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Problem with inherited property ownership
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Q: I inherited 8 pieces of property that includes vacant lots and 2 houses. I co-own them with 9 other people who grew up with my deceased father.  They created  a housing development corporation with the original intent of building housing for the elderly, but that never happened.  They use empty lots as special event parking a few times a year.  While I was originally acknowledged as a co-owner after my father’s death in 2000, the active members of the group do not keep me informed of any of the activities, and I do not share in the thousands of dollars they make renting the lots out and/or using as a parking lot.

Please advise of my options as far as forcing the group to recognize my existence and include me in all activities of group, and sharing of revenues.  I am more than willing to pay my share of taxes and/or any dues, and have considered forcing them to buy me out.  Any assistance or advice would be greatly appreciated.  The property is possibly worth a combined $60K-$100K.  Howard.

A: Howard. Have you confirmed that you are still an owner? While you would have to sign a deed conveying your interest in the properties, I have been involved in too many situations where deeds are forged. Accordingly, you should arrange to have a lawyer conduct a title search for you; the cost should not be more than $300-400 at most.

Once you have confirmed that you still have an ownership interest, then I would send a letter to all of the other owners, advising them that you have an interest and if they do not provide you with an accounting for tax purposes, you will have no alternative but to file suit. While such a letter would best come from a lawyer, if you decide to send it,  make sure it is mailed by certified mail, return receipt requested.

You should also check with the local real estate taxing authority to confirm that there are no outstanding tax obligations.

As a property owner of investment property, a yearly income tax return should be filed. I suspect that the property is not owned by a limited liability company, so it is a partnership. There should be a partnership agreement spelling out who does what, who pays how much, etc.

You may have to file suit, to get everyone’s attention. I suspect, however, that if you ask for their partnership tax returns for the last several years, and if they don’t have any such documents,  they may realize they should work with you , rather than against you. After all, the threat of an IRS investigation is often a catalyst.

Q: I have a question regarding real estate escrow accounts used for  taxes and home insurance.  I have a mortgage on my home and the account is with my bank where I make my monthly mortgage payments.

My question, is there a legal maximum the bank can hold in an escrow account?  Nancy.

A: Dear Nancy. First, I want to go on record that I am unalterably opposed to lender’s requiring that real estate taxes and insurance be escrowed. Many years ago, I was instrumental in getting the Washington, D.C. city council (the city’s legislative body) to pass a law that allows homeowners to pay their own taxes and insurance if they put down at least twenty percent of the purchase price when they buy a home – or if there is that same amount of equity when refinancing.

I have no problem if a homeowner wants to have the tax and insurance moneys escrowed; I do, however, object, to the fact that lenders require the escrows.

According to a Department of Housing and Urban Development (HUD) statement, the law does not require escrows. “It is the lender’s decision whether the borrower must maintain an escrow account for the purpose of paying taxes and other items.”  And it is my understanding that Fannie and Freddie (the two giant mortgage companies) will allow borrowers to pay their own taxes and insurance when the equity reaches the twenty percent mark. However, since lenders make money on the funds they hold in escrow (they do not pay interest), from my experience most lenders will impose a fee – perhaps an eighth of a percent higher interest rate – for the privilege of not having to escrow

The Real Estate Settlement Procedures Act (known as RESPA) does not require lenders to maintain a cushion; however, the law has allowed lender to keep an additional two months of escrow payments, unless your state law has a different requirement.

If you are buying – or refinancing – make sure to ask what the lender’s policy is regarding these escrow accounts.

And more important: once a year – after your real estate tax and home owner’s insurance bills have been paid by your lender – make sure to confirm that they have, in fact, been paid. In many states, you can look on-line at your local taxing authority to confirm payment.

Why do I recommend this? Because over the years, I have found that too many lenders – for whatever reason – have not always made these payments to the taxing authority and to the insurance company on a timely basis. Sometimes it is negligence; often the lender is in another state and does not know where to sent the real estate tax bill. And on a few occasions, I have encountered pure fraud on the part of unscrupulous lenders.

Bottom line: it’s your house and your investment. Confirm that your taxes and insurance are paid on a timely basis when due.

Q: We are renting a condo in Chicago for two years while we are trying to sell our home out-of-state. There have been many items especially with the older appliances that have had to be fixed. We have done some of them, others either a repairman has had to repair them and some is a “you just have to live with it” comment from the management company. This also includes repairs to plumbing which again is the same situation.

But what I am writing about is the sliding glass door to the patio. For some reason, suddenly we are unable to see out of one side of the slider. The management company again states “you just have to live with it”. I don’t remember any place in the lease that says they won’t do reasonable repairs and “we have to live with it.”

We are paying a high rent, again not as high as the owner originally wanted but also the same problem with the price he wants for property. He bought this condo in 2003 and does not seem to realize what has happened in the market. There is nothing that comps this property within 100,000 to the price he demands.           What should we do? We still have 8 months on our lease to live here. Ellyn.

A: Dear Ellyn. You have to carefully review your lease. From my experience, most residential leases are one-sided in favor of the landlord. In fact, I often joke that if there is anything in the lease that protects the tenant, it is because the landlord’s attorney forgot to take it out.

The typical lease requires the tenant to make minor repairs, and the landlord will only be responsible for major system failures – such as the dishwasher stops working and cannot be repaired.

So, I am not sure exactly what the problem is with the sliding door? It does not sound like a major health or safety issue that would be the obligation of the landlord.

However, since this really bothers you, you might want to consult with a local attorney.

Q: Real estate activity is high in my area. I found a house that I would like to buy, but the seller’s broker told me that I cannot have any contingencies in the contract. Should I make an offer anyway?  Glenda.

A: Dear Glenda.  There are three contingencies that I consider very important. (1) Financing. Unless you have all the cash needed to buy the house, you cannot take a chance on lender unwilling to make you a loan; (2) appraisal – nowadays, appraisers are very conservative, and if their value is too low, you will have to pay the difference with cash out of your own pocket; (3) home inspection – why would you take a chance on an older house without having it fully inspected by a professional, independent home inspector?

I know that sellers in a hot market prefer a clean contract, with no contingencies.  But unless you are a gambler willing – and able – to take chances, I cannot recommend entering into a contract without these three contingencies. A contingency means that if certain things do not occur, and you are within the time period spelled out in the real estate contract, you have the absolute right to cancel the contract, and get your deposit refunded.

Otherwise, if you find out that you cannot get a loan – you can lose the earnest money deposit. Or if you buy the house and find thousands of dollars of needed repairs (as happened to one of my clients), you will have no one to blame but yourself.