LegalMatch: Real Estate

The Battle of the Black Mold, Part I.

  Mold is everywhere.

It nests in the creamy pits of forgotten coffee mugs, chews through loaves of week-old bread, and generally turns things we like into things we would really rather not touch. Sure, it’s great when it’s powdered and packaged and sold as Penicillin, but even feverish infectees aren’t clambering to feast on fungus-infected food.

And perhaps this aversion isn’t without reason, considering the toxicity of some of our less-friendly household molds. 

Black mold, in particular, has been a plague on the human race since Biblical times. It thrives on moisture and loves porous surfaces, and it’s as difficult to eradicate as a roach infestation. Especially in old buildings, where ventilation is shaky and inhibited, black mold can spread like poison ivy on plant steroids. So let’s take a minute and determine (a) how to identify harmful types of mold and (b) what you and your landlord should do about it. 

 

Identifying Toxic Mold in Your Home

Mold is a term that encompasses a huge variety of organisms, and not all of them are a health-hazard. However, if you have something growing on your walls, in your bathroom, or even in the fridge, it’s probably a safe bet that you should get rid of it ASAP. While there are tests to determine the toxicity of the mold present in your home, they are largely unnecessary. It’s better to move directly to controlling the problem—the moisture level in your home.

The following symptoms can be an indication of exposure to toxic mold or another household irritant, and are commonly grouped together under the name “Sick Building Syndrome:”

• Headache
•  Eye, nose, or throat irritation
• Dry cough
• Dry or itchy skin
• Dizziness and nausea
• Sensitivity to odors
• Difficulty concentrating
•  Fatigue

Because these are common symptoms for many different diseases, Sick Building Syndrome requires that two more conditions be present. (1) The cause of the symptoms is unknown, and (2) the sufferer experiences relief shortly after leaving the building. If this sounds familiar, it may be time to break out the bleach and get to scrubbing.  Sick Building Syndrome is no 24-hour flu.

(Check in later for Part II).

Subprime Mortages and the Crisis of Foreclosures.

The title might be a mouthful, but “subprime mortgage crisis” is probably a familiar phrase if you’ve been reading the papers—or even just scanning the headlines on your way past the newsstand.

What are Subprime Mortgages?

Subprime mortgages are home loans made to people who have a higher likelihood of defaulting on their payments and foreclosing on their homes.

Sometimes this happens because a financial institution makes a bad judgment call-- lending to would-be homeowners who have a poor credit history or an inadequate income for the purchase they’re making. Other times, the fault lies in misleading or confusing advertisements by predatory lenders.  Low introductory interest rates on ARMs (Adjustable Rate Mortgages) create another problem. In these cases, people can afford the lower initial interest rate, but are unable to make their payments when interest rates increase later on.

ARMs are one of the reasons for the current glut of subprime mortgages and large number of foreclosures.

 

How are Subprime Mortgages and Foreclosures Related?

Foreclosure is the end result of an unpaid subprime mortgage.

When a homeowner cannot or will not make their mortgage payments, the bank or lender has the right to force that person to sell their home. The money from the sale of that home is then used to pay off the unmet home loan or mortgage. You can think of it as a kind of “insurance” for the financial institution that gave you the loan in the first place.

Imagine eating at a cash-only restaurant, only to realize that you don’t have a dime on you. You might leave your wallet with a waiter while you run to the ATM. And while waiter doesn’t necessarily want your wallet, they will keep it as insurance that you will return with money to pay for your meal. A mortgage works the same way. And a foreclosure means that if you don’t return, or you default on your payment, the waiter will keep your wallet and the bank will keep your home.

If you’re a more visual person, you can also check out this graphical representation of the subprime mortgage crisis from the New York Times.

Learn more about subprime mortgages and avoiding foreclosures at our LegalMatch law library, or by visiting the Real Estate and Property Law Forum at the LegalCenter.

 

 

By Kate Beall

Break A Lease Without Breaking the Bank.

Renting can be a nightmare. Leasing—even worse.

 

In a twelve-month period in 2006, I moved over six times—from Northern California to Southern California to all along the coast and back. I was seamless. I had packing down to a molecular-level science (that mostly involved never entirely unpacking), I could fit the entirety of my life into the back of a Civic, and I knew the I-5 like its asphalt was hard-coded into my blood.

The nomadic madness of that year taught me quite a few things about finding apartments. One: never move in with a stranger who you wouldn’t take out for coffee. Two: if you have to spend more than 60 seconds convincing yourself that this place is not that bad of a commute, it is. Three: If it’s broken when you move in, it’s going to be broken when you leave. And four: always, always, always rent month-to-month.

But once I got to San  Francisco (where month-to-month rentals and parking spaces DO NOT exist), I was forced to lock in to the first lease of my life. And let me tell you: learning about leases (and safe lease termination) can save your skin.

 

If you need to break a lease, you have a few options—but you’ll have to review the details of your lease agreement to figure out exactly what they are. A real estate lawyer can help you figure out the relevant bits if you need some clarity, and may even have a great suggestion for getting out of your particular situation. But whether you’re leasing commercial or residential property, you can try these more general bits of advice on for size:

(1) Assigning a commercial lease to someone else can save you thousands of dollars you’d otherwise be burning to break or pay out your lease. If you can find someone who is willing to take over your lease, and your contract allows for you to transfer the lease to them, you’re home free.

(2) If you can’t assign the lease, you may be able to sublet your property instead. However, while assigning allows you to wash your hands of any responsibility for the property, subletting still leaves you as the responsible party for any property damage or missed payments that come up. So make sure to choose your lessee wisely.

(3) If neither assigning or subletting are permitted by your lease, you’ll need to find something wrong with the place you’re leasing. Not only that—you’ll need to have serious documentation proving that you brought that “something wrong” to the landlord’s attention on more than one occasion, and that they have still failed to fix it. This obligation is called “duty to repair,” and if your landlord doesn’t? They’ve broken your lease, and you can do the same.

(4) Got the funds? You can usually pay out the remainder of your lease if you decide to break it, although it’s best to reserve this option for situations where you only have a month or two left. Some leases also have a set fee written into their contracts which you can pay in order to break away from it—but be careful. If you don’t pay close attention to the terms of your lease, you could be taken advantage of by a less-than-moral landlord.

If you do manage to successfully break a lease, take it as a lesson learned when you start looking at that next long-term contract. And the next time you’re presented with a restrictive lease, think about it carefully before you sign the dotted line. Or have someone think about it for you—like a lawyer that specializes in tenant’s rights to break a lease.

by Kate Beall

Cutting Income Tax with Property Exchange.

Income tax can mount up quickly—especially if you own multiple investment properties. And when you start selling old properties and acquiring new properties, the chunk of cash that comes out of your “profit” and goes to taxes can end up severely crippling your purchasing power.

But if you own investment property and want to shake off irksome income tax, it would be wise to consider a 1031 exchange (also known as a Like-Kind exchange). A 1031 exchange allows you to “exchange” an investment property for a replacement property—so long as the replacement property carries a greater (or equal) level of debt than the previous property. 

This means, simply: if you plan on trading up and exchanging one of your current properties for one with a higher value (generally a more expensive or larger property), you can proceed as if you were exchanging the properties instead of selling one and buying the other. It’s because of this that like-kind exchanges allow you to avoid paying any income tax on the sale of your initial property.

 

 Complicated?

Somewhat-- especially if you factor in “boot” (taxable property gain). But figuring out if you qualify for a 1031 exchange can salvage up to 30% of your purchasing power—money that would otherwise be paid to the government as tax. Getting in touch with a property exchange lawyer can put you on the right track to saving hundreds or even thousands of dollars in income taxes. Check with an attorney before you sell investment property, and figure out how you can save money on real estate.

 

 By Kate Beall

Urbanization and Endangered Species.

As a kid, I grew up in an empty expanse of desert. I was a part of Southern California before “The OC,” when Orange County was known for its endless groves of leafy citrus trees, and a good chunk of the dry, rocky land was still uncultivated.

Our backyard was full of coyotes and a trip to the nearest grocery store meant you’d usually catch a roadrunner or red-tail hawk preening in the dust. But as tract houses slowly dug their trenches into the homes of field mice and wild rabbits, the local fauna began to disappear. Now, visiting my parents' home means navigating set after set of tract-home developments and urban sprawl-- with not a roadrunner in sight.

This story is one that has replayed across this country and others, and sometimes only thin strips of wildlife preserves and natural sanctuaries seem to hint at what a pre-urbanized landscape used to look like. But does this mean that progress demands the sacrifice of species?  And what can you do about it?

Roadrunners and coyotes aren’t protected under the Endangered Species Act, but there are creatures (and plants!) that are negatively affected every year by the development of new homes, entertainment venues, shopping malls, airports, factories, and other human institutions. Check out the government’s guide to threatened and endangered species, and learn more about protected species in your state.

If you’re concerned about the environmental impact of a proposed development in your area—for example, building a paper-processing plant in an area that is home to a protected species like the Kangaroo Rat—you can consult the corresponding Environmental Impact Statement for more information.  These statements are created to describe exactly what kind of impact a new development will have on the surrounding communities and environment (both human and animal).  If you decide that you need a lawyer to get involved in the protection of a local species, or you feel that a proposed development is in violation of Federal Wildlife Laws, you should consult with an attorney who specializes in Environmental Law.

By Kate Beall