The tester was doing her job seeking out fair housing violations online. She spotted a listing for a sale of a condominium which contained the words “adunt [sic] only community no children under 16” in the remarks section of the listing. The condominium complex was also named in the suit.

The condominium complex was dismissed early on from the suit. The brokerage firm settled out of the case. That left the agent alone in the case and stuck paying a $5,000.00 deductible on his errors and omissions insurance coverage.

So what did the agent do wrong? The answer is that he did nothing wrong. What happened is that the condo listing appeared among the agent’s Internet Data Exchange (IDX) listings. IDX is a pooling, an accumulation, of listings submitted by various brokers who are members of a given MLS and streamed out by the MLS to various members’ websites. Thus IDX permits agents to display virtually all of the home listings in their market area and not just the agent’s personal listings or his/her company listing. It is a valuable marketing tool. Here the listing that violated the fair housing rules and regulations was someone else’s listing – not the listing of the agent who got sued. The offending listing, however, appeared on the agent’s IDX site. This case is evidence that it is possible to get caught in a trap where the agent is sued over a listing which contains forbidden information where the listing is not the target agent’s listing. By the time the agent’s attorney figured out what was going on, he recommended the agent settle for $5,000.00 which was in addition to the $5,000.00 insurance deductible. However, the settlement, if accepted by the agent might not clear the agent with the state licensing authority or any other agency that might have jurisdiction. The agent does not want to accept such a settlement.

It should be noted that there is a potential defense based on the Communications Decency Act of 1996. It absolves intermediaries of interactive computer services from being treated as the publisher or speaker of any information provided by another information content provider. While that is helpful, this agent is still responsible to deal with the pending time-consuming litigation and bear some substantial expense attempting to get himself extricated from the litigation.

The deceased, in this case, designated his son from a prior marriage as the beneficiary of 83 percent of a community individual retirement account (“IRA”). The deceased’s wife had previously been the sole beneficiary on the account which was held in the deceased’s name. The surviving spouse demanded at least one half of the IRA account, if not the entire account.

The court noted that in Arizona, during marriage, each spouse has an undivided half interest in the community property. While either spouse generally has the power to dispose of community property, each spouse owes the other certain fiduciary duties. In some community property states, a spouse, during marriage, can only dispose of one-half of the community property.

Here the court decided that one spouse may designate a non-spouse as beneficiary of more than 50 percent of a particular community property retirement account, as long as the other spouse receives half of the community overall and other circumstances do not make the distribution fraudulent or unjust.

Regulating the servicing of mortgage loans is within the jurisdiction of the CFPB.  Today, mortgage loan servicing is a huge business.  One of the problems is that there has been a lack of coordination between those dealing with the mortgage lenders concerning loan modifications and/or short sales and the foreclosure departments of such mortgage servicers.  Often, a person can be negotiating a modification of their home mortgage with the promise their loan will not be foreclosed during the negotiation process only to learn the servicing department did not instruct the trustee to delay the trustee’s sale and the property ends up getting sold out from under the owner.  Remedying such a problem today is difficult and expensive and most persons in that predicament do not have the funds to rectify the problem and end up losing their home.

New guidelines have been developed which affect servicing agents who handle 5,000 or more accounts.

The recently released new guidelines from CFPB prohibit dual-tracking.  What that means is that a loan servicing agent cannot start a foreclosure if a borrower already has submitted a completed application for a loan modification or some form of foreclosure alternative.  The purpose is to give the owner/borrower an opportunity to submit a loan modification application and have it properly processed.  Under the new regulations the servicer must wait at least for 120 days of delinquency prior to making a first foreclosure notice or filing for foreclosure.

Additionally, the servicer must advise an owner/borrower as to all loss mitigation options after the owner/borrower has missed two consecutive mortgage payments.  This is a process to educate homeowners about examples of various options potentially available to them.

An important new requirement is that servicers must institute policies and procedures that give delinquent borrowers direct, easy and continuous access to servicing employees who are able to assist the borrower with their loan issues.  Also, the servicing employees dealing with the borrowers will be charged with responsibility to alert borrowers about missed information on loan modification applications and for ensuring that the documents arrive at the right personnel for processing.  Additionally, the loan servicing agent must provide continuous updates to the borrower on any pending loan modification.  This will be a significant improvement over the current chaos that reigns between servicing agents and borrowers.  There are a number of other provisions servicing agents will be required to comply with.  The devil will be in the detail of implementing such sweeping changes and reform.

The above is the “good news”.  The bad news for borrowers is that the new changes do not have to be implemented prior to January 2014!  BUT, it is a step in the right direction for distressed homeowners.

First and foremost, for anyone facing a foreclosure or short sale on their principal residence, they can rest assured that the amount of debt forgiveness up to $2,000,000.00 will be exempt from income taxation.  The law known at the Mortgage Debt Forgiveness Relief Act of 2007 was extended for another 12 months through January 1, 2014.  While extension of this law was not as critical in Arizona as it is in other states that do not have an anti-deficiency law, it is perceived by the public as necessary to avoid such income taxation on the amount of debt forgiven in either a short sale or foreclosure scenario.  This law does only apply, however, to a situation involving a deficiency with a principal residence where the debt was incurred to purchase, build or substantially improve a principal residence and the debt is secured by that residence.

With the extension of this Mortgage Debt Forgiveness Relief Act of 2007, there will continue to be, in Arizona, two bases for a homeowner to exempt from income the debt forgiveness – a claim under the Mortgage Debt Forgiveness Relief Act of 2007 that has now been extended and also by claiming the debt as being a non-recourse loan.  Either way, the debt forgiveness will be exempted from being included as income for purposes of income taxation.

Secondly, the law to avoid the fiscal cliff did not, as many were concerned might occur, eliminate the popular mortgage insurance tax deduction.  The American Taxpayer Relief Act of 2012 extends a law that expired at the end of 2011.  The American Taxpayer Relief Act of 2012 permits the deductibility of mortgage insurance premiums.  There are, however, certain limitations.  Those taxpayers with an adjusted gross income of less than $100,000.00 can deduct 100% of their annual mortgage insurance premiums.  Taxpayers with more than $100,000.00 of taxable income, may also benefit but on a reduced sliding scale.

Another win, albeit minor, concerns the government’s increasing the capital gains tax rate from 15% to 20% for individuals who earn more than $400,000.00.  The law provides that only gains of more than $250,000.00 for individuals ($500,000.00 for households) are subject to taxes on the excess portion of capital gains.  Thus, in order for an individual homeowner to be affected, they would first have to have an adjusted gross income above $400,000.00 and then have a gain of more than $250,000.00 from the sale of their property.  Thus the amount of the exclusion remained the same.  Therefore,  it will only potentially impact those individuals with incomes over $400,000.00 combined with a capital gain of over $250,000.00 ($500,000.00 for a household).

So, despite what your opinion is of the law that was passed to stop our country from being pushed off the “cliff” there was some benefit for property owners.  As an optimist, I always have to look for the positive!!

“Mortgage originators…do not include…a residential mortgage loan, a person, estate, or trust that provides mortgage financing for the sale of 3 properties in any    12-month period to purchasers of such properties…provide that such loan – “(i) is not made by a person, estate, or trust that has constructed, or acted as a contractor for the construction of a residence on the property in the ordinary course of business of such person, estate, or trust; “(ii) is fully amortizing, “(iii) is with respect to a sale for which the seller determines in good faith and documents that the buyer has a reasonable ability to repay the loan; “(iv) has a fixed rate of an adjustable rate  [of interest] that is adjustable after 5 or more years, subject to reasonable annual and lifetime limitations on interest rate increases; and “(v) meets any other criteria the Board may prescribe;”

The “Board” is the Consumer Advisory Board established pursuant to the new Bureau of Consumer Financial Protection which has been established within the Federal Reserve.

A serious question has to be asked as to why an individual should be limited to only three such carrybacks during a 12 month period?  Has anyone claimed such carryback loans are a problem in the mortgage industry?  One should also closely scrutinize the above criteria.  The restrictions are very limiting on what is permitted as to a private seller-carryback loan and now such loans are full of possible traps.  For instance, item (iv) above requires that any adjustment to the interest rate (only permitted after 5 years) must be “reasonable”.  But there is no definition of what constitutes a “reasonable” adjustment.  Also, the criteria shown above are subject to further adjustment and/or limitation at any time by the “Board”.  We all know that once the government gets involved and opens the door a crack, it later walks through it like a Triumphant Arch.  We have most likely only seen the beginning of regulation in this area.

Another CAI honor for MMGM’s HOA Division went to Mike Shupe as he was elected to a three-year term on the Chapter’s Board of Directors.

The agent represented potential purchasers (“Fords”) in locating a home.  In fact the Fords liked a particular property so well they revisited the premises and started measuring it for placement of their furniture.  The agent’s husband, also an agent, assisted his wife working with the Fords.  The husband allegedly informed the Fords that they would be getting a ‘steal’ of a deal.

Several days after submitting an offer the purchasers learned that their agents had worked with another buyer and assisted that buyer in making an offer on July 21st on the property.  The following day the Fords made an offer on the property.  The husband told the Fords that he had told a friend of his about the interest the Fords had in the particular property and the friends immediately submitted an offer through the husband and ahead of the Fords.

The seller approved and accepted the initial offer, not the Fords.  The Fords decided to file a lawsuit and allege that the agent husband conduct amounted to a breach of fiduciary duty by sharing confidential information with another third-party perspective purchaser.  The Fords also claimed that the husband had failed to pursue their offer vigorously but rather assisted the other party purchasing the property.  The lawsuit was dismissed by the trial court.  Fords appealed.

The appellate court in Ohio, after evaluating the claims, found that the Fords had stated a proper claim for breach of fiduciary duty.  The court noted that the complaint properly alleged that the husband agent shared confidential information with a third party which act, if it occurred, could constitute a breach of fiduciary duty.  More importantly the court found that it is possibly that the act of writing two offers for the same property may constitute a breach of fiduciary duty.

The court noted that it is not impermissible for an agent to represent multiple parties who may be interested in the same property.  But, the court noted that what is not clear is whether that permitted an agent to write multiple offers for the same property.

The appellate court sent the case back to the trial court for further consideration of the issues.  It is always a delicate situation for an agent in a fiduciary relationship with a client.  A fiduciary duty is the highest duty known at law.  An agent must always bear in mind that (s)he must honor that duty at all times.  Here, we don’t know where the Ohio court will go in deciding this case but in the interim you can be certain the Ford’s agents are not sleeping so well at night waiting for a final verdict in this matter.

Having done a lot of real estate law over the years it is surprising how often we are called upon to rescue transactions that are caught up on situations that are a problem due to a lack of estate planning.  We receive panic calls from real estate agents with clients who have a transaction ready to close escrow when it is discovered by the title company that someone did not do something in terms of estate planning that will now cause the transaction to be hung up due to a lack of foresight by the owner/seller.

A common situation is where a person has a will, a general power of attorney, a living will and a medical power of attorney so they feel they are ready for any eventuality.  The person, for some reason is no longer able to act on his/her own behalf – often due to a terminal condition – perhaps he/she is in hospice.  The person named as the general power of attorney is trying to complete a real estate transaction already in progress.  The title companies in Tucson normally will not recognize a general power of attorney to close a real estate transaction.  The title company usually will insist upon having a special or limited power of attorney which is specific to the real estate transaction in progress.  That’s a problem since there is not such a limited power of attorney and the person who needs to provide it is not mentally or physically able to do so!

Many times there is a situation where a husband and wife owned a property.  One of the spouses dies and there is no probate.  The surviving spouse claims to be the owner of the property and lists the property for sale.  At time for closing it is discovered there is need for a probate.  This can be accommodated and most probates can be dispatched with rather quickly resulting in only a short delay (a week or two) in the closing.  Other times, it may delay a closing for months.

In certain cultures properties are just “handed down” generation to generation without doing any checking on the title and without any probate.  It is believed that since mom and dad, who owned the property, are now deceased, the kids now have a right (and title) to the property.  This can go on for several generations until someone decides they want to list or sell the property.  Then it may take several probates to clear up the title.

The moral here is to have an up to date estate plan which meets your unique needs.  For a given family situation a simple will may be inadequate to deal with the particular situation presented.  There may be a special needs child who should have some unique planning.  There may be a child with an addiction which presents some difficult and careful planning.  There may be that one child that is wayward and will cause issues for the other children.  There can be a myriad of facts which require careful consideration.

Even if you did all the correct planning a number of years ago you ought to consider a review of your plan to see if it is still timely.  People’s situations change rather substantially, more than we think, over a span of five to seven years.  It is good to take out your estate planning documents and see if they fit your current needs.  More often than not after five to seven years most people need to tweak their estate planning documents to fit their current reality.

We are beginning to see that boomers are facing some harsh realities with their children.  Their children have not turned out exactly the way parents planned or one or more or their children have extraordinary needs due to the economy or health or other considerations.  Sometimes the “poor man’s will” of putting property in joint tenancy with the “kids” may not prove to be a wise decision.  Sometimes the children no longer get along.  We often see children inheriting property and they don’t and won’t speak to one another.  Unfortunately, we find that in such situations the problem is so severe it takes a lawsuit to untangle the title to get the property sold and proceeds divided appropriately.

Right now we are experiencing a situation where a surviving parent placed a property in joint tenancy with a child as an estate planning tool – when the father would die it would automatically go to the daughter without a probate.  Sounds like a good plan on the surface.  But the father knew there were issues with the daughter.  Now, the client, in his eighties, needs to sell the rental property to pay for medical bills.  Unfortunately, the child, who technically is on the title due to the joint tenancy, won’t agree to convey the property back to her father and won’t agree to have the property sold.  It is a harsh and sad reality for the father.  A trust could have dealt with this situation much more effectively.

Where do you sit in relation to your “plan”?  Are you satisfied you have done the best you can or should you give it some more thought?  The first step is to have a plan.  Then you need to see if your legal documents will carry out your plan effectively.  This is especially important with your real estate.  Attorneys are great at “what ifs”:  coming up with various “what if this happens and did you consider the consequence if that happens” situations that you may not have considered.  Give it some thought – soon!  Call us if you want some assistance in figuring out what is the best estate plan given your unique situation.

In the case of Young v Rose CA_CV 10-0786 a real estate agent was dealing with a purchaser interested in acquiring a property in the $4,000,000 range.  The agent had been dealing with the purchaser for over 18 months.  The exclusive real estate agent contract in question expired.

The agent sent an e-mail to the purchaser advising the purchaser to sign a new buyer-broker agreement.  The purchaser signed and returned the agreement by e-mail.  The agent wrote back by e-mail and said “thank you”.

The purchaser subsequently acquired a property through another real estate agent resulting in the first agent suing for breach of the exclusive buyer-broker agreement which the purchaser had signed but which neither the agent nor the broker signed.  The purchaser claimed that although he had signed, since neither the agent nor the broker signed the exclusive buyer-broker agreement, there was not an enforceable contract.  The purchaser argued that Arizona Revised Statutes § 32-2151.02(A)(4) required both parties to sign such an agreement.

The agent argued that Arizona Revised Statute §32-2151.02(A)(4) was merely regulatory and would not bar a civil claim since the purchaser, the party to be charged, had signed the agreement.  Further the agent tried to claim that the purchaser’s signature satisfied the statute of frauds.   The agent made a further argument that by responding with a “thank you” that was the equivalent of a signature.  The court was not impressed with either argument.  The court noted that while the statute of frauds only requires that the party to be charged (sued) need sign the written document, Arizona Revised Statute §32-2151.02(A)(4) deals specifically with real estate professionals and mandates that such agreements must be signed by both parties.  Since it was only signed by the purchaser, the agent could not sue based on the fact there was an “agreement”.

The court indicated that based on the status of the case the court would not address whether the “thank you” e-mail sent by the agent to the purchaser upon receipt of the employment agreement signed by the purchaser was the equivalent of a signature by the agent.  However, the court did announce that to be considered a signature the agent would first have to prove that the parties agreed to conduct the transaction by electronic means which is determined from the context and surrounding circumstances, including the parties’ conduct.  There was not sufficient evidence before the court to make such a decision.  The court did state that there must be evidence demonstrated of intent to authenticate the specific writing at issue.  No such evidence was present in this case and it was sent back to the trial court for further hearing to determine whether there was evidence of such intent to authenticate the agreement.

The morale to this story is agents need to make certain that exclusive buyer-broker agreements are signed by both parties.  Imagine the attorney fees expended for this case so far and it is not over.  It all could have been avoided by the agent/broker simply signing the employment agreement when it arrived and sending a copy back to the purchaser.  The agent/brokers would have been enjoying a substantial commission instead of spending their time in court.

The claim revolves around the claim that the Broker owed a fiduciary duty to the trust because the Broker had a statutory duty to supervise the brokerage’s employees.  The Trust claimed that if the Broker had exercised his duty to supervise the Salesperson, he would have known of the Salesperson’s misrepresentations.

The Broker claimed he had no personal duty to the Trust.  He claimed to have no knowledge of the Salesperson’s interactions with the Trust and his duty to supervise was owed solely to the corporation, not to the Trust.

The trial court agreed with the broker and dismissed the case.  The Trust appealed.

The California Court of Appeals affirmed the trial court.  It found that in California, a corporate officer can only be liable to a third party for breach of a duty if the officer breached a duty owed specifically to the third party.  The court found that an officer of the corporation is not liable to third parties for breach of duties owed to the corporation and here the Broker did not have a fiduciary duty to the Trust.  The court stated that the Broker’s statutory duty to supervise the Salesperson was a duty owned to the brokerage firm (corporation). Since the Broker had no contact with the Trust, the Broker did not owe any duty to the Trust.  The lawsuit was dismissed.

Sandler v Sanchez, 142 Cal. Rptr. 3d 771 (Cal. Ct. App. 2012)