Tag Archives: Real Estate Attorney

How to Setup a Security Deposit Account

20 Nov

By Attorney George Warshaw
MetroBoston Publication Date: November 20, 2013

 

There’s more to it than you may think.

First, the account has to be set up within 30 days of when the security deposit is paid, and the tenant given notice of the account within that 30 days period.

Second, it must be placed in a bank located in Massachusetts. You can’t use Fidelity to hold the money and you can’t deposit it in another state.

So you can’t set it up at Bank of America in New Hampshire or Citizens in Rhode Island. The account branch has to be located in Massachusetts.

Most banks have what they call security deposit accounts; basically a savings or escrow account that pays interest. Usually the name of the account identifies it by the words “Tenant’s Security Deposit Account” or some variation.

I use TD Bank. TD has a special Security Deposit Account Agreement that complies with the law. Five other banks I surveyed don’t use any special agreement. Therefore, I can’t tell if the account just sounds nice or actually complies with the legal requirements.

Last, landlords have to give tenants notice about the account every year. Make it easy on yourself. Have the printed monthly bank statement sent directly to the tenant. They get the info required and you can always access it online.

 

© 2013 George Warshaw.  George Warshaw is a well-known attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, litigates real estate matters, and prepares wills, trusts, and estate plans. George welcomes new clients and questions. Contact him at metro@warshawlaw.com.

Lessons Landlords Haven’t Learned

7 Nov

MetroBoston Publication Date November 6, 2013
By Attorney George Warshaw

I’ve written many articles on security deposits intending to educate landlords and tenants alike. I’ve met with many tenants on their security deposit problems and received a great many more emails from tenants.

Oddly, I’ve never received one email from a landlord. Perhaps they don’t read the Metro.

These are the most common violations of the security deposit laws.

#1. Not returning the deposit within 30 days after the tenancy ends.

#2. Deducting for repairs that are not “repairs” such as apartment cleaning, repainting where the alleged abuse is only ordinary wear and tear, and repairs that are not actually made.

#3. Not stating in the landlord’s deduction letter above the signature (or elsewhere): “signed under the penalties of perjury.” A landlord cannot deduct for repairs unless these magic words appear.

#4. Not depositing the security deposit into a proper tenant’s security deposit account.

#5. Not paying the tenant interest every year.

#6. Not delivering the tenant a notice within 30 days of occupancy stating the bank and account numbers where the money is being held.

#7. Not providing the tenant an Apartment Condition Statement within 10 days of occupancy.

Numbers 1, 2, 3, and 4 are triple damage penalties under the law.
Numbers 6 and 7 result in the loss of the right to take or hold the security deposit.

© 2013 George Warshaw. George Warshaw is a well-known attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, litigates real estate matters, and prepares wills, trusts, and estate plans. George welcomes new clients and questions.  Contact him at metro@warshawlaw.com.

Is Interest Due on Last Month’s Rent?

9 Oct

MetroBoston Publication date October 9, 2013
By Attorney George Warshaw 

Many landlords choose to require a last month’s rent rather than a security deposit under the belief that there is less risk and no liability with a last month’s rent.

That’s very true with one exception: a landlord still has to pay the tenant interest on the amount of the last month’s rent.

Yes, that’s right. It’s a common misconception that interest is only payable on a security deposit and not on the last month’s rent.

The tenancy statute is very clear. A tenant is entitled to interest at the annual rate of 5% on the amount paid as last month’s rent with one exception.

A landlord may avoid paying the 5% rate if the landlord escrows the money in an interest-bearing account bank account. In that case the tenant only receives the interest earned in the account.

In calculating the number of months that interest is due, the landlord doesn’t have to pay interest for the very last month of the tenancy, since that is the month for which the last month’s was taken and presumably used.

If a landlord takes a last month’s rent and a security deposit, the tenant is entitled to interest on both, payable at the end of each year of the tenancy.

© 2013 George Warshaw.  George Warshaw is a well-known attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, litigates real estate matters, and prepares wills, trusts, and estate plans. George welcomes new clients and questions. Contact him at metro@warshawlaw.com.

 

Is Your House Haunted?

18 Apr

Metro®Boston, Publication Date: April 18, 2012
By Attorney George Warshaw

The Amityville horrors right in your neighborhood.

A murder, a suicide or unimaginable event occurred years ago. You hear cries and whispers at night. It’s eerie.

It’s your home?

You didn’t know it when you bought, but now you want to sell or rent your house or apartment. Can you sell or rent it without disclosing it was the scene of a violent crime or haunted? Will you be sued if you don’t?

Under Consumer Protection Laws, real estate agents usually have to disclose all facts that would be material to a person making an offer.

When it comes to “psychologically impacted” property, the answer is “not unless you’re asked.”

Several years ago, the Massachusetts Legislature adopted its own form of a “Don’t ask, Don’t tell” policy where the real property was the site of a felony, suicide or homicide, or an alleged parapsychological or supernatural phenomenon.

Section 114 of chapter 93 of the General Laws protects a seller, landlord or a real estate agent from failing to disclose to a buyer or tenant that the real property is or was “psychologically impacted” – unless the seller, landlord or agent was asked about the possible occurrence of an event at the house or apartment and then failed to disclose it.

And if your house is haunted, well, there’s always Ghostbusters!
© George Warshaw 2012

George Warshaw is a real estate and estate planning attorney in Massachusetts.  He represents buyers and sellers of homes and condos in Massachusetts, and prepares wills, trusts for individuals and families. George welcomes new clients and questions at metro@warshawlaw.com.

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Legal Advice: Laws, and court decisions interpreting them, change frequently and this article is not updated as laws change. The content and information contained in this article is neither intended as legal advice nor shall establish an attorney-client relationship.

What’s Most Overlooked in an Offer to Purchase?

27 Feb

Metro®Boston, Publication Date: February 22, 2012
By: George Warshaw

You’re out shopping for a new home. You’re not too worried about getting or needing a loan to finance your purchase.

You submit an offer, it’s accepted, but the appraisal comes in lower than your offer. Can you cancel your purchase or renegotiate the price?

Quite often, no!

Buyers who finance 80% or more of their purchase price have a built-in protection.  The bank will turn you down if the appraisal comes in less than the purchase price.

Borrow more than 80% of the value of the home and the bank has too much risk.  80% LTV (Loan-to-Value) is considered the maximum safe-lending benchmark.

But, if you finance less than 80% of your purchase price, you may have no safety net. Let me explain by example.

Buy a home for $500,000, but request a loan for only $250,000 (i.e. 50% LTV). You may care if the appraisal comes in at $400,000, but the bank won’t. That’s because the appraised LTV is still well below the 80% safe-loan benchmark.

The time to protect yourself is in your offer. Ask your broker or attorney whether your offer should be subject to an appraisal of no less than the purchase price of the house.

It may protect you in the end.

© 2012 George Warshaw.

George Warshaw is a real estate and estate planning attorney in Massachusetts.  He represents buyers and sellers of homes and condos in Massachusetts, and prepares wills, trusts for individuals and families. George welcomes new clients and questions at metro@warshawlaw.com.

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Legal Advice: Laws, and court decisions interpreting them, change frequently and this article is not updated as laws change. The content and information contained in this article is neither intended as legal advice nor shall establish an attorney-client relationship.

Where Are Interest Rates Going?

11 Aug

Metro®Boston, Publication Date: August 10, 2011

By Attorney George Warshaw

Lost in the debris of the deficit debacle and the stock market free fall is the effect on mortgage interest rates. Will they rocket upwards, stay the same or decline?

Mortgage rates rise or fall based on something. But what?

There are actually two types of mortgage loans and two types of rates: first mortgages are long-term interest rates; home equity loans are short-term monthly rates. The rate on each is established differently, and often go in different directions based on the exact same news.

When the Fed announces that it is lowering or raising rates, that immediately affects the monthly rate charged on home equity loans, not first mortgages.

First mortgage rates are determined by the longer-term bond market. I’ve heard it said that first mortgage rates follow “the 10-year Treasury” or “mortgage backed securities” instead. In other words, as prices on a specific longer-term “fixed income investment” rise or fall on Wall Street, first mortgages interest rates ultimately bounce along with it.

Confused? Since no one seems to be managing our economy right now, you are not alone. Be safe. If you can lower your first mortgage rate, do it now.

Need a recommendation for a good mortgage lender? Email me. I know several good lenders.

© 2011 George Warshaw. All Rights Reserved.

George Warshaw is a real estate attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, and prepares wills, trusts, and estate plans. George welcomes new clients and questions at george.warshaw@warshawlaw.com.

Money When You Need It

26 Jul

Metro®Boston, Publication Date: July 13, 2011

By Attorney George Warshaw

I’ve always relied on a simple lending principle: banks will gladly loan you money when you don’t need it; but not necessarily when you really need it.

That’s why home equity loans are a key financing planning tool.

A home equity loan (often called a HELOC) is a loan against the equity in your house or condo. The interest rate is typically based on the prime rate and can float or change monthly as the prime changes. It functions like a credit card.

I spoke with William Schulz, a banker at Citibank (617-725-0104, william.h.schulz@citi.com), a specialist in home equity loans.

“Because interest is often (i.e. not always) deductible on your taxes, many people use it for their children’s college education, home remodeling, medical expenses, or to have money available should they need it,” he said.

“The process is simple. It costs the borrower nothing in fees, and nothing if you don’t use it. Once you provide the necessary paperwork, it’s usually 30 days to closing.”

Since interest paid on a credit card is often not deductible, a HELOC can be a sensible way of making major purchases – but be careful: like any mortgage loan, it has to be repaid!

© 2011 George Warshaw. All rights reserved.

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George Warshaw is a real estate attorney and legal author. He represents buyers and sellers of homes and condos in Massachusetts, and prepares wills, trusts, and estate plans. George welcomes new clients and questions at george.warshaw@warshawlaw.com.

Legal Advice: Laws, and court decisions interpreting them, change frequently and this article is not updated as laws change. The content and information contained in this article is neither intended as legal advice nor shall establish an attorney-client relationship. Before making any legal decision, consult an attorney to see how the foregoing may apply to your circumstances.

The New Mass. Homestead Law

31 May

Metro®Boston, Publication Date: June 1, 2011 

By Attorney George Warshaw

If you mention “homestead law” to someone in Massachusetts, their eyes usually roll in puzzlement and ask, “What’s that?”

Quite simply, it’s a law designed to help homeowners keep their homes when in debt or faced with a judgment they cannot pay. The law does not protect against divorce, taxes, or mortgage foreclosure, but it is very helpful in many other situations.

The law prevents a plaintiff, claimant or creditor from selling your principal residence to satisfy a debt, as long the equity in your home is not more than $125,000 or $500,000.

By filing a Declaration of Homestead in the registry of deeds, you protect up to $500,000 of the equity in your home against liens imposed after the time and date of your filing.

If you choose not to file, you still receive $125,000 in protection – but only if you bought your home on or after March 16, 2011. Otherwise, you must file a written declaration to gain any protection.

Filing a declaration is cheap and easy to do. While it is better to have a lawyer guide you, you can download the form on most registries of deeds websites.

Homesteads filed under the old law are valid with, perhaps, one exception:  recent decisions from the bankruptcy court have led many to question whether the “release of homestead” language in the standard Fannie Mae mortgage inadvertently terminated a homestead filed before March 16th (i.e. under the former version of the law).

Many commentators are suggesting that homeowners file a new homestead declaration to be safe.

How the new law works. Here’s an example:

Husband and wife (H&W) purchase a home for $500,000 and borrow $100,000 from the bank, giving the bank a mortgage for the amount borrowed. It will be their principal residence.

They thought about filing a formal homestead declaration to obtain the maximum protection but did not. Fortunately, the new law gives them an automatic $125,000 protection in the equity in their new house or condominium from liens and lawsuits.

They hire a home improvement contractor and get into a dispute. The contractor files a mechanic’s lien and later obtains a judgment for $25,000. The judgment cannot be enforced against the marital home. Thus, the contractor cannot force the sale of the house or condo to pay the judgment. Their home is safe under the homestead law – at least for now.

A few years pass and the husband and wife sell their home for the same price they paid. The contractor cannot stop the sale or require they pay the $25,000 judgment as a condition of the sale. The husband and wife take the proceeds from the sale, a little less than $100,000, and put it into their bank account. That money is safe for one year under the new law.

If the husband and wife use the proceeds from their sale to buy a new home within one year of their sale, the proceeds and their new home will be protected against the contractor’s judgment.

The new Massachusetts Homestead Law is very complicated, but it works to the benefit of all homeowners. It provides special protections for persons of age 62 or more or who are disabled and permits beneficiaries of a trust to protect their principal residence if the real estate is in the trust.

It will take a few years before the courts provide guidance and clarity on the details of the law. © 2011 George Warshaw. All rights reserved.

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George Warshaw is a real estate attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, and prepares wills, trusts, and estate plans. George welcomes new clients and questions at george.warshaw@warshawlaw.com.

Legal Advice: Laws, and court decisions interpreting them, change frequently and this article is not updated as laws change. The content and information contained in this article is neither intended as legal advice nor shall establish an attorney-client relationship. Before making any legal decision, consult an attorney to see how the foregoing may apply to your circumstances.

Avoiding Surprises in Home Renovations

24 May

Metro®Boston, Publication Date: May 25, 2011

By Attorney George Warshaw

Your real estate agent or broker, with good intentions, recommends a home improvement contractor. He starts the job but you get into a dispute and quite rightly refuse to pay. Can the contractor place a lien on your home?

Massachusetts law permits an unpaid contactor, including a subcontractor, to place a lien on one’s home for work, labor and materials. It is typically called a “mechanic’s lien.”

A contractor must carefully follow strict procedures in order to acquire and maintain the lien on your house, condo or vacation home, but it’s not hard to do.

If you are renovating or remodeling your home should you care? Try to refinance, get a home equity loan or sell your house with a lien on it!

Now for the surprise. . .

A subcontractor or materials supplier who has not been paid can file a mechanic’s lien on your home – even if you paid the contractor in full, and even if you never signed a single document with the sub!

Can you protect real estate from mechanic’s liens? Make sure the roofer, the plumber, Lowe’s and Home Depot and all subs are paid. The homestead law is another way. More on homesteads next week. © 2011 George Warshaw.

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George Warshaw is a real estate attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, and prepares wills, trusts, and estate plans. George welcomes new clients and questions at george.warshaw@warshawlaw.com.

Legal Advice: Laws, and court decisions interpreting them, change frequently and this article is not updated as laws change. The content and information contained in this article is neither intended as legal advice nor shall establish an attorney-client relationship. Before making any legal decision, consult an attorney to see how the foregoing may apply to your circumstances.

Protecting Your Home From Liens And Lawsuits

17 May

Metro®Boston, Publication Date: May 18, 2011
Expanded Content

By Attorney George Warshaw

There are several ways that you can protect your home from liens and lawsuits.

The Massachusetts Homestead Act, recently revised, protects all or part of the equity homeowners have in their house or condo from individuals or businesses suing the homeowner. The protection applies only to primary residences and not second homes or investment properties.

Homeowners automatically receive $125,000 in protection upon the recording of a deed. The statute permits homeowners to increase that protection to $500,000 by filing a declaration of homestead with the registry of deeds.

The homestead is particularly valuable in disputes with home improvement contractors. A contractor or subcontractor has the ability to file a so-called “mechanic’s lien” on your home for unpaid work – even if you dispute that work. The homestead law often prevents a contractor from enforcing that lien.

Another method of creditor protection is to place your home into a trust. When done for a legitimate purpose, such as estate planning or as a way of managing real estate, a trust may prevent or deter a creditor from acquiring a lien on your home. A creditor usually has to “break the trust” through a court proceeding in order to attach one’s home. Under the newly revised Homestead Act, one can now utilize both a trust and a homestead to maximize lien protection.

A trust is typically created by signing a “declaration of trust” – a document prepared by a lawyer that often contains creditor protection features. © 2011 George Warshaw.

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George Warshaw is a real estate attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, and prepares wills, trusts, and estate plans. George welcomes new clients and questions at george.warshaw@warshawlaw.com.

Legal Advice: The content and information contained in this article is not intended as legal advice. Before making legal decisions consult an attorney to see how the foregoing may apply to your circumstances. Laws change frequently and this article is not updated as laws change.

Mistakes Home Buyers Make in the Offer

9 May

Metro® Boston, Publication Date: May 11, 2011

By Attorney George Warshaw

You’ve searched MLS (Multiple Listing Service) for a condo or house for sale in Massachusetts, acquired a real estate agent along the way, and now you’re ready to make an offer to purchase your new home.

Here’s a few things, often overlooked, that you may want to include or change in your offer: 

  • Make your purchase conditional on an appraisal that is no less than the purchase price
  • Don’t choose Friday or the last day of the month as your closing date. These are the busiest real estate days and your deed might not get recorded that day (i.e. you could be prevented from moving into your new home when you expect)
  • Make your offer conditional on all systems and appliances being in good working order on the day of closing
  • Be wary of the preprinted “inspection contingency.” These often limit your right to cancel solely to “serious structural or mechanical defects” that may exist in the house or condominium. Change it to an “inspection that is satisfactory to you.”
  • If you’ve also listed your home for sale, don’t try to buy the same day as you sell.

More on this to come. © 2011 George Warshaw. 

The foregoing is not intended as legal advice. Consult an attorney to see how or if the information may apply to you.

George Warshaw is a real estate attorney and author. He represents buyers and sellers of homes and condos in Massachusetts, and prepares wills, trusts, and estate plans. George welcomes new clients and questions at george.warshaw@warshawlaw.com

A Short Sale Surprise

30 Apr

Metro® Boston, Publication Date: April 13, 2011

By Attorney George Warshaw

In a short sale, a mortgage lender agrees to accept less than it is owed when a house or condo is sold.

The short sale lender issues a letter to the seller (i.e., its borrower) in which the lender promises to release its mortgage upon receipt of a certain amount of money by a specific date. The letter is in turn given to the closing attorney who relies upon the letter in conducting the closing and issuing title insurance.

I recently discovered a lender that issues not one, but two short sale letters: one for the attorney, and one that specifically directs that it “DOES NOT” go to the attorney. The second letter requires additional “side” money before the lender will release its mortgage.

What happens if the sale goes through but the lender never receives the secret side money? The unsuspecting buyer won’t have clear title to the property if the lender refuses to release its mortgage.

The unsuspecting buyer hopefully bought title insurance, but it could still take several years before the mortgage is finally cleared from the title.

Apparently, our Attorney-General was notified of this national lender’s disgraceful practice and has done nothing about it. Maybe that’s the surprise! © 2011 George Warshaw.

The foregoing is not intended as legal advice. Consult an attorney to see how or if the foregoing applies to you.

Attorney George Warshaw represents buyers and sellers of homes, condos and investment properties, prepares wills and trusts for inheriting real estate, and trusts that protect your children and pets. George welcomes new clients and questions at  george.warshaw@warshawlaw.com.

Discounting Brokerage Fees

30 Apr

Metro® Boston, Publication Date: March 16, 2011

By Attorney George Warshaw 

A recent advertisement offered to give a buyer a “$5,000 rebate certificate” if the buyer attends one of the broker’s “open houses” and then uses that broker as the buyer’s agent in the sale of any property. 

Hmmm! Sounds interesting. Go to an open house, see a particular house or condo, sign up right then with the broker to buy that or any other property, and get $5,000 back at the time of purchase. 

This could be a good deal for a buyer, but it also might not. 

A broker that lists a house or condo for sale receives the entire sales commission where there is no other broker involved. That’s good for the broker: it doesn’t have to split the commission with a buyer’s agent. 

Where the listing broker gives a buyer a cash incentive to use no other broker, how does a buyer know the lowest possible price at which the property could be purchased where the buyer is not getting independent advice? 

There’s no substitute for being a knowledgeable buyer. Consider assembling your own team of realtor, lender and lawyer before you start shopping for a new home. You’ll be assured that way of getting the best possible advice. © 2011 George Warshaw.

The foregoing is not intended as legal advice. Consult an attorney to see how or if the foregoing applies to you.

Attorney George Warshaw represents buyers and sellers of homes, condos and investment properties, prepares wills and trusts for inheriting real estate, and trusts that protect your children and pets. George welcomes new clients and questions at  george.warshaw@warshawlaw.com.

The Broker as Escrow Agent

30 Apr

Metro® Boston, Publication Date: January 26, 2011

By Attorney George Warshaw

It wasn’t a bad idea.

The buyer saw a condo at a Coldwell Banker open house. He made an offer. It was revised and rejected several times. THEN he hired a broker to help him. His offer was finally accepted by the seller.

The buyer made an unusual deal with his new broker. “I’ll pay you an hourly fee, but no less than $3,000; just refund me your share of the broker’s commission.”

Coldwell claimed that the buyer’s broker was too late to the dance and had done nothing, or very little, to earn a commission. Since Coldwell was holding the deposit in escrow from which commissions were to be paid, it refused to pay the buyer’s agents any portion after closing. 

The purchase agreement, however, stated that the commission was to be split evenly between Coldwell and the buyer’s agent, but Coldwell never signed the agreement (brokers rarely do). 

The court nonetheless found Coldwell liable and awarded the buyer triple damages. An escrow agent is required to follow the escrow terms of the purchase and sale agreement. In the event of a conflict, it should have declined to hold the money, negotiated different terms of escrow, or sought immediate guidance from a court. See Zang v. NRT NewEngland,77 Mass. App. Ct.665 (2010). 

The foregoing is not intended as legal advice. Consult an attorney to see how or if the foregoing applies to you.

Attorney George Warshaw represents buyers and sellers of homes, condos and investment properties and prepares wills and trusts for inheriting real estate. George welcomes new clients and questions at  george.warshaw@warshawlaw.com.