DEAR BENNY: We bought a brand-new home in January for $709,000, but the builder is now selling similar homes in our community for $200,000 less. My neighbors and I are thinking of seeking legal advice because they are deliberately bringing the values down. –Steve
DEAR STEVE: I don’t defend developers and builders, and in fact have filed my share of lawsuits for clients against them. But I cannot agree that your builder is deliberately bringing the values down. The real estate market is in bad shape, and property values in many parts of the country are depressed. Developers are using all sorts of gimmicks and come-ons (such as free plasma TV sets, or two-year free car rentals) to entice to sign contracts.
I haven’t researched this area of the law in several years, but my recollection is that you will have a hard time convincing a judge that the developer is in the wrong. The judge could, of course, issue an injunction, directing that the sales price be higher — but what good would that do if no one wants to buy?
One common thread that runs through real estate law is that real estate values are unpredictable and that no one can guarantee escalation of prices. If property values go up, you cannot be ordered to give all or some of your gain back to the developer. Similarly, if values go down, why should the developer be required to pay you any money?
I completely understand your position and your frustration. The only saving grace is that sometime in the future your house will appreciate in value.
DEAR BENNY: Could you tell us the pluses and minuses of owning and operating a bed-and-breakfast home, including tax advantages? –Rich
DEAR RICH: I know very little about bed-and-breakfasts, other that they generally are owned and operated on a “mom and pop” basis, and rely heavily on advertising and word of mouth for their customers. Some make money and others barely bring in enough income to pay the monthly mortgage. Out of curiosity, I searched the Internet and found a large number of Web sites in this area.
As or the tax advantages, they would be treated just like any other business.
If you really want to pursue this, do you want to buy an existing business or start one in your own home? Ask your accountant to run the numbers, and give him or her all of the information you have obtained, including your projections of income and expenses. Your accountant should then be able to explain the tax consequences.
DEAR BENNY: My water utility pipes run through my neighbor’s property. We have an easement agreement and title. He wants to change where the pipes are, and change the easement. Can he do this? –Marlene
DEAR MARLENE: There are two parts to your question. First, can he change the location of the pipes? He would have to contact the local water authority for permission. There also may be other governmental agencies that would have to get involved before permission can be granted.
But assuming that permission is obtained, what’s your position on all this? Does it really matter to you where the pipes lie, so long as your water flow is not impacted? Is the neighbor going to pay the cost of relocating the pipes? Clearly, you should not have to be asked to spend any money for the convenience of your neighbor.
Can your neighbor unilaterally change the easement? I did a little legal research and generally the answer is no. However, in some states, where the change is minimal in nature — and in no way impacts on your ability to use the easement — the courts have allowed a unilateral change. You will have to talk with your own attorney about this.
However, if you will not be affected, why not be neighborly and cooperate?
DEAR BENNY: I bought a property in early 1980 and put it in my daughter’s name. I have been paying the real estate taxes on it, doing all of the maintenance work, and have been renting it out. Can I claim that rental property is now mine? –Bill
DEAR BILL: Sorry, the title is in your daughter’s name and since she obviously is over the age of majority, she can do with it what she wants. She can also claim back rent for whatever period of time your state statute of limitations provides.
Who has been declaring income and deducting real estate taxes and other expenses over these many years? If and when the property is sold, who plans to declare and pay the capital gains tax? You and your daughter should talk to your own separate attorneys. You possibly could be facing some difficult IRS problems.
DEAR BENNY: There is a landowner in the subdivision in which I live who has a land clearing/construction company he is running from his home. The property is zoned residential-agricultural. A couple of years ago this landowner was bringing in waste cleared from other sites and dumping it in a ravine on his property behind his home. The county found out and fined him. Since then he has subdivided his property and sold part and built a new home on another part. He is continuing the dumping operation on his property. The subdivision covenants state that dumping is prohibited. Outside of the covenants, is this activity legal?
The covenants also state that landowners will pay a yearly road maintenance fee, but, despite several notices, the owner has not paid his share of the fees. The covenants also state that no commercial businesses can be run out of the landowner’s homes. Unfortunately, the county does not enforce the covenants. What can be done to correct these problems? It should be noted that this landowner is abusive and has threatened his neighbors with retaliation, and the neighbors are afraid to confront him. –Cindy
DEAR CINDY: One of the major problems of community living is that all too often owners get intimidated and are afraid to take action — even when there are clear illegal activities going on.
You should take two steps: Arrange to meet with your county supervisor and explain that this dumping activity is continuing. If the county took action earlier, it may now consider bringing criminal charges against that owner.
You should also retain a real estate attorney in your area. Hopefully, you can convince at least a few of your neighbors to contribute to a legal defense fund.
Is there a formal organization such as a board of directors in your community? If so, they should ask their attorney to investigate and take all appropriate legal action.
If you do not have the support of your neighbors, my only advice is to either accept the problems or move out of the community.
DEAR BENNY: My wife and I, along with her sister, are joint owners of their deceased mother’s home. After the mother’s death, we got an appraisal to establish a stepped-up valuation. My wife and I are in the process of buying out her sister’s share. Are we entitled to get a new appraisal and receive a stepped-up valuation at that time? –Grant
DEAR GRANT: You can always pay for an appraisal. But if the price you and your wife are paying the sister is based on the stepped-up valuation, the sister will not have any capital gains tax to pay, and the tax basis for you and your wife will be the value at the date of the mother’s death.
You are not entitled to a second stepped-up basis, because the sister did not die.
DEAR BENNY: I won the bid at public auction for a house. I was required to make a deposit of $20,000, and now the home’s occupant will not allow my appraiser into the property to do an appraisal. Without the appraisal, no one seems to be able to do the loan without 30 percent down. Is it possible to have a mortgage company do a drive-by appraisal with the purchaser making only a 5 percent deposit on the loan? –Lionel
DEAR LIONEL: Congratulations! I hope you got a good price for the house.
But I seriously question why you are pursuing this matter if there is an “occupant” still in the house? Even if you are able to get a loan and take title, how will you get that person out of the house? You may have to bring an eviction action in your local landlord-tenant court, and that is both time-consuming and expensive.
Have you been able to access the house? Do you know its condition? Often, when a home is foreclosed upon (or even auctioned) the occupant takes (or destroys) a lot of the fixtures and equipment.
Have you discussed this with the auctioneer? When the auction was conducted, were there any conditions attached to the process, such as “it would be the responsibility of the successful bidder to deal with the occupant”?
And who is the occupant? Is he the current owner or just a trespasser?
This should be the responsibility of the auctioneer and/or the person who initiated the auction. If the current homeowner was the sponsor of the auction, it makes no sense that your appraiser is not permitted access. I would think that the owner would like to get rid of the house as soon as possible.
This just does not make sense and you should investigate this fully.
Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to benny@sandbox.inman.com.
