Dear Real Estate Professional:
The D.C. Recorder of Deeds has issued a notice concerning the
upcoming increase in recordation/transfer taxes. Generally, the
combined taxes will increase from 2.2% to 3% effective January 1,
2003; however, if all documents were executed prior to January 1
and so certified by the title company, the ROD will allow the old
transfer/recordation tax to be paid if the documents are recorded
within 30 business days after December 31. The surcharge of $5 per
document will increase to $6.50 effective January 1, with no
transition period. You will recall the original 2.2% tax may apply
if the sales price is less than $250K, the deed filed within 30
days of date of execution and is eligible for the homestead
exemption.
Click Here for copy of Notice from Recorder of Deeds
At the D.C. Bar's Real Estate, Housing and Land Use Section's 12th
Annual Real Estate Highlights Program to be held on December 3,
2002, Roy L. Kaufmann will be reviewing cases involving real
property of interest to professionals practicing in the District
of Columbia. For those who still have not registered, you may call
the D.C. Bar at 202-626-3463. Here is a synopsis of cases:
Tax Deeds: Under pre-Tax Clarity Act statute, purchaser of tax
deed was unable to quiet title in her favor because the District
failed to send adequate notice of the sale to any of the owners,
including the conservator of one of the owners in contravention of
Mennonite (462 U.S. 791). This was notwithstanding the fact that
the conservator had filed a change-of-address notification with
the District. The court also discussed the inapplicability of the
90-day time limit for contesting tax sale deeds under 47 D.C. Code
1303.04(f)(4)(1981 ed.)
Langon v. Reilly 802 A.2d 951
Tax Deeds: Again, under pre-Tax Clarity Act statute, a suit
instituted by purchaser of tax deed was unsuccessful, this time
because a notice was sent by the District by regular mail, instead
of by certified or registered mail, as required by the statute.
Court held it was irrelevant whether the record owner of the
property actually received the notice. Further, tax sale purchaser
was unable to collect any reimbursement for maintenance and
improvements he made to the property. General recitation of the
caveat emptor on the part of the tax deed purchaser and strict
compliance required by the District.
Associated Estates v. Caldwell 779 A2d 939
Appealing Your Real Estate Tax Assessment may achieve the opposite
result: The District used the replacement cost approach and the
taxpayer used the sales comparison approach. The difference
between the two approaches exceeded $1,000,000. The court found
that the taxpayer had failed to show that the District's reasons
for relying on the replacement cost approach were irrational or
unfounded, even if the sales comparison approach might have
produced a more accurate valuation. Court held that the trial
court's reliance on the resulting valuation was not in error. The
net result was an assessment that was higher than originally
levied by the District.
Bender v. D.C. 804 A.2d 267
Attack on Tenancy by the Entirety: U.S. Supreme Court, in
reviewing Michigan law, holds that an IRS lien against a husband
alone, attaches to his half of property owned as tenants by the
entirety. court held that his interest constituted "property" or
"rights to property". Analysis of Michigan law determined that his
rights in the property were among a "bundle of sticks" - a
collection of individual rights which, in this instance,
constituted "property". The state law determined which sticks are
in a person's bundle, but federal law determines whether those
sticks constitute property for federal tax lien purposes. Since
state law gave the husband the right to use the property, to
exclude others from using the property, right of survivorship,
right to encumber the property, etc. The fact that these rights
were not unilateral was unpersuasive. The number and quantity of
these rights ("sticks") constituted "property" subject to the
federal lien.
U.S. v. Craft U.S. Supreme Court No. 00-1831
Foreclosure set aside: Borrower sent notice of change of address
to the lender's address as it appeared on the Deed of Trust.
Lender used the property address for its notice of foreclosure.
Court credited borrower's testimony that a change of address had
been sent and the court did not address whether actual notice by
the borrower would have mooted the defective statutory notice.
Abdel-Kafi v. Citicorp 772 A2d 802
Foreclosure set aside: Persistent pro-se borrower was successful
in invalidating a foreclosure after multiple defaults and cures.
D.C. Code 45-715.1 limits a defaulting debtor's right to cure one
time every two calendar years. The Deed of Trust, however, had no
limitations in the number of times to cure (as is the case in most
Fannie Mae deeds of trust). Court held that the contractual right
to cure bestowed upon the borrower greater rights than the statute
which merely established a minimum requirement for contracts that
do not otherwise provide a right to cure. Lender had failed to
provide payoff and reinstatement information to borrower to enable
him to cure, in reliance upon the statutory "limitation". Lender
lost. Evidence that the borrower would not have had the money
necessary to cure was irrelevant.
O'Malley v. Chevy Chase Bank 766 A.2d 964
Purchaser Bought House, Accepted cash in satisfaction of items on
inspection contingency punch-list, was surprised about leaky
basement, filed both for rescission (one and one-half years later)
and for breach of contract. Court held that purchaser had to elect
remedies (either rescission or breach). Rescission would fail
because it was not timely raised and breach would fail because the
purchaser had received cash consideration in lieu of repairs
(although purchaser claims that he did not believe that the cash
received was for the wet-basement problem). Seller was allowed to
impeach the purchaser about deceptive statements made during loan
application process and in connection with lawsuit because of
relevance to credibility.
Dean v. Garland 779 A.2d 911
Poorly Drafted Lease Hurts Landlord: Lease to a laundromat had two
provisions: tenant to pay 9.2% of taxes and assessments including
"water rents" and a provision requiring the tenant to pay for
utilities "of every kind and nature". When the water bill came in
sky-high, tenant objected to paying any more than 9.2% thereof.
Court held that "water rents" had been used synonymously with
water usage in the D.C. Code; that the lease had been poorly
drafted (i.e. the drafter could have eliminated "water rents" from
the taxes and assessments section, thus unambiguously relegating
water usage to the "utilities" section. The trial court
interpreted the ambiguity as an issue of fact against the landlord
and the court of appeals affirmed.
Double H Housing v. Big Wash 799 A.2d 1195
Title/Duty to Defend: Owner of home was delinquent on mortgage.
Lender (without foreclosing) entered into a contract with a third
party to purchase/sell the property. The third party then
negotiated to sell the property to Stevens. Stevens is alleged to
have ignored the third party and the lender, and purchased the
property directly from the property owner. Irate third party filed
suit against Stevens saying that Stevens had purchased the
property from the LENDER, alleging fraud, conspiracy, etc. Stevens
asked the title company to defend and title company, after reading
the complaint, declined to defend because the actions of Stevens
fell within an exception in the policy ("defects... adverse
claims... or other matters ... created, suffered or agreed to ...
by the insured"). Note that irate third-party's complaint was
incorrect in that it alleged that Stevens bought the property from
the lender, whereas it was purchased from the original owner.
Appellate court held that title underwriter was justified in
comparing the allegations in the complaint with the terms of the
policy (called the "eight corners test" as well as the "four
corners test" just to confuse us further) and, because the
allegations fell within an exception, the underwriter was not
obligated to defend. Stevens urged the court to follow other
State's lead in creating a "factual exception test" wherein, if
there is a divergence between the facts alleged by the plaintiff
and those actually known or ascertainably, the court should
decline to apply the eight corner test and look to the actual
facts to determine whether there was a duty to defend. The court
declined to do so, saying that only an en banc review could
achieve this goal. En banc consideration was denied.
Stevens v. United General 801 A.2d 61
A hotel/rooming house can use self-help in D.C. to evict a
non-paying resident by changing the locks even if resident had
been present for months.
Harkins v. WIN Corporation 771 A.2d 1025
Please feel free to circulate this newsletter to others in the
industry, both within and outside your office.
Sincerely,
Real Property and Asset Management Group
Jackson & Campbell P.C.
email:
RKaufmann@JacksCamp.com
voice: (202) 457-1600
web:
http://www.JacksCamp.com
