Cantor Floman Blog

Real Estate Transactions: The conveyance tax has increased. When you sell your home, you will be required to pay a conveyance tax to the State of Connecticut and the City/Town where the property is located. 

• The State conveyance tax had been .5% of the gross sales price.
• Effective as of July 1, 2011, the State conveyance tax rises to .75% of the gross sales price under $800,000.00.
• Here is an example. You sell your home for $350,000.00. Prior to July 1, the State conveyance tax would have been $1,750.00; now, the State conveyance tax will be $2,625.00.
• If the gross sales price exceeds $800,000.00, the State conveyance tax is 1.25% of the gross sales price above $800,000.00.

Although the State conveyance tax may have increased, we continue to provide affordable legal representation to individuals who are selling and/or buying homes. Feel free to contact us for a detailed description of our legal services.

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Although condominiums and co-ops (Cooperative Housing Corporations) both are Common Interest Communities, there are important differences.  

• The purchase of a condominium unit is the purchase of an ownership interest in a specific housing unit that is part of the condominium complex.  In addition to the specific unit, the purchaser also owns an undivided interest in the common areas, such as parking lots, hallways, gardens, swimming pools, and/or a clubhouse. Purchasing a condominium is similar to purchasing a single family home in that you receive a Deed (recorded on the Land Records) as evidence your ownership interest.
• In contrast, the purchase of a co-op is the purchase of stock in a Cooperative Housing Corporation. The Corporation owns the real property and you own a part of the Corporation. Although your shares of stock in the Corporation entitle you to exclusive possession of a specific unit, you, individually, do not own any of the real property. Your ownership interest is evidenced by shares of stock in the Corporation (personal property) and not by a Deed to a specific unit (real property).

If you are purchasing a condominium or co-op it is important to review all applicable documents before obligating yourself to proceed with the transaction. We can help you make an informed decision by explaining your rights and responsibilities.

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Real estate transactions: Is your home part of a Planned Unit Development?  

A Planned Unit Development often includes a blend of residential, commercial and retail units, together with open space set aside for recreational purposes. Purchasing a home in such a community has advantages and disadvantages.

• Because the aesthetics of the community have been defined, in advance, you know what you are buying into, and that it will not change.
• On the other hand, the rules and regulations of the PUD may restrict your ability to engage in activities you otherwise would expect to be able to do at or from your home. For example, some Planned Unit Developments prohibit you from engaging in business from your home.    

If you are buying a home that is part of a Planned Unit Development, it is critically important that you review all of the restrictions on use, in advance. We can help you with this.

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Here’s the story of what happened that led to the legal dispute.

Mr. Blackwell (Buyer) and Mr. Mahmood (Seller) entered into a contract for the purchase and sale of real estate in Windsor. The sales price was $1,800,000.00. Mr. Blackwell gave a deposit of $40,000.00. Mr. Blackwell’s obligations under the contract were contingent on his ability to obtain a mortgage in the amount of $1,440,000.00. If Mr. Blackwell was unable to obtain a mortgage commitment in that amount within 30 days, he had an option to cancel the contract and get back his deposit. A provision such as this is typical in Connecticut real estate contracts.

To everyone’s surprise, the appraisal ordered by the Bank to which Mr. Blackwell applied for a mortgage set a value for the real estate of $1,220,000.00, considerably less than the contract price. In those circumstances, of course, the Bank would not approve a mortgage for $1,440,000.00.

Mr. Blackwell and Mr. Mahmood wanted to keep the deal together, if possible. Several written extensions and one oral extension of the mortgage commitment date were granted. Although the original contract was dated as of September 20, at the end of December the Buyer and Seller still were discussing ways of making the deal work. Mr. Mahmood was leaving for a trip out of the country and he and Mr. Blackwell agreed they would continue discussions at the end of January when Mr. Mahmood returned from his trip.

It was not until after Mr. Mahmood returned from his trip that the Buyer and Seller finally concluded the deal could not work. In early February, Mr. Blackwell formally notified Mr. Mahmood of this, in writing, and requested the return of his deposit. Mr. Mahmood refused to return the deposit. The reason he gave was that the written notice was sent later than 30 days after Mr. Blackwell had learned of his inability to obtain a mortgage. Mr. Mahmood maintained, therefore, that the deposit was forfeited as liquidated damages, all as specified in the contract.

Here’s what Mr. Blackwell did next.

Since Mr. Mahmood refused to return his deposit, Mr. Blackwell brought suit to recover his deposit. His Complaint alleged that the course of conduct between them estopped (legally prevented) Mr. Mahmood form insisting on strict compliance with the contract. After all, Mr. Blackwell said, we were continuing to talk about how to keep the deal together and I was waiting for Mr. Mahmood to return from his overseas trip, and he had encouraged me to wait. But, Mr. Blackwell did even more than that. In addition to that, however, Mr. Blackwell alleged that Mr. Mahmood’s failure to return the deposit constituted statutory theft pursuant to Section 52-564 of the Connecticut General Statutes. This significantly upped the ante because proof of statutory theft allows the trial court to award triple damages. Finally, Mr. Blackwell alleged that Mr. Mahmood’s failure to return the deposit violated the Connecticut Unfair Trade Practices Act, commonly referred to by the acronym CUTPA. This also significantly upped the ante because a violation of CUTPA allows the trial court to award the plaintiff attorney’s fees and punitive damages as well as monetary damages.

Here’s what happened at the trial.

The trial was to a single Judge, not to a jury. The Judge found in favor of Mr. Blackwell on all counts of his Complaint and awarded him a total amount of $136,930.41. That’s quite an award. Imagine this all could have been avoided if Mr. Mahmood simply had returned the deposit when requested.

Here’s what the Appellate Court said.

Not surprisingly, Mr. Mahmood was unhappy with the result at trial. He asked Connecticut’s Appellate Court to review the decision of the trial Judge. The Appellate Court did so and the Court’s decision was released on April 27, 2010. It can be found at 120 Conn. App. 690. The Court unanimously affirmed the trial Judge’s decision. In doing so, the Appellate Court followed a well established legal doctrine which says the decision of a trial court is to be set aside on appeal only if the decision “is clearly erroneous” either because it is legally incorrect or not supported by the evidence. The job of an Appellate Court is not to retry the case; rather, the job of the Appellate Court is to determine if the trial Judge’s decision is based on evidence presented at trial and is legally correct. Applying that standard, the decision of the trial judge was affirmed.

Analysis.

The result for Mr. Mahmood appears particularly harsh. As often is the case in legal disputes, the party who tells the more credible story usually wins. A corollary of that statement is that a party who appears not credible often pays a price. In this case the trial Judge said “Mahmood was not credible during this trial and in various documents that are either part of the file or are exhibits in this case.” It appears that this type of finding played a significant role in the trial Judge’s conclusion that Mr. Mahmood was liable for triple damages, attorney’s fees, and punitive damages, all in addition to the basic monetary damages of $40,000.00 (the amount of the deposit). Once he lost at trial, Mr. Mahmood faced an uphill battle at the Appellate Court. Since the trial Judge’s decision was based on the evidence and legally correct, the Appellate Court, following well established precedent, had no choice but to affirm the decision.

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Change in federal law will affect residential real estate closing process.

For many years, federal law has required the Buyer and Seller of residential real estate to sign what is referred to as a “HUD-1” closing statement. The purpose of the HUD-1 is to disclose all costs associated with the transaction and all adjustments between the Buyer and Seller. It has not been uncommon for the figures on the HUD-1 to change, often at the last minute. The change in federal law requires a mortgage lender to give the Buyer/Borrower a Good Faith Estimate of all closing costs at least 10 days prior to the closing. In most cases, the closing costs disclosed on the Good Faith Estimate cannot be changed at the closing. This change in federal law puts a premium on accurately determining all closing costs much earlier in the process.

Whether you are a Buyer or a Seller, we will explain the HUD-1 and Good Faith Estimate and assure that your interests are protected by the terms of the Purchase and Sale Agreement and at the closing.  

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What is owner’s title insurance and why do I need it?

When you purchase a home, your lender will insist that you have a title insurance policy for the amount of your mortgage loan. It is important that you also have coverage to insure your ownership interest. There are many potential defects in title that simply cannot be discovered, even with a careful title search. A few examples include forged deeds, unreleased mortgages or other liens, claims by Indian nations, and transfers by persons without legal capacity. For a modest price, an owner’s title insurance policy will give you coverage for any such title defects.

We would be pleased to answer your questions about title insurance or any other aspects of your home purchase.  

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We’re thinking of buying a home together, but we’re not married. 

It increasingly is common for non-married people to buy a home together. What happens if the relationship ends? Who stays? Who goes? What are the terms? A written agreement that sets forth the rights and responsibilities of each party will make the separation easier for both.

• Ideally, the agreement should be entered into prior to the purchase or shortly after the purchase.
• The agreement should cover subjects such as responsibility for expenses while living together, sharing appreciation and depreciation, allocating tax benefits and burdens, buy-out options, and a mechanism for resolving disputes. 
• Statutory provisions applicable to the division of property when a marriage or civil union fails are not applicable, but may provide helpful guidance.
• Because of the potentially conflicting interests, the same law firm should not represent both parties.
• Although love, affection, and friendship abound in the beginning, it is important not to lose sight of the fact that the purchase also is a business transaction and should be treated as such.

We would be pleased to meet with you to help prepare an agreement that protects your interests and, at the same time, treats your partner with respect and sensitivity.

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Is a reverse mortgage right for you? 

If you are short on cash, have limited income, and have substantial equity in your home, a reverse mortgage may be an option to consider.

• Available to homeowners 62 or older, with limits on the amount that can be borrowed determined by your age and the value of your home.
• An attractive feature of a reverse mortgage is that no repayment is required while the homeowner is alive and living in the home.
• Money can be taken as a lump sum or as a periodic income stream.
• Interest accrues on the amount that has been borrowed, thereby reducing the equity in the home over time.
• Interest rates and loan charges for most reverse mortgage products tend to be higher than conventional mortgages or lines of credit.  
• Compare a conventional line of credit as an alternative way to access cash from your home, when needed.

We would be pleased to meet with you to help determine if a reverse mortgage is appropriate for you.

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The importance of adhering to time limitations specified in the inspection contingency.

Residential real estate Purchase and Sales Agreements almost always contain an inspection contingency.The purpose of the inspection contingency is to allow the buyer time, after signing the Agreement, to have a professional inspect the property and report on actual or potential problems discovered. The reported results of the inspection often lead to additional negotiations, and, on occasion, an adjustment of the sales price. The Agreement will contain strict time limitations for conducting the inspection and reporting the results. Failure to adhere to the time limitations specified in the Agreement may constitute a waiver of the Buyer’s right to conduct the inspection or request a price adjustment based on the results.

Whether you are a Buyer or a Seller, it is our responsibility to assure that the applicable time limitations are adhered to so that your rights pursuant to the  Agreement are protected.

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Will the closing really take place on the closing date?

If you are buying or selling a house, you assume that the closing date stated in the Sales Agreement means the closing actually will occur on that date. That is not always the case. Connecticut courts consistently have concluded that unless the Sales Agreement says “time is of the essence” there is a reasonable period of time after the date specified in the Sales Agreement within which to close. If it is essential for you that the closing occur on the date specified in the Sales Agreement, the Sales Agreement must, at a minimum, say that closing on that date is of the essence.

If we meet with you before the Sales Agreement has been signed and you tell us that time is of the essence, we will assure that the appropriate language is included in the Sales Agreement.

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