“Let It Snow, Let It Snow, Let It Snow…But Should Someone Else Be Clearing it?”

Winners, shopping in Calgary

Winter has made its early debut. The snow has begun falling and the salt trucks are already covering the roads (and our cars), and it’s not even December! Despite the bleak forecasts, people are out and about in large numbers, especially in light of the approaching holidays. With the snow comes the ice, and shopkeepers and property owners alike are getting their own shovels and salt stashes ready to clear their walkways and sidewalks for their customers and tenants. Along with the bad weather also come the questions regarding a property owner’s or lessee’s obligations to a tenant or customer to create a safe, and ice or snow free, place to come and go. It’s best to have a plan of action with regard to your property before the bad weather hits and understand your duties to those visiting your property during the winter season. If you’re a landlord, business owner or retail lessee, consider the following:

Landlord/Tenant Obligations

Generally, a landlord has a duty to exercise reasonable care to keep common areas held in the landlord’s control in a safe condition for their tenants, as well as recognize changing conditions and remedy them as they arise. This is especially an issue when the weather turns for the worse. Landlords need to be aware of potential issues as the snow and ice starts to accumulate, keeping on hand the proper materials to keep the walkways clear and safe and be cognizant of problems as they arise so they are fixed in a reasonable manner and within reasonable time.

Business Owners/Lessees

For tenants leasing a retail space, it is important to first look to your retail lease to determine exactly who is obligated, if anyone, to clear and salt the walkways and storefront in bad weather such as snow and ice. If your business or property sits on a municipality owned walkway or roadway, look to your city ordinances to determine whose obligation this may be in inclement weather. Determining whose responsibility it is to take action when winter hits is the first step in preventing injuries on your premises as well as liability for yourself or your business. Whether you’re a retail landlord or tenant, consider whether you need to incorporate language into your lease that speaks to duties with regard to snow and ice if these obligations are not clear.

If your business, like many others, clears and salts its sidewalks and parking lots to encourage people to come in despite the wintery conditions, it is important to have a consistent policy in keeping your premises clear and as safe as possible. With a change in Kentucky law over the last 5 years, even if it is obvious to your customers that weather is poor and the sidewalks slick, the entity occupying the property could still face liability if it doesn’t ensure the care towards its premises is reasonable under the circumstances.

By addressing these potential issues early, landlords, business owners and lessee’s can reduce the possibility of incidents on their premises and injuries to their customers or tenants during the winter season. If you are a landlord, retail owner or tenant and have questions about your obligations, contact the attorneys at McBrayer today.

BMacGregor

Brittany MacGregor is an associate attorney practicing in the Lexington office of McBrayer, McGinnis, Leslie & Kirkland, PLLC. She is a graduate of Transylvania University and the University of Kentucky College of Law. Ms. MacGregor’s practice focuses on real estate law, including title examination, title insurance, clearing title issues, deeds, settlement statements, preparation of loan documentation, contract negotiation and preparation, and lease negotiation and preparation. She may be reached at bmacgregor@mmlk.com or at (859) 231-8780.

This article is intended as a summary of federal and state law activities and does not constitute legal advice.

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Is An Interest-Only Mortgage Right For You?

There are a number of financing options to consider when purchasing a home, one of which is the interest-only mortgage. This type of mortgage requires a homeowner to pay only the interest that accrues on the loan each month. None of the principal is paid off until the interest-only period expires. The length of the interest-only periods can vary, but payments are relatively low during this time. After expiration of the interest-only term, the buyer is then required to make monthly payments for the principal.

Traditionally, interest-only mortgages were used when home prices were so high that a conventional mortgage payment was out of a borrower’s range. They gave homeowners more bang…or, specifically more house…for their buck. Many saw interest-only loans as one of the many contributing factors to the foreclosure crisis. Freddie Mac stopped backing the loans in 2010; as a result, fewer lenders now offer interest-only mortgages and those that do utilize strict qualifying standards.

This kind of mortgage still presents some advantages. The extra cash that an interest-only mortgage payment leaves a homebuyer with can be used for other purposes, such as to pay off school loans or to upgrade the home. The key, as I see it, is to invest the saved money wisely or put it into other appreciating assets. Ideal candidates for this type of mortgage are those who are certain that they will sell the house before the interest-only period ends or individuals who may have unpredictable income or earnings with a large variable component. For example, brokers who work on a commission structure and whose incomes can fluctuate dramatically can certainly benefit from the flexibility, if they commit to paying the principal when the income is available.

Perhaps the most significant disadvantage to interest-only mortgages is the potential for “payment shock” at the conclusion of the interest-only period. This can be a devastating situation for borrowers who fail to plan properly. There is always the risk that the value of the home will fall during the interest-only period, leaving a homeowner owing more on the home than it is worth.

Borrowers using this particular financing plan should assess their abilities to stay within a financial plan and determine upfront how the cost savings will be used. An interest-only mortgage is not for everybody, but for some, it can be a helpful tool in an ever-changing financial landscape. If you have questions about buying a home, contact the real estate attorneys at McBrayer today.

CRichardson

Christopher A. Richardson is an associate at McBrayer, McGinnis, Leslie & Kirkland, PLLC in the Louisville, KY office. Mr. Richardson concentrates primarily in real estate, where he is experienced in residential and commercial closing transactions, landlord/tenant relations, and mortgage lien enforcement/foreclosure. Mr. Richardson has closed innumerable secondary market and portfolio residential real estate transactions and his commercial practice ranges from short-term collateralized financing and construction lending to development revolving lines of credit. He can be reached at 502-327-5400 or crichardson@mmlk.com.

This article is intended as a summary of  federal and state law and does not constitute legal advice

LBAR Launches App, Just As Industry Giants Merge & New Concerns Arise

Zillow and Trulia, the two largest sites in the home listings game, are merging. These sites enable buyers to navigate an online map to find a home’s value, look at available listings, and connect with local real estate agents. And while the companies, nearly a decade old, have somewhat helped to streamline the home buying and selling process, real estate deals remain a transaction that largely require professional assistance – from agents, to bankers, to attorneys. Even with online assistance from sites like Zillow and Trulia, most homebuyers prefer one-on-one guidance and advice from a trusted professional.

The merger, which will result in the two companies becoming by far the biggest online portal in the industry, has caused concern throughout the residential brokerage business. Some are worried that the merger will result in the company having too much power over listings, possibly raising associated fees. There has even been talk that the company might now break into the brokerage business itself, something that the separate companies have not done to date.

The National Association of Realtors (NAR) has its own consumer website, realtor.com, which is operated by Move Inc. and ranks third behind Zillow and Trulia in terms of popularity. In July, a new NAR marketing campaign emphasized the accuracy of realtor.com listings and the role of realtors in buying and selling homes. The long-standing critique of both Zillow and Trulia has been the accuracy of their services’ listing information. Realtor.com, on the other hand, gets listings directly from most of the nation’s more than 800 multiple listing services (MLSs).

Local MLS associations should not worry about the merger too much, as there is still very much a need for professionals in the world of real estate transactions. Associations, should, however note that they must make more of an effort to reach consumers in the online environment and offer value-added services that the industry behemoths do not – such as proving local expertise or always having the latest listings.

Taking a page from this playbook, the Lexington-Bluegrass Association of Realtors (LBAR) just announced the launch of their mobile app, LBAR Homes, which allows users to view all homes for sale or rent in the Bluegrass Region. Users can search by address, city, or zip code to see property details for all homes for sale or rent in a specified area, including price, square footage, estimated mortgage, taxes, features, maps, pictures, and more. A contact feature allows users to connect with respective listing agents by phone or email. The free app can be downloaded from an app store or at app.lbar.com, or by texting LBAR to 87778.

Once you find your home, you’ll want to contact a closing attorney to assist in the legal aspect of the purchasing process. Contact McBrayer’s real estate group if you’re ready for this exciting step in the process!

BMacGregor

  Brittany C. MacGregor is an associate attorney practicing in the Lexington office of McBrayer, McGinnis, Leslie & Kirkland, PLLC. She is a graduate of Transylvania University and the University of Kentucky College of Law. Ms. MacGregor’s practice focuses on real estate law, including title examination, title insurance, clearing title issues, deeds, settlement statements, preparation of loan documentation, contract negotiation and preparation, and lease negotiation and preparation. She may be reached at bmacgregor@mmlk.com or at (859) 231-8780.

This article is intended as a summary of federal and state law activities and does not constitute legal advice.

Mortgage Prequalification versus Preapproval

First time home-buyers are often under the impression that mortgage prequalification and preapproval are interchangeable terms, but they are actually two separate steps in the financial process and it is important to understand the difference between them.

Prequalification is a lender’s estimate of how much you could be eligible to borrow based on information you supply. In a prequalification, a credit report is not pulled, which means that the lender is depending on incomplete (and sometimes inaccurate) information. Prequalification does not mean a loan will be given, but is meant to serve only as an estimate for the mortgage process. Prequalifications help sellers determine a potential buyer’s general creditworthiness and give buyers a better understanding of their future financial responsibilities, but are not binding in any way.

Preapproval, however, is more concrete and does involve a credit report check. Lenders will contact employer, banks and others to verify a potential loan recipient’s income, assets, debts and credit history in this step. A preapproval from a lender will say how much you are eligible for, how long the approval is valid, and may contain some additional conditions for the loan. Note that a lender may not require the payment of any fees, except the cost of a credit report, at the time of a preapproval. Just because one obtains a preapproval does not mean that the loan is final – the funding will only be given when the property appraisal, title search, and other verifications have been confirmed.

There is no harm in getting prequalified, but to seal the deal preapproval is necessary. Buying a home is a complex process – make sure you know the industry lingo before getting involved in buying and selling negotiations to ensure that all parties are on the same page.

J. Markham

Joshua J. Markham is a member at McBrayer, McGinnis, Leslie & Kirkland, PLLC in the Lexington, KY office. Mr. Markham practices in virtually every aspect of real estate law, including title examination, title insurance, clearing title issues, deeds, settlement statements, preparation of loan documentation, contract negotiation and preparation, lease negotiation and preparation, and any and all other needs related to residential and commercial real estate matters.He can be reached at jmarkham@mmlk.com or (859) 231-8780, ext. 149.

This article is intended as a summary of federal and state law activities and does not constitute legal advice.

Not So Fast On Your “No Pets” Policy

Many landlords enforce a “no pets” policy in their rental units – and for good reason. Pets can be destructive, frighten other tenants, and increase landlords’ liability exposure. Such a policy, however, can be discriminatory to those with disabilities. While most landlords understand their obligation to make an exception for service animals, not all know what to do when a tenant requests to keep an emotional support animal (“ESA”) in their unit.

The Fair Housing Act prohibits discriminatory practices in connection with virtually all forms of private residential housing, whether for sale or rent. 42 U.S.C. 3603(a); see also KRS 344.360. It is important to note that the Act prohibits discrimination in a wide variety of actions, such as advertising, new design, or zoning. Discrimination under the Fair Housing Act also includes “a refusal to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford [a person with a disability] an equal opportunity to use and enjoy a dwelling. 42 U.S.C. §3604(f)(3)(B); see also KRS 344.360(11)(b). If a person is physically impaired (or, has a record of impairment or is regarded as having an impairment) and has a trained service dog to perform a major life task that he or she struggles to perform on their own, the Fair Housing Amendments Act of 1988 requires the landlord to make a reasonable accommodation to their policies.[1]

Similarly, the Fair Housing Act’s reasonable accommodation requirements also include ESAs under appropriate circumstances. The request for ESA’s, unlike requests for trained service dogs, is relatively new.[2] There are unique perils when dealing with ESAs and landlords should always proceed with caution if a request has been made. Whereas a tenant’s physical disabilities can be readily apparent, the same is not the case with emotional disabilities. Landlords can, and should, ask the person seeking the accommodation to provide documentation that the animal provides emotional support that alleviates one or more of the identified symptoms or effects of an existing disability. While what qualifies as an acceptable source of such documentation has not been clearly established, documentation provided by physicians, psychiatrists, social workers or other mental health professionals has been deemed sufficient to warrant the allowance of an ESA as a reasonable accommodation.[3] However, existing case law makes clear that for a reasonable accommodation to be made, the tenant must demonstrate a relationship between his or her ability to function and the companionship of the animal.[4]

Importantly, according to the Americans with Disabilities Act, only a dog that is individually trained to do work or perform tasks for those with disabilities can be labeled a service dog. However, there are currently no similar provisions in the Americans with Disabilities Act, the Federal Housing Act, or in state regulations on what types of animals can serve as an ESA; a tenant could potentially rely on a snake or a pig as his or her ESA, and with proper documentation, could be legally entitled to keep the pet in his or her residential unit in accordance with the Fair Housing Act. Further, while service dogs must undergo specific training (which often makes them less problematic from a landlord’s perspective), there currently is no such requirement for ESAs.

Pet policies can curb some of the problems that landlords routinely encounter, but if applied uniformly without exception when a reasonable request has been made by a disabled tenant, it may lead to an even bigger problem: a discrimination claim. In addition to a general statement that the landlord will not discriminate against tenants or prospective tenants based on race, color, religion, sex, familial status, disability, or national origin, landlords should include language in their pet policies to reassure individuals with disabilities that an exception (i.e., a reasonable accommodation) will be made if appropriate under the Fair Housing Act and other applicable law.

[1] The Rehabilitation Act of 1973 and Title II of the ADA may also protect a tenant’s right to reasonable accommodation in some instances (i.e., if the housing is public or federally subsidized).

[2] ESAs are defined in the Fair Housing Act (1988) as those animals that belong to a person who is emotionally or psychologically disabled. It was not until a September 2010 Department of Justice ruling that the distinction was made between a “service animal” and ESA for purposes of the ADA.

[3] See Office of Fair Housing and Equal Employment Notice 2013-01 (April 25, 2013).

[4] See, e.g., Housing Authority of the City of New London v. Tarrant, 1997 Conn. Super. LEXIS 120 (Conn. Super. Ct. Jan. 14, 1997); Crossroads Apartments v. LeBoo, 578 N.Y.S.2d 1004 (City Court of Rochester, N.Y. 1991).

BYates

Brendan Yates joined the Lexington office of the firm as an associate in 2002. Brendan is a member of the firm’s Litigation Department, where he focuses his practice on construction and real estate litigation, workers’ compensation defense litigation, insurance defense and commercial litigation. He has successfully defended his clients in state and federal courts, the Kentucky Court of Appeals, the Kentucky Supreme Court, and in administrative agency proceedings in Kentucky. He can be reached at byates@mmlk.com or (859) 231-8780, ext. 208.

This article is intended as a summary of  federal and state law and does not constitute legal advice.

Lenders: Are You Using Electronic Signatures?

Earlier this year, the Federal Housing Administration (“FHA”) announced that they would begin accepting electronic signatures on documents associated with mortgage loans. FHA already allows e-signatures on some third party documents, outside of the lender’s control. The announcement, which became effective immediately, expanded the documents for which e-signatures are acceptable and now includes:

(1)    Any documents associated with servicing or loss mitigation;

(2)    Any documents associated with the filing of a claim for FHA insurance benefits;

(3)    The HUD Real Estate Owned Sales Contract and related addenda; and,

(4)    All documents included in the case binder for mortgage insurance except the Note.

Starting December 31, 2014, FHA will also accept e-signatures on the Note for forward mortgages, but not Home Equity Conversion Mortgages.

Lenders who have decided to rely on e-signatures must be sure that they are in compliance with the Electronic Signature in Global and National Commerce Act (“ESIGN”). In addition, authentication systems should be in place that can confirm that a signature may be attributed to the purported signer and lenders should take steps to confirm the signer’s identity as a party to the transaction. There must also be record retention controls in place that are consistent with the retention policies of ink-signed documentation.

Hopefully, the acceptance of e-signatures will reduce mortgage origination costs and streamline document submission processes for both lenders and borrowers. The move is just a part of the overall initiative to make the home buying process easier for consumers (see what the Consumer Financial Protection Bureau is doing here).

By now, lenders should have had time to review their technological capabilities and update their policies and procedures on e-signatures. If you are a lender and have not done so, consider how accepting e-signatures can improve your processes and efficiency. If you have questions about FHA’s announcement or about regulations to which you must adhere, such as ESIGN, contact a McBrayer real estate attorney today.

CRichardson

Christopher A. Richardson is an associate at McBrayer, McGinnis, Leslie & Kirkland, PLLC in the Louisville, KY office. Mr. Richardson concentrates primarily in real estate, where he is experienced in residential and commercial closing transactions, landlord/tenant relations, and mortgage lien enforcement/foreclosure. Mr. Richardson has closed innumerable secondary market and portfolio residential real estate transactions and his commercial practice ranges from short-term collateralized financing and construction lending to development revolving lines of credit. He can be reached at 502-327-5400 or crichardson@mmlk.com.

This article is intended as a summary of  federal and state law and does not constitute legal advice.

Beyond the Commercials: Understanding Reverse Mortgages

You have likely seen the commercials for reverse mortgages. While the advertisements urge viewers to “call now to secure you reverse mortgage today” and make them seem risk-free, obtaining a mortgage of this type is a serious decision that should not be made without fully understanding its pros and cons.

A reverse mortgage is a loan available to homeowners who are 62 years or older that enables them to convert part of the equity in their home to cash, ideally to cover basic monthly living expenses and pay for health care (though there is no restriction on how proceeds can be used). The amounts that can be borrowed are determined by a formula that takes into account the percentage of the home’s value based on the borrower’s age and current interest rates.

With a traditional mortgage, the borrower makes payments to the lender. The reverse mortgage “reverses” that payback stream so that the lender makes payments to the borrower in the form of a steady stream of income (annuity), a lump sum payment or a line of credit he or she can draw on. The loan is not required to be paid back until the home is sold or vacated. If the homeowner(s) die, the loan must be paid back either through the sale of the home or with other funds from the borrower’s estate. If the loan amount exceeds the value of the home when the loan comes due, the house becomes the property of the lender. Reverse mortgage terms mandate that borrowers continue paying property taxes and homeowner’s insurance, so default on the loan is still possible even though there are no monthly payment obligations.

Home Equity Conversion Mortgages (HECMs) are by far the most popular types of reverse mortgages. HECMs are created and regulated by the U.S. Department of Housing and Urban Development. A HECM is not a government loan, but is issued by a private bank and insured by the Federal Housing Administration. In recent years, the HECM program has experienced increasing defaults and it was discovered that many borrowers are confused about what a reverse mortgage really is (thanks, at least in part, to deceptive advertising common in those TV commercials). Instead of using the loan as a long-term financial tool, borrowers were using it as a last-ditch effort to manage a money crisis.

As a result, in 2013 many reforms were brought to the HECM program. The major changes included:

(1)   Limiting the amount of money that can be disbursed at closing or during the initial year after closing;

(2)   Requiring a financial assessment before granting loan approval so that borrowers demonstrate their ability to meet all their housing obligations, like taxes, insurance, and maintenance.

(3)   Requiring set asides for payment of property taxes and insurance out of line of the credit or tenure/term payments for some borrowers.

Hopefully, the changes will improve the program and help seniors use reverse mortgages in the way that they were intended to be used. If you have a question about your home mortgage, contact a real estate attorney at McBrayer today.

BMacGregor

 Brittany C. MacGregor is an associate attorney practicing in the Lexington office of McBrayer, McGinnis, Leslie & Kirkland, PLLC. She is a graduate of Transylvania University and the University of Kentucky College of Law. Ms. MacGregor’s practice focuses on real estate law, including title examination, title insurance, clearing title issues, deeds, settlement statements, preparation of loan documentation, contract negotiation and preparation, and lease negotiation and preparation. She may be reached at bmacgregor@mmlk.com or at (859) 231-8780.

This article is intended as a summary of federal and state law activities and does not constitute legal advice.