar heating panels?

Answer: I assume that your HOA has a provision in the Covenants, Conditions and Restrictions (“CC&Rs”) regulating the placement of solar heating panels in your community. This CC&Rs provision can regulate the placement of solar heating panels, including prohibiting the placement of solar heating panels on a homeowner’s roof, only if this provision in the CC&Rs does not “adversely affect the cost or efficiency” of the solar heating panels. A.R.S. §33-1816(B). Therefore, if the removal of the solar heating panels from your roof to another location on your lot would affect the cost or efficiency of the solar heating panels, you are not required to remove the solar heating panels from your roof.

Homeowner Responsible for Fees, Insurance and Maintenance Until Foreclosure Sale After Mortgage Default

March 30, 2011
Question: We were unable to make the payments on our Gilbert home. Because of the mortgage default a foreclosure sale was scheduled for May 7. We moved out of the home before the May 7 foreclosure sale, however, we recently learned that the May 7 foreclosure sale had been postponed and no new foreclosure sale date has been set. I contacted the Arizona real estate law firm that was handling the foreclosure sale, and this law firm could not give me a definite date for the foreclosure sale. How can I learn when the foreclosure sale will occur? Do I have to keep paying the homeowner’s association monthly fees even though I no longer live in the home? Real property taxes?

Answer: First, any homeowner subject to foreclosure of their home should attend the foreclosure sale. Although many mortgage lenders have websites with information about foreclosure sale dates, under Arizona real estate law only the people attending the foreclosure sale have the right to learn about the postponement of the foreclosure sale and any new foreclosure date. Second, a lender can postpone a foreclosure sale indefinitely, subject to the six-year statute of limitations for enforcement of the mortgage loan. Third, you are personally liable for the homeowner’s association monthly fees, plus the reasonable maintenance of the home, until the foreclosure sale occurs. Therefore, in addition to paying the homeowner’s association monthly fees, you must keep the homeowner’s insurance policy current, including any endorsement for coverage of the home which is now abandoned. Finally, your real property taxes are a non-recourse obligation, and you have no personal liability for real property taxes. Any foreclosure of a real property tax lien will only occur at least several years after the real property taxes are delinquent.