Real Estate (West's Encyclopedia of American Law)
Land, buildings, and things permanently attached to land and buildings. Also called realty and real property.
Real estate is the modern term for land and anything that is permanently affixed to it. Fixtures include buildings, fences, and things attached to buildings, such as plumbing, heating, and light fixtures. Property that is not affixed is regarded as PERSONAL PROPERTY. For example, furniture and draperies are items of personal property.
The sale and lease of real estate in the United States are major economic activities and are regulated by state and federal laws. The two major types of real estate are commercial and residential real estate. Commercial real estate involves the sale and lease of property for business purposes. Residential real estate involves the sale and rental of land and houses to individuals and families for daily living.
The sale of residential property is heavily regulated. All states require real estate agents and brokers, who earn a commission from the owner of real estate for selling the property, to be licensed. To get a license, a person must have a high school diploma, be at least eighteen years old, and pass a written test on real estate principles and law.
Since the 1970s, home buyers have been given additional protection under the law. Many states and municipalities require a seller...
(The entire section is 438 words.)
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Boundary/Property/Title Disputes (Encyclopedia of Everyday Law)
The concept of land estates in American law arose out of the feudal system in England which consisted of present interests and future interests in estates which were parcels of land. These concepts developed into the modern law of possessory rights.
The most common form of ownership, when a homeowner purchases a home, is the fee simple absolute. The holder of a title in fee simple has full possessory rights now and in the future for an infinite duration. There are no limitations on its inheritability. The holder of the estate can sell the entire estate or any part of it and dispose of it by will at time of death. When a condominium or townhouse is purchased, the owner typically purchases the residential unit in fee simple and obtains the right to use the common areas. Each unit has its own tax bill, DEED, MORTGAGE and ownership rights but shares in the maintenance of the common areas.
Joint Tenancy with Right of Survivorship
In this type of title each owner holds an undivided share of the estate. There is a right of survivorship which means on the death of one joint owner, the surviving owner or owners retain an undivided right to the entire estate, which is not subject to the rights of the heirs of the deceased co-owner.
Tenancy in Common
In a title held as a TENANCY in common, each owner has an undivided interest in the entire property. Each tenant has the right to possession of the whole property. There is no right of survivorship. Each tenant has a distinct proportionate interest in the property, which passes by SUCCESSION. There is a presumption that a conveyance to two or more persons is a tenancy in common.
Tenancy in the Entirety
This is a marital estate, which can only be created between a husband and wife. It is similar to a joint tenancy except that the right of survivorship cannot be destroyed, since severance by one tenant is not possible. An existing marriage is requisite for a tenancy by the entirety. In many states there is a presumption that a tenancy by the entirety is created in any conveyance to a husband and wife. This type of title is considered somewhat archaic and the majority of states have abolished this type of tenancy, favoring instead that the couple take title to the property as joint tenants with right of survivorship.
Obtaining Title to Property
A purchaser of real estate has the right to receive a clear, marketable title to the property being purchased absent an agreement to the contrary. In most jurisdictions, a buyer obtains a title EXAMINATION and TITLE INSURANCE through a title company. If the purchase is financed through a bank, the bank will require title insurance to protect the bank against loss resulting from claims by third parties against the real estate. In some states, attorneys offer title insurance as part of their services in examining title and providing a title opinion. The attorney's fee may include the title insurance premium. In other states, a title insurance company or title agent directly provides the title insurance. A lender's title insurance policy will not protect a purchaser. The purchaser must buy an owner's policy in order to obtain protection, and doing so is generally less expensive if acquired at the same time and with the same insurer as the bank's policy.
Banks and title insurance companies often require a survey to mark the BOUNDARIES of the property. A survey is a drawing of the property showing the perimeter boundaries and the location of any buildings or structures on the property. The total cost of a title insurance policy varies depending on several factors including, the amount insured and the searches requested.
The actual transfer of title to real property typically occurs via a deed at the closing of the transaction. There are various types of deeds:
- Quitclaim Deeds: These deeds contain no covenants by the grantor. These are typically used when two owners hold title to a property and one owner releases the other, perhaps due to sale of the property or a DIVORCE of the parties.
- Warranty Deeds: These deeds contain covenant or warranties from the grantor, including that the grantor has the right to convey the property and that there are no encumbrances on the property. A general WARRANTY DEED warrants title against defects arising before as well as during the time the grantor has title. A special WARRANTY deed contains the same covenants, but only warrants against defects arising during the time the grantor has title.
A deed must be in writing and should clearly identify the parties and the land involved. In order to protect a purchaser or lender from the subsequent rights of third parties over the real estate, it is essential to record the relevant documents by filing in a county recording office. Significant differences with regard to recording procedures and requirements exist from county to county. Most recording statutes provide that the deed must be acknowledged before a NOTARY PUBLIC to be recorded.
In addition to putting others on notice regarding ownership of the property, recording also tracks chain of title. When title insurance is purchased, the title insurer checks the chain of title to determine whether any defects occurred in prior conveyances and transfers. Such defects can then be put right or excluded from coverage.
Ownership of Land by Aliens
The regulation of the rights to hold real property of individuals who are not citizens of the United States is left to the states. Generally, any alien or nonnational may take, hold, convey and devise real property. There are not many federal restrictions on nonnationals owning or investing in real property in the United States.
Forms of Leaseholds
A leasehold is an estate in land with an ascertainable period of possession. The tenant has a present possessory interest in the premises, and the landlord/owner has a future interest. When a tenant signs a LEASE, the type of right that tenant has in the property is known as a leasehold.
This is a tenancy for a term of successive periods such as year-to-year or month-to-month. There is no definite termination date, and it continues until terminated by either the LANDLORD or tenant. It is terminated by proper notice, which is usually statutorily prescribed. This tenancy may be created by express written agreement, by oral agreement, or by operation of law.
Tenancy at Will
The LANDLORD AND TENANT both have the right to terminate the tenancy at will. The parties must have an agreement or understanding that either party can terminate at any time. The tenancy has no stated duration and lasts as long as the landlord and tenant desire. In most states, the acceptance by the landlord of regular rent will cause the courts to consider the tenancy to be a periodic tenancy. No notice is required to terminate a tenancy at will at COMMON LAW. However, in most states, statutes require notice of termination to be given at least one month in advance.
Tenancy for Years
This tenancy continues for a fixed period of time and has certain beginning and termination dates. Since the parties know when the tenancy will end, the term expires at the end of the period without notice required by either party.
A tenant who was lawfully in possession of a leasehold and stays too long at the end of the tenancy is called a tenant at sufferance, commonly known as a holdover tenant. This tenancy lasts until the tenant is evicted or until the landlord elects to hold the tenant to an additional term.
If two or more people who own a property as tenants in common or if people who are not married to each other own a property as joint tenants with right of survivorship develop a dispute concerning the property, any owner may bring a partition action with the court to get the property divided between owners. While the lawsuit is pending, all owners will have equal access to and interest in the property. This arrangement applies regardless of whether the mortgage is in one owner's name or the name of all owners.
Identifying Property Boundaries
If a survey was done when at the time of the purchase of the property, the survey should reflect the boundary lines. Prior to erecting a fence on a boundary line, an updated survey could be ordered which reflects the accurate boundary lines. This may be impossible, due to perhaps the age of the property or the wording of the deed. (Some older deeds can contain legal descriptions such as "52 feet from the bend in the stream" on a piece of land, which has only a dry riverbed where a stream once existed.) In such a situation, the owner may file a quiet title lawsuit and request the judge determine the boundary lines of the property. This procedure is generally more expensive than a survey due to the legal filing fees. Another perfectly acceptable alternative is for adjacent property owners to agree on a physical object, such as a fence, which could serve as the boundary line between the properties. Each owner would then sign a quitclaim deed to the other, granting the neighbor ownership to any land on the other side of the line both owners had agreed upon.
Adverse Possession Issues
If the piece of property in dispute has been used by someone other than the owner for a number of years, the doctrine of adverse possession may apply. State laws vary with respect to time requirements; however, typically, the possession by the non-owner needs to be open, notorious, and under a claim of right. In some states, the non-owner must also pay the property taxes on the occupied land. A permissive use of property eliminates the ability to claim adverse possession.
Local fence ordinances usually regulate height and location, and sometimes the material used and appearance. Residents of subdivisions are often subject to even stricter Homeowners' Association restrictions. In residential areas, local rules typically restrict backyard fences to a height of six feet and front yards to a height of four feet. Exceptions exist and a landowner can seek a variance if there is a need for a higher fence. While some jurisdictions have specific aesthetic ZONING rules with respect to fences, as long as a fence complies with local laws it cannot be taken down simply because it is ugly. In fact, unless the property owners agree otherwise, fences on a boundary line belong to both owners when both are using the fence. Both owners are responsible for keeping the fence in good repair, and neither may remove it without the other's permission. In the event that trees or other vegetation hangs over the fence, most states agree that the property owner may cut tree limbs and remove roots where they cross over the property line, provided that such pruning will not damage the basic health and welfare of the tree.
Sometimes disputes arise between neighbors when trees belonging to one property owner fall on and damage or destroy adjacent property. In such cases, the tree owner is only responsible for damage if some failure to maintain the tree contributed to the damage. If the damage was solely the result of a thunderstorm or act of God, the tree owner will not be responsible as the damage could not have been foreseen. If, however, the tree owner allows the tree to grow so that it uproots the fence, it would be considered an ENCROACHMENT onto the adjacent property. In that instance, the tree owner would be required to remove the offending tree. Leaves, bean pods, or acorns which fall off and end up on adjacent property are considered a natural occurrence and are the responsibility of the landowner on whose property they ultimately come to rest.
In the old courts of England, the owner of livestock was held strictly liable for any damages to person or property done by the livestock straying onto the property of another. The mere fact that they strayed and damaged crops, other livestock or PERSONAL PROPERTY was sufficient to hold the owner liable for the injuries inflicted by cattle, sheep, goats, and horses. This strict liability position made sense in the confines of a small island such as England, but in the United States with herds of livestock wandering over vast expanses of land, a different process developed. The legislatures enacted statutes which provided that livestock were free to wander and that the owner was not responsible for damage inflicted by those livestock unless they entered land enclosed by a legal fence. These became known as open range laws. Subsequently, certain states reversed the open range laws and required the owners of livestock to fence in their livestock. This position was similar to the common law position, only instead of strict liability, the livestock owner could be held liable only upon a showing that the livestock escaped due to the owner's NEGLIGENCE.
Modern Law of Deeds to Real Property. Natelson, Robert, Aspen Law, 1992.
Neighbor Law: Fences, Trees, Boundaries and Noise. Jordan, Cora, Nolo Law, 2001.
American Land Title Association
1828 L Street, NW
Washington, DC 20036-5104 USA
Phone: (800) 787-ALTA
Fax: (888) FAX-ALTA
American Society for Photogrammetry & Remote Sensing
5410 Grosvenor Lane, Suite 210
Bethesda, MD 20814-2160 USA
National Society of Professional Surveyors (NSPS)
6 Montgomery Village Avenue, Suite #403
Gaithersburg, MD 20879 USA
Phone: (240) 632-9716
Buying And Selling/Mortgages (Encyclopedia of Everyday Law)
Most people borrow money in order to purchase their home. A loan for this purpose is commonly called a home loan or MORTGAGE. The term mortgage originates from two Latin words. The first, "mort" is from the Latin word for death. The second, "gage" means pledge or promise. The word "mortgage" literally means "dead promise." While this may seem nonsensical at first, it actually makes sense: the property was considered forfeited or "dead" to the borrower if the loan were not repaid. Similarly, once the loan was satisfied, the promise itself was dead or unenforceable.
Typically, a mortgage is secured by a LIEN on the property. The mortgagor is the party transferring the interest in land. The mortgagee is the provider of the loan. A mortgage is paid in installments that include both interest and a payment on the principle amount borrowed. With respect to which entity has title to the property, a number of possibilities exist. Under the title theory, title to the security interest rests with the mortgagee. Most states follow the lien theory under which the legal title remains with the mortgagor unless there is FORECLOSURE. The intermediate theory applies the lien theory until there is a DEFAULT on the mortgage whereupon the title theory applies.
Types of Mortgages
A mortgage involves the transfer of an interest in land as security for a loan. The mortgagor and the mortgagee generally have the right to transfer or assign their respective interest in the mortgage. Standard contract and property law provisions govern the transfer or assignment of any interest. There are several different types of mortgages available.
Fixed Rate Mortgage
A fixed rate mortgage carries an interest rate that will be set at the inception of the loan and remain constant for the length of the mortgage. A 30-year mortgage will have a rate that is fixed for all 30 years. At the end of the 30th year, if payments have been made on time, the loan is fully paid off. To a borrower the advantage is that the rate will remain constant and the monthly payment will remain the same throughout the life of the loan. The lender is taking the risk that interest rates will rise and it will carry a loan at below market interest rates for some or part of the 30 years. Because of this there is usually a higher interest rate on a fixed rate loan than the initial rate and payments on adjustable rate or balloon mortgages. If the rates fall, homeowners can pay off the loan by refinancing the house at the then lower interest rate.
Adjustable Rate Mortgage
An adjustable rate mortgage (ARM) provides a fixed initial interest rate and a fixed initial monthly payment for a short period of time. With an ARM, after the initial fixed period, which can be anywhere from six months to six years, both the interest rate and the monthly payments adjust on a regular basis to reflect the then current market interest. Some ARMs may be subject to adjustment every three months while others may be adjusted once a year. Also, some ARMs limit the amount that the rates can change. While an ARM usually carries a lower initial interest rate and lower initial monthly payment, the purchaser is taking the risk that rates may rise in the future.
Owner Carryback and Financing
An alternative form of financing, usually a last resort for those who cannot qualify for other mortgages, is owner financing or owner carryback. The owner finances or "carries" all or part of the mortgage. Owner financing often involves balloon mortgage payments, since the monthly payments are frequently interest only. A balloon mortgage has a fixed interest rate and fixed monthly payment, but after a fixed period of time, such as five or ten years, the whole balance of the loan becomes due at once. This means that the buyer must either pay the balloon loan off in cash or refinance the loan at current market rates.
Home Equity Loan
A home equity loan is usually used by homeowners to borrow some of the equity in the home. Doing so may raise the monthly housing payment considerably. More and more lenders are offering home equity lines of credit. The interest may be tax DEDUCTIBLE because the debt is secured by a home. A home equity LINE OF CREDIT is a form of revolving credit secured by a home. Many lenders set the credit limit on a home equity line by taking a percentage of the home's appraised value and subtracting from that the balance owed on the existing mortgage. In determining the credit limit, the lender will also consider other factors to determine the homeowner's ability to repay the loan. Many home equity plans set a fixed period during which money can be borrowed. Some lenders require payment in full of any outstanding balance at the end of the period.
Home equity lines of credit usually have variable rather than fixed interest rates. The variable rate must be based on a publicly available index such as the prime rate published in major daily newspapers or a U. S. Treasury bill rate. The interest rate for borrowing under the home equity line will change in accordance with the index. Most lenders set the interest rate at the value of the index at a particular time plus a margin, such as 3 percentage points. The cost of borrowing is tied directly to the value of the index. Lenders sometimes offer a temporarily discounted interest rate for home equity lines. This is a rate that is unusually low and may last for a short introductory period of merely a few months.
The cost of setting up a home equity line of credit typically includes a fee for a property APPRAISAL, an application fee, fees for attorneys, TITLE SEARCH, mortgage preparation and filing fees, property and TITLE INSURANCE fees, and taxes. There may also be recurring maintenance fees for the account or a transaction fee every time there is a draw on the credit line. It might cost a significant amount of money to establish the home equity line of credit, although interest savings can justify the cost of establishing and maintaining the line.
The federal Truth in Lending Act requires lenders to disclose the important terms and costs of their home equity plans, including the APR, miscellaneous charges, the payment terms, and information about any variable-rate feature. If the home involved is a principal dwelling, the Truth in Lending Act allows 3 days from the day the account was opened to cancel the credit line. This right allows the borrower to cancel for any reason by informing the lender in writing within the 3-day period. The lender must then cancel its security interest in the property and return all fees.
A second mortgage provides a fixed amount of money repayable over a fixed period. In most cases the payment schedule calls for equal payments that will pay off the entire loan within the loan period. A second mortgage differs from a home equity loan in that it is not a line of credit, but rather a more traditional type of loan. The traditional second mortgage loan takes into account the interest rate charged plus points and other finance charges. The ANNUAL PERCENTAGE RATE for a home equity line of credit is based on the periodic interest rate alone. It does not include points or other charges.
A reverse mortgage works much like traditional mortgages, only in reverse. It allows homeowners to convert the equity in a home into cash. A reverse mortgage permits retired homeowners who own their home and have paid all of their mortgage to borrow against the value of their home. The lender pays the equity to the homeowner in either payments or a lump sum. Unlike a standard home equity loan, no repayment is due until the home is no longer used as a principal residence, a sale of the home, or death of the homeowner.
Deed of Trust
A DEED OF TRUST is similar to a mortgage, with one important exception. If the borrower breaches the agreement to pay off the loan, the foreclosure process is typically much quicker and less complicated than the formal mortgage foreclosure process. While a mortgage involves a relationship between the borrower/homeowner and the bank/lender, a DEED of Trust involves the homeowner, the lender, and a title insurance company. The title insurance company holds legal title to the real estate until the loan is paid in full, at which time the title company transfers the property title to the homeowner.
An ESCROW company or agent is an independent third party who handles aspects of the purchase and related loan transaction. The escrow company will often hold the DOWN PAYMENT until the closing, receive the amount of the loan from the lender, transfer the down payment and mortgage money to the seller, transfer and record the deed of title to the buyer or title company, and make sure the lender is protected by filing and recording the mortgage with the local county recorder of deeds. In some states the escrow functions are handled by a licensed title insurance company or an escrow company, while in other states an attorney handles the transaction. The purchase is said to be held in escrow pending certain investigations, inspections, and contingencies.
Abstract of Title
An abstract is a document that a title insurance company or, in some states, an attorney, will prepare giving the history of the home. The document usually lists who owned the property all the way back to its first original owner. The document will also disclose any liens or encumbrances on the title which may affect whether lenders will provide a loan or whether the new homeowner will want to take title to the property.
Prepayment Penalty Clause
A prepayment PENALTY is a charge the borrower pays when a mortgage is repaid before a certain period of time elapses. Not all lenders impose a prepayment penalty. From a mortgage lender's perspective a prepayment penalty helps the lender at least recoup some or all of the significant expense it incurs in putting a new loan on the books. If the loan is to be repaid quickly due to a refinance, the lender may have a significant loss. A prepayment penalty provision must be set out in the mortgage contract in order for the lender to collect one.
Mortgage Contingency Clause
A mortgage contingency clause is a provision in the home purchase contract that says that if the prospective buyer cannot get a mortgage within a fixed period of time, the buyer may cancel the entire transaction.
Mortgage Bankers and Brokers
A mortgage broker can submit a loan to many different lenders and typically has access to several types of loan programs. A mortgage broker can shop for the best and most competitive mortgage rates and terms available tailored to meet a borrower's needs. Some charge processing or origination fees. Mortgage bankers are lenders that are large enough to originate loans and create pools of loans. Some companies do not sell directly to those major investors but sell their loans to the mortgage bankers. They often refer to themselves as mortgage bankers as well.
A direct lender loans the money directly to the borrower. Banks and credit unions are often direct lenders.
Secondary Market Lenders
Federal National Mortgage Association (FNMA or Fannie Mae), Government National Mortgage Association (GNMA or Ginnie Mae) and Federal Home Loan Mortgage Corporation (FHLMC or Freddie Mac) are all secondary market lenders. Many retail lenders actually receive their funds from a secondary market lender. These secondary lenders have assisted the national mortgage market by allowing money to move easily from state-to-state. The movement of loan funds helps to avoid a situation where mortgages are only available in certain areas or states. Also, the secondary lenders have established regulations and guidelines that help the general public.
Defaults and Foreclosures
If a homeowner fails to make payments upon the mortgage, the lender may foreclose on the property. Foreclosure allows the mortgagee to declare that the entire mortgage debt is due and must be paid immediately. This action is accomplished through an acceleration clause in the mortgage. Many states regulate acceleration clauses and allow late payments to avoid foreclosure. Depending upon the terms and agreements made in the mortgage contract, the lender may do a STATUTORY foreclosure or a judicial foreclosure. A statutory foreclosure can be performed without bringing a court action. The lender does have to follow strict state regulations as to the proper notices and opportunities to provide payment by the homeowner before a sale of the property occurs. This procedure is relatively quick. If a judicial foreclosure action is required, the lender must file a complaint with the court system and go through the LITIGATION process to obtain the right to foreclose on the property. In several state jurisdictions, the homeowner is allowed the right to stay in possession of the home until the foreclosure process is finalized or a sale of the home occurs.
Since lenders want to avoid the cost of foreclosure, the lender will sometimes work out an agreement with the homeowner whose payments have fallen behind. The lender may accept interest only payments or partial payments for a while in order to assist the homeowner. There are detailed regulations regarding foreclosure procedures. Filing a Chapter 7 BANKRUPTCY temporarily stalls a lender's right to foreclosure, until it gets court permission to go forward with the foreclosure proceedings. Under a Chapter 13 plan, it is possible for a homeowner to make up the missed payments. Liens do not automatically go away in any bankruptcy. A bankruptcy discharge does not extinguish a lien on property.
Some states have anti-deficiency laws which protect purchasers of residential real property used as primary residence. If the purchaser fails to make the mortgage payment the property is foreclosed and title is obtained by the lender through a legal procedure. The property is then typically sold to pay the mortgage and a deficiency between the sale price and the outstanding balance of the mortgage usually exists. Under anti-deficiency laws, if the mortgage is a purchase money mortgage for the purchase of a dwelling occupied by the purchaser, the purchaser will not be held responsible for any deficiency. The lender can only recover the property and the proceeds of a subsequent sale. The purchaser does not pay any deficit between the sale proceeds and the outstanding loan balance. This allows the purchaser to walk away from a property without owing a deficiency judgment amount. Anti-deficiency laws typically provide no protection for second mortgages or home equity lines. Also, there is no protection when the property is not used as the primary residence of the purchaser.
Private mortgage insurance and government mortgage insurance protect the lender against default and enable the lender to make a loan which the lender considers a higher risk. Lenders often require mortgage insurance for loans where the down payment is less than 20% of the sales price. Mortgage insurance should not be confused with mortgage life, credit life, or DISABILITY insurance, which are designed to pay off a mortgage in the event of the borrower's death or disability.
With lender paid mortgage insurance (LPMI), the lender purchases the mortgage insurance and pays the premiums to the insurer. The borrower cannot cancel LPMI or government mortgage insurance during the life of the loan. However, it may be possible to cancel private mortgage insurance at some point, such as when the loan balance is reduced to a certain amount.
A mortgage interest credit is available for first-time home buyers whose income is generally below the median income for the area in which they live. The credit is intended to help lower-income individuals afford home ownership. A tax credit is allowed each year for part of the home mortgage interest paid. Any mortgage interest DEDUCTION is reduced by the amount of the credit taken. The interest on home mortgages is typically tax deductible.
ALASKA: Alaska has a broad form of anti-deficiency STATUTE that precludes a deficiency judgment following the completion of a nonjudicial foreclosure.
ARIZONA: Arizona's anti-deficiency statutes prevent a lender from suing a person for any losses on a home after foreclosure. A person may not be sued by the lender for property located on 2.5 acres or less that is a single family residence or duplex. This provision is only applicable if the decrease in value is not due to the home owner's neglect. If a lender seeks a deficiency judgment, it has 90 days after the sale of the property to begin judicial proceedings to recover any losses. Failure to do so may result in the lender's loss of its right to recover the deficiency. In the event the property is something other than the foregoing, a deficiency judgment may still be avoided by deeding the property back to the lender prior to foreclosure. This is known as a deed-in-lieu of foreclosure. By accepting the deed, the lender is agreeing to accept the property for the amount that the borrower owes, thus eliminating any potential deficiency. However, when a person deeds the property back to the lender, he or she may be taxed on the amount of the deficiency that was forgiven by the lender. The only exception to Arizona's anti-deficiency statutes are VA loans. VA is allowed to obtain a deficiency judgment despite current state laws that prohibit such actions.
CALIFORNIA: California's anti-deficiency law applies only to funds used to purchase a residence. The anti-deficiency law does not apply to additional financing such as second mortgages or home-equity loans. California requires foreclosure on real property trust deeds and mortgages instead of a suit on the note. No deficiency judgment is possible where the seller takes back a purchase money note and deed of trust as part of the sale financing. If a third-party lender finances the purchase, the third party cannot recover a deficiency judgment if that loan is given and used for paying all or part of the purchase price, is secured by the property purchased, is a property for use by no more than four people, and is owner occupied. A deficiency judgment is not available if the lender forecloses by private sale by TRUSTEE instead of a judicial foreclosure law suit. Federally made or guaranteed loans are generally not subject to the anti-deficiency laws of the state. V. A., FHA and Small Business Administration loans may subject the borrower to a deficiency judgment. A third-party refinance of a purchase money loan is not a purchase money loan and the buyer could be personally liable for payment of the seller's note after a judicial foreclosure.
FLORIDA: In Florida, mortgages must be foreclosed by filing a lawsuit in court. Florida is unusual in that the state has passed few statues regulating foreclosures. A sale can be set aside if there is an error in the procedure to foreclose; however, it cannot be set aside because of a too low sale price. After the sale takes place, the sale terms must be confirmed by the court. If the terms of the sale order are met, title in the buyer's name can become complete by filing a certificate of title. At the discretion of the court, junior lien holders can redeem the property, up to the time of the confirmation of the sale. The EQUITY OF REDEMPTION is cut off when the sale is confirmed, but it exists prior to that time. The borrower can redeem the property from foreclosure by curing the default prior to confirmation. Any action for a deficiency must be filed within four years from the foreclosure.
MASSACHUSETTS: Under the Massachusetts Uniform FRAUDULENT Conveyance Act if the foreclosure sale took place for less than MARKET VALUE, it may be ruled to be a fraudulent conveyance. Therefore the lender should have the property appraised at the time of foreclosure. In Massachusetts, there are two methods by which a mortgage may be foreclosed. The lender may enter and take possession of the premises and then wait three years for title to become final in the name of the lender. The other method is that the lender may complete a non-judicial sale under a power of sale clause. Unless the borrower can come up with enough money to pay off the mortgage within three years, however, the lender's ownership becomes final and the borrower's right to redeem the property is cut off. Despite this provision, the usual method of foreclosure is through sale under a power of sale clause in the mortgage. The sale must be conducted in accordance with the requirements specified in the power of sale clause. Notice of the foreclosure must be given. There is no requirement for the borrower to actually receive the notice, merely for the lender to make a diligent effort to locate the borrower. If there is any money left from the foreclosure sale after paying off the lender, the surplus goes to the borrower. A proper sale prevents the borrower from exercising any right to reclaim the property through redemption. If the foreclosure sale proceeds are not enough to pay off the lender, then the borrower is liable for the deficiency.
NORTH DAKOTA: In North Dakota, a lawsuit may be brought in district court for foreclosure or for satisfaction of a mortgage on real estate. Prior to bringing any lawsuit, the lender must give the borrower advance notice. This notice must be sent no later than 90 days before the suit is filed. The notice must state a description of the real estate, the date and amount of the mortgage, the amount due for principal, interest, and taxes. The notice must also state the time period for redemption, which is either one year, or, for small tracts with substantial balances and the properly worded mortgages, six months. The notice must be served by registered or certified mail addressed to the owner of record. If the borrower brings in the missing payments any time within 30 days after receipt of the notice, the loan must be reinstated. North Dakota law requires the lawsuit paperwork to include several allegations that are unusual. First, North Dakota law requires the attorney bringing the suit to hold a POWER OF ATTORNEY to act on behalf of the lender. Second, the lender must also declare in the original lawsuit whether the lender will pursue a deficiency judgment against the borrower if the foreclosure sale does not bring in enough money to pay off the outstanding loan balance. The lender may not ask for a deficiency in the foreclosure suit if it has already brought another suit just to collect on the loan. If the borrower can bring in the missed payments plus foreclosure costs before the DECREE of sale is issued by the court, then the lender's lawsuit to foreclose must be dismissed. Whenever the real estate is sold at foreclosure, the sheriff or deputy must give the buyer a certificate of sale, and at the expiration of the redemption time period, a deed must be given to the buyer. Any cash surplus from the sale, beyond that needed to pay off the mortgage and the foreclosure costs, must be paid to the borrower.
OREGON: Foreclosure in Oregon may be either by court action or by advertisement and sale. The borrower, or any junior lien holder, can cure the default prior to foreclosure. A deficiency judgment cannot be obtained through a non-judicial deed of trust foreclosure by advertisement. A person who was entitled to receive notice of the foreclosure but did not receive it may sue to invalidate the foreclosure at any time within five years of the sale. On a judicial foreclosure, the borrower or a successor in interest may redeem property within 180 days after sale.
SOUTH CAROLINA: South Carolina uses judicial foreclosure. The lender must file a lawsuit and seek either an order of sale or a judgment for the loan balance against the borrower or both. Deficiency judgements are permitted. Within 30 days after the sale, a borrower who was sued for a deficiency can apply to the court for an order of appraisal. The DEFENDANT appoints one APPRAISER, the judgment CREDITOR appoints another, and the judge appoints another. If the appraised value is greater than what remains owed on the loan, after subtracting the foreclosure sale proceeds, then there is no deficiency. However if it is less, then the borrower still gets credit against the judgment for the higher appraised value of the property.
TEXAS: Texas has laws which make foreclosure easy. Deficiency judgments can only be for the difference between FAIR MARKET VALUE and the balance owed on the loan. There is no right of redemption.
All about Escrow and Real Estate Closings. Gadow. Sandy, Escrow Publishing Company, 1999.
How to Find a Home and Get a Mortgage on the Internet. Johnson, Randy, Wiley, John & Sons, Incorporated, 2000.
Owner Will Carry: How to Take Back a Note or Mortgage without Being Taken. Broadbent, Bill, Dry Bones Press, 2000.
National Association of Mortgage Brokers
8201 Greensboro Drive, Suite 300
McLean, VA 22101 USA
Phone: (703) 610-9009
Fax: (703) 610-9005
Primary Contact: Joseph L. Falk, President
National Association of Mortgage Planners
3001 LBJ Freeway, Suite 110
Dallas, TX 75234 USA
Phone: (972) 241-0927
Fax: (972) 241-7046
Condominiums/Co-Ops (Encyclopedia of Everyday Law)
While home ownership is a dream most people aspire to, for some it is a difficult one to reach. As housing costs continue to rise, the hope of affording even what was once called a "starter home" seems out of reach for many people. Many people see renting as a better alternative to buying, but renting provides no equity. The answer for people who want to own their own home or who want equity but like the convenience of apartment-type living is to purchase a condominium or a cooperative apartment.
CONDOMINIUMS AND COOPERATIVES are known as common interest communities. All the common space, including hallways and corridors, lobbies and common rooms, and exterior grounds, are commonly owned or maintained by all the tenants in the development. Although condominium ownership differs in significant ways for cooperative ownership, both afford the buyer with the opportunity to achieve equity at a relatively reasonable price without giving up some of the amenities of apartment living, such as on-site repair people.
Condominiums, also known as "condos," offer many of the same amenities as home ownership, except that the development is managed by an "association" that acts much like a cooperative's board of directors (see below). Individual owners of condominium units share in ownership of common areas, such as corridors and recreation rooms indoors and courtyards outdoors. The association makes sure that the common areas are kept in good repair. There may be an on-site superintendent, or there may be a maintenance crew on call.
Condominium sales are treated just like house sales; the buyer secures a MORTGAGE and on the day of purchase signs an actual DEED for the dwelling. That deed does not grant the same level of ownership that a deed to a house would provide. All the buyer really owns is the air space within the unit. Because the common space is jointly held by all the residents, they are restricted and often prohibited from making any changes, even beneficial ones. Thus, a condominium owner who wants to renovate indoors can install new fixtures, tear out non-supporting walls, even install a new kitchen or bathroom. That same owner is probably not allowed to do any exterior painting or do any gardening outdoors, not even moving a bush or planting a tree. (In some complexes, property is set aside for this purpose, but even then any plantings must conform with the overall character of the development.)
Condominiums can take many forms structurally. They may be like regular apartments, or they may be townhouses. In fact, many are converted apartment houses or townhouse complexes. Some condominium communities actually offer individual standalone houses; these communities look like typical housing tracts, but again the residents own only the air space inside their homes. Even though each may have a fair amount of property, that property is managed by the association and not the individual owners.
A cooperative, more commonly known as a co-op, is generally much more like apartment living that a condo. A large number of co-op buildings actually started out as rental buildings but were later converted. Co-ops are more restrictive than condominiums, but they also offer residents greater say in several aspects of how the property is managed.
The owner of a co-op does not own his or her unit. The co-op is a corporation, complete with a CORPORATE board of directors, and each resident is a "shareholder." Co-op buyers do not sign a deed. Instead, they purchases shares of the corporation, shares that include a LEASE granting use of a specific unit. The number of shares owned is based on the size of the unit.
The "mortgage" that one receives when making a co-op purchase is not really a mortgage but rather a loan to purchase shares. To all intents and purposes, however, it functions as a mortgage.
In addition to the selling price for a co-op, there is also a monthly maintenance fee for upkeep of the property. It can include utilities, maintenance and repairs, and property taxes. This fee can range from a small amount to levels higher than mortgage payments. Parts of the maintenance fee may be tax DEDUCTIBLE.
Because they do not own their individual units, co-op owners are generally not allowed to do anything inside their apartments beyond simple maintenance. A co-op owner cannot put in a new kitchen or bathroom or tear down any walls. In this regard, co-op living is very much like apartment living. The positive side of this is that residents are not responsible for making their own repairs; the on-site maintenance crew or superintendent handle those.
Advantages of Condominiums and Co-ops
Why choose to live in a condominium or a co-op over renting or private home ownership? There are a number of reasons, and ultimately the answer depends on a person's circumstances and goals.
A renter who wishes to build equity in his or her home but who has no desire to incur the responsibilities of maintaining a home may choose condominium or co-op ownership because it provides many of the same maintenance services as a rental unit would. A single person who wishes to own property but who cannot afford a house may turn to the generally more reasonable condominium or co-op market. Older homeowners who wish to give up what has become a large and unwieldy house but who have no desire to spend their equity on a rental unit often see condominiums or co-ops as an attractive alternative.
Although condominium and co-op owners are responsible for the maintenance in their own units (more so for co-op owners), the comfort of knowing that someone else will do the landscaping, the exterior painting, and the snow removal is often more than enough to make this option more attractive than home ownership.
Condominiums and co-ops also offer more stability than apartment houses. In years past, people moved into apartment houses and stayed for many years; they would start with a small apartment, move to a larger one in the same building as their family grew, and move back into a smaller one when their children had moved out. Today, most people who live in apartments do not stay long. This may be the result of higher rents, or it may be because apartment houses are often maintained with less than stellar reliability. A condominium or co-op offers a stronger sense of community to residents because they are owners; they are less likely to move after only a few years. Also, because they are owners, they will probably assume more responsibility in making sure the common areas are well-maintained.
Disadvantages of Condominium and Co-op Living
For all their advantages, condominiums also have a number of disadvantages that should make potential buyers weigh their decision carefully.
A condominium or co-op owner has to pay not only a monthly mortgage but also the maintenance fee. In an expensive unit, this can run into thousands of dollars over the course of a year. Granted, some of that is probably tax deductible, and the money goes for maintenance and other common costs. Nevertheless, some people see the combination mortgage/maintenance fee as similar to paying double rent. Thus, the older couple who wants to trade their large house for a small co-op might find the various costs prohibitively expensive when they are all added up.
Because many condominium and co-op buildings are older, converted apartment houses, chances are that maintenance and repair costs will be quite high. For the condominium owner, this means higher repair costs within his or her own unit. For the co-op owner, this means higher monthly fees to pay for repairs throughout the building.
The extent of restrictions in condominiums depends on the layout of the development. If the development consists of free-standing homes or townhouses, residents may have a fair amount of leeway as far as landscaping, for example. For buildings, the restrictions will probably be more comprehensive and more carefully enforced.
Restrictions in co-ops are far more allencompassing. Co-op residents who wish to sell their unit, or rather, their shares, often find that the co-op BYLAWS are extremely strict about whom they can sell to. People who fail to meet a minimum income may be ineligible to live in a particular co-op, even if they have enough money to make the purchase. For that matter, co-op apartments in wealthy neighborhoods will sometimes refuse to sell to celebrities, citing their fear that the presence of a celebrity will draw too many fans and other celebrities to the building.
Co-op SUBLETTING is also subject to significant restrictions. Some co-ops only allow a set number of subleases per year. Thus, a person who has been transferred to another state will need to seek approval to sell the co-op or to sublet it, and that approval may not be forthcoming.
Particularly in co-ops, the board of directors wields considerable power; often the only way to gain some influence within the development is to join the board. The politics involved in decisionmaking is literally brought home to co-op residents, and many do not enjoy the experience.
Because many people are unwilling to put up with the restrictions found in condominium and co-op communities, it can be much harder to find a buyer to begin with. Condominiums and co-ops do not rise in value the same way houses do, so while they preserve equity they do not build as much as a private home would.
Conversions to Condominiums or Co-ops
It is not uncommon for rental buildings to be converted to condominiums or co-ops; in fact, most of the older buildings that are condominium or co-op developments started out as rentals.
Frequently the first sign that a building's owner is considering a conversion is a series of improvements to the buildingew windows, new kitchens and bathrooms, redecorated common space (corridors, lobby). The sponsor of the conversion (usually but not necessarily the owner) will contact all the tenants and give them the opportunity to purchase their own units, usually for a good price. If enough tenants decide to take the sponsor up on the offer, the conversion can go through. Although there is a fairly low minimum number, sponsors like to get as high a percentage of tenants to buy in as possible, because it means more money to pay for upkeep and keep maintenance fees down.
Example: Conversions in New York
In New York City and some of its outlying suburbs, many rental apartment buildings are subject to rent regulation laws that prohibit landlords from raising rents beyond a certain percentage. Buildings constructed before 1974 are subject to rent stabilization, which allows only small increases each time the lease is renewed (every year or every two years). Buildings constructed before 1974 may be protected under rent control laws that further restrict the amount of rental increases. Rent-controlled and rent-stabilized tenants have a LEGAL RIGHT to have their leases renewed as long as they are paying their rent on time and as long as the apartment is their primary residence. If a rental building is converted to a condominium or co-op, these tenants are still allowed to stay in their apartments.
Clearly for a building seeking a conversion from rental to co-op, it would be important to convince a reasonably high percentage of tenants to buy in. Otherwise, the renters would continue to pay their artificially low rents (they do not have to pay monthly maintenance fees) while shareholders would have to pick up more of the common costs. Since it only requires 15 percent of the current tenants to approve a co-op conversion, this could leave the sponsor of the conversion (often the LANDLORD) with carrying 85 percent of its units as rentals. (In most cases, apartment house owners will wait until they have a much higher percentage before they proceed with a co-op conversion.)
Not surprisingly, many tenants choose to remain renters because it costs less than buying. For elderly tenants in particular, who have no need for the equity of an owned residence, continuing to rent may make sense.
Rent-controlled apartments are deregulated as soon as the tenant moves out, but rent-stabilized apartments remain stabilized no matter how often they change hands. Some apartment owners have tried to "warehouse" apartments by not renting stabilized apartments as they become available. The fewer apartments rented when the co-op conversion takes place, the fewer renters the building will have to carry. The practice of warehousing apartments is illegal.
Also illegal is trying to force renters to leave by curtailing services to them or by harassing them. Many co-op boards enact strict regulations in the hope of driving away renters. Some of these restrictions, such as no-pets clauses, may be imposed with the idea that renters with pets would rather leave than give up their companions. While co-op boards have a great deal of latitude when enacting rules or guidelines, those guidelines cannot be unduly unfair or onerous to the renters.
Buying a Condominium or Co-op
People interested in condominium or co-op ownership should pay close attention to a number of factors at each development they visit:
- They should ask about the financial condition of the association or corporation that manages the property. They may request a copy of the latest financial statements and budgets. They can find out about the ratio of owners to renters, the stability of the maintenance fees, and recent unit sales.
- They should find out whether there are any pending lawsuits against the development. Builders, neighbors, and even former owners might have filed suit. If anyone did, they can find out why and find out the outcome.
- They should ask about the bylaws and the restrictions. If they are particularly strict, prospective buyers may not wish to purchase a home there. Even if they have no trouble with the restrictions, potential subsequent buyers might when it comes time to sell later on.
- Prospective buyers should hire an inspector to check the structural condition of the building (including electrical, heat, and plumbing). They should find out the condition of the roof and the common areas. Also, they need to find out about how soundproof the building is.
- Prospective buyers should talk to current or former owners if possible. They may be able to find out from the owners what are the pros and cons of the development in questionhat they like and what they wish they could change.
Condominium and co-op ownership is not for everyone. If people think it will meet their needs, however, they will do themselves an enormous favor simply by making a checklist of the items above and being prepared when it comes time to discuss an actual deal.
The Co-op Bible: Everything You Need to Know About Coops and Condos. Shapiro, Sylvia, St. Martin's Griffin, 1998.
How to Buy a House, Condo, or Co-op. Thomsett, Michael C., and the Editors of Consumer Reports. Consumer Reports Books, 1996.
Keys to Purchasing a Condo or Co-op. Friedman, Jack P., and Jack C. Harris. Barron's Education Series, 2000.
National Association of Realtors
P. O. Box 10598
Chicago, IL 60610 USA
Phone: (800) 874-6500
Fax: (312) 329-5960
Primary Contact: Terrence M. McDermott, Chief Executive Officer
Urban Homesteading Assistance Board
120 Wall Street, 20th Floor
New York, NY 10005 USA
Phone: (212) 479-3300
Primary Contact: Andrew Reicher, Executive Director
U. S. Department of Housing and Urban Development (HUD)
451 Seventh Street, SW
Washington, DC 20410 USA
Phone: (202) 708-1112
Fax: (202) 708-1455 (TTY)
Primary Contact: Mel Martinez, HUD Secretary
Contractors/Liens (Encyclopedia of Everyday Law)
A LIEN is a claim to property for the payment of a debt, typically one connected to the property. Because a lien is something that is filed with the local recorder's office, it can be a powerful legal tool. It is a public record, available to anyone, that alleges a valid, unpaid debt against the specific real estate named in the lien.
There are several types of liens, all of which could cloud the title and prevent the seller from conveying marketable title to the buyer. In some states, a MORTGAGE is regarded as a lien, not a complete transfer of title, and if not repaid the debt is recovered by FORECLOSURE and sale of the real estate. Real estate can also be affected by liens for federal income taxes. Additionally, liens can be placed on property for the non-payment of real estate taxes and special assessments, including homeowners' association dues. Contractors, subcontractors, material suppliers, and laborers can place liens against property for the value of work or materials installed on that property. The filing requirements and statutes of limitation for these liens vary according to the law of each state.
The word lien, derived from the French, means "knot or binding." The person to whom the debt is owed, the one who binds the property, is known as the lien holder. In certain circumstances, the lien holder may foreclose on the property if the debt is not paid in full. Liens can generally be removed by the payment of the amount owed. This payment can occur at any time up to and including the stage at which the closing documents for the sale of the property are signed.
A contractor's lien, often known as a mechanic's lien, or a construction lien, is a claim made by contractors or subcontractors who have performed work on a property who have not yet been paid. A supplier of materials delivered to the job may also file a mechanic's lien. In some states, professionals such as architects, engineers, and surveyors may also be entitled to file a lien for services rendered.
The priority of liens on a construction project does not depend upon the time of completion of the particular job, but rather everything relates back to the first visible commencement of the work. This stipulation means the final work, such as painting, is equal in priority to the initial work of laying a cement foundation. Therefore, during the entire work of construction, the owner must obtain lien releases or waivers of lien from each SUBCONTRACTOR and material supplier. Without these waivers or releases the real estate is subject to liens of all the subcontractors, even if the general contractor, though paid in full, fails to pay the subcontractors.
In some states, contractors and subcontractors must notify the property owner prior to filing a lien, but in other states such liens can be filed without any notification to the owner. Lien claimants who are contractors or subcontractors are protected under this legal doctrine because all their materials and labor are "buried" in the real estate, having become part of it. Unlike mortgage liens, however, the liens of these claimants cannot force a foreclosure.
In a DIVORCE, one party may be awarded the right to live in the marital house. When that spouse sells the property, the ex-spouse may be entitled to half of the equity. That ex-spouse could file a lien to ensure receipt of his or her share of the sales proceeds. In some states, although a lien is not part of a divorce proceeding, it can be placed on property of parents for unpaid CHILD SUPPORT payments.
A judgment lien can be filed if an actual judgment in a lawsuit is obtained from a court. Such cases include failure to pay a debt, including credit cards, bank loans, or deficiency judgements on repossessed vehicles. In some circumstances, judgments can be enforced by sale of property until the amount due is satisfied.
Homeowners' Association Liens
Homeowners' Association Liens are commonly filed against property when Homeowner Association Dues assessed against that property are not paid on time. When a house or condominium belonging to a homeowners' association sells, the title or ESCROW company will request a certificate of payment from the homeowners' association to be sure that all due and assessments have been paid and are current. If these payments have not been made, the dues will need to be brought current at the time the closing transaction papers are signed.
Federal Tax Liens
A tax lien can sometimes be placed on a property for past taxes due to the government by the taxpayer/owner. In order for a Federal Tax Lien to be filed by the Internal Revenue Service (IRS), the IRS must file a Notice of Federal Tax Lien. Prior to even filing a notice, however, the IRS must do all of the following:
- The IRS must determine and assess the exact amount of tax liability
- The IRS must send the taxpayer a notice and demand for payment
- The taxpayer must neglect or refuse to fully pay the liability within 10 days of the notice and demand
If the taxpayer pays the lien or posts a bond guaranteeing payment, the IRS must issue a Release of the Notice of Federal Tax Lien within 30 days. A lien will release automatically if the IRS does not refile the lien before the time expires to legally collect the tax. A taxpayer may sue the federal government for damages if the IRS knowingly or negligently fails to release a Notice of Federal Tax Lien provided the taxpayer first exhausts all administrative appeals within the IRS and the suit is filed within two years from the date the IRS should have released the lien.
A taxpayer can also get a Lien Release by entering into an INSTALLMENT agreement with the IRS to satisfy the liability. Finally, the IRS can withdraw a filed Notice of Tax Lien if the withdrawal will facilitate collection of the tax or if it is determined by the IRS that the withdrawal would be in the best interest of both the taxpayer and the government.
A Federal Tax Lien is incorrect and may be appealed if any of the following occurs:
- The taxpayer paid the entire amount owed before the lien was filed
- The IRS assessed the tax and filed the lien when the taxpayer was in BANKRUPTCY and subject to the automatic stay during bankruptcy (although the bankruptcy filing may not absolve the taxpayer of the tax liability, the filing of the lien during that time would not be permissible)
- The IRS made a procedural, administrative, or mathematical error in making an assessment
- The STATUTE OF LIMITATIONS had expired prior to the time the IRS filed the lien
An equitable lien is a legal fiction created by courts in certain circumstances in which justice may require the creation of a lien. Courts of equity have the power to create so-called equitable liens on property to correct some injustice. For example, a person who lived on the property and contributed a substantial amount to the improvement of the property may be able to, with the assistance of the court, obtain a lien on the property by suing for a constructive trust.
People having a home built can require contractors and subcontractors to provide lien releases or waivers as part of a written project contract. The contract can mandate a lien release be issued before the contractor receives payment for services, in which case it is called a lien WAIVER. If payments are made to a general contractor in stages for work performed by subcontractors, the homeowner can obtain lien releases from the various subcontractors as their part of the project is completed.
Sometimes, construction loan documents drafted by a bank may indicate that the bank will obtain lien releases, but the bank may do this solely for its own benefit. Therefore, the property owner's requiring lien releases should be clearly stated and independent of any agreement made by or with the bank.
Often contractors will have waiver and release forms available. If not, sample waivers and releases can usually be obtained from local or state CONSUMER PROTECTION organizations. In addition to signed lien releases, those building homes should keep records of what has been paid to contractors, which contractors worked on the job site and when. Unfortunately, unethical contractors can easily file FRAUDULENT liens for incorrect amounts. Accurate record keeping can help the homeowner ensure lien releases from all necessary parties.
Although the terms lien waiver and lien release seem to be interchangeable, a release demonstrates completion and payment, so as to prove any claim has been satisfied, while a waiver demonstrates a relinquishment of a known right. Waivers are typically obtained prior to commencement of any work, whereas releases are subsequently obtained. Waivers of lien must be in writing, give a sufficient description of the real estate, and be signed by the one with authority to file or claim a lien. No payment needs to be made in advance if the subcontractor agrees to release the land from the lien and rely only on the credit of the owner or general contractor for payment of the debt.
Liens can be discharged after a certain length of time. Therefore, if a property owner is in no hurry to sell the property, and the lien holder is not seeking to foreclose, it may make sense to do nothing and wait until the lien expires. If the lien is not renewed, the cloud on the title will no longer exist. If a person pays and satisfies a lien in order to have it discharged, it is imperative that a written, legally sufficient release or satisfaction be obtained and recorded in the appropriate government office. Doing so ensures clear title to the property.
State Rules Regarding Contractor's Liens
ALABAMA: All potential lienors, with the exception of an original contractor (a contractor with a direct contract with the owner who is exempted from the notice requirement), must fulfill three basic steps prior to perfecting a lien: provide STATUTORY notice to the owner, file a verified statement of lien in the PROBATE office of the county where the improvement is located, and file suit to enforce the lien. The verified statement of lien must be filed in the office of the judge of probate of the county where the subject property is located. When the property is located in more than one county, the statement must be filed in each county.
ARKANSAS: Unlicensed contractors cannot take legal action to enforce their contracts.
ARIZONA: Unlicensed contractors cannot take legal action to enforce their contracts.
CALIFORNIA: A subcontractor or supplier must give notice to the owner. Unlicensed contractors cannot take legal action to enforce their contracts. Design professionals may file liens, and lien rights may exist even when the design was not used.
DISTRICT OF COLUMBIA: Although the mechanic's lien has no priority over a prior recorded construction loan, it does have priority over any security interest filed after the mechanic's lien even though it is not necessary to file suit to enforce the mechanic's lien until one year after it is filed.
FLORIDA: In cases where the contractor does work and is not paid by the owner for the full amount that is due, the contractor can file a lien against the owner's property. The Claim of Lien must be filed with the Clerk of the Circuit Court in the county where the property is located within 90 days of the date the contractor last performed any labor or services or furnished materials. The contractor is not required to give a Notice To Owner as a condition for obtaining a lien against the owner's property. However, if the contractor is entitled to receive his final payment, the contractor must give the owner a Contractor's AFFIDAVIT before any lien can be effective. A Contractor's Affidavit must state that all subcontractors, sub-subcontractors, and material suppliers have been paid. If all subcontractors have not been paid, the Contractor's Affidavit must list those who remain unpaid and the amounts due. If the final payment is due, the contractor has no lien rights until the Contractor's Affidavit is given to the owner.
If the direct contract for the entire job between the owner and the contractor is less than $2,500, subcontractors and suppliers who do not have a direct contract with the owner have no lien rights on the job. Only the contractor (the person with a direct contract with the owner) can file a lien on jobs of less than $2,500. Design professionals may file liens, and lien rights may exist even when the design was not used.
GEORGIA: A lien can only be filed if the contractor filing the lien is in substantial compliance in the underlying contract with the owner. All liens must be filed with the clerk of the superior court of the county where the property is located within three months after completion of the work. When filing a lien, the contractor must send a copy of the lien by registered or certified mail to the owner of the property or the contractor as the agent of the owner. The party filing the lien has 14 days to file the lien with the clerk of the superior court in the county where the property is located. This notice must refer to the then-owner of the property against which the lien was filed and refer to a DEED or other recorded instrument with the chain of title of the affected property.
HAWAII: A lien may be filed for design work and supervision, but only if the design is used to improve the property.
IOWA: A lien may be filed for design work and supervision, but only if the design is used to improve the property.
KANSAS: Posting a bond is permitted; however, the court determines the amount of the bond. No advance notice requirements prior to filing a lien.
LOUISIANA: Subcontractors, laborers, employees, suppliers, and lessors may file claims against both the owner and the general contractor. All claims of suppliers and subcontractors rank equally and ahead of the privilege of contractor and surveyors, architects and engineers, which also rank equally. If no claimant conclusively establishes prior claim superior to others, a pro rata distribution is assumed.
MARYLAND: A lien cannot be filed unless the value of the improvements equals at least 15 percent of the property value. A contractor cannot obtain a lien until suit is filed and a court orders the lien. Once obtained, however, the lien has priority over other liens filed after this court determination.
MASSACHUSETTS: A design professional may lien only for work done supervising construction, but not for design.
MINNESOTA: Liens are filed with the recorder of deeds.
MISSISSIPPI: All parties claiming liens on the same property shall be made parties to the suit. Any sale of property made shall be by a special WRIT of EXECUTION and all liens paid pro rata. Subcontractors and laborers may bond amount due by general by written notice to owner. Owner may pay amount due into court for final distribution according to rights of parties.
MISSOURI: The owner cannot put up a bond to fight the lien. The lien is filed with the clerk of the court rather than in the recorder's office. A lien may be filed for design work and supervision, but only if the design is used to improve the property.
NEBRASKA: Lien waivers are invalid. Design professionals may file liens, and lien rights may exist even when the design was not used.
NEW YORK: Unlicensed contractors cannot take legal action to enforce their contracts.
NORTH CAROLINA: All claims of lien must be filed in the office of the clerk of superior court in each county wherein the real property subject to the claim of lien is located. Claims of lien may be filed at any time after the obligation becomes due, but not later than 120 days after the last furnishing of labor or materials.
OHIO: A design professional may lien only for work done supervising construction, but not for design.
PENNSYLVANIA: Advance Lien Waivers are permitted. Subcontractors must serve a Formal Notice on owner at least 30 days before filing a lien claim. Subcontractors performing alterations or repairs must serve an additional notice on the owner before work completed. All contractors must file liens in the court clerk's office within four months of the last work and serve notice of the lien claim on the owner within one month after that. Lawsuits to enforce liens must be filed within two years of lien filing. A General Contractor can file stipulation against liens with court before the project begins waiving all subcontractor mechanic's lien rights. Third tier or sub-subcontractors have no lien rights. A design professional may lien only for work done supervising construction, but not for design.
SOUTH CAROLINA: A person furnishing labor or material actually used in improving real property by agreement with or consent of the owner shall have a lien on such property and on the interest of the owner up to the amount due in contract. South Carolina defines consent to require a contract between the mechanic and owner before labor and material is furnished. Notice is required.
The Notice of Intent to Lien must include:
- The name of the claimant
- The name of the person with whom the claimant contracted or was employed
- A general description of the labor, services, or materials furnished and their contract price or value
- A description of the project sufficient for identification
- The first and last dates on which materials, labor, or services were provided or scheduled to be provided
- The amount due
TENNESSEE: Advance Lien Waivers are permitted. A lien claimant has no lien if the claimant makes even a minor mistake in filing this notice of lien. A single mistake can be FATAL to the mechanics' lien. The lien attaches only to whatever interest the owner has in the land. Thus, if an owner is leasing property, the lien can only be asserted against the leasehold interest, not the ownership interest of the LESSOR.
A contractor who contracts directly with the owner need not give any formal notice to the owner in order to preserve lien rights against the owner. However, if the contractor desires to perfect the lien against someone who purchases the owner's land without notice of the lien, then the contractor must file a sworn statement. Submitted within 90 days after the project is completed or within 90 days from the contractor's last work on the project, this statement must include the amount due and a complete legal description of the land.
The contractor without a direct contract with the owner must give two separate and distinct notices (although there is no reason why they cannot be done in the same document, if within the proper time period) to the owner and the contractor. Within 60 days of the last day of the month in which work was performed or materials were furnished, the contractor must send a notice of nonpayment to the owner and the contractor who has a contract with the owner. The notice of nonpayment must contain all of the following information: the name and address of the contractor sending the notice of nonpayment; a general description of the work, services or materials provided; a statement of the last date the contractor performed work or furnished materials; and a legal description of the real property. In addition to the notice of nonpayment, the contractor must also send to the owner a notice that the lien is claimed. This notice to the owner must be sent within 90 days from either the time the work is complete or within 90 days from the completion of the improvements. The lien of a contractor who did not contract directly with the owner is valid for 90 days from the date of the notice claiming the lien. The lien continues to be valid until the final termination of any suit for enforcement brought within the 90-day period. A contractor without a direct contract with the owner must also file a sworn statement and notice of the lien in order to be protected from purchasers without notice.
TEXAS: The contractor must file an affidavit claiming a lien no later than the fifteenth day of the fourth month following the month in which the original contract was materially breached or terminated, completed, finally settled, or abandoned. The affidavit must contain the following information: sworn statement of the claim, a legally sufficient description of the real property, a description of the work performed by the claimant, the amount due, the name and address of the reputed owner, and the name and address of the claimant. The affidavit must be filed with the county clerk in the county in which the property is located. The original contractor must send a copy of the lien affidavit to the owner at his last known business or residential address no later than the deadline for filing the affidavit or the tenth day following the filing of the affidavit, whichever is earlier.
There are two types of statutory liens for subcontractors. Fund Trapping occurs when a claimant can obtain a lien on the property and subject the property owner to personal liability to the extent that the owner has received the requisite statutory notice and fails to withhold any further payments from the contractor in an amount sufficient to cover the stated claim. In other words, when an owner receives the required "fund-trapping" notice, any unpaid contract funds (up to the amount of the claim as stated in the notice) are "trapped" in the hands of the owner. The claimant has a lien on the real property and a claim against the owner personally for the funds that were "trapped" by the notice letter. There is a significant problem with this method, however. If the owner has already paid all of the contract funds by the time it receives the "fund-trapping" notice letter, there may be no contract funds trapped. In that case, the claimant does not have a valid lien on the property. Statutory Retainage is handled the following way. To ensure that at least some contract funds will be available to satisfy claims arising toward the completion of construction, the property code requires an owner to retain ten percent of the contract amount (or value of the work then completed) during the course of construction and for 30 days following final completion. The statutory obligation to retain contract funds is commonly known as "statutory retainage." This required retainage creates a fund for the benefit of claimants who have filed lien affidavits within 30 days after the completion of the original contract and who have sent the required notices. If an owner fails to retain sufficient funds as required by the code, the owner will be personally liable and his property subject to a lien to the extent of the funds that should have been retained.
The requirements for a subcontractor's lien where the subcontractor's contract is not directly with the owner are the same but also require notice to the owner. The second-tier contractor is required to furnish the owner with a written notice of its claim. The notice letter must be sent to the owner no later than the fifteenth day of the third month following each month during which the claimant performed work for which payment is sought. For the subcontractor's lien to "trap any contract funds," the letter must contain a specific statutory warning which advises the owner that he will be personally liable and his property will be subject to a lien if he fails to withhold sufficient contract funds to pay the claim. The letter must also be sent to the original contractor by actual delivery or certified mail.
Requirements for a third-tier subcontractor are the same as for a second-tier subcontractor, except that the third-tier subcontractor must also send a letter of notice to the original contractor. Design professionals may file liens, and lien rights may exist even when the design was not used.
UTAH: Unlicensed contractors cannot take legal action to enforce their contracts. State law protects homeowners from having a lien maintained on their home and from civil judgment by persons other than the original contractor, provided the following conditions are met:
- The homeowner used the services of a licensed contractor
- The homeowner has a written contract with the original contractor
- The homeowner pays the original contractor(s) in full according to the terms of the written contract and any amendments to that contract
If a lien is incorrectly placed on a property, it is the owner's responsibility to notify the lien claimant in writing that the above listed requirements have been met and to provide all relevant documentation.
VIRGINIA: The contractor's lien holder has partial priority over even the construction lender. Therefore, banks in Virginia are typically concerned about contractor's lien waivers. All persons performing labor or furnishing materials of the value of $50 or more for the construction, removal, repair, or improvement of any structure may file a lien upon the structure. The contractor seeking a lien must file a Memorandum of Mechanic's Lien with the land records of the county where the real property is located. The general contractor may file a lien at any time after the work is commenced or materials furnished but not later than 90 days from the last day of the month in which the contractor last performs labor or furnished materials.
The main elements of a lien memorandum are as follows: name of owner, address of owner, name of claimant, address of claimant, type of materials or services furnished, amount claimed, type of structure on which work done or materials furnished, brief description and location of real property, date from which interest on the above amount is claimed and signature of claimant or its authorized agent. In addition, the memorandum must contain an affidavit by the claimant or its agent that the owner is justly indebted to the claimant in the amount claimed by the lien.
WASHINGTON: Unlicensed contractors cannot take legal action to enforce their contracts.
A Simplified Guide to Construction. Acret, James, Building News, Inc., 1997.
Construction Nightmares. O'Leary, Arthur, and James Acret, Building News, Inc., 1997.
Federal Tax Liens. Schmudde, David A., American Bar Association, 2001.
Fix the Lien Law Hodgepodge. McGreevy, Susan, Engineering News-Record, 2000.
National Mechanics Liens Handbook: The Mechanics Lien Laws of the 50 States and the District of Columbia. Acret, James, BNI Publications, Incorporated, 2001.
Selecting and Working with Architects, Engineers and Contractors. Williams, David J., 1st Books Library, 2001.
American Society of Home Inspectors, Inc.
932 Lee Street, Suite 101
Des Plaines, IL 60016 USA
Phone: (847) 759-2820
Fax: (847) 759-1620
California Contractors State License Board
9821 Business Park Drive
Sacramento, CA 95827 USA
Phone: (800) 321-2752
Fax: (916) 255-4016
National Association of Home Builders
1201 15th Street, NW
Washington, DC 20005
Phone: (202) 822-
Easements (Encyclopedia of Everyday Law)
An EASEMENT is a property interest, which entitles the owner of the easement to the privilege of a specific and limited use of the land of another. A right of way is a form of an easement granted by the property owner that gives another the right to travel over and use the owner's land as long as it is not inconsistent with the owner's use and enjoyment of the land. These principles had their origins in traditional COMMON LAW which governed matters such as the free flow of water and which allowed neighboring landowners to traverse, often by horseback or on foot, an informal "road system." Early courts reasoned that while absolute ownership rights of property can be lessened by an easement, society as a whole benefits from the resulting freedom of movement.
An affirmative easement is a requirement to do something, such as allowing another access to or across a certain piece of property. Most easements fall into this category.
A negative easement is a promise not to do something with a certain piece of property, such as not building a structure more than one story high or not blocking a mountain view by constructing a fence. There are not many negative residential easements in existence today as such architectural specifications are typically covered by rules and regulations promulgated by homeowners' associations. These documents are usually entitled Codes, Covenants, and Restrictions, often referred to as CC&Rs. A negative easement is sometimes referred to as an easement of light and air and in most states cannot be created by implication.
Creation of Easements
There are five ways to create an easement: by an express grant, by implication, by strict necessity, by permission, and by prescription.
An express easement is created by a DEED or by a will. Thus, it must be in writing. An express easement can also be created when the owner of a certain piece of property conveys the land to another but saves or reserves an easement in it. This arrangement is known as an easement by reservation.
To create an easement by implication, three requirements must be met:
- The easement must be at least reasonably necessary to the enjoyment of the original piece of property.
- The land must be divided (or "severed"), so that the owner of a parcel is either selling part and retaining part, or subdividing the property and selling pieces to different new owners.
- The use for which the implied easement is claimed must have existed prior to the severance or sale.
The courts will find an "easement by necessity" if two parcels are so situated that an easement over one is strictly necessary to the enjoyment of the other. The creation of this sort of easement requires that at one time, both parcels of land were either joined as one or were owned by the same owner. Prior use of the easement, however, is not required. The most common example of an easement by necessity is landlocked property, so that access to a public road can only be gained by having a right of way over an adjoining parcel of land. The legal theory is the landlocked parcel was accidentally created, and the owner forgot to include an easement appurtenant to reach the road.
A permissive easement is simply an allowance to use the land of another. It is essentially a license, which is fully revocable at any time by the property owner. In order to be completely certain that a permissive easement will not morph into a prescriptive easement, some landowners erect signs stating the grant of the permissive easement or license. Such signs, often found on private roadways, typically state: "This is a private roadway. Use of this road is permissive and may be revoked at any time by the owner."
Most litigated easements are those created without permission. An easement by prescription is one that is gained under principles of adverse possession. Prescriptive easements often arise on rural land when landowners fail to realize part of their land is being used, perhaps by an adjoining neighbor. Fences built in incorrect locations often result in the creation of prescriptive easements. If a person uses another's land for more than the STATUTE OF LIMITATIONS period prescribed by state law, that person may be able to derive an easement by prescription. The use of the land must be open, notorious, hostile, and continuous for a specified number of years as required by law in each state.
The time period for obtaining an easement by adverse possession does not begin to run until the one seeking adverse possession actually trespasses on the land. Thus, a negative easement cannot be acquired by prescription because no TRESPASS takes place. The use of the easement must truly be adverse to the rights of the landowner of the property through which the easement is sought and must be without the landowner's permission. If the use is with permission, it is not adverse. There must be a demonstration of continuous and uninterrupted use throughout the STATUTE of limitations period prescribed by state law. If the use is too infrequent for a reasonable landowner to bother protesting, the continuity requirement will probably not be satisfied.
Subsequent parties in the same position to the land using the right of way adversely can add up the time to meet the required statute of limitations. This situation is known as tacking. Thus, a prescriptive easement need not be exclusive; it can be shared among several users.
A conservation easement, a type of express easement, is created by a voluntary legal agreement between a landowner and another party, usually the government, which restricts the development of a piece of land. Under certain specific conditions, conservation easements are recognized by the U. S. Internal Revenue Service (IRS). If IRS requirements are met, the landowner may qualify for certain tax incentives. The requirements for a conservation easement approved by the IRS are as follows:
- The easement must have a valid conservation purpose; that is, the easement holder must be satisfied that protection of the land or resources is justified for conservation reasons. Different land trusts and government entities have different requirements that must be satisfied. Generally, the IRS requires purposes such as the following:
- Outdoor recreation by, or the education of, the general public
- Protection of a relatively natural habitat of fish, wildlife, or plants
- Preservation of open space
- Preservation of historically important land area or buildings
- The agreement must be completely voluntary: no one can force a landowner to enter into a conservation easement agreement. A conservation easement may be either donated or sold by a landowner to an easement holder.
- The agreement must be legally binding. It is recorded as a Deed of Conservation Easement. The agreement is binding on both present and future owners of the property. Both the landowner and the qualified easement holder must be in a position to enforce the terms of the agreement. This requirement recognizes the easement holder's responsibility for periodic inspection of the property with the landowner.
- The agreement must be permanent and irrevocable. A conservation easement must be permanent in order to qualify for the income and estate tax benefits provided by the IRS. If a conservation easement is valid for a set period of time only, for instance, ten years, the landowner may be eligible for certain property tax benefits but is not eligible for federal and state income and estate tax benefits.
- The easement must be held by a qualified easement holder, i.e., a government entity or a land trust. While any government entity can hold an easement, those most likely to hold conservation easements include city and county governments and certain federal agencies, such as the U. S. Forest Service and the U. S. Fish and Wildlife Service. A land trust is a private, nonprofit corporation.
- The easement must restrict development of the land. Ownership of land includes a number of legally recognized rights, including the rights to subdivide, sell, farm, cut timber, and build. The goal of devising a conservation easement is the landowner's voluntary agreement to give up one or more of these rights in order to protect certain natural resources. Prohibitions could include such matters as limitations on roads, structures, drilling, or excavating. The landowner could retain certain rights as long as those rights did not interfere with the conservation goals of the easement. For example, the landowner could retain the right to use the land, to restrict public access, and even to construct additional structures on certain sites.
When a landowner donates a permanent conservation easement to a land trust, the landowner may deduct the value of the easement from federal and state income taxes. The value of an easement is the difference between the FAIR MARKET VALUE of the land without the restriction and the fair MARKET VALUE after the restriction. If the value of the parcel exceeds $5000.00, the value of the conservation easement must be computed by a certified APPRAISER. The landowner can deduct up to 30 percent of the ADJUSTED GROSS INCOME over a period of six years until the value of the easement is exhausted, if the property has been held for investment purposes for more than twelve months.
The organization that holds the easement has the right to enter and inspect the property and is legally obligated to assure that the property is in compliance with the terms of the easement.
Similar to conservation easements, preservation easements protect against undesirable development or indirect deterioration. Preservation easements may provide the most effective legal tool for the protection of privately owned historic properties. Such easements are usually expressly created and incorporated into formal preservation easement deeds. Preservation easements can prohibit such actions as alteration of the structure's significant features, changes in the usage of the building and land, or subdivision and topographic changes to the property. The property continues on the tax rolls at its current use designation rather than its value if developed, thereby giving the property owner a certain tax benefits.
The same standards are used as in conservation easements to determine the qualified tax DEDUCTION. The DONOR is entitled to a charitable contribution deduction in the amount of the fair market value of the donated interest. However, an easement to preserve a historic structure must protect a structure or area listed in the National Register or located in a National Register district and certified by the Secretary of the Interior as being of historic significance to the district. The donation of an easement over an historically important land area includes land that is either independently significant and meets National Register criteria for evaluation or is adjacent to a property listed individually in the National Register of Historic Places in a case where the physical or environmental features of the land area contribute to the historic or cultural integrity of the property.
The definition of a historically important land area includes structures or land area within a registered historic district, except buildings that cannot reasonably be considered as contributing to the significance of the district. To qualify as a preservation easement the donation must be protected in perpetuity. Because of this point, rights of mortgagers must be carefully set out in the easement to avoid loss of the easement in the event of FORECLOSURE.
Uses of Easements
Once an easement is created, the owner of the easement has the right and the duty to maintain the easement for its purpose unless otherwise agreed between the owner of the easement and the owner of the underlying property. The owner of the easement can make repairs and improvements to the easement, provided that those repairs or improvements do not interfere in the use and enjoyment of the easement by the owner of the property through which the easement exists.
When the title is transferred, the easement typically remains with the property. This case is known as an easement appurtenant. This type of easement ldquo;runs with the landrdquo; which means that if the property is bought or sold, it is bought or sold with the easement in place. The easement essentially becomes part of the legal description.
If a parcel of property with an easement across it is sub-divided into smaller lots and sold to different people, and the geography is such that each of the smaller lots can benefit from the easement, then each will usually be permitted to use the easement.
Easement in Gross
Traditionally, easements in gross were easements that could not be transferred and were not tied to a particular piece of land. A person could grant an easement across a residence to a neighbor, but this type of easement would not continue with the new neighbor if the neighbor holding the easement sold the property. Today, courts typically refer to these types of easements as ldquo;personalrdquo; easements. Nevertheless, an easement that began as personal may be transferable, particularly if it is a commercial easement, such as a utility easement.
Termination of Easements
Unlike other types of interests in land, easements may be terminated by ABANDONMENT under certain circumstances. Simply stating a desire to abandon the easement is not be enough. Words alone are legally insufficient to constitute abandonment. However, if the easement holder intends to abandon an easement and also takes actions which manifest that intent, that is sufficient to show abandonment of the easement, and it can be terminated. One action that qualifies as manifesting intent is non-use of the easement for an extended period of time, despite the holder of the easement's having had an extended period of access to the easement.
Holding Our Ground: Protecting America's Farms and Farmland. T. Daniels and D. Bowers, Island Press, 1997.
Pennsylvania Land Trust Handbook. Thomas A. Coughlin, Chesapeake Bay Foundation, 1991.
Preserving Family Lands: Essential Tax Strategies for the Landowner. S. J. Small, Landowner Planning Center, 1992.
Property. Jesse Dukeminier and James E. Krier, [no publisher given], 1998.
Saving the Forests for the Trees and Other Values. Laurie A. Wayburn, The Newsletter of Land Conservation Law. Vol. 4, No. 5, 1994.
.The Conservation Easement Handbook. J. Diehl and T. Barnett, eds., Land Trust Alliance and Trust For Public Land, 1988.
American Farmland Trust
1920 N Street NW, Suite 400
Washington, DC 20036 USA
Phone: (202) 659-5170
Land Trust Alliance
1319 F St. NW, Suite 501
Washington, DC 20004 USA
Phone: (202) 638-4725
Trust for Public Land
116 New Montgomery St.,4th Floor
San Francisco, CA 94105 USA
Phone: (415) 495-4014
Foreclosure (Encyclopedia of Everyday Law)
FORECLOSURE is the LEGAL RIGHT of a MORTGAGE holder or other third-party LIEN holder to gain ownership of the property and/or the right to sell the property and use the proceeds to pay off the mortgage if the mortgage or lien is in DEFAULT. It is a concept that has existed for centuries.
Initially, the law had it that a mortgage default resulted in the automatic ownership of the property by the holder of the mortgage (sometimes referred to as the mortgagee). But the law developed over the years so as to allow mortgagors time to pay off mortgages before their property was taken away. This process of taking away the mortgagor's property because of default is what constitutes foreclosure.
Today, numerous state laws and regulations govern foreclosure to protect both the mortgagor and the holder of the mortgage from unfairness and FRAUD. In the United States, although states have their own variations, the basic premises of foreclosure law remain the same.
Types of Foreclosure
The mortgage holder can usually initiate foreclosure anytime after a default on the mortgage. Within the United States, there exist several types of foreclosure. Two are widely used, with the rest being possibilities only in a few states.
The most important type of foreclosure is foreclosure by judicial sale. This is available in every state and is the required method in many. It involves the sale of the mortgaged property done under the supervision of a court, with the proceeds going first to satisfy the mortgage, and then to satisfy other lien holders, and finally to the mortgagor. Because it is a legal action, all the proper parties must be notified of the foreclosure, and there will be both pleadings and some sort of judicial decision, usually after a short trial.
The second type of foreclosure, foreclosure by power of sale, involves the sale of the property by the mortgage holder not through the supervision of a court. Where it is available, foreclosure by power of sale is generally a more expedient way of foreclosing on a property than foreclosure by judicial sale. The majority of states allow this method of foreclosure. Again, proceeds from the sale go first to the mortgage holder, then to other lien holders, and finally to the mortgagor.
Other types of foreclosure are only available in limited places and are therefore considered minor methods of foreclosure. Strict foreclosure is one example. Under strict foreclosure, when a mortgagor defaults, a court orders the mortgagor to pay the mortgage within a certain period of time. If the mortgagor fails, the mortgage holder automatically gains title, with no obligation to sell the property. Strict foreclosure was the original method of foreclosure, but today it is only available in New Hampshire and Vermont.
The concept of acceleration is used to determine the amount owed under foreclosure. Acceleration allows the mortgage holder the right when the mortgagor defaults on the mortgage to declare the entire debt due and payable. In other words, if a mortgage is taken out on property for $10,000 with monthly payments required, and the mortgagor fails to make the monthly payments, the mortgage holder can demand the mortgagor make good on the entire $10,000 of the mortgage.
Virtually all mortgages today have acceleration clauses. However, they are not imposed by STATUTE, so if a mortgage does not have an acceleration clause, the mortgage holder has no choice but to either wait to foreclose until all of the payments come due or convince a court to divide up parts of the property and sell them in order to pay the INSTALLMENT that is due. Alternatively, the court may order the property sold subject to the mortgage, with the proceeds from the sale going to the payments owed the mortgage holder.
Foreclosure by Judicial Sale
Foreclosure by judicial sale requires the mortgage holder to proceed carefully in order to ensure that all affected parties are included in the court case, so the purchaser of the foreclosed property receives valid title to the property.
Parties and Omissions
A mortgage holder bringing a suit for foreclosure in court must join any "necessary" parties to the case. To understand what a necessary party is, it must be realized that the purpose of a foreclosure sale is to sell the property as it was when the mortgage was first taken out. Anyone who acquired an interest in the property after the mortgage was taken out must be dealt with in the court case before the property can be sold.
Necessary parties include parties who acquired easements, liens, or leases after the mortgage being foreclosed was executed. They can be added, or "joined" to the case as parties without their consent. The intent is to terminate their interest in the property. If a party is not joined, then their interest in the property is not affected by the foreclosure, and the purchaser does not acquire an interest in the property fee of their rights.
For example, if party A takes out a mortgage from party B and then takes out a second mortgage from party C, and party B decides to foreclose on the property and sell the property to party D at foreclosure, party B must extinguish the interest of party C to sell the property to party D. Otherwise party C can enforce their mortgage on party D.
The other type of party involved in a foreclosure case is called a "proper" party. A proper party is a party that is useful, but not necessary, to a foreclosure case. An example would be a party who had an interest in the property before the mortgage was executed. Since this party would not be affected by the foreclosure, the individual is considered a voluntary party to a case and normally cannot be included in the case without consenting to it. However, often courts will require these parties to be joined anyway to the case to clarify their status with respect to the mortgage being foreclosed upon.
The procedure for a judicial sale varies from state to state, but generally calls for a court appointed official or a public official such as the sheriff to conduct the actual sale of the foreclosed property. The mortgage holder can bid for the mortgaged property.
If a lien holder who acquired the lien after the mortgage was executed (also known as a junior lien holder) is not named as a party in the foreclosure, the individual can either foreclose the lien subject to the mortgage sold at foreclosure or redeem the lien and acquire the property by paying the purchaser the mortgage debt. In the case of a omitted junior lien holder, the purchaser of the property has the option of paying the lien holder outright for their interest in the property, or reforeclosing on the original mortgage to eliminate the junior lien holder, - in which case there would be another foreclosure sale.
When the foreclosure sale is not enough to satisfy the amount of the mortgage, the mortgage holder may bring a deficiency judgment against the mortgagor to make up the difference. For example, a mortgage holder of a $10,000 mortgage, who only receives $8,000 in a foreclosure sale, may sue the mortgagor for the remainder of the amount due under the mortgage.
Deficiency judgments are tempered in many jurisdictions by "fair value" legislation. This requires the deficiency to be calculated using the difference between the mortgage debt and the fair value of the real estate. In the above example, a court in a fair value JURISDICTION might determine that the fair value of the property was $9,000. In that case, the mortgage holder could only obtain a deficiency judgment of $1,000.
Foreclosure By Power of Sale
Foreclosure by the power of sale, where law allows it, usually saves time and money over foreclosure by judicial sale. It accomplishes the same thing as a judicial sale. However, there are also some difficulties associated with this method of foreclosure.
Availability and Disadvantages
Today, 29 states (Alabama, Alaska, Arizona, California, Colorado, the District of Columbia, Georgia, Hawaii, Idaho, Maine, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Missouri, Montana, Nevada, New Hampshire, North Carolina, Oregon, Rhode Island, South Dakota, Tennessee, Texas, Utah, Washington, West Virginia and Wyoming) allow foreclosure by the power of sale.
However, foreclosure by the power of sale is often subject to JUDICIAL REVIEW at a later date because there are issues about title that must be resolved by the court. These would include actual defects in the DEED, and the priority of various lien holders and lessees on the property. In addition, in many jurisdictions the mortgage holder is prohibited from seeking a deficiency judgment if the holder chooses to sell the property through extra-judicial means. Also, the mortgage form must generally allow for power of sale and cannot be in the form of an absolute deed for a foreclosure by the power of sale to take place.
Deed of Trust
In many jurisdictions, a DEED OF TRUST is required in order to conduct a foreclosure by the power of sale. A deed of trust conveys the property from the mortgage holder to the TRUSTEE, who holds the property in trust for the mortgage holder. In the instance of foreclosure, the trustee, not the mortgage holder, conducts the sale of the mortgaged property. The trustee is generally instructed by the mortgage holder to foreclose on the mortgage and is under no obligation to determine whether this foreclosure is justified.
A deed of trust and trustee supervised foreclosure allows the mortgage holder to bid for the foreclosed property, provided the trustee and the mortgage holder are not closely associated. Otherwise, a mortgage holder cannot bid for the mortgaged property when the foreclosure is by power of sale.
Foreclosure by power of sale requires notice of the sale to interested parties. Generally speaking, this is done by taking out an advertisement in a local newspaper in the jurisdiction in which the property is located. Many states also require notice be given to the mortgagor.
This procedure has resulted in some constitutional controversy. It has been argued in several cases that foreclosure by power of sale legislation fails to comply with the notice and HEARING requirements of the Fourteenth Amendment of the U. S. Constitution. Courts have consistently rejected this theory when it comes to private foreclosure actions with no public official conducting the foreclosure sale, ruling that there is no state action necessary to invoke the terms of the Fourteenth Amendment. However, there have been rulings indicating that if the mortgage holder is a government entity or if a public official conducts the foreclosure sale, the Fourteenth Amendment might be invoked and stricter notice requirements might apply. The CASE LAW on this issue is so far unsettled.
Federal Laws Affecting Foreclosure
While the Fourteenth Amendment has a debatable nexus to foreclosure actions, at least two federal laws clearly apply to foreclosure actions
The filing of any BANKRUPTCY action automatically stays a foreclosure proceeding, regardless of type. At that point, whether the stay will be lifted depends on whether the mortgagor has equity in the mortgaged property. If the bankruptcy has been filed under a Chapter 11 petition, the bankruptcy court may "terminate, annul, modify or condition such stay" for cause, including the lack of adequate protection of an interest in property of the mortgage holder, or if the mortgagor does not have equity in the property and the property is not necessary for an effective reorganization.
If it has been filed as a straight bankruptcy petition, asking for discharge of all debts, the mortgage holder will be allowed to foreclose if the bankrupt DEBTOR has no equity in the property. If there is equity in the property, the property can be sold by the bankruptcy court.
Soldier and Sailors Relief Act
The Soldiers and Sailors Relief Act of 1940 gives special protection to mortgagors on active duty in the armed forces for mortgage loans executed prior to when they went into service. The Act provides that a service person can apply to a court to set aside a DEFAULT JUDGMENT leading to a foreclosure action. Because of this provision, a mortgage holder initiating a foreclosure action against a mortgagor who fails to answer the foreclosure complaint must file an AFFIDAVIT with the court stating the mortgagor is not on active duty in the armed services.
If the mortgagor is in the armed services, the individual must be present or represented at the foreclosure hearing, meaning foreclosure by power of sale is not available. If a court finds that the mortgagor's ability to meet the terms of the mortgage has been affected by their service in the armed forces, they can stay the foreclosure action as long as the person is in the service.
STATUTORY redemption allows the mortgagor to redeem the mortgage even after foreclosure sale. About one-half the states have statutory redemption laws. Generally, these laws give anywhere from six months to a year for the mortgagor to redeem the mortgage by payment of the foreclosure sale price plus a statutory rate of interest to the sale purchaser. Junior lien holders also have a right to redeem under these statutes, in order of their priority, though not until the period for the mortgagor to redeem runs out. As a rule, the mortgagor can retain possession of their property during this statutory redemption period.
"The Constitutionality of Texas Nonjudicial Foreclosure: Protecting Subordinate Property Interests From Deprivation Without Notice" Krock, Kenneth M., Houston Law Review, Fall 1995.
How To Save Your Home From Foreclosure. RJM Marketing, 1998.
Land Transactions and Finance. Nelson, Grant, and Dale Whitman, West Group, 1998.
Real Estate Finance in a Nutshell. Bruce, Jon W., West Group, 1997.
Federal Home Loan Mortgage Corporation (Freddie Mac)
8200 Jones Branch Drive
McLean, VA 22102-3110 USA
Phone: (703) 903-2000
Primary Contact: Leland C. Brendsel, Chairman
Federal National Mortgage Association (Fannie Mae)
3900 Wisconsin Avenue, NW
Washington, DC 20016-2892 USA
Phone: (202) 752-7000
Primary Contact: Primary Contact, Franklin Raines, Chairman
Mortgage Bankers Association of America (MBAA)
1919 Pennsylvania Avenue, NW.
Washington, DC 20006-3438 USA
Phone: (202) 557-2700
Primary Contact: John Courson, Chairman
Homeowner's Liability/Safety (Encyclopedia of Everyday Law)
Premises liability involves the responsibility of property owners to maintain safe conditions for people coming on or about the property. Homeowners can be and often are held liable for injuries which occur on their property. If a person slips, trips, or falls as a result of a dangerous or hazardous condition, the property owner may be fully responsible. Property owners are generally held accountable for falls as a result of water, ice, or snow, as well as abrupt changes in flooring, poor lighting, or a hidden hazard, such as a gap or hard to see hole in the ground. Several categories of persons to whom a property owner may be liable exist, and the duties of protection owed to each group are specific.
Where a homeowner, by express or implied invitation, induces or leads others to come upon the premises for any lawful purpose, a duty to exercise ordinary care arises to keep the premises safe. The invitation may be express, implied from known and customary use of portions of the premises, or inferred from conduct actually known to the homeowner. Workers or contractors are typically considered invitees.
A licensee is a person who has no contractual relation with the owner of the premises but is permitted, expressly or implicitly, to go on the premises. A social guest at a residence is normally considered a licensee. The homeowner is liable to a licensee only for willful or wanton injury. It is usually willful or wanton not to exercise ordinary care to prevent injuring a licensee who is actually known to be, or is reasonably expected to be, within the range of a dangerous act or condition.
Surprising to many homeowners is the fact that a duty is also owed to those without permission to be on the premises. A trespasser is a person who enters the premises of another without express or implied permission of the owner, for the trespasser's own benefit or amusement. The duty of the owner to a trespasser is not to prepare pitfalls or traps for the trespasser nor to injure the trespasser purposely. Once the owner is aware of the trespasser's presence or can reasonably anticipate such presence from the circumstances, (EVIDENCE of skateboarders in an unfinished swimming pool would fall into this category) then the owner has a duty to exercise ordinary care to avoid injuring the trespasser.
Homeowner's Insurance policies cover this form of legal liability in the event that anyone suffers an injury while on the insured property. Certain actions of the policyholder, which occur away from the insured property, may also be covered. Even if a house is under construction and has no contents to be protected, the homeowner should obtain liability insurance to protect against claims of workers and even trespassers.
When a homeowner purchases liability insurance, part of the insurance company's obligation is to provide a defense in the event of a lawsuit. Even though the insurance company selects the lawyer and must approve the payment of all legal fees and other expenses of the lawsuit, the lawyer represents the policyholder. Under most types of liability insurance, the insurance company has the contractual right to settle or defend the case as it sees fit. The homeowner has an opportunity to express opinion, but the company typically has no obligation to obtain the policyholder's consent or approval.
A suit against a homeowner may involve several different claims, some of which may be covered by the liability insurance policy and some of which may not be covered. The insurance company is obligated to provide a defense for any claim, which could be covered, but the company may not be obligated to pay the damages for certain types of claims. Since liability policies typically do not provide coverage for intentional acts, there may be a question as to whether the policyholder acted intentionally. Negligent or accidental acts are generally covered, however, papers filed in court might ALLEGE both negligent and intentional actions. In such a situation, the insurance company may send the homeowner a Reservation of Rights letter, a notice that the company is paying for the defense for the claim but is not agreeing that it is required to pay for any and all losses under the terms of the policy.
Limitations and exclusions can alter the provisions of coverage in a policy. A limitation is an exception to the general scope of coverage, applicable only under certain circumstances or for a specified period of time. An exclusion is a broader exception which often rules out coverage for such cases as intentional acts, when the policy covers damages due to negligent acts.
Insurance companies and policyholders have contractual obligations which must be satisfied to ensure resolution of claims. Insurance policies list specific things a policyholder must do in order to perfect a claim once a loss has taken place. These duties are known as contract conditions. Policies typically require an insured to give prompt notice of any loss or the time and place of an accident or injury. Liability claims require the policyholder to give the insurance company copies of any notices or legal papers received.
The insurance company may ultimately refuse to pay part or all of a claim. The insurance company may take the position that the loss is not covered by the policy, perhaps because it was the result of some intentional act. Or the insurance company may allege that the policyholder took some type of action that rendered the policy void. Because insurance policies are contracts and open to interpretation by the courts, policyholders may be able to use the legal system to reverse such decisions. If an insured homeowner opts to consult an attorney to pursue such remedies, the chosen attorney ought to be one other than the one hired by the insurance company to represent the homeowner.
In addition to considering the welfare of those in the home and visitors to the home, safety precautions can reduce potential liability for homeowner's and in some cases attention to these issues may even lower the cost of homeowner's insurance.
Smoke Alarms and Fires
Fire kills more Americans than all natural disasters combined and over 80 percent of all fire deaths occur in residences. Direct property loss due to fires in the United States is estimated at $8.6 billion per year. Cooking and smoking are the leading causes of residential fires, followed by heating fixtures. A smoke alarm is a battery operated or electrically connected device that senses the presence of visible or invisible particles produced by combustion and is designed to sound an alarm within the room or suite within which it is located. There are two types of household smoke alarms in common use: ionization and photoelectric smoke alarms. An ionization alarm uses a small amount of radioactive material to ionize air in the sensing chamber. As a result, the air chamber becomes conductive, permitting current to flow between two charged electrodes. When smoke particles enter the chamber, the conductivity of the chamber air decreases. When this reduction in conductivity is reduced to a predetermined level, the alarm is set off. Most smoke alarms in use are this type. A photoelectric smoke alarm consists of a light emitting diode and a light sensitive sensor in the sensing chamber. The presence of suspended smoke particles in the chamber scatters the light beam. This scattered light is detected and sets off the alarm. Smoke alarms should be maintained in accordance with the manufacturers' instructions. Occasional light vacuuming will keep the air vents clean. Long life smoke alarms have been designed to use lithium batteries where the battery life is predicted to last 10 years with the normal low battery drain of ionization smoke alarms. The smoke alarms are still designed to provide a low battery audible signal as the battery charge is reduced to a level that may make the smoke alarm inoperable. Although these batteries are designed to last 10 years, ongoing testing and maintenance is required as per manufacturers' instructions.
Furnace, Fireplace, and Chimney Maintenance
Carbon monoxide is an odorless, colorless gas that interferes with the delivery of oxygen in the blood to the rest of the body. This gas can impede coordination, worsen cardiovascular conditions, and produce fatigue, headache, weakness, confusion, disorientation, nausea, and dizziness. High levels result in death. The symptoms are sometimes confused with the flu or food poisoning. Fetuses, infants, elderly, and people with heart and respiratory illnesses are particularly at high risk for the adverse health effects of carbon monoxide. An estimated 1,000 people die each year as a result of carbon monoxide poisoning and thousands of others end up in hospital emergency rooms. Carbon monoxide is produced by the incomplete combustion of carbon-containing fuels including coal, wood, charcoal, natural gas, and fuel oil. It can be emitted by combustion sources such as unvented kerosene and gas space heaters, furnaces, wood stoves, gas stoves, fireplaces and water heaters, automobile exhaust from attached garages, and tobacco smoke. Problems can arise as a result of improper installation, maintenance, or inadequate ventilation.
Chimneys blocked by birds' or squirrels' nests can cause deadly carbon monoxide gas to enter a home. This danger can be lessened by having the chimney professionally cleaned each year. A carbon-monoxide alarm will provide added protection, but such alarms are not a replacement for proper use and maintenance of fuel-burning appliances. Proper placement of a carbon monoxide detector is important. Because victims of carbon monoxide poisoning will slip deeper into unconsciousness as their condition worsens, a loud alarm is necessary to wake them. Additional detectors on every level and in every bedroom of a home provide extra protection. Homeowners should not install carbon monoxide detectors directly above or beside fuel-burning appliances, as appliances may emit a small amount of carbon monoxide upon start-up. A detector should not be placed within fifteen feet of heating or cooking appliances or in or near very humid areas such as bathrooms. Carbon monoxide rises with warmer air temperatures and so mounting the device on or near the ceiling is often recommended.
Drowning is the second leading cause of unintentional injury-related deaths to children ages 14 and under. A temporary lapse in supervision is a common factor in most drownings and near-drownings. Child drownings can happen in a matter of secondsn the time it takes to answer the phone. There is often no splashing to warn of trouble. Children can drown in small quantities of water and are at risk in their own homes from wading pools, bathtubs, buckets, diaper pails, and toilets as well as swimming pools, spas, and hot tubs. Pool and spa owners can take practical steps to make their pool and spa less dangerous and reduce their potential liability.
All doors which give access to a swimming pool should be equipped with an audible alarm which sounds when the door and/or screen are opened. The alarm should have an automatic reset feature. The alarm can be equipped with manual means, such as touchpads or switches, to temporarily deactivate the alarm for a single opening of the door from either direction. This arrangement allows adults to pass through without setting off the alarm. Such deactivation should last for no more than 15 seconds. The deactivation touchpads or switches should be located at least 54 inches above the threshold of the door.
A non-climbable, five-foot fence that separates the pool/spa from the residence should be installed. Openings should be no more than four inches wide so children cannot squeeze through the spaces. A fence or barrier completely surrounding the pool can prevent many drowning accidents. The area adjacent to the outside of the fence must be free of objects such as chairs, tables, and playground equipment that children could use to climb over the fence. Other safety measures can include:
- Self-closing and self-latching gates and doors leading to the pool should have latches above a child's reach. Gates should open outward.
- Pool safety covers can be installed. Power operated covers are the safest and easiest to use.
- A telephone can be installed near the pool. Emergency numbers as well as the address of the property should be posted near the phone so that it is visible to callers.
- Constant supervision of swimmers of all ages is the most effective means of drowning prevention.
Wiring Systems and General Maintenance
The improper use of extension cords can cause shocks, fires, and other electrical hazards, which is another area of potential danger and liability for homeowners. Electrical cords and wiring systems should be inspected on a periodic basis. General maintenance, not only for electrical devices, but for other items and conditions which may be unsafe or dangerous, is helpful to prevent potential liability.
A Glossary of Insurance, Development and Planning Terms. Davidson, Michael, American Planning Association, 1997.
The Legal Edge for Homeowners, Buyers, and Renters. Bryant, Michel J., Renaissance Books, 1999.
Environmental Health Center
1025 Conn. Ave., NW, Suite 1200
Washington, DC 20036 USA
Phone: (202) 293-2270
National Safety Council
1121 Spring Lake Drive
Itasca, IL 60143 USA
Phone: (630) 285-1121
Fax: (630) 285-1315
National Swimming Pool Foundation
PO Box 495
Merrick, NY 11566 USA
Phone: (516) 623-3447
Fax: (516) 867-2139
U. S. Fire Administration
16825 S. Seton Ave
Emmitsburg, MD 21727 USA
Phone: (301) 447-1000
Housing Discrimination (Encyclopedia of Everyday Law)
Title VIII of the CIVIL RIGHTS Act of 1968, as amended in 1988, also known as the Fair Housing Act, and the Civil Rights Act of 1866 prohibit DISCRIMINATION in a wide array of real estate practices, including housing sale and rental, provision of homeowner's insurance, and MORTGAGE lending.
The Fair Housing Act
The Fair Housing Act identifies seven classes protected by the law: race, color, national origin, religion, sex, familial status, and DISABILITY. State and local laws often extend these protected classes to include such characteristics as sexual preference, age, and even student status. The Fair Housing Act is a federal law, which covers most housing in the United States. In some circumstances, the Act exempts owner-occupied buildings with no more than four units, single-family housing sold or rented without the use of a broker, and housing operated by organizations and private clubs that limit OCCUPANCY to members. For purposes of the Fair Housing Act, sexual discrimination includes SEXUAL HARASSMENT which is defined as deliberate or repeated unsolicited verbal comments, gestures, or physical contact that creates an offensive environment and sexual favors sought in return for housing. With regard to familial status, families are defined as at least one child under the age of eighteen living with at least one parent or appointed GUARDIAN. It also includes pregnant women and those in the ADOPTION process.
The Civil Rights Act
The provisions of the Civil Rights Act of 1866 are extremely broad. Section 1981 protects the right of all persons to make and enforce contracts free from racial discrimination. Section 1982 protects the rights of citizens to INHERIT, purchase, LEASE, sell, hold and convey real and PERSONAL PROPERTY. The act only covers racial discrimination, however, and section 1982 only protects United States citizens.
Anti-Discrimination Provisions for Sales and Rentals
No one may take any of the following actions based on race, color, national origin, religion, sex, familial status or disability:
- Refuse to rent or sell housing
- Refuse to negotiate for housing
- Make housing unavailable
- Deny a dwelling
- Set different terms, conditions or privileges for saleor rental of a dwelling
- Provide different housing services or facilities
- Falsely deny that housing is available for inspection,sale, or rental
- For profit, persuade owners to sell or rent (blockbusting)
- Deny anyone access to or membership in a facility orservice (such as a multiple listing service) related to the sale or rental of housing
Anti-Discrimination Provisions for Mortgage Lending
No one may take any of the following actions based on race, color, national origin, religion, sex, familial status or disability
- Refuse to make a mortgage loan
- Refuse to provide information regarding loans
- Impose different terms or conditions on a loan, such asdifferent interest rates, points, or fees
- Discriminate in appraising property
- Refuse to purchase a loan
- Set different terms or conditions for purchasing a loan
Additionally, it is illegal for anyone to threaten, coerce, intimidate, or interfere with anyone exercising a fair housing right or assisting others who exercise that right. It is also unlawful to advertise or make any statement that indicates a limitation or preference based on race, color, national origin, religion, sex, familial status, or disability. This prohibition against discriminatory advertising applies to single-family and owner-occupied housing that is otherwise exempt from the Fair Housing Act.
Because persons with disabilities face negative stereotypes and prejudice that limit them from housing options along with physical barriers, federal and local governments have amended fair housing laws to include persons with disabilities as a protected class. The broadest protections originate from the Federal Fair Housing Act Amendments of 1988 and Section 504 of the Rehabilitation Act of 1973.
Disability can encompass either a physical or mental disability. Disability can include hearing, mobility and visual impairments, chronic alcoholism, chronic mental illness, AIDS, AIDS Related Complex, and mental retardation, or it can be any other condition that substantially limits one or more major life activities. However, housing need not be made available to a person who is a direct threat to the health or safety of others or who currently uses illegal drugs. If a person either has a disability or is regarded as having a disability, a LANDLORD may not refuse to allow the tenant to make reasonable modifications to the dwelling or common use areas at the tenant's expense. The landlord also must make reasonable accommodations in rules, policies, practices, or services if necessary for the disabled person to use the housing. These actions includes the permitting of assistive animals and the designation of disabled parking spaces.
Newly constructed, multi-family housing of four or more units require at least one building entrance to have an accessible route, public and common areas readily accessible to and usable by people with disabilities, and doors sufficiently wide for use by persons in wheelchairs. Accessibility guidelines are issued by HUD to provide technical assistance in meeting the design requirements.
A reasonable modification is a structural or other physical change to the unit or housing structure to provide a person with a disability physical access. A common example is a ramp to a building's entrance. It is the responsibility of the consumer to make an accommodation or modification request. A landlord should not be expected to predict or anticipate a person's needs. Accommodation or modification letters should be in written form to document the request.
According to Fair Housing laws, "reasonable" means that the action requested by the individual with the disability does not cause an undue financial or administrative burden to the housing provider, does not cause a basic change in the nature of the housing programs available, will not cause harm or damage to others, and is technologically possible. An accommodation or modification request will be denied if it is not reasonable according to the above standards.
Under fair housing and civil rights laws, landlords can request verification from a medical professional or professional service provider (such as a social worker) that indicates a tenant requires a reasonable accommodation or modification. For a modification, a landlord may ask to inspect or review site plans and demand that they are completed in a workmanlike or professional manner. Aesthetics is not a defense in denying a modification request. While a modification or accommodation request only requires a minimal disclosure of disability (to identify oneself as protected under the law), disclosure may hasten the request process. However, it is not required.
It is an illegal inquiry for a landlord, leasing or sales agent to ask a tenant the following questions:
- What is your disability?
- What is the nature of your disability?
- How severe is your disability?
- How was your disability acquired?
- What medications do you take?
- Can you live independently?
- Do you have AIDS?
- Why do you need this reasonable accommodation or modification?
- Are you a fire hazard?
In buildings that have an elevator and four or more units, public and common areas must be accessible to persons with disabilities. This means that doors and hallways must be wide enough for wheelchairs. Additionally, all units must have an accessible route into and through the unit, accessible light switches, electrical outlets, thermostats and other environmental controls, reinforced bathroom walls to allow later installation of grab bars, and kitchens and bathrooms that can be used by people in wheelchairs. These requirements are federal minimum standards only and do not replace any more stringent standards in State or local law.
Unless a building or community qualifies as housing for older persons, it may not discriminate based on familial status. That is, it may not discriminate against families in which one or more children under 18 live with a parent, a person who has legal CUSTODY of the child or children, or the designee of the parent or legal custodian, with the parent or custodian's written permission. Familial status protection also applies to pregnant women and anyone securing legal custody of a child under 18.
Housing for older persons is exempt from the prohibition against familial status discrimination if the Housing and Urban Development (HUD) Secretary has determined that it is specifically designed for and occupied by elderly persons under a Federal, State or local government program, or it is occupied solely by persons who are 62 or older, or it houses at least one person who is 55 or older in at least 80 percent of the occupied units, and adheres to a policy that demonstrates an intent to house persons who are 55 or older.
Individuals with complaints of discrimination can have HUD investigate to determine whether there is reasonable cause to believe the Fair Housing Act has been violated. A one-year STATUTE OF LIMITATIONS exists after an alleged violation for filing a complaint with HUD. HUD will notify the alleged violator of the complaint and permit that person or entity to submit an answer. HUD will try to reach an agreement through CONCILIATION, but if HUD has reasonable cause to believe that a conciliation agreement is breached, HUD will recommend that the Attorney General file suit.
State and local agencies also exist to enforce fair housing laws. HUD may refer complaints to those agencies for investigation. HUD may also authorize the attorney general to go to court to seek temporary or preliminary relief, pending the outcome of a complaint, if irreparable harm is likely to occur without HUD's intervention. If HUD finds reasonable cause to believe that discrimination occurred, the matter will go to an administrative hearing at which HUD attorneys litigate the case on behalf of the complainant. Alternately, complainants can hire an attorney. An Administrative Law Judge (ALA) will consider the EVIDENCE and if ALA decides that discrimination occurred, the respondent can be ordered to pay damages, including actual damages, and damages for humiliation, pain and suffering. The respondent may also be order to make the housing available, pay attorney's fees, and pay fines to the Federal Government.
The matter can also proceed to Federal District Court with private COUNSEL where the court may order relief, which could include PUNITIVE DAMAGES. The STATUTE of limitations in federal court is two years from the date of an alleged violation. The Attorney General may file a suit in a Federal District Court if there is reasonable cause to believe a pattern or practice of housing discrimination is occurring.
Only certain kinds of discrimination are covered by fair housing laws. Landlords are not required by law to rent to any tenant who applies for a property. Landlords can select tenants based on objective business criteria, such as the applicant's ability to pay the rent and take care of the property. Landlords can lawfully discriminate against tenants with bad credit histories or low incomes. Landlords must be consistent in the screening, treat all tenants in the same manner, and should document any legitimate business reason for not renting to a prospective tenant.
State and Local Laws
Along with the federal laws against housing discrimination, a few states and cities jurisdictions provide additional protection under local laws.
CALIFORNIA: Fair Employment and Housing Act, which includes the California Fair Housing Law often called the Rumford Fair Housing Act, is the primary state law banning discrimination in housing accommodations because of race, color, religion, sex, marital status, national origin, ancestry, disability, and familial status. The Civil Rights Act of 1959 provides for the right to be free from discrimination in public accommodations. This Act has been interpreted by the courts to prohibit arbitrary discrimination by business establishments on any basis other than economic status such as level of income.
BERKELEY: Berkeley Municipal Code prohibits discrimination against families with children, discrimination based on sexual orientation, and discrimination based on the fact potential applicants have of having AIDS or associated conditions.
OAKLAND: Oakland ORDINANCE prohibits discrimination against families with children and against persons who have the medical condition known as AIDS or ARC or AIDS related conditions (ARC).
RICHMOND: Richmond Ordinance prohibits discrimination in housing against people with AIDS and related conditions.
SAN FRANCISCO: San Francisco prohibits discrimination on the basis of race, color, creed, religion, national origin, ancestry, age, sex, sexual orientation, gender identity, domestic partner status, marital status, disability or AIDS/HIV status, familial status, source of income, weight and height.
NEW YORK: New York State law adds marital status and age to the list of protected categories. New York City law adds sexual orientation, lawful occupation, and citizenship status.
Fair Housing Compliance Guide. Daniels, Rhonda, Home Builder Press, 1995.
Fair Housing Litigation Handbook. Zuckerman, Howard, Wiley, John & Sons, Inc., April 1993.
Arizona Center for Disability Law
3839 N. Third Street, Suite 209
Phoenix, AZ 85012
Phone: (602) 274-6287
Fax: (602) 274-6779
Cleveland Tenants Organization
2530 Superior Avenue
Cleveland, OH 44115
Phone: (216) 621-0540
Primary Contact: Mike Foley
Metropolitan St. Louis Equal Housing Opportunity Council
1027 South Vandeventer Ave.nue, Fourth Floor
St. Louis, MO 63110
Phone: (314) 534-5800
Fax: (314) 534-2551
South Bay Fair Housing Project
2 W. Santa Clara Street, 8th Floor
San Jose, CA 95109
Phone: (408) 283-3700
U. S. Department of Housing and Urban Development
451 7th Street S.W.
Washington, DC 20410
Phone: (202) 708-1112
Primary Contact: Mykl Asanti
Insurance (Homeowner's And Renter's) (Encyclopedia of Everyday Law)
Insurance is a legally binding contract, typically referred to as an insurance policy. The contractual relationship is between the insurance company and the person or entity buying the policy, the policyholder. The policyholder makes payments to the insurance company, which can be monthly, quarterly or yearly. The insurance company agrees to pay for certain types of losses under certain conditions, which are set forth in the policy.
One requirement for insurance is that the policy-holder needs to possess an insurable interest in the subject of the insurance. A policyholder either owning or renting property is said to have such an interest in the property. Insurance policies compensate an insured party for the cost of monetary damages in the event of economic loss or in the event of damages leveled against a policyholder who is liable for damages to another. Liability insurance pays damages up to the dollar amount of liability coverage purchased and protects the personal assets of the policyholder in the event of a judgement against the policyholder for damages.
Homeowner's insurance includes both property and liability coverage, many of which cover activities away from and not in any way connected with a policyholder's residence. Homeowner's insurance covers repair or rebuilding of a house which is damaged by natural causes such as fire, fallen trees, or heavy winds. It also covers acts of theft and VANDALISM. This type of policy also typically pays for replacement of the personal items inside a residence if those items are damaged by the same causes that damage the house or if such items are stolen.
Homeowner's policies also cover legal liability in the event that anyone suffers an injury while on the insured property. Certain actions of the policyholder, which occur away from the insured property may also be covered. Even if a house is under construction and has no contents to be protected, the homeowner can insure the structure against damages for fire and liability.
TITLE INSURANCE provides coverage to a homeowner if it is discovered in the future that there was a defect in the title and the homeowner did not get clear title to the property. Coverage is provided if a dispute arises that was not discovered during the TITLE SEARCH. The title insurance will pay attorney fees, as well as all other costs in defending the title. The lender will usually require title insurance until the loan is paid in full.
MORTGAGE insurance is only for the benefit of the lender. It protects the lender against the risk of nonpayment by the buyer. It is generally required by a lender to protect it against DEFAULT by a borrower who makes a low DOWN PAYMENT. If the borrower defaults, the mortgage insurer pays the lender its money and then seeks to recover from the borrower or forecloses on the property.
Mortgage Life Insurance
Mortgage life insurance is not the same as mortgage insurance. It is simply a life insurance policy that pays off the mortgage balance if the policyholder dies.
Although renting a property is not subject to the same liability as owning a property, renters can still benefit from property insurance. Renter's insurance typically covers the cost of replacing personal items that are stolen, damaged, or destroyed. Additionally, renters, like owners, have potential liability to anyone injured on the occupied property. Renter's insurance policies are similar to homeowners' insurance policies but have no coverage for buildings or structures. Although renter's insurance is not usually required by the terms of some leases, tenants may be required to have insurance to cover their liability exposure if someone is injured on the premises, or if damages occur from items owned by the renter, such as waterbeds.
Exclusions and Limitations
Limitations and exclusions can alter the provisions of coverage in a policy. A limitation is an exception to the general scope of coverage, applicable only under certain circumstances or for a specified period of time. An exclusion is a broader exception which often rules out coverage for such things as intentional acts, when the policy covers damages due to negligent acts.
Rates and Applications
State insurance laws dictate the manner in which insurance companies may conduct marketing, underwriting (determining which policyholders or risks to accept or reject for coverage), and rate activities. Insurance underwriting decisions must be based on reasons that are related in some way to the risk to be insured. Some states have laws limiting an insurance company's ability to cancel or discontinue coverage once a policy has been issued. In all states, it is illegal to refuse insurance on the basis of race, color, sex, religion, national origin or ancestry. In many states this list is expanded to include marital status, age, occupation, language, sexual orientation, physical or mental impairment, or the geographic area a person resides. An individual has a LEGAL RIGHT to be promptly informed of the reasons for a refusal to issue an insurance policy.
Insurance companies determine the premium, or payment to charge, based on numerous circumstances known as rating factors. These rating factors must be reasonably related to the risk being insured. The rates and rating factors for insurance must be filed with the state insurance regulatory agency for each state where the insurance is to be sold. In certain states, the rates must get regulatory approval before they can be used.
Generally, once a policy is issued, it can be cancelled only for failure to make premium payments or for misrepresentation or FRAUD by the policyholder. State laws typically limit items an insurance company can include in the cancellation provisions of its policies. Most property and liability policies are issued for a stated policy term. The limitation on cancellation applies only during the policy term. Insurance companies can decide to discontinue or not renew these policies at the end of the term for any reason except a reason that would be prohibited by law. In most states, an insurance company is required to provide the policyholder with written notice if it intends not to renew a renter's or homeowner's policy.
A policyholder may cancel an insurance policy at any time by giving notice to the insurance company. Some clauses include financial penalties for early cancellation by the policyholder. Most property and liability policies require what is known as a short rate PENALTY when a policyholder requests cancellation, which gives the insurance company the ability to retain a larger, disproportionate amount of the premium.
A cancellation notice usually must be sent to the policyholder several days prior to the effective date of cancellation. State law usually requires at least 10 days advance written notice, with a reinstatement period. Once the time period has expired, reinstatement after termination of coverage is discretionary by the insurance company.
Payment of Claims
Insurance companies and policyholders have contractual obligations which must be satisfied to ensure resolution of claims. Insurance policies list specific things a policyholder must do in order to perfect a claim once a loss has taken place. These duties are known as contract conditions. Policies typically require an insured to give prompt notice of any loss, information about what property was damaged or the time and place of an accident or injury. In the case of property damage, the policyholder will be required to take steps to protect the property from further destruction. In the event of theft, policies usually require a police report. Liability claims require the policyholder to give the insurance company copies of any notices or legal papers received.
The insurance company may deny or refuse to pay a claim. The insurance company may take the position that the loss is not covered by the policy or that the claimant was not insured under the policy. In some cases, the insurance company may conclude that the policyholder took some type of action that rendered the policy void. Because insurance policies are contracts which are open to interpretation by the courts, policyholders may be able to use the legal system to reverse such decisions.
Good Faith Payment of Claims
All insurance policies are contracts and all contracts contain an implied obligation of GOOD FAITH and fair dealing. When a claim is presented, this implied obligation means that an insurance company must make a thorough, good faith investigation of the claim. This investigation includes an obligation for the insurance company to review potential reasons and circumstances that could justify the claim.
If an insurance company breaches this implied covenant of good faith and fair dealing and refuses to pay a claim that it legally should be pay or denies a claim without adequate investigation, the policy-holder may have a BAD FAITH claim against the company. If the company is found to have acted in bad faith in its handling of a claim, the policyholder would be entitled to damages. If the conduct by the insurance company is outrageous and totally unconscionable, the insured also may be entitled to recover PUNITIVE DAMAGES.
No federal regulatory agency exists to monitor insurance companies and so companies selling insurance are regulated by individual state agencies. These state regulatory groups are designed to assure that insurance companies operating in the state have the financial ability to pay claims. The state regulatory agency is typically empowered to take various actions against an insurance company that fails to conduct its business in a financially sound manner, including actions to prohibit the company from doing business in the state.
Most states have laws regarding the conduct of insurance business to ensure lawfulness and fairness to applicants for insurance and policyholders. State agencies can investigate complaints by consumers and SANCTION companies with unfair practices. State agencies also review policy forms used by insurance companies and rates charged for various types of insurance for compliance with state law.
Unlike car insurance, there is no law that requires a homeowner to have insurance. However, banks and lending institutions usually require that a borrower carry such insurance to protect the interest of the lender until the loan is repaid. A mortgage or DEED OF TRUST typically requires enough insurance to cover the repair or rebuilding of the house in the event it is destroyed. Mortgages can be structured so that the lending company pays the insurance directly, and the cost is taken out of the homeowner's monthly mortgage payment.
A Glossary of Insurance, Development and Planning Terms. Davidson, Michael, American Planning Association, 1997.
The Legal Edge for Homeowners, Buyers, and Renters. Bryant, Michel J., Renaissance Books, 1999.
Alabama Department of Insurance
201 Monroe Street, Suite 1700, PO Box 303351
Montgomery, AL 36104
Phone: (334) 269-3550
Fax: (334) 241-4192
Alaska Department of Community and Economic Development
3601 C Street, Suite 1324
Anchorage, AK 99503
Phone: (907) 269-7900
Fax: (907) 269-7910
Alaska Department of Community and Economic Development
P.O. Box 110805
Juneau, AK 99811
Phone: (907) 465-2515
Fax: (907) 465-3422
Arizona Department of Insurance
2910 North 44th Street, Suite 210
Phoenix, AZ 85018
Phone: (602) 912-8444
Fax: (602) 954-7008
Arkansas Department of Insurance
1200 West 3rd Street
Little Rock, AR 72201
Phone: (501) 371-2640
Fax: (501) 371-2749
California Department of Insurance
300 Capitol Mall, Suite 1500
Sacramento, CA 95814
Phone: (916) 492-3500
Fax: (415) 538-4010
Colorado Division of Insurance
1560 Broadway, Suite 850
Denver, CO 80202
Phone: (303) 894-7499, ext. 4311
Fax: (303) 894-7455
Connecticut Department of Insurance
P.O. Box 816
Hartford, CT 06142
Phone: (860) 297-3984
Delaware Department of Insurance
841 Silver Lake Blvd., Rodney Building
Dover, DE 19904
Phone: (302) 739-4251
Fax: (302) 739-5280
District of Columbia Department of Insurance and Securities Regulation
810 First Street, NW, Suite 701
Washington, DC 20002
Phone: (202) 727-8000
Fax: (202) 535-1196
Florida Department of Insurance
Plaza Level Eleven
Tallahassee, FL 32399
Phone: (850) 922-3130
Georgia Insurance and Fire Safety
Two Martin Luther King, Jr. Drive
Atlanta, GA 30334
Phone: (404) 656-2070
Fax: (404) 651-8719
State of Hawaii, Department of Commerce and Consumer Affairs
250 South King Street, 5th Floor
Honolulu, HI 96813
Phone: (808) 586-2790
Fax: (808) 586-2806
State of Idaho Department of Insurance
700 West State Street, P.O. Box 83720
Boise, ID 83720
Phone: (208) 334-4250
Fax: (208) 334-4398
Illinois Department of Insurance
100 West Randolph Street, Suite 15-100
Chicago, IL 60601
Phone: (312) 814-2420
Fax: (312) 814-5435
Illinois Department of Insurance
320 West Washington Street
Springfield, IL 62767
Phone: (217) 782-4515
Fax: (217) 782-5020
Indiana Department of Insurance
311 W. Washington St., Ste 300
Indianapolis, IN 46204
Phone: (317) 232-2385
Fax: (317) 232-5251
State of Iowa Division of Insurance
330 Maple Street
Des Moines, IA 50319
Phone: (515) 281-5705
Fax: (515) 281-3059
Kansas Insurance Division
420 SW 9th Street
Topeka, KS 66612
Phone: (785) 296-7801
Fax: (785) 296-2283
Kentucky Department of Insurance
215 West Main Street
Frankfort, KY 40601
Phone: (502) 564-3630
Fax: (502) 564-1650
Louisiana Department of Insurance
950 North Fifth Street
Baton Rouge, LA 70804
Phone: (225) 343-4834
Fax: (254) 342-5900
Maine Bureau of Insurance
34 State House Station
Augusta, ME 04333
Phone: (207) 624-8475
Fax: (207) 624-8599
Maryland Insurance Administration
525 St. Paul Place
Baltimore, MD 21202
Phone: (410) 468-2000
Fax: (410) 468-2020
Massachusetts Division of Insurance
South Station, 5th Floor
Boston, MA 02110
Phone: (617) 521-7794
Fax: (617) 521-7772
Michigan Office of Financial and Insurance Services
611 West Ottawa Street, 2nd Floor North, P.O. Box 30220
Lansing, MI 48933
Phone: (517) 373-0220
Fax: (517) 335-4978
Minnesota Department of Commerce
133 East 7th Street
St. Paul, MN 55101
Phone: (651) 296-2488
Fax: (651) 296-4328
Mississippi Department of Insurance
P.O. Box 79
Jackson, MS 39205
Phone: (601) 359-3569
Fax: (601) 359-2474
Missouri Department of Insurance
301 West High Street, Room 630
Jefferson City, MO 65102
Phone: (573) 751-4126
Fax: (573) 751-1165
Montana Department of Insurance
840 Helena Avenue, P.O. Box 4009
Helena, MT 59601
Phone: (406) 444-2040
Fax: (406) 444-3497
Nebraska Department of Insurance
941 O Street, Suite 400
Lincoln, NE 68508
Phone: (402) 471-2201
Fax: (402) 471-4610
Nevada Division of Insurance
1665 Hot Springs Road, #152
Carson City, NV 89706
Phone: (775) 687-7690
Fax: (775) 687-3937
New Hampshire Department of Insurance
56 Old Suncook Road
Concord, NH 03301
Phone: (603) 271-2261
Fax: (603) 271-1406
New Jersey Department of Banking and Insurance
20 West State Street
Trenton, NJ 08625
Phone: (609) 633-7667
Fax: (609) 984-5273
New Mexico Department of Insurance
P.O. Box 1269
Santa Fe, NM 87504
Phone: (505) 827-4601
Fax: (505) 827-4734
New York State Insurance Department
Agency Bldg. 1-ESP, Empire State Plaza , NY 12257
Phone: (518) 474-6600
Fax: (518) 474-6630
Consumer Services Bureau NYS Insurance Department
65 Court Street #7
Buffalo, NY 14202
Phone: (716) 847-7618
Fax: (716) 847-7925
North Carolina Department of Insurance
430 North Salisbury Street
Raleigh, NC 27611
Phone: (919) 733-7349
Fax: (919) 733-6495
North Dakota Insurance Department
600 East Blvd. Avenue, 5th Floor
Bismarck, ND 58505
Phone: (701) 328-2440
Fax: (701) 328-4880
Ohio Department of Insurance
2100 Stella Court
Columbus, OH 43215
Phone: (614) 644-3378
Fax: (614) 752-0740
Oklahoma Insurance Department
3814 North Santa Fe
Oklahoma City, OK 73118
Phone: (405) 521-2828
Fax: (405) 521-6652
Oregon Insurance Division
350 Winter Street, NE, Room 440-2
Salem, OR 97310
Phone: (503) 947-7984
Fax: (503) 378-4351
Pennsylvania Insurance Department
1321 Strawberry Square, 13th Floor
Harrisburg, PA 17120
Phone: (717) 787-2317
Rhode Island Insurance Division
233 Richmond Street, Suite 233
Providence, RI 02903
Phone: (401) 222-2223
Fax: (401) 222-5475
South Carolina Department of Insurance
1612 Marion Street
Columbia, SC 29201
Phone: (803) 737-6180
Fax: (803) 737-6231
South Dakota Division of Insurance
118 West Capitol
Pierre, SD 57501
Phone: (605) 773-3563
Fax: (605) 773-5369
Tennessee Department of Commerce and Insurance
500 James Robertson Parkway, 5th Floor
Nashville, TN 37243
Phone: (615) 741-2241
Fax: (615) 532-6934
Texas Department of Insurance
333 Guadalupe Street
Austin, TX 78701
Phone: (512) 463-6169
Fax: (512) 475-2005
Utah Department of Insurance
State Office Building Rm 3110
Salt Lake City, UT 84114
Phone: (801) 538-3805
Fax: (801) 538-3829
Vermont Department of Banking, Insurance, Securities and Health Care Administration
89 Main Street, Drawer 20
Montpelier, VT 05620
Phone: (802) 828-3302
Fax: (802) 828-3301
Virginia Bureau of Insurance
P.O. Box 1157
Richmond, VT 23218
Phone: (804) 371-9967
Washington Office of the Commissioner of Insurance
14th Avenue and Water Street
Olympia, WA 98504
Phone: (360) 753-3613
Fax: (360) 586-3535
West Virginia Department of Insurance
1124 Smith St.
Charleston, WV 25301
Phone: (304) 558-3354
Fax: (304) 558-0412
Wisconsin Office of the Commissioner of Insurance
121 East Wilson Street, P.O. Box 7873
Madison, WI 53707
Phone: (608) 266-0103
Fax: (608) 266-9935
Wyoming Department of Insurance
122 West 25th Street, 3rd Floor East
Cheyenne, WY 82002
Phone: (307) 777-7401
Fax: (307) 777-5895
Landlord/Tenant Rights (Encyclopedia of Everyday Law)
Landlordenant law governs the rental of property. The basis of the legal relationship between a LANDLORD AND TENANT is derived from both contract and property law. The tenant has a temporary possessory interest in the premises. The rental premises may be land, a house, a building, or an apartment. The length of the TENANCY may be for a specific period of time, for an indefinite but renewable period of time (this would include a monthoonth tenancy). During the term of the tenancy, the tenant has the right to possess the premises, and to restrict the access of others. A landlordenant contract may alter and define rights allowed under law. Landlordtenant contracts are typically known as rental agreements or leases. What provisions may be contained in a LEASE is normally regulated by state law. Standard in all leases is the implied covenant of quiet enjoyment which gives the tenant the right to possess the rental premises without interference from or disturbance by others, including the LANDLORD. Another standard lease provision for residential rental units is the WARRANTY of HABITABILITY. If the landlord causes the rental to become uninhabitable or fails to make repairs so that the premises are uninhabitable, a constructive EVICTION may occur. This may allow the tenant to withhold rent, repair the problem and deduct the cost from the rent, or recover damages. Federal law prohibits DISCRIMINATION in housing and the rental market. Landlords are also typically restricted by state laws from evicting tenants in retaliation of action the tenant may have taken to enforce a provision of the lease, a housing code compliance, or other applicable law.
Leases and Rental Agreements
A lease or rental agreement is a contract between a landlord and a tenant which gives the tenant the right to use and occupy rental property for a certain period of time. When a tenant turns over the right or the partial right to use and occupy rental property to a roommate or subtenant, that agreement is sometimes referred to as a sublease. A lease can be a verbal agreement or a written agreement. At the end of the lease, use and possession of rental property must be returned to the landlord. A lease requires the tenant to pay a specified amount of money each month in return for the use and enjoyment of the premises. This payment is called rent.
A landlord is the owner the rental property or the agent of the owner of rental property. Often real estate management companies will act as landlords for private or CORPORATE entities. The landlord allows a tenant to use and occupy the rental property in exchange for payment of rent.
A tenant is the person or entity that has the right to occupy rental property in accordance with a rental agreement or lease. In addition to provisions set out in the lease, state law typically outlines tenant rights with its own Landlord and Tenant law.
If roommates are listed on the lease, each roommate is considered a tenant and each one will be individually fully responsible for the total amount of the rent due to the landlord, unless the lease specifically states otherwise. If only one roommate is listed on the lease and the others have not signed the lease, only the roommate listed is considered the tenant. The others are considered subtenants. Only roommates who sign the lease are responsible for the full amount of the rent to the landlord. The roommates who signed may have some separate claims against their non-signing, non-paying roommates, but such claims would typically be covered by contract law rather than landlord tenant law.
Standard Lease Provisions
Most lease have standard provisions which set forth landlord and tenant rights and obligations. Such provisions include:
- The names of the parties
- A description of the rental property
- The term, or length, of the lease
- The amount of rent
- The due date of the rent
- The amount of the security deposit
- Whether the tenant is subject to late fees
- Maintenance responsibilities
- Options to renew
- Termination notice requirements
- When the landlord may enter the rental property
- Rules concerning pets
While leases or rental agreements do not have to be in writing to be valid, the terms of the agreement will be easier to enforce and the responsibilities of the parties will be clearer if the rental agreement is in writing.
Some clauses that appear in a written lease or rental agreement are, by the nature of the clause, unenforceable. These include agreements that the landlord can repossess property if the tenant falls behind in the rent, agreements allowing the landlord to enter the rental unit any time, without notice, agreements that tenants will pay for all damages to the rental unit without regard to fault, and agreements that court action entitles the landlord to more money than can be order by the court.
Landlords have the responsibility to maintain residential rental property and repair any defects. Under most state law, there is an IMPLIED WARRANTY of habitability, which is defined as the minimum standard for decent, safe, sanitary housing suitable for human habitation. This warranty applies throughout the lease. Most jurisdictions that ordinances or laws that require owners of real property to maintain the property and make any necessary repairs. These codes typically require that any rental property offered by a landlord must meet the minimum standards established in the codes. The landlord's obligation is to deliver the rental property to the tenant in compliance with the housing codes and to maintain compliance with the housing codes throughout the time the tenant has possession of the rental property.
The responsibilities of tenants are typically spelled out in the lease; however, basic responsibilities include timely payment of rent, reasonable use and care of the premises, and a duty not to disturb or disrupt surrounding neighbors with excessive noise.
A security deposit is an amount of money given by the tenant to the landlord to ensure that reimbursement is available for any damage done to the premises by the tenant. Some leases require additional deposits for pets or waterbeds. State laws require the return of the security deposit within a certain period of time. If the entire security deposit is not returned, the landlord should provide the tenant with a written explanation regarding any deductions made from the security deposit. Some states have laws with steep financial penalties for landlords that fail to return the security deposit within the amount of time allowed by law. A security deposit typically cannot be credited toward the payment of the final month's rent. Some state laws require the landlord to keep the security deposit in a separate interest bearing account.
Eviction and Unlawful Detainer
Eviction is a legal process by which a landlord may terminate a tenant's right to remain on the rental property. Ultimately, the tenant may be forcibly removed from the property by the sheriff or other law enforcement official; however, doing so requires a formal court order. A tenant can be evicted for numerous reasons, but typically evictions take place where the tenant is in violation of one or more provisions of the lease agreement. Valid reasons for eviction may include:
- Failure to pay rent on time
- Harboring pets or persons not authorized to reside at the premises under the lease
- Illegal or criminal activity taking place within the rental premises
A landlord cannot forcibly evict a tenant without proper notice. The landlord must provide written notice to the tenant of the DEFAULT. If the tenant does not fix the default within a reasonable amount of time, the landlord must file for a formal court eviction proceeding. Courts commonly refer to eviction actions as "forcible entry and detainer" or "unlawful detainer" actions. The legal theory is that the landlord alleges the tenant unlawfully continues to detain or have use and possession of the rental property, and the landlord seeks the assistance of the court to have the tenant removed. The first step is for the landlord to file a complaint or petition with the local court and pay a small filing fee. The tenant must be served with the court documents. An UNLAWFUL DETAINER action is typically a proceeding which, unlike many civil trials, can move quickly through a court system; however, in some jurisdictions, tenants are entitled upon request to a jury trial in which the jury determines whether the tenant should be evicted.
In most jurisdictions, once the landlord has filed the required paperwork, a court HEARING on the unlawful DETAINER will be set. In some jurisdictions, the tenant is required to file a written notice or answer. In those jurisdictions, if the answer is not filed, the landlord will prevail without a hearing ever being set. In jurisdictions that do require a hearing, if the tenant does not attend the scheduled court hearing, the landlord will prevail. If the tenant does attend, the court will determine whether the tenant should be evicted and will take into account any defenses the tenant may have. The landlord may be given a monetary judgment for the amount of money owed for rent, attorney fees and costs, and may be granted a WRIT for possession of the premises. A writ will typically issue a few days after the judgement, allowing the tenant the opportunity to move voluntarily. Once the writ is issued, it may be executed by local law enforcement officials (never the landlord directly) so that the tenant is removed from the rental property and then the landlord is given possession.
Each state has its own requirements for the notice of eviction and the method the tenant receives the notice. If the landlord did not provide sufficient notice prior to filing a court action or did not correctly deliver or serve the notice to the tenant, the tenant may have a defense to the eviction, even if the tenant has not paid the required rent. If this argument is successful, the landlord will usually be forced to redo the procedure from the beginning.
Acceptance of Partial Rent
If the landlord accepts partial rent from the tenant, knowing that the tenant is in noncompliance with the lease agreement, either because of nonpayment of rent or due to some other reason, the right to evict the tenant during that rent period is usually waived. The landlord could have the tenant sign a paper indicating that partial acceptance on the part of the landlord waives any rights the tenant would otherwise have to claim partial payment. Such waivers are valid in many jurisdictions.
Failure of the Landlord to Maintain the Premises
A tenant seeking to use this theory as a defense to eviction should provide written notice to the landlord that there is a defect in the property. The notice to the landlord typically must provide the landlord with a reasonable amount of time to accomplish the repairs. If the landlord is nonresponsive, the tenant may then hire and pay for a professional to make the necessary repairs, then deduct the cost of the repairs from the rent paid to the landlord. Some states restrict this repair and deduct tactic and provide that the cost of the repair must not be more than one month's rent.
This type of eviction happens when the landlord takes an action against a tenant for acting as an tenant activist. If the landlord seeks to evict the tenant for informing government agencies of code violations or requesting that the landlord make repairs and maintain the rental property in fit and habitable condition, a retaliatory eviction claim may be a valid defense to an eviction action.
Constructive eviction occurs when residential rental property is in an uninhabitable condition. When rental property is uninhabitable, it is said to create circumstances under which the tenant has been deprived of the full use and possession of the rental property and has therefore been "evicted." The theory of constructive eviction is that since the tenant did not received what was contracted for, the tenant is not obligated to continue paying rent to the landlord. In order for such a claim to be effective, the tenant should give the landlord written notice of reasons for the constructive eviction and provide the landlord with a reasonable amount of time to correct the problems. If the landlord does not fix the problems within a reasonable amount of time, the tenant may leave the rental property and not be responsible for payment of rent which would have otherwise been due.
In 1968 the federal government passed the Fair Housing Act which has since been modified and adopted by states and various localities. The Fair Housing Act as amended prohibits discrimination in housing and related transactions on the basis of race, color, national origin, sex, religion, DISABILITY, and familial status (the presence or anticipated presence of children under 18 in a home). The Act covers discrimination in all types of housing-related transactions, including rentals and leases.
State and Local Laws
Most states and some jurisdictions have Landlord Tenant Acts specific to the area. These laws vary significantly and state laws will govern the provisions of any lease.
ALASKA: Except for units renting for more than $2,000 per month, security deposits and prepaid rents may not total more than two months' rent. Security deposits and prepaid rent must be deposited by the landlord or the property manager in a trust account in a bank or SAVINGS AND LOAN ASSOCIATION or with a licensed ESCROW agent. Exceptions can be made in rural Alaska, if there is no bank in town, and it would be impractical to bank the money. A trust account can be any separate savings or checking account labeled "trust account" and used only for deposits and prepaid rents. There is no requirement that the trust account earn interest. However, if the rental property is managed by a property manager, the interest in the trust account belongs to the tenant, under the terms of the real estate license law, unless the tenant agrees in writing that the interest is payable to the property owner. A seven-day written notice is required to terminate a tenancy for nonpayment of rent. The tenant can cure by paying the rent within seven days. The notice must tell tenants that they have the choice of paying or moving.
ARIZONA: Security deposits cannot exceed one and a half times the monthly rent. To bring an eviction action, the landlord must first serve a five-day notice to vacate the premises in person, by certified mail, or at the premises. If notice is sent by certified or registered mail, the tenant is assumed to have received the notice on the date the tenant signs for it or five calendar days after it was mailed, which ever occurs first. State law mandates that the trial be held no sooner than three and no later than six business days after the complaint was filed. If the complaint is for non-payment of rent and the landlord accepts payment of all rent due and reasonable late fees identified in the written agreement, attorney fees and court costs, the rental agreement is reinstated and the case will be automatically be dismissed. An eviction order is issued no earlier than the sixth calendar day after judgment if the tenant has not moved out of the rental unit. The order instructs the sheriff or constable to evict the tenant. Lockouts and utility shutoffs by the landlord prior to 24 hours after the issuance of a writ are unlawful. Unlawful lockouts and utility shutoffs may entitle the tenant two months' free rent. Security deposits must be returned within 14 business days from the time the tenant vacates the premises.
ARKANSAS: Tenants have few rights under Arkansas law. Rental units can lawfully be rented in "as is" condition. The landlord does not have to provide additional maintenance to the dwelling. Security deposits cannot be in excess of two months rent. Security deposits must be returned within 30 days. A landlord may withhold the entire amount of the security deposit for damages or unpaid rent. There are two types of eviction procedures: "unlawful detainer" (a civil eviction) and "failure to vacate" (a criminal eviction). "Unlawful detainer" requires three days written notice to vacate after which the landlord can file a complaint. If the tenant does not object in writing to the eviction within five days, the sheriff can removed the tenant from the rental property. "Failure to vacate" method of eviction, requires ten days written notice. This method of eviction applies only to non-payment of rent. Tenants who do not leave the premises within ten days can be charged with a criminal MISDEMEANOR and could be fined $25 a day for each day the tenant remains on the rental property. A landlord is not permitted to change the locks, move furniture out, turn off utilities or use any other "self-help" method of eviction; however, all property left in the dwelling by the tenant will be considered abandoned and may be disposed of by the landlord as the landlord sees fit and without recourse by the tenant. All property left on the premises by the tenant is subjected to a LIEN in favor of the landlord for the payment of all sums agreed to be paid by the tenant.
CALIFORNIA: The landlord must pay five percent interest on all security deposits and deposits must be returned to the tenant within 21 days after the tenant vacates the rental property. State law requires a 60 day notice for any rent increases which, alone or cumulatively, raise a tenant's rent by more than 10 percent within a 12 month period. This law covers both rent controlled and non-rent controlled units. Lockouts are illegal, and the landlord can be liable for $100 a day in penalties on an illegal lockout. There is a three day notice requirement. Tenants must answer a complaint for forcible detainer within five days or lose the right to trial.
SAN FRANCISCO: Under the San Francisco Housing Code, landlords must provide heat capable of maintaining a room temperature of 68 degrees (at a point three feet above the floor). This level of heat must be provided for at least thirteen hours, specifically from 5:00 AM to 11:00 AM and 3:00 PM to 10:00 PM.
COLORADO: There is a three day requirement on non-payment of rent notices. Colorado law provides that in certain situations a landlord may have a lien on a tenant's PERSONAL PROPERTY for rent the tenant owes the landlord. In certain circumstances, the landlord may enter the tenant's residence at a reasonable time and in a peaceable manner to take possession of the property covered by the lien. Under this law, a landlord can take only certain property of the tenant to pay back rent. A landlord cannot take personal items, cooking utensils, bedding, beds, or clothes; however, the landlord can take such items as stereos, computers, and televisions. If the landlord takes a tenant's property and the tenant doesn't pay money owed to the landlord within 30 days, then the landlord must file a FORECLOSURE action in court. After a complex legal procedure set forth in Colorado law, the landlord may sell the tenant's property to recover the money owed by the tenant. If the landlord sells or otherwise disposes of the tenant's property without properly complying with Colorado law, the tenant is entitled to bring a court action to recover the value of the property or $100 (whichever is greater) and reasonable attorney's fees. The landlord may be liable to the tenant for actual and PUNITIVE DAMAGES if the landlord wrongfully takes the tenant's property. Lockouts by landlords are illegal, but a tenant who is unlawfully locked out could still be arrested for disturbing the peace if an argument with the landlord erupts in the process of re-entry.
CONNECTICUT: By law the temperature of the rental unit must stay above 65 degrees in the winter. The landlord must also keep the rental unit free of rat and roach infestations. No peeling paint or broken windows are allowed. Security deposits must be returned within 30 days from date of move-out. Security deposits must be kept in an escrow account in a Connecticut bank. Security deposit cannot exceed two months rent. This limit is reduced to one month's rent if a tenant is 62 years of age or older.
DELAWARE: Rental agreements for period longer than one year must be in writing. The security deposit may not be more than one month's rent if the rental agreement is for one year or more. A security deposit must be held in a federally insured bank with an office within the State of Delaware. The account must be called a security deposit account and cannot be used in the operation of the business of the landlord. The landlord must disclose to the tenant the location of the security deposit account within 20 days of the receipt of a written request for that information, or the landlord forfeits the security deposit. A landlord may not charge any non-refundable fee as a condition for the tenant living in the rented unit, unless that fee is an optional service fee for actual services rendered to the tenant. Delaware has special provisions whereby a tenant may terminate a rental agreement early by giving the landlord 30 days written notice. These provisions include job transfer in excess of 30 miles, serious illness, admission into a senior citizens facility or retirement home, admission into a subsidized rental unit, military service, and death.
FLORIDA: A landlord may not prohibit waterbeds, unless the local building code bans them. However, renters with waterbeds must carry a "reasonable amount" of liability insurance on the bed payable to the building owner. DEDUCTION notices regarding security deposits must be sent to the tenant within 15 days of move-out; otherwise the landlord loses the right to take any deductions at all. If the landlord has the security deposit in an interest-bearing account, the landlord must pay the tenant either 5% interest or 75% of the account's interest rate.
GEORGIA: Georgia law requires that before the tenant pays a security deposit and moves into the rental unit the landlord must give the tenant a complete list of all existing damages. Georgia law does not require the landlord to place the security deposit in an interest bearing account nor does the law require that any interest that is earned be paid to the tenant. The landlord has 30 days to return the security deposit after the tenant terminates the lease.
HAWAII: To bring an eviction action, the landlord must first serve a five day notice to vacate the premises. This notice can be posted on the rental premises
IDAHO: Idaho law says nothing as to whether the landlord has the right to enter the premises. If the rental agreement does not address the landlord's right to enter the premises, the landlord should notify the tenant as to the necessity of entry, requesting permission to enter in a reasonable manner. Security deposits should be returned within 21 days but in no case later than 30 after the tenant vacates. If a tenant fails to pay rent or violates any term of the rental agreement, the landlord must give the tenant written notice of the violation and provide three days in which the tenant can remedy the problem. The notice informing the tenant of the violation must be delivered to the tenant personally, or a copy of the notice may be left with some person of suitable age and discretion at either the tenant's residence or place of business. If this form of communication proves impossible, the landlord may post the notice in a conspicuous place on the property and a copy must be mailed to the tenant at the address where the property is situated. If a landlord pursues formal LEGAL PROCEEDINGS for the purpose of evicting a tenant due to nonpayment of rent, the trial must be held within 12 days from the time the lawsuit is filed in court.
ILLINOIS: The Illinois Retaliatory Eviction Act prohibits landlords from evicting tenants for complaining to any governmental authority. There is no limit on the amount of security deposit a landlord can require; however, the landlord must pay the tenant interest on the security deposit if it is held for at least six months and there are at least 25 rental units in the complex. The landlord must pay the interest to the tenant or apply the interest as a credit to rent every 12 months. Security deposits must be returned within 45 days of tenant move out. Any security deposit wrongfully withheld by the landlord is subject to double damages. Leases running year-to-year require a 60-day written notice. Evictions require a 10 day notice. Lockouts and utility shutoffs are prohibited.
KANSAS: "Party shack" laws prohibit certain activities in rental unit, including gambling, promoting OBSCENITY, prostitution, or the use or possession of controlled substances. Under these laws, unlawful activities can subject a tenant to eviction. The three-day notice used for non-payment of rent has been narrowly defined as any 72-hour period with additional time requirements when mailed. Security deposits must be returned with 14 days of tenant move out with wrongfully withheld amounts being subject to damages of one and a half times the amount of the security deposit.
MAINE: Evictions require a seven-day notice, and the tenant can cure within the seven days by paying the rent. The tenant can also cure prior to the court case being held by paying all rent, cots and fees due. The notice cannot be served until the tenant is seven days or more behind in rent. It can be served personally. If the tenant owes back rent, the landlord can keep any property left on the premises and may ultimately sell it.
MARYLAND: Tenants can cure by paying the rent owed, plus court costs, up until the time the sheriff arrives to evict the tenant. This is known as the tenant's "right to redeem." The tenant can exercise this right three times within a 12 month period, at which point the landlord no longer has to accept the rent. Security deposits must be returned within 45 days of tenant move out.
MASSACHUSETTS: If there is a security deposit, the landlord must give a written statement of the condition of the rental property to the tenant within ten days after the beginning of the tenancy and must deposit the money in a separate interest bearing account. The landlord must also give the tenant a signed receipt listing the name of the bank and account number where the security deposit is held. If the landlord fails to do so within 30 days, the tenant is entitled to get the security deposit immediately returned. Late charges are not permissible unless the rent is more than 30 days late. Massachusetts has designated Housing Courts with judges specializing in this area. Either party can request eviction cases be transferred to the Housing Court; however, doing so may limit the parties' APPELLATE rights.
MICHIGAN: The landlord must provide a seven-day notice prior to bringing an eviction action. Lockouts, shutting of utilities, and physically moving out tenant possessions are illegal landlord actions, and the tenant may sue the landlord for such acts. State law prohibits the renting of cellars for living purposes. A cellar is defined as having 50% or more of the outside walls below ground level. A basement where more than 50% of the outside walls are above ground can be lawfully rented, but a cellar must meet specific minimum standards before being rented. The only way a cellar can be legally rented is if it has received a variance from the local housing or health department. Security deposits are regulated by the Michigan Security Deposit Act. This law applies to all tenants in the state and to all subtenants and encompasses both verbal and written leases. The total security deposit charged cannot exceed one and a half times the monthly rental rate. The landlord must deposit the security deposit into a regulated financial institution. The name and address of the institution must be given to the tenant upon rental and the landlord may only use the money if a bond is posted with the Secretary of State's Office. Even if a bond is posted, the deposit remains property of the tenant. Landlords must return the security deposit to the tenant within 30 days of the tenant's moving. Landlords may keep the interest earned on security deposits.
ANN ARBOR: It is illegal for the landlord to include a cleaning WAIVER as part of the lease without compensation to the tenant. Ann Arbor City Housing Code prohibits cleaning waivers; however, it does not prohibit agreements between landlord and tenant that provide for the tenant to clean the unit in return for compensation.
NEBRASKA: Evictions require a three-day notice, and tenants must respond to any SUMMONS and complaint in writing. If the tenant does not respond in writing, the landlord can obtain a DEFAULT JUDGMENT. No unit may be rented until it contains safe heating equipment, which heats the entire unit. Security deposits cannot exceed one month's rent unless there is a pet and the landlord requires a pet deposit. The landlord must return security deposits within 14 days after a tenant requests it.
OMAHA: A city code inspector may not come out to a rental unit to inspect unless the tenant has given the landlord a 14 day notice of the problems.
NEW HAMPSHIRE: New Hampshire law requires landlords to provide safe, sanitary housing for tenants. By law, rental properties will not meet this standards if any of the following are present: bugs, mice, or rats, (unless the landlord is conducting a routine inspection and extermination program; internal plumbing that does not work or a back-up of sewage caused by a faulty septic or sewage system; bad wiring, such as exposed wires, the wrong connectors, bad switches or outlets, or other conditions that create a danger of electrical shock or fire; leaking roof or walls; falling plaster from the walls or ceilings; large holes in floors, walls, or ceilings; porches, stairs, or railings are not structurally sound; insufficient water, or broken water heater; leaks in the gas lines; improperly installed heating facilities or heating facilities which cannot safely and adequately heat all livable rooms and bathrooms to an average temperature of at least 65 degrees or if heat is included in the rent, the premises are not actually kept at a minimum average temperature of 65 degrees in all livable rooms.
NEW MEXICO: A landlord cannot charge a tenant more than one month's rent as a deposit on any lease of less than a year. If the lease is for a year or more, the landlord may collect a deposit of more than one month's rent but must pay the tenant current passbook interest on the whole deposit. The landlord has 30 days from the end of the tenancy in which to return the security deposit. Evictions for non-payment require that the landlord give a three-day notice then go to court to file for a "writ of RESTITUTION of property." The landlord may not lock the tenant out or remove tenant property without a court order. If a tenant does not request any type of service to be performed in the residence, the landlord must provide the tenant with a written 24 hour written notice before entering the premises.
NEW YORK: In New York City, landlord-tenant disputes generally fall into two categories: nonpayments, where the tenant has not paid rent, and holdovers, where the landlord alleges the tenant has violated the terms of the lease. These disputes are generally heard in New York City Housing Court which is part of the New York City Civil Court system. If the Housing Court orders an eviction, a 72-hour Notice of Eviction is sent by a city marshal. New York City residents can call the number on the notice to find out what day the marshal has scheduled the eviction. The eviction could take place at any time within the 72 hours.
NORTH CAROLINA: Security deposits cannot be more than two months' rent. Late charges cannot exceed $15 or 5% of the rent payment, whichever is more. Late charges cannot be assessed unless the tenant is at least five days late on the rent. The landlord is required to maintain in good and safe working order and promptly repair all electrical, plumbing, sanitary, heating, ventilating, air conditioning, and other facilities and appliances supplied, but only if the tenant first advises the landlord of needed repairs in writing. If the repairs are emergency ones, the landlord must fix the problem once the landlord becomes aware of the problem, regardless of whether the tenant has given written notification. If the tenant repairs an emergency problem, the landlord must reimburse the tenant, regardless of prior notice. The tenant can agree to perform some or all of the landlord's maintenance duties, but the parties must make an agreement separate from the lease, and the tenant must be compensated.
NORTH DAKOTA: The security deposit cannot exceed the amount of one month's rent or $1,500. This amount includes any extra pet deposits. The landlord must deposit the money in a federally insured interest-bearing savings or passbook account. The landlord may apply the security deposit money and accrued interest upon termination of the lease toward any damages suffered through the NEGLIGENCE of the tenant, unpaid rent, or costs of cleaning and repairs which were the tenant's responsibility. Any tenant property with a total estimated value of no more than $1,500, which has been left for at least 30 days in the vacated premises, becomes the property of the landlord to dispose of or sell, without notice to the tenant. Additionally, expenses for storing or moving the property which exceed proceeds from the sale can be deducted from the security deposit. Security deposits must be returned with 30 days of the termination of the lease or the landlord may be subject to treble damages for amounts wrongfully withheld.
OHIO: To bring an eviction action, the landlord must first serve a three-day notice to vacate the premises in person, by mail, or at the premises. A landlord may enter a tenant's unit only after giving a 24-hour notice, except in case of emergency. Landlords may not enter at an unreasonable time or in an unreasonable manner. Tenants may seek injunctive relief from the courts if landlords abuse their right of access. State law requires landlords to evict tenants when the landlord has information from a law enforcement officer, based on a legal search, that the tenant, the tenant's guest, or a member of the tenant's household is involved in drug activity in connection with the premises. In some areas of the state, landlords may be held liable for repeated drug violations in their properties.
OKLAHOMA: All security deposits must be kept in an escrow account by the landlord. When the lease is terminated, any security deposits may be used to pay the balance of rents due or for repairs to the dwelling; however, the landlord must provide an itemized statement of what is kept and for what the amount is kept delivered to the tenant. The balance of the deposit must be returned within 30 days of the termination date of lease or termination of tenancy if the tenant sends a written demand for the return of the deposit. If the tenant fails to demand in writing the return of the deposit within six months, the deposit becomes the landlord's money.
OREGON: A landlord may evict a tenant based on a 72-hour notice for non-payment of rent, if the tenant fails to pay rent within seven days of its due date. If the tenant fails to pay the rent within the 72 hours, the landlord may immediately file a court eviction proceeding. In calculating the seven-day period, the day the rent is due counts. The landlord may not evict a tenant on 72 hours' notice for non-payment of rent when the only money owed is a late charge. If a written agreement states the landlord can give notice after four days, only four days of default are required. The notice must give the tenant 144 hours to pay the rent in that case. Notices may be served by either personal delivery or by first class mail. Oregon law does require that the landlord return the deposit within 31 days after the tenancy ends.
PENNSYLVANIA: For evictions, notice time should be written in the lease. For verbal leases, the landlord must give 15 days' notice prior to filing for eviction for non-payment of rent. State law allows the tenant to pay the amount of the money judgment up to the time of the scheduled eviction to save the tenancy; however, this money must be paid to the constable not directly to the landlord. Even after a court ordered eviction, tenants have 21 days before the tenant is required to move out. Lockouts and utility shutoffs are not allowed. Security deposits limited to no more than two months' rent as a security deposit in the first year of residence and no more than one month rent thereafter. The landlord has 30 days to return the security deposit and if this is not done, the tenant can collect double the amount that would have been due after any damages are taken into account.
RHODE ISLAND: Evictions require that the landlord send the tenant a five-day notice. An elderly (age 65 or older) tenant may terminate a written lease agreement if entering a residential care/assisted living facility, a nursing facility, or a private or public housing complex designated by the federal government as housing for the elderly. A landlord must give a minimum two-day verbal or written notice when needing to enter a tenant's rental unit. Entry should be during reasonable hours and only for such legitimate business reasons such as inspections, repairs, alterations, supplying necessary services, or showing the unit to potential buyers or renters.
SOUTH CAROLINA: Security deposits must be returned with 30 days of the termination of tenancy. A five-day written notice is required unless the lease provides that no such notice need be given. Lockouts and utility shutoffs are illegal. Once a tenant is served with eviction papers, the tenant has ten days to answer. If the tenant does not answer in court, the landlord can obtain an ejectment order to evict the tenant without further court proceedings.
TENNESSEE: The landlord cannot turn off utilities while a tenant is living in the rental unit, even if the tenant is in default on the lease. Lockouts are not permitted. If the landlord refuses to make repairs within 14 days after a written request from the tenant, the tenant can break the lease and can sue the landlord for damages caused by the landlord's refusal to make repairs. A 30-day notice is required prior to filing for eviction for non-payment of rent unless the lease provides for a waiver of notice.
TEXAS: Texas law requires a three-day notice for eviction for breach of the lease unless the notice provides for a shorter or longer notice period. If utilities are part of the rent payment, the landlord can cut off the utilities but must give a five-day written notice of intent to do so, and the tenant must be at least seven days late in paying the rent. The landlord may legally change the lock on the tenant's door when rent is delinquent but must first give the tenant at least three days advance written notice of intent to change the locks if the rent is not paid. The landlord must also leave a statement attached to the outside of the door explaining where the tenant may acquire a new key. By law, the landlord must give the tenant the key when requested, even if the tenant has not paid rent. The landlord has 30 days to return the security deposit after termination of the lease.
VERMONT: Evictions require a 14-day notice, which may be hand delivered to the tenant. A landlord can enter a rental unit only with 48 hours advanced notice, only 9:00 a.m. and 9:00 p.m., and only to either, inspect the premises, make necessary repairs, or show the unit. Landlords must supply heating facilities capable of safely and adequately heating all habitable rooms. Heating facilities must be able to maintain the heat at the minimum temperature of 65 degrees Fahrenheit when the outside temperature is 15 degrees Fahrenheit. The Code forbids the use of space heaters with a flame that is not properly vented to a chimney or duct leading to the outdoors. If heat is included in the rental charge, it is the landlord's responsibility to provide adequate heat whenever the outside temperature is below 55 degrees Fahrenheit, regardless of the time of year. The Code forbids a landlord to turn off required utilities, "except for such temporary interruption as may be necessary while actual repairs or alterations are in process or during temporary emergencies." Thus, it is illegal for a landlord to shut off a tenant's heat, water, or electricity under most circumstances.
BURLINGTON: People who suffer discrimination in rental units may file a complaint either under the Burlington Housing Discrimination ORDINANCE with the Burlington city attorney's office or under the Vermont Fair Housing Act with the HUMAN RIGHTS Commission. If a tenant complains about problems to a housing inspector, and the inspector determines that the problems are code violations, any attempt by the landlord to evict the tenant within 90 days after the landlord has repaired the problems is presumed to be an act of retaliation. Security deposits can be no more than one month's rent and must be placed into an interest-bearing account, with an interest rate at least equivalent to a current Vermont bank passbook savings account. The tenant is entitled to the interest.
BARRE: Security deposits are limited to one month's rent, and tenants are entitled to the interest.
VIRGINIA: Evictions require a five-day notice, which may be sent with a certificate of mailing or posted on the door by the county sheriff's department. The notice should name each person on the lease and specify the sum due. Until the court date a tenant has the LEGAL RIGHT to avoid eviction by paying the landlord the full amount due (including reasonable attorney's fees and late charges as well as rent). A tenant may exercise this right only once in any 12-month period with the same landlord. The Virginia Residential Landlord and Tenant Act protects tenants from certain types of retaliatory eviction. A tenant otherwise in compliance with the lease cannot be evicted simply for complaining to the landlord about a violation of state law or the county housing code, complaining to County Community Inspections about a serious code violation, organizing or joining a tenants' association, or testifying against the landlord in court.
WASHINGTON: All leases beyond one month must be in writing. Leases of more than one year must also be notarized.
SEATTLE: The Rental Agreement Regulation Ordinance declares that month-to-month rental agreements cannot contain minimum stay requirements, and requires landlords to provide tenants with a summary of landlord-tenant laws. Seattle's Just-Cause Ordinance protects city renters from retaliatory evictions. Additionally, landlords of city tenants are required to give at least 60 days written notice when housing costs are increased by 10% or more in a year.
WISCONSIN: Landlords may not advertise or rent condemned property. Landlords must disclose any uncorrected housing code violations of which they have received notice and must also reveal any other defects which may be a substantial hazard to health or safety, such a structural defects, a lack of hot and cold running water, or serious plumbing or electrical problems. If the heating unit is incapable of maintaining temperature of at least 67 degrees Fahrenheit, this fact must also be disclosed. If the dwelling unit is one of several units, which are not individually metered, the landlord must disclose how utility charges will be allocated among the individual dwelling units. A landlord has the right to inspect, repair, and show the premises at reasonable times. Except for emergency situations, the landlord may only enter after a 12-hour advance. There are no statewide rent controls in Wisconsin. There is no state law limiting amount of a rent increase. Month-to-month tenancy requires a notice of termination at least 28 days prior to the next rent due date. An initial five days notice is required prior to filing eviction proceedings with the tenant having the option to pay and/or cure the default. But on a second default, the landlord can terminate on 14 days notice without giving the tenant an opportunity to pay or cure the default. Holdover tenants can be obligated to pay twice the amount of the rent, prorated on a daily basis, for each day of unlawful occupation of the premises. The landlord must return security deposits within 21 days and may deduct for unpaid rent or physical damages for which the tenant is responsible. State law does not require payment of interest on security deposits.
Guide to Being a Smart Landlord. Edwards, Casey F. and Susanna Craig, Macmillan Publishing, 2000.
How to Negotiate Real Estate Leases: For Landlords and Tenants. Warda, Mark, Sourcebooks, 1998.
Landlording: A Handy Manual for Scrupulous Landlords and Landladies Who Do It Themselves. Robinson, Leigh, ExPress Publishing, 2001.
National Housing Institute
439 Main Street, Suite 311
Orange, NJ 07050 USA
Phone: (973) 678-9060
Fax: (973) 678-8437
The Tenants Union
3902 S. Ferdinand St.
Seattle, WA 98118 USA
Phone: (206) 723-0500
Fax: (206) 725-3527
Neighbor Relations (Encyclopedia of Everyday Law)
Probably as soon as humans shifted from nomadic to agricultural, neighbors have had disputes. Through the centuries, these conflicts have been resolved numerous ways. In early history the resolution was sometimes amicable and other times it was literally a fight to the death. Modern conflict resolution of neighbor disputes is generally not so dangerous as in ancient times. However, the concept that one's home is one's castle is an idea ingrained deeply enough to create strong and sometimes seemingly uncompromising positions when neighbors face off.
Legal disputes in the area of neighbor relations can be unreasonably costly as disputes are typically about rights rather than monetary damages. Attorneys fees can run higher than any potential damage award by a court, and this fact can lead to both parties coming away dissatisfied and financially and emotionally drained. Thus, MEDIATION is often recommended as a means to resolve these types of disputes.
Good neighbors communicate, resolving problems to their mutual benefit. However, conflicts can develop over a number of common issues.
Surveys done at the time of any property purchase, should reflect the boundary lines. Prior to erecting a fence on a boundary line, an updated survey could be ordered which reflects the accurate boundary lines. This may be impossible, due to perhaps the age of the property or the wording of the DEED. (Some older deeds can contain legal descriptions such as "52 feet from the bend in the stream" on a piece of land, which has only a dry riverbed where a stream once existed.) In such a situation, the owner may file a quiet title lawsuit and request the judge determine the boundary lines of the property. This procedure is generally more expensive than a survey due to the legal filing fees. An acceptable alternative is for adjacent property owners to agree on a physical object, such as a fence, which could serve as the boundary line between the properties. Each owner would then sign a quitclaim deed to the other, granting the neighbor ownership to any land on the other side of the line both owners had agreed upon.
If the piece of property in dispute has been used by someone other than the owner for a number of years, the doctrine of adverse possession may apply. State laws vary with respect to time requirements, however, typically, the possession by the non-owner must be open, notorious, and under a claim of right. In some states, the non-owner must also pay the property taxes on the occupied land. A permissive use of property eliminates the ability to claim adverse possession.
Good neighbors should agree to split the cost of the repair of fences or common boundary walls. Local fence ordinances usually regulate height and location and sometimes the material used and appearance. Residents of subdivisions are often subject to even stricter Homeowners' Association restrictions. In residential areas, local rules typically restrict backyard fences to a height of six feet and front yards to a height of four feet. Exceptions exist and a landowner can seek a variance if there is a need for a higher fence. While some jurisdictions have specific aesthetic ZONING rules with respect to fences, as long as a fence complies with local laws it cannot be taken down simply because it is ugly. In fact, unless the property owners agree otherwise, fences on a boundary line belong to both owners when both are using the fence. Both owners are responsible for keeping the fence in good repair, and neither may remove it without the other's permission. In the event that trees hang over the fence, most states agree that the property owner may cut tree limbs and remove roots where they cross over the property line, provided that such pruning will not damage the basic health and welfare of the tree.
Sometimes disputes arise between neighbors when trees belonging to one property owner fall on and damage or destroy adjacent property. In such cases, the tree owner is only responsible for damage if some failure to maintain the tree contributed to the damage. If the damage was solely the result of a thunderstorm or act of God, the tree owner will not be responsible, as the damage could not have been foreseen. If a tree limb appeared precarious and the owner failed to maintain the tree after warnings, the owner may well be responsible for resulting damage when a storm causes the limb to fall. If, however, the tree was well maintained and a storm causes a tree limb to crash into a neighbor's roof, the tree owner is not responsible. If, however, the tree owner allows the tree to grow so that it uproots the fence, it would be considered an ENCROACHMENT onto the adjacent property. In that instance, the tree owner would be required to remove the offending tree. A boundary tree is one planted on the boundary line itself and should not be removed without mutual agreement. Leaves, bean pods, or acorns which fall off and end up on adjacent property are considered a natural occurrence and are the responsibility of the landowner on whose property they ultimately come to rest.
Property owners in every state have the right to cut off branches and roots that stray into their property, in most cases this is the only help that is provided by the law, even when damage from a tree is substantial. A property owner who finds a neighbor's tree encroaching must first warn or give notice to the tree owner prior to commencing work and give the tree owner the chance to correct the problem. If the tree owner does nothing, the tree can still be trimmed. As a general rule a property owner who trims an encroaching tree belonging to a neighbor can trim only up to the boundary line and must obtain permission to enter the tree owner's property, unless the limbs threaten to cause imminent and grave harm. Additionally, the property owner cannot cut the entire tree down and cannot destroy the structural integrity or the cosmetic symmetry and appeal of a tree by improper trimming.
In the old courts of England, the owner of livestock was held strictly liable for any damages to person or property done by the livestock straying onto the property of another. The mere fact that they strayed and damaged crops, other livestock, or PERSONAL PROPERTY was sufficient to hold the owner liable for the injuries inflicted by cattle, sheep, goats, and horses. This strict liability position made sense in the confines of a small island such as England, but in the United States with herds of livestock wandering over vast expanses of land, a different process developed. The legislatures enacted statutes which provided that livestock were free to wander and that the owner was not responsible for damage inflicted by those livestock unless they entered land enclosed by a legal fence. These became known as open range laws. Some years later, certain states reversed the open range laws and required the owners of livestock to fence in their livestock. This position was similar to the COMMON LAW position, only instead of strict liability, the livestock owner could be held liable only upon a showing that the livestock escaped due to the owner's NEGLIGENCE. Dogs or other animals inflicting bites may make their owners both civilly and criminally liable for such behavior. In some jurisdictions, an animal can be declared dangerous by a court and a judge may order the animal be confined or destroyed. If the issue is that the neighbor has too many pets, the neighbor could be in violation of a zoning, health code, or noise ORDINANCE.
Disputes sometimes arise between neighbors about changing views. If a tree entirely on a neighbor's property grows so large that it blocks a property owner's view or even natural sunshine, the best tactic is to discuss the matter with the neighbor. The homeowner probably has no LEGAL RIGHT to get the neighbor to alter the tree unless a local ordinance or Homeowners' Association rule exists regarding such an issue.
Sometimes structural additions or changes ruin views and may potentially damage property values. Local zoning and building departments typically require permits and set rules for any building or structural changes. If the neighbor meets the legal requirements, generally nothing can be done. Homeowners' Associations and CC&Rs may be of some assistance, particularly if the change is unusually hideous and more cosmetic than structural.
Natural water runoff from a neighbor's property due to rain or snow is not actionable. However, natural runoff is uncommon in city areas. Any grading or building which alters the natural runoff and may cause the neighbor to be liable for damages. If a neighbor's home improvement project causes a water line to burst, creating flood or water damage, the neighbor will likely be responsible. Fortunately, most homeowner's insurance policies cover this type of negligence.
Parking is governed by local laws and ordinances and typically enforced by the local municipality. If a car is parking in a no-parking zone, fire lane, or parked unlawfully in any manner, a citizen can simply call the local parking enforcement authorities and have the vehicle ticketed and/or towed. A car parking on private property without permission can be considered abandoned and can be towed away by order of the property owner; however, unless the property owner has some arrangement with the towing company, a charge will likely be assessed at the time of the tow. Broken cars or unsightly recreational vehicles parked on any property may violate a provision of the zoning code or perhaps Homeowner's Association rules. If not, and the vehicle is parked either on a neighbor's property or a public street, not much can be done to remedy the matter other than convincing the neighbor that such items detract from the neighborhood. There must be a written agreement to enforce any agreement for sharing maintenance and/or towing expenses for a shared driveway.
Excessive noise is usually a criminal MISDEMEANOR violation. Police can be called to quiet a noisy event; however, it is difficult to measure damages for any type of civil suit for continued noise violations. It may be possible to appear at the trial for a noise violation and, once the neighbor is found guilty of the violation, ask the judge to order no excessive noise as a condition of the violator's PROBATION.
Homeowner's Associations, health codes, local ordinances, and nuisance laws may prohibit unmaintained yards. Homeowner's Associations sometimes have provisions in which, after adequate notice, the association may hire a landscaper to maintain the property and assess the homeowner.
Although thousands of people work out of their homes, home-based businesses can cause traffic congestion, noise, unwelcome smells, unsightly signage, and general neighborhood upheaval. Local ordinances regulate home businesses and may require specific business licenses. Zoning ordinances may prevent home based businesses in residential areas altogether.
Alternative Dispute Resolutions
Increasingly widespread in recent years, alternative dispute resolution may be helpful in resolving neighborhood disputes. In lieu of costly LITIGATION, parties involved in a dispute may settle their differences through a mediation or ARBITRATION. This is known as alternative dispute resolution, the alternative to litigation and court. Essentially, arbitration differs from mediation in that arbitration uses a neutral third person who makes a decision after HEARING from all sides. A mediator is also a neutral third party, but a mediator assists the parties in reaching an agreement rather than making the decision for the parties involved. Mediation, and arbitration to a degree, give the parties greater control in the outcome of the situation. The parties can also agree upon a framework in which any future disputes may be resolved.
Mediation is an attempt by the parties to resolve a dispute with the aid of a neutral third party known as a mediator. The mediator is often an attorney or retired judge, but the parties may use any mediator. The mediator may offer advice or creative resolutions, but mediation is a non-binding process in which the parties must agree in order to reach some type of resolution. If the mediator is a licensed attorney, mediation proceedings can be fully confidential. In a mediation, the parties are not bound to award only monetary damages as a court might be but instead can fashion a process and a solution especially well suited to the dispute between them.
The Legal Edge for Homeowners, Buyers, and Renters. Bryant, Michel J., Renaissance Books, 1999.
Jordan, Cora. Neighbor Law: Fences, Trees, Boundaries and Noise. Nolo Law, 2001.
Natelson, Robert. Modern Law of Deeds to Real Property. Natelson, Robert, Aspen Law, 1992.
American Arbitration Association
335 Madison Avenue, Floor 10
New York, NY 10017 USA
Phone: (212) 716-5800
Fax: (212) 716-5905
International Centre for Dispute Resolution
1633 Broadway, Floor 10
New York, NY 10019 USA
Phone: (212) 484-4181
Fax: (212) 246-7274
Primary Contact: Luis Martinez, Vice President
3200 North Central Avenue, Suite 2100
Phoenix, AZ 85012 USA
Phone: (602) 734-9300
Fax: (602) 279-3077
Primary Contact: Harry Kaminsky, Vice President
The Tenants Union
3902 S. Ferdinand St.
Seattle, WA 98118 USA
Phone: (206) 723-0500
Fax: (206) 725-3527
Environmental Health Center
1025 Conn. Ave., NW, Suite 1200
Washington, DC 20036 USA
Phone: (202) 293-2270
Renters' Liability (Encyclopedia of Everyday Law)
Premises liability involves the responsibility of property owners to maintain safe conditions for people coming on or about the property. Those responsible for the premises can be held liable for injuries, which occur on the property, even if another person or entity is the lawful owner of that property. If a person slips, trips, or falls as a result of a dangerous or hazardous condition, the renter and property owner may both be responsible in some manner. Several categories of persons to whom property owners and those renting the premises may be liable exist, and the duties of protection owed to each group are different.
Where, by express or implied invitation, a person induces or leads others to come upon a particular premises for any lawful purpose, a duty to exercise ordinary care arises to keep the premises safe. The invitation may be express, implied from known and customary use of portions of the premises, or inferred from conduct actually known. Workers or contractors are typically considered invitees.
A licensee is a person who has no contractual relation with the premises but is permitted, expressly or impliedly, to go on the premises. A social guest at a residence is normally considered a licensee. Liability to a licensee only arises for willful or wanton injury. It is usually willful or wanton not to exercise ordinary care to prevent injuring a licensee who is actually known to be, or is reasonably expected to be, within the range of a dangerous act or condition.
Surprising to many is that a duty is also owed to those without permission to be on the premises. A trespasser is a person who enters the premises of another without express or implied permission, for the trespasser's own benefit or amusement. The duty to a trespasser is not to prepare pitfalls or traps for the trespasser nor to injure the trespasser purposely.
Insurance is a legally binding contract, typically referred to as an insurance policy. The contractual relationship is between the insurance company and the person or entity buying the policy, the policyholder. The policyholder makes payments to the insurance company, which can be monthly, quarterly, or yearly. The insurance company agrees to pay for certain types of losses under certain conditions, which are set forth in the policy.
One requirement for insurance is that the policy-holder needs to possess an insurable interest in the subject of the insurance. A policyholder renting property is said to have such an interest in the property. Insurance policies compensate an insured party for the cost of monetary damages in the event of economic loss or in the event of damages leveled against a policyholder who is liable for damages to another. Liability insurance pays damages up to the dollar amount of liability coverage purchased and protects the personal assets of the policyholder in the event of a judgement against the policyholder for damages. Some renters' policies cover legal liability in the event that anyone suffers an injury while on the insured property. Certain actions of the policyholder, which occur away from the insured property may also be covered.
When a renter purchases liability insurance, part of the insurance company's obligation is to provide a defense in the event of a lawsuit. Even though the insurance company selects the lawyer and must approve the payment of all legal fees and other expenses of the lawsuit, the lawyer represents the policyholder. Under most types of liability insurance, the insurance company has the contractual right to settle or defend the case as it sees fit. The policy owner has an opportunity to provide input, but the company typically has no obligation to obtain the policyholder's consent or approval.
The entity that the renter is leasing from typically has some type of liability insurance also. This may, in some circumstances, cover the renter. Liability suits may involve several different claims, some of which may be covered by the liability insurance policy and some of which may not be covered. The insurance company is obligated to provide a defense for any claim, which could be covered, but the company may not be obligated to pay the damages for certain types of claims. Since liability policies typically do not provide coverage for intentional acts, there may be a factual question as to whether the policyholder acted intentionally. Negligent or accidental acts are generally covered; however, papers filed in court might ALLEGE both negligent and intentional actions. In such a situation, the insurance company may send a Reservation of Rights letter. This is a notice that the company is paying for the defense for the claim but is not agreeing that it is required to pay for any and all losses under the terms of the policy.
Limitations and exclusions can alter the provisions of coverage in a policy. A limitation is an exception to the general scope of coverage, applicable only under certain circumstances or for a specified period of time. An exclusion is a broader exception which often rules out coverage for such things as intentional acts, when the policy covers damages due to negligent acts.
Insurance companies and policyholders have contractual obligations which must be satisfied to ensure resolution of claims. Insurance policies list specific things a policyholder must do in order to perfect a claim once a loss has taken place. These duties are known as contract conditions. Policies typically require an insured to give prompt notice of any loss or the time and place of an accident or injury. Liability claims require the policyholder to give the insurance company copies of all notices or legal papers received.
The insurance company may ultimately refuse to pay part or all of a claim. The insurance company may take the position that the loss is not covered by the policy, perhaps because it was the result of some intentional act. Or the insurance company may allege that the policyholder took some type of action that rendered the policy void. Because insurance policies are contracts and open to interpretation by the courts, policyholders may be able to use the legal system to reverse such decisions. If an insured opts to consult an attorney to pursue such remedies, it should be an attorney other than the one hired by the insurance company to represent the policyholder.
Although renting a property is not usually subject to the same liability as owning a property, renters can still benefit from property insurance and renters can purchase separate liability insurance. Renter's insurance typically covers the cost of replacing personal items that are stolen, damaged, or destroyed. Additionally, renters, like owners, have potential liability to anyone injured on the occupied property. Renters' insurance policies are similar to homeowners' insurance policies but have no coverage for buildings or structures. Although renter's insurance is not usually required, by the terms of some leases, tenants may be required to have insurance to cover their liability exposure if someone is injured on the premises, or if damages occur from items owned by the renter, such as waterbeds. And, the LANDLORD can, in fact, require the renter to have liability insurance. When signing a new LEASE or after proper legal notice for a month-to-month rental agreement the landlord can even lawfully change the terms of the agreement to require renter's insurance. This may be particularly important if the renter has animals or the property contains a pool. The landlord's insurance will probably not cover tenant property losses unless the tenant can specifically demonstrate that the landlord was negligent in some manner.
There are a variety of costs associated with a move and most moving companies will provide a free written estimate. Estimates are typically based on shipment weight and length of travel. Professional moving companies are required by federal law to provide some level of insurance; however, additional insurance can be purchased. Basic liability insurance results in a standard coverage of about $.60 per pound per item. Thus, a 100 pound item would create a liability for the mover on that item of $60. With declared value protection or ACTUAL CASH VALUE insurance, the value of the goods is pre-determined by the owner of the goods, and the mover is liable for this declared value, or the purchase price less DEPRECIATION. If all the items are lost or stolen, the mover's liability would be the total pre-determined worth of the goods as stated in the moving agreement. Moving companies can take up to 120 days after receipt of any complaint to make a decision about paying on the claim.
A Glossary of Insurance, Development and Planning Terms. Davidson, Michael, American Planning Association,1997.
The Legal Edge for Homeowners, Buyers, and Renters. Bryant, Michel J., Renaissance Books, 1999
The Tenants Union
3902 S. Ferdinand St.
Seattle, WA 98118 USA
Phone: (206) 723-0500
Fax: (206) 725-3527
U. S. Department of Transportation Office of Motor Carriers
400 7th Street, S.W.
Washington, DC 20590 USA
Phone: (202) 366-4000
Timeshares are created when a developer purchases or builds one or more condominium type units and then completes the required legal steps to be allowed to sell week stays in these units. Some states consider some TIMESHARE arrangements to be actual pieces of real estate, making other real estate laws applicable to timeshare owners.
In this timeshare, the timeshare owner purchases an ownership interest in a particular piece of real estate. Usually, the buyer purchases a particular unit and a particular week in the year. That owner will always stay in that same unit on the same week of every year, unless an exchange is made through an exchange company. This arrangement is usually called Fixed Time or Fixed Unit.
In a non-deed timeshare, the timeshare owner purchases a LEASE, license, or club membership to use the property for a specific amount of time each year for a stated number of years. This is sometimes called a Floating Time arrangement. The purchaser has to contact the resort to make reservations for the exact week required. Some resorts have limitations on how early units can be reserved. Seasonal Floating is the same as Floating Time except that the owner can only reserve time within a particular season
Considerations in Purchasing a Timeshare
Numerous factors should be taken into account prior to purchasing a timeshare. A review of the background of the seller, developer, and management company, along with a review of the current maintenance budget, will assist the prospective seller in making an informed decision. Local real estate agents, Better Business Bureaus, and CONSUMER PROTECTION offices also are good sources of information. While many reputable builders do exist, purchasing an undeveloped property carries additional risks. One means of protection is to hold money in an ESCROW account in case the developer defaults. The commitment from the seller that the facilities will be finished as promised should be written into the purchase contract with a date certain.
Timeshares provide the convenience of prearranged vacation facilities, however future circumstances may alter future planning ability. Timeshare plans typically do not include recession provisions for poor health or job loss. Vacationing tastes and favored activities may also change over time. These factors should be considered in evaluating a purchase.
Timeshare resales usually are difficult and often sold at a loss to the seller. Therefore, timeshares are typically not considered an investment as a second or vacation home might be. There are many investment options in the property area, but investment should not be a major factor when purchasing a timeshare. Renting is also difficult and many timeshare owners pay advance fees to rental agencies which may not be able to find any renters for that time frame.
Total costs include MORTGAGE payments and expenses, as well as travel costs, annual maintenance fees and taxes, closing costs, broker commissions, and finance charges. Annual timeshare maintenance fees can be high depending on the amenities of the resort. The larger and more upscale the resort, the higher the fees. These fees cover all of the costs of operation but are typically several hundred dollars a year. These fees can and do rise over time. All of these expenses should be incorporated when determining the overall cost of purchasing a timeshare.
Purchase documents for any type of real estate transaction are binding legal contracts and should be reviewed by an attorney. The contract may provide for, and some states require, a set "cooling-off" period during which the purchaser may cancel the contract and obtain a refund. The contract may include a non-disturbance clause and/or a non-performance clause. A non-disturbance provision ensures continued use of the unit in the event of DEFAULT and subsequent third party claims against the developer or management firm. A non-performance protection clause allows the purchaser to retain ownership rights, even if a third party is required to buy out the contract. All promises made by the salesperson should be written into the contract. If not, such provisions will almost certainly be unenforceable in a court of law.
These programs allow trades with other resort units in different locations for an additional fee. However, these trades usually cannot be guaranteed. There also may be some limits on exchange opportunities. Most developers are affiliated with large exchange companies. Two major companies are Resort Condominiums International (RCI) and Interval International (II). When a developer affiliates with the exchange company, the exchange company allows all of the buyers who purchase at that development to be able to join the exchange company. The developer pays an initial fee to the exchange company, and thereafter the individual timeshare owners are usually assessed an annual fee. The exchange company provides owners with a directory of hundreds of resorts. The exchange company is a huge computerized reservation system that is also licensed as a travel agency. An individual can deposit the week that they own and trade it for a week at another resort anywhere in the world, provided that one is available. There is usually a fee for the exchange, and there are also size rules, which allow trades equal or down. In most exchanges, a two bedroom can exchange for a two bedroom, but a three bedroom would likely require additional charges. Both of the major exchange companies rate their resorts. Usually, one needs to be giving up a week at a top resort to get a week at another top resort. In RCI the top rated resorts are called Gold Crown. In II top resorts are known as Five Star. There are a number of smaller exchange companies that are available to timeshare owners. These smaller companies are often regionally based.
Timeshares and vacation club memberships in foreign countries are subject to the law of the JURISDICTION in which the timeshare is located. A contract outside the United States for a timeshare located in another country will not be protected under U. S. federal or state contract property laws.
Timeshare resorts sometimes offer free lodging to potential buyers in exchange for their attendance at a presentation about properties the developer has for sale. A free Vacation Certificate may be offered by telephone, mail, or from the Internet. Offers vary, but they are often for a three day, two night stay at the resort itself or a nearby hotel. Nearly all offers are subject to certain conditions, including age and income requirements. Both spouses must usually attend a sales presentation and upon arrival participants are often asked to provide proof of identity. Advance deposits, which may not be refundable, are often required to guarantee the time. Any charge termed a processing fee is probably nonrefundable. If deposit funds are actually called a deposit, refunds may be given at the location or at the end of the stay.
Most states now regulate timesharing, either under existing state land sale laws or under laws that were specifically enacted for timesharing. The regulating authority is usually the Real Estate Commission in the state where the timeshare property is located.
FLORIDA: Under the Florida Vacation Plan and Timesharing Act, purchasers may cancel Timeshare contracts within 10 calendar days after the date the contract is signed if the seller is notified of the cancellation in writing. Any attempt by the seller to obtain a WAIVER of the cancellation right is void and of no effect. While closing documents may be executed, the closing cannot actually take place until the 10 day cancellation period has expired.
HAWAII: Hawaii state law requires the purchaser to have a seven-day right of rescission of any timesharing sales contract. Hawaii law also outlines specific guidelines for developers, acquisition agents, and sales agents of timeshare units, providing that failure to fully disclose certain actions as sales solicitations constitutes unfair and deceptive business practices. The law is also quite severe with respect to seller misrepresentations.
MARYLAND: A time-share purchaser shall have the right to cancel the sales contract until midnight of the tenth calendar day following, the contract date, or the day on which the time-share purchaser received the last of all documents required to be provided as part of the public offering statement, which ever is latest. This right of cancellation cannot be waived by the purchaser or by any other person. Although documents may be signed in advance, closing cannot occur until the purchaser's cancellation period has expired. Any false representation made by or on behalf of a developer that a purchaser may not exercise the right of cancellation or any attempt to obtain a waiver of the purchaser's cancellation rights or a closing prior to the expiration of the cancellation period shall be unlawful, and the transaction is voidable at the option of the purchaser for a period of one year after the expiration of the cancellation period.
MASSACHUSETTS: In Massachusetts, timeshares are considered real estate. Notices of assessments and bills for taxes are required to be furnished to and paid by the managing entity or if there is no managing entity, to each timeshare owner. The managing entity is required by law to give notice of such ASSESSMENT to the timeshare owners.
NEVADA: In Nevada, the purchaser of a timeshare may cancel, by written notice, the contract of sale until midnight of the fifth calendar day following the date of EXECUTION of the contract. The contract of sale must include a statement of this right. This right of cancellation may not be waived. Any attempt by the developer to obtain a waiver results in a contract that is voidable by the purchaser. The notice of cancellation may be delivered personally to the developer or sent by certified mail or telegraph to the business address of the developer. The developer shall, within 15 days after receipt of the notice of cancellation, return all payments made by the purchaser.
NEW MEXICO: The contract of sale is voidable by the purchaser within seven days after execution of the contract of sale. The contract shall conspicuously disclose the purchaser's right to cancel under this subsection and how that right may be exercised. An instrument transferring a timeshare shall not be recorded until seven days after the execution of the contract of sale. Advertisements which include the offer of a prize or other inducement must fully comply with the provisions of the Unfair Practices Act.
NEW HAMPSHIRE: The law requires that buyers' deposits must be held in escrow until the closing. Some projects must present a public offering statement to each buyer before or at the time of purchase. In addition, under the law buyers usually may cancel their purchase within five days after signing the purchase contract or five days after receiving the public offering statement whichever is later.
OREGON: A seller offering an exchange program to a purchaser in conjunction with a timeshare plan must provide specific written information to the purchaser about the exchange program, including whether participation is voluntary. A purchaser from a developer may cancel, for any reason, any contract, agreement or other EVIDENCE of indebtedness associated with the sale of the timeshare within five calendar days from the date the purchaser signs the first written offer or contract to purchase. A notice of cancellation given by a purchaser need not take a particular form and is sufficient if it indicates in writing the purchaser's intent not to be bound by the contract or evidence of indebtedness. Notice of cancellation, if given by mail, shall be given by certified mail, return receipt requested, and is effective on the date that the notice is deposited with the United States Postal Service, properly addressed and postage prepaid. Upon receipt of a timely notice of cancellation, the developer shall immediately return any payment received from the purchaser. If the payment was made by check, the developer shall not be required to return the payment to the purchaser until the check is finally paid. Upon return of all payments the purchaser shall immediately transfer any rights the purchaser may have acquired in the timeshare to the developer, not subject to any encumbrance created or suffered by the purchaser. No act of a purchaser shall be effective to waive the right of cancellation.
SOUTH CAROLINA: Contracts must inform the purchaser of the right to cancel the contract within four days, not including Sunday if that is the fourth day, from the date of the contract. Additionally, the purchaser may cancel at any time if the accommodations or facilities are no longer available as provided in the contract. Cancellation notice must be sent to the seller by certified mail, return receipt requested.
TEXAS: Under the Texas Timeshare Act, a purchaser may cancel a contract to purchase a timeshare interest before the sixth day after the date the contract is signed. If a purchaser does not receive a copy of the contract at the time the contract is signed, the purchaser may cancel the contract to purchase the timeshare interest before the sixth day after the date the contract is received by the purchaser. A purchaser may not waive the right of cancellation under this section. A contract containing a waiver is voidable by the purchaser.
Blaggers: Adventures inside the Sun-Kissed but Murky World of Holiday Timeshare. Ley, Barry, Mainstream Publishing, 2001.
Setting up Home in Florida: How to Buy, Rent or Timeshare Residential Property in the Sunshine State. Ray, Michael, Trans-Atlantic Publications, 1996.
American Resort Development Association
15th Street NW, Suite 400
Washington, D.C. 20005
Phone: (202) 371-6700
Fax: (202) 289-8544
Federal Trade Commission
600 Pennsylvania Ave, NW
Washington, DC 20580
State Legislative Affairs Office
201 South Orange Avenue Suite 525
Orlando, FL 32801
Phone: (407) 245-7601
Fax: (407) 872-0771
Trespassing (Encyclopedia of Everyday Law)
Trespassing is a legal term that can refer to a wide variety of offenses against a person or against property. Trespassing as it relates to real estate law means entering onto land without consent of the landowner. There are both criminal and civil TRESPASS laws. Criminal trespass law is enforced by police, sheriffs, or park rangers. Civil trespass requires that the landowner initiate a private enforcement action in court to collect any damages for which the trespasser may be responsible, regardless of whether a crime has been committed. Traditionally, for either type of trespass, some level of intent is required. Thus, the trespasser must not simply unwittingly traverse another's land but must knowingly go onto the property without permission. Knowledge may be inferred when the owner tells the trespasser not to go on the land, when the land is fenced, or when a "no trespassing" sign in posted. A trespasser would probably not be prosecuted if the land was open, the trespasser's conduct did not substantially interfere with the owner's use of the property, and the trespasser left immediately on request.
The landowner may indicate, verbally or in writing, permission to enter onto the land.
The existence of consent may be implied from the landowner's conduct, from custom, or from the circumstances. Consent may be implied if these factors exist: the landowner was unavailable to give consent and immediate action is necessary to save a life or prevent a serious injury. Additionally, some states may extend this protection to animals.
A hunting license is not a license to trespass, but state laws treat hunters differently when it comes to trespassing. Some states have laws that specifically address trespassing while hunting, and others rely simply on the general trespassing statutes of the state. In about half of the states posting is not required to prevent trespassing; that is, it is against the law for hunters to trespass on private property without the landowner's permission even if the land is not posted. Where posting is required, some states have laws specifying how to post land. In some states, trespass while in possession of a firearm is a FELONY punishable by IMPRISONMENT for up to five years and/or a fine up to $5,000. A few states have laws that address hunters trespassing to retrieve dogs or wounded animals. In most states, however, hunters may not retrieve dogs or wounded animals if they cannot legally hunt on that land.
Sometimes a trespasser continues trespassing for such a long time, the law permits the trespasser to have the right to stay on the land. This right ranges from the right to live on the land to the right to pass across it to get somewhere else. If the piece of property in dispute has been used by someone other than the owner for a number of years, the doctrine of adverse possession may apply. State laws vary with respect to time requirements; however, typically, the possession by the non-owner needs to be open, notorious, and under a claim of right. In some states, the non-owner must also pay the property taxes on the occupied land. A permissive use of property eliminates the ability to claim adverse possession. One common form of trespassing is when a neighbor's driveway or fence encroaches onto someone else's land. Sometimes the owner will not want to make an issue of the encroachmentither because it seems to be a minor problem or because the neighbor is a friend. To avoid problems later, however, the owner should give the "trespasser" written permission to keep the ENCROACHMENT for as long as the owner continues to authorize it. If properly handled, this document will prevent the trespasser from acquiring a right to continue the encroachment and from passing along this right to future owners.
Trespass By Animals
In the old courts of England, the owner of livestock was held strictly liable for any damages to person or property done by the livestock straying onto the property of another. The mere fact that animals strayed and damaged crops, other livestock, or PERSONAL PROPERTY was sufficient to hold the owner liable for the injuries inflicted by cattle, sheep, goats, and horses. This strict liability position made sense in the confines of a small island such as England, but in the United States with herds of livestock wandering over vast expanses of land, a different process developed. The legislatures enacted statutes which provided that livestock were free to wander and that the owner was not responsible for damage inflicted by those livestock unless they entered land enclosed by a legal fence. These became known as open range laws. Subsequently, certain states reversed the open range laws and required the owners of livestock to fence in their livestock. This position was similar to the COMMON LAW position, only instead of strict liability, the livestock owner could be held liable only upon a showing that the livestock escaped due to the owner's NEGLIGENCE.
All city, county, and state law enforcement officers are authorized to enforce the hunter trespass laws. In 40 states, wildlife officers from the state's wildlife management agency are also authorized to enforce the trespassing laws. In 22 states posting is not required which means it is against the law for hunters to trespass on private property without the landowner's permission even if the land is not posted. Where posting is required some states have laws specifying how to post land. Only a few states have statutes that specifically address hunters trespassing to retrieve dogs or wounded animals. In all other states hunters may not retrieve dogs or wounded animals if the hunter cannot legally hunt on that land.
ALABAMA: All hunting requires permission of the landowner. There are no requirements for posting by property owners
ALASKA: Trespassing notices must be printed legibly in English, be at least 144 square inches in size, give the name and address of the person under whose authority the property is posted and the name and address of the person who is authorized to grant permission to enter the property, be placed at each roadway and at each way of access onto the property that is known to the land owner. In the case of an island, signage must be placed along the perimeter at each cardinal point of the island. The sign must explicitly state any specific prohibition that the posting is directed against.
ARIZONA: Hunters are permitted to enter onto land unless lawfully posted. Signs must be at least eight inches by eleven inches with plainly legible wording in capital and bold-faced lettering at least one inch high. The sign must have the words "no hunting", "no trapping" or "no fishing" either as a single phrase or in any combination. The signs must be conspicuously placed on a structure or post at least four feet above ground level at all points of vehicular access, at all property or fence corners and at intervals of not more than one-quarter mile along the property boundary. A sign with one hundred square inches or more of orange paint may serve as the interval notices between property or fence corners and points of vehicular access. The orange paint shall be clearly visible and shall cover the entire above ground surface of the post facing outward and on both lateral sides from the closed area.
FLORIDA: Trespass while in possession of a firearm is a felony punishable by imprisonment for up to five years and/or a fine up to $5,000. A person who knowingly propels or causes to be propelled any potentially lethal projectile over or across private land without authorization also commits felony trespass. A potentially lethal projectile includes any projectile launched from any firearm, bow, crossbow or similar tensile device.
IOWA: The unarmed pursuit of game or fur-bearing animals lawfully injured or killed which come to rest on or escape to the property of another is an exception to the trespass law.
KANSAS: Trespassing is permitted by licensed hunters in order to pursue a wounded game bird or animal, except that if the owner of the land instructs the hunter to leave, the hunter must leave immediately. Any person who fails to leave such land when instructed is subject to the provisions of the criminal trespass law.
LOUISIANA: Trespass is permitted in order to retrieve a dog or livestock, provided the trespasser is unarmed. Posting by landowners is required. Trespass on marshlands to trap or hunt fur bearing animals without permission is strictly prohibited
MARYLAND: It is unlawful to hunt on private lands in all counties without permission of the landowner or the landowner's LESSEE. Written permission is required from the property owner to hunt on private property in Allegany, Anne Arundel, Baltimore, Calvert, Carroll, Cecil, Charles, Frederick, Garrett, Harford, Howard, Montgomery, Prince George's, St. Mary's, and Washington Counties. Written permission is required from the property owner to hunt deer on private property in Somerset, Wicomico, and Worcester Counties. Written permission is required from the property owner to trap on private and PUBLIC LANDS in all counties. The landowner is not liable for accidental injury or damage to the hunter, whether or not the landowner or the landowner's agent or lessee have given permission to hunt.
MICHIGAN: A person other than a person possessing a firearm may, unless previously prohibited in writing or orally by the property owner, enter on foot upon the property of another person for the sole purpose of retrieving a hunting dog. The person shall not remain on the property beyond the reasonable time necessary to retrieve the dog.
MINNESOTA: Law allows hunters to trespass unless no trespassing signs are posted along the BOUNDARIES every 1000 feet or less, or in wooded areas where boundaries are less clear, at intervals of 500 feet or less, or at the primary corners of each parcel of land and at access roads or trails at points of entrance. Furthermore, the law mandates that the lettering should be at least two inches high and the name and phone number of the landowner or occupant should be listed. Lands that are cropped or grazed and show signs of tillage, crops, crop residue, or fencing for livestock containment do not require posting of signs. Hunters must ask permission to enter these lands. A person on foot may, without permission of the owner, enter land to retrieve a wounded animal that was lawfully shot. The hunter must leave the land immediately after retrieving the wounded game. A person on foot may, without permission of the owner, enter private land without a firearm to retrieve a hunting dog. After retrieving the dog, the person must immediately leave the premises.
NEW YORK: A person may enter and remain upon unimproved and apparently unused land, which is neither fenced nor otherwise enclosed in a manner designed to exclude intruders, unless notice against trespass is personally communicated to by the owner.
NORTH CAROLINA: In Halifax and Warren counties, no arrests for trespassing can be made without the consent of the owner the land.
NORTH DAKOTA: Any hunter may enter upon legally posted land to recover game shot or killed on land where the hunter had a lawful right to hunt.
OKLAHOMA: Signs are required at all entrances and all corners and at 200 yard intervals along property lines.
OREGON: No person shall hunt upon the cultivated or enclosed land of another without first obtaining permission from the owner or lawful occupant thereof, or the agent of such owner or occupant. The boundaries of enclosed land may be indicated by wire, ditch, hedge, fence, water or by any visible or distinctive lines that indicate a separation from the surrounding or contiguous territory.
SOUTH CAROLINA: Any person entering upon the lands of another for the purpose of hunting, fishing, trapping, netting; for gathering fruit, wild flowers, cultivated flowers, shrubbery, straw, turf, vegetables or herbs; or for cutting timber on such land, without the consent of the owner or manager, is guilty of a MISDEMEANOR.
SOUTH DAKOTA: In the part of the Black Hills fire protection district lying south of Interstate Highway 90, no person may enter upon any private land with intent to take or kill any bird or animal, after being notified by the owner or lessee not to do so. Such notice may be given orally or by posting written or printed notices to that effect at the residence or where the buildings are located thereon, and at the gates or entering places therein, and in conspicuous places around the land posted. All such notices shall contain the name and address of the owner or lessee posting the lands.
TEXAS: It is against the law to hunt or fish on privately owned lands or waters without the permission of the owner or owner's agent. No person may pursue a wounded wildlife resource across a property line without the consent of landowner of the property where the wildlife resource has fled. Under the trespass provisions of the Penal Code, a person on a property without the permission of the landowner is subject to arrest.
UTAH: Written permission is required from the owner or person in charge to enter upon private land that is either cultivated or properly posted and must include the signature of the owner or person in charge, the name of the person being given permission, the appropriate dates, and a general description of the property.
VERMONT: Notices prohibiting the taking of wild animals shall be erected upon or near the boundaries of lands to be affected with notices at each corner and not over 400 feet apart along the boundaries thereof. Notices prohibiting the taking of fish shall show the date that the waters were last stocked and shall be maintained upon or near the shores of the waters not over 400 feet apart. Legible signs must be maintained at all times and shall be dated each year.
VIRGINIA: Fox hunters and coon hunters, when the chase begins on other lands, may follow their dogs on prohibited lands, and hunters of all other game, when the chase begins on others lands, may go upon prohibited lands to retrieve their dogs, but may not carry firearms or bows and arrows on their persons or hunt any game while thereon. The use of vehicles to retrieve dogs on prohibited lands shall be allowed only with the permission of the landowner.
WEST VIRGINIA: Written permission must be in the possession of anyone who will shoot, hunt, fish, or trap upon the fenced, enclosed or posted grounds or lands of another person. Written permission is also required to peel trees or timber, build fires or do any other act or thing thereon in connection with or auxiliary to shooting, hunting, fishing or trapping. Hunters who kill or injure any domestic animal or fowl, destroy or damage any bars, gates, or fence, or leave open any bars or gates resulting in damage to the owner, can be held criminally liable as well as liable to the landowner. The landowner may personally arrest any such person found violating this law and take the hunter before a JUSTICE OF THE PEACE for trial. In such instances, the landowner is vested with all the powers and rights of a game warden.
The Legal Edge for Homeowners, Buyers, and Renters. Bryant, Michel J., Renaissance Books, 1999.
Modern Law of Deeds to Real Property. Natelson, Robert, Aspen Law, 1992.
Neighbor Law: Fences, Trees, Boundaries and Noise. Jordan, Cora, Nolo Law, 2001.
Environmental Health Center
1025 Conn. Ave., NW, Suite 1200
Washington, DC 20036 USA
Phone: (202) 293-2270
The Fund for Animals
200 West 57th Street
New York, NY 10019
Phone: (212) 246-2096
Fax: (212) 246-2633
Primary Contact: Marian Probst, President
Zoning (Encyclopedia of Everyday Law)
ZONING is the way the local governments control the physical development of land and the kinds of uses for different parcels of property. State and local governments have the power to enact statutes and ordinances, known as zoning regulations, in order to control the use of land for the protection of the public health, safety, and welfare. Zoning laws place significant limitations on the uses of the property within the defined areas or "zones" established in the particular zoning ORDINANCE. Zoning laws typically specify the areas in which residential, industrial, recreational or commercial activities may take place. These could be residential, rural, commercial, industrial or a combination. Zoning laws often use numerical or alphabetical designations, such as CR-1; however the designation are not standard and differ from one community to another.
In addition to limiting land uses, zoning laws can also regulate the dimensional requirements for lots and for buildings on property located within the community, the density of development, and what livestock can inhabit the parcel of land. Zoning ordinances may designate certain spaces for hospitals, parks, schools, and buildings with historical significance. Zoning can also provide for restrictions on parts of certain parcels of land, such as those parcels which lie within protected peaks and ridges.
Zoning ordinances and maps are public records. The zoning information is listed on the tax records in most localities. These records can be located at the local tax assessor's office and are often online.
Types of Zoning
Zoning categories and symbols vary among communities. A C-1 zone in one city is not necessarily the same as a C-1 in another. Typically, jurisdictions use letters of the alphabet as code abbreviations to identify the use allowed in a physical geographic area, such as R for residential, C for commercial, and I for industrial. These symbols are usually paired with some number. The number can specify the level of use, or it may indicate a certain amount of acreage or square footage for that particular property.
Residential zoning can include Single Family Residences (SFR), Suburban HOMESTEAD (SH), or any number of other designation which cover homes, apartments, duplexes, trailer parks, co-ops, and condominiums. Residential zoning can cover the issues as to whether mobile homes can be placed on the property and the number of such structures.
Zoning laws typically limit the type of animals allowed at a residence. While domestic pets, such as dogs, birds, and cats, are generally not regulated, chickens, sheep, horses, llamas, pigs, and cows are subject to certain requirements. Many ordinances prohibit keeping these farm animals in residential neighborhoods. Others limit the number of animals based on the size of the property.
Zoning laws on home-based businesses can depend on the nature of the business, whether there are employees or business invitees, the hours of operation, signage, parking and delivery concerns, and noise issues. Some zoning ordinances prohibit all in-home businesses in residential areas. Others restrict the type of business, the hours, and may require separate parking and entrance facilities. Rules regarding home-based businesses for condominiums are typically even more restrictive than private residences.
Commercial zoning usually has several categories and is dependant upon the business use of the property and often the number of patrons. Office buildings, shopping centers, nightclubs, hotels, certain warehouses, some apartment complexes, as well as vacant land that has the potential for development into these types of buildings can all be zoned commercial. Almost any kind of real estate except single-family home and single-family lots can be regarded as commercial real estate.
The availability of parking may affect the type of commercial zoning that is permitted. Additionally, there can be rules regarding the proximity of certain types of businesses to others. Many zoning laws prohibit or restrict adult entertainment establishments to a certain geographical area. Others bar such establishments within a certain distance of existing schools or churches.
Like commercial zoning, industrial zoning can be specific to the type of business. Environmental factors including noise concerns usually are issues in determining into which industrial level a business falls. Manufacturing plants and many storage facilities have industrial zoning. Certain business, such as airports, may WARRANT their own designation.
Industrial Zoning is often dependent upon the amount of lot coverage, which is the land area covered by all buildings on a lot, and building height. Additionally, set-back requirements are higher for industrial zoned properties.
Agricultural zoning is generally used by communities that are concerned about maintaining the economic viability of their agricultural industry. Agricultural zoning typically limits the density of development and restricts non-farm uses of the land. In many agricultural zoning ordinances, the density is controlled by setting a large minimum lot size for a residential structure. Densities may vary depending upon the type of agricultural operation. Agricultural zoning can protect farming communities from becoming fragmented by residential development. In many states, agricultural zoning is necessary for federal voluntary incentive programs, subsidy programs and programs that provide for additional tax abatements.
This designation is often used for farms or ranches. In certain parts of the country, this designation will include residences zoned to allow horses or cattle.
Any of the designations can be combined to form some sort of combination zone, many of which are unique to the community adopting the particular designation.
Homes and buildings over fifty years old are often included in historic zones. These zones have regulations, which prevent the alteration of the structures from the original conditions, although there are allowances for repair and restoration in keeping with the historic plan. Frequently, buildings in these areas can qualify for governmental tax incentives.
The National Register of Historic Places is the U. S. official list of cultural resources worthy of preservation. Authorized under the National Historic Preservation Act of 1966, the National Register is part of a national program to coordinate and support public and private efforts to identify, evaluate, and protect historic and archeological resources. Properties listed in the Register include districts, sites, buildings, structures, and objects that are significant in U. S. history, architecture, archeology, engineering, and culture. The National Register is administered by the National Park Service, which is part of the U. S. Department of the Interior. The National Register accepts applications for buildings, which meet certain specific historic requirements.
Owners of properties listed in the National Register may be eligible for a 20% investment tax credit for the certified rehabilitation of income-producing certified historic structures such as commercial, industrial, or rental residential buildings. This credit can be combined with a straight-line DEPRECIATION period of 27.5 years for residential property and 31.5 years for nonresidential property for the depreciable basis of the rehabilitated building reduced by the amount of the tax credit claimed. Federal tax deductions are also available for charitable contributions for conservation purposes of partial interests in historically important land areas or structures.
Increasingly popular in upscale communities, this sort of zoning covers color schemes, landscaping, mailboxes, fences, solar panels, decks, satellite dishes, and types of materials. Esthetic zoning ordinance may require that building plans be submitted and approved by an architectural review committee. Wireless communication receiving devices can often be impacted by these types of zoning rules.
Permitted and Accessory Uses
Permitted and ACCESSORY uses are built-in exceptions within a certain zoning category. For example, a property which is not zoned for a bar may have a bar which is connected to the hotel as accessory or permitted use.
Change of Zoning
If the zoning on a parcel of land is inconsistent with the use the land owner desires, the owner may apply to the local JURISDICTION for a change of zoning. Each jurisdiction has its own rules and regulations. However, there is typically an application and a fee, followed by some type of HEARING at which the owner presents the request and the reasons for the requested change. Surveys, drawings, photographs, and even models can be used to convey the proposed plan. Many owners hire engineers or lawyers to assist with the rezoning process.
If the owner is unsuccessful in obtaining the change, there may be a possibility to appeal the action either within the administrative structure of the governmental body or in a court of law.
A variance is a request to deviate from current zoning requirements. If granted, it permits the owner to use the land in a manner not otherwise permitted by the zoning ordinance. It is not a change in the zoning law. Instead, it is a specific WAIVER of requirements of the zoning ordinance.
Typically, variances are granted when the property owner can demonstrate that existing zoning regulations present a practical difficulty in making use of the property. Each jurisdiction municipality has rules for variance requests. Usually, the land owner seeking the variances files a request or written application for a variance and pays a fee. Normally, the requests go first to a zoning board. The zoning board notifies nearby and adjacent property owners. The zoning EXAMINER may then hold a hearing to determine if the variance should be granted. The applicant may then be required to appear before the governing body of the municipality, such as a city council, for the final determination.
A nonconforming use is a permitted use of property which would otherwise be in violation of the current zoning ordinance. The use is permitted because the land owner was using the land or building for that use before the zoning ordinance became effective. Nonconforming uses are often referred to as being "grandfathered in" to a zoning code. In order to qualify for nonconforming use, the property almost always needs to have had the use continuously. Thus, if the businesses closes and the use lapses for any time, the permission for the nonconforming use could vanish.
Conditional Use Permits
Similar to variances, conditional use permits allow an otherwise non-permitted use of the property that the zoning code does not include. Conditional use permits are usually granted at a public hearing before a political body, usually with the conclusion that the new use of the property will be in the PUBLIC INTEREST.
Eminent domain is the power of government to take private property and use it for public purposes. The power of eminent domain is recognized in the United States Constitution, which prohibits the taking of private property "without just compensation." The federal constitutional provision recognizing the power of eminent domain implies the requirement that property be taken for a "public use."" Public use includes the traditional government activities of building roads, government and public facilities such as government buildings and parks, as well as more generally beneficial activities assured through protection of scenic areas, wetlands, and historic landmarks.
If the government zones a piece of property such that the property owner can no longer effectively use the parcel of land, this provision may be applicable. The property owner may be able to sue for compensation because the land has been "taken" by the government. This is commonly referred to as "a taking." Just compensation is difficult to determine. By definition, it is the FAIR MARKET VALUE that a property owner would receive if the property were being sold without the zoning restrictions in place. If the government and the property owner are unable to agree on the fair MARKET VALUE, the property owner can file suit and hire a certified APPRAISER to give TESTIMONY concerning the value.
Daniels, Thomas L. and Keller, John W., Lapping, Mark B.The Small Town Planning Handbook. American Planning Association, 1995.
Davidson, MichaelA Glossary of Zoning, Development and Planning Terms. American Planning Association, 1997.
Fischel, William A. The Economics of Zoning Laws: A Property Rights Approach to American Land Use Controls. Johns Hopkins University Press, 1987.
Harr, Charles Monroe and Kayden, Jerold S. Zoning and the American Dream: Promises Still to Keep. American Planning Association, 1989.
Siegan, Bernard H.Property and Freedom: The Constitution, the Courts, and Land-Use Regulation. Bowling Green State University, 1997.
American Association of Home Based Businesses (Residential Zoning)
PO Box 10023
Rockville, MD 20849 USA
Primary Contact: Beverley Williams, President
National Register of Historic Places
1849 C Street, NW NC400
Washington, DC 20240 USA
Phone: (202) 343-9536
National Trust for Historic Preservation.(Historic Zoning)
1785 Massachusetts Ave, NW
Washington, DC 20036 USA
Phone: (202) 588-6000
Fax: (202) 588-6038
Urban Planning Institute
2100 M Street, NW
Washington, DC 20037 USA
Phone: (202) 833-7200
Real Estate (Encyclopedia of Business)
Real estate is land and all that is either on or under it, including water, trees, buildings, minerals, and oil. "Real estate," also called "real property," is a term that developed in medieval times. When contests were held over the title of a piece of land, the person judged as rightful owner received the real (actual) property as the settlement of the dispute.
The term "real estate" is used today to refer to land and the property on it, and to the real estate industryncluding the sale and leasing of both domestic and commercial land, appurtenant property, and the financing of and investment in real properties.
In the selling and renting of both domestic and commercial real estate, brokers buy and sell and appraisers fix value. Property managers and a host of others arrange rentals. Another set of persons is involved with the financing of real estate purchases or rentals and mortgage issues for purchase.
Because of the many facets of the industry, determining which are the largest firms requires asking further questions. What part of the industry? By what measure? Volume of sales? Number of brokers? Number of offices? The industry itself is at odds on ranking issues. Regardless of the ranking system used, Century 21 and ReMax are indisputably the two largest players in the domestic residential real estate market.
Residential real estate sales were strong throughout the mid-to-late 1990s, but profits for real estate brokers fell during the same period. In response to market and business pressures, real estate companies adopted measures to increase agent productivity and streamline operations through reducing listings. Smaller firms also tended to consolidate during the period, and firms of all sizes became more willing to share information to boost overall sales in the residential real estate market.
Century 21 is one of the largest franchise real estate brokers in the United States, with Weichart Realtors operating nationally as one of the largest independent realtors. Although its parent company, Cendant Corp., was found guilty in 1998 of fraudulent accounting that falsely inflated corporate revenues to raise stock prices, Century 21 retained its standing in the market, in part by focusing its efforts on the growing Spanish-speaking market in the United States. Trends in 20th-century realty brokerage include the development of mortgage financing companies that handle financing and refinancing for domestic real estate sales, the increased training and professionalism of real estate broker, and the use of the term "realtor," developed by the National Association of Realtors.
Real estate sales grew consistently and capital markets became increasingly lucrative during the mid-to-late 1990s, producing a boom in the real estate debt financing industry. Real estate debt financing also became increasingly competitive during the period, and insurance companies, long the main providers of mortgages, began to withdraw from the market. A variety of firms, including community banks and independent credit companies, emerged to replace insurance companies as providers of real estate debt financing. This proliferation of credit providers resulted in increased reliance on title insurance by mortgage finance underwriters, leading to creation of a national rating of title insurance firms by Fannie Mae in spring 1998. Not all insurance companies abandoned the real estate debt financing industry, however, as Prudential Insurance Co. created the Prudential Mortgage Capital Co. in August 1997 to serve as a conduit for the provision of commercial real estate loans.
As a force in the economy, the real estate industry holds power in its own right. Real estate brokers and managers form the seventh-largest industry by receipts (nearly $75 billion in 1992) in the nation among nonmanufacturing and service industries. Investment in real estate development by individuals and businesses, for their own use or as a speculative venture, grew to be a significant force in the 1990s. Real estate investment trusts (REITs) are, according to the Standard & Poor's Industry Survey of November 3, 1994, a "formidable economic force." After a short downturn during the second half of 1995, REITs rebounded and by spring 1998 total market capitalization of REITs reached $1.3 trillion, and the number of REITs in the United States grew to 216. Some of the major players in the REIT market are Starwood Lodging Trust, Equity Office Properties Trust, Crescent Real Estate Equities Inc., Rouse Company, and the Simon DeBartolo Group.
The two largest foreign investors in U.S. real estate are Canada and Japan, although the Japanese recession of the. late 1990s drastically reduced participation by Japanese investors. The outlook for the future of real estateoth commercial and domestics tied to the fate of interest rates, to changes in tax laws that make investment trusts easier to set up, and to the activities of REITs both in the stability of their investments and their activity in the stock market. Capital gains rates, which applied to real estate, were reduced from 28 to 20 percent in 1997; this, along with the increased use of REITs to facilitate mergers and acquisitions, seems likely to spur real estate sales and keep prices high for some time.
updated by Grant Eldridge]
"Banking." Industry Surveys. 3 December 1994, B59-60.
Bergsman, Steve. "Choosing the REIT Stuff." Black Enterprise, February 1995, 57-58.
Eckman, Katy. "Century 21 Eyes No. I Realtor Role in Spanish Language Marketing." Adweek 19, no. 41 (13 October 1997): 5.
Frantz, James B. "Borrowers Win Big in Today's Lending Frenzy." National Real Estate Investor 39, no. 10 (October 1997): 52.
Hylton, Richard D. "Why Real Estate Stays Grounded." Fortune, 13 December 1993, 141-43.
Jacobs, Barry G. "Balanced-Budget Package Provides Some Real Estate Relief." National Real Estate Investor 39, no. 10 (October 1997): 40.
Kimelman, John. "What Recovery?" Financial Planner, 21 February 1995, 68-69.
Levin, Gary. "Realty Firms Wage War over Ads." Advertising Age, 22 March 1993, 8.
Marshall, William T. "Breaking with Tradition." America' s Community Banker 7, no. I (January 1998): 16.
Nelson, Emily, and Mark Maremont. "Cendant Cites Wider Accounting Fraud: Bogus Revenue Over 3 Years Neared $300 Million." Wall Street Journal, 15 July 1998, A3.
Richards, Geoffrey. "Rating Title Firms: A Trend that Keeps Growing." National Real Estate Investor 40, no. 5 (May 1998): 102.
Schneider, Howard. "Ripple Effects Real Estate." Mortgage Banking 57, no. I (October 1996): 42.
Shaughnessy, Andy. "REIT Pulse." National Real Estate Investor 40, no. 8 (August 1998): 24.
Silver, Michael. "Corporate America Uses REIT Growth to Leverage Real Estate." National Real Estate Investor 40, no. 5 (May 1998): 120.
Slatin, Peter. "The Ground Floor: Opportunity Funds Vie with REITs in Hot Market." Barron's, 2 March 1998, 28.
Taub, Stephen. "REITs that Have the Wrong Stuff." Financial World, 2 January 1996, 18.
Tessler, Joelle. "REITs Use Offerings for Buying Spree." Wall Street Journal, 29 November 1996, A3C.
"Two Real Estate Investment Trusts Agree to Merge." New York Times, 28 February 1995, D4.