Intrafamily refi forgoes costs, hassle

DEAR BENNY: I am looking into refinancing my Texas home from a 5/1 adjustable-rate mortgage to a fixed-rate. During this process my mother stated that she would lend me the $150,000 to pay off my existing loan and I would pay her back at the current market rate for a 30-year fixed. This would provide her a stable investment, and I can forgo the closing costs, paperwork, appraisal, etc., associated with a refi.

What are the legal implications of this transaction? If I pay off my current loan do I assume title? What paperwork do I have to sign with my mom to validate the transaction and where do we file it? She would have to claim the income; can I still write off the interest as I would do with any other home loan? Is this transaction as simple as it sounds? --Craig

DEAR CRAIG: Actually, it's simpler than it sounds.

First, let me respond to your question about title. You still own the property, even though there is a mortgage with a commercial lender. All the lender has is security -- protected by recording the mortgage (or deed on trust) on land records in the county where your property is located. When you pay off that loan, the lender will either arrange to release the lien from land records, or send you the appropriate papers for recording.

I suggest that your mother retain legal counsel -- at your expense -- to assist her. The current lender needs to be paid off; this is what the attorney will do. The lawyer will also prepare the appropriate legal documents -- the promissory note and the deed of trust (or mortgage in some states) -- which you will sign and notarize.

Once you start sending your monthly payments to your mother, she will have to declare the interest received as income on her annual income tax return. And so long as the new deed of trust (mortgage) is recorded among land records, you will be able to deduct for tax purposes the interest you have paid her each year.

DEAR BENNY: I live in a large condominium complex, with an outdoor swimming pool. There are occasions when someone sits around the pool smoking. The problem is that when I come up for a breath of air, I get a lungful of smoke, anywhere in the pool. It's hard to believe smoke travels as far as it does.

I've appealed to our board to prohibit smoking in the pool area, or at least for a specified hour. Their response is that the city will not allow such a restriction in the outdoors. Do I have a remedy? --B.H.

DEAR B.H.: In today's world, it is hard for me to believe that the city does not allow such a restriction. More and more cities are enacting anti-smoking regulations, so the board's answer is, at best, disingenuous.

More importantly, however, there is what I call "public and private zoning."

This means that while a city may or may not have a particular rule in effect, it does not mean that your condominium board of directors cannot impose such a smoking ban. Unless there is a specific regulation in the city that states "no smoking restrictions may be imposed in public property" -- which I seriously doubt -- your board has the authority to pass such a rule.

Landlords all over this country have imposed "no smoking" rules in their buildings. More and more condos have enacted similar rules. In fact, some associations are even banning smoking within individual units, which will have to be tested in the courts before it becomes widespread.

I suggest that you ask the board for a legal opinion on whether it can enact such a smoking ban in its common elements.

DEAR BENNY: My aunt and I own about 400 acres in a rural area that we inherited from family. We own it as joint tenants with right of survivorship. We want to sell the land to developers and maximize the amount for the sale but do not know how to begin the process. Do we need to prepare the land in some way? I have friends who had fewer acres and made several millions off the sale of their land to county administrations and private developers. They seem to have been at the right place at the right time to make their sales.

Then my aunt asked about wind farms. From my research, there aren't any in this area. Is it a good opportunity before many people get into the business? Should we contact the county planning commission? If we do, what do we say? Should we contact the politicians in the area? If so, how should we reach out to them? What can we do to make our land attractive so we can sell it and live comfortably in our future? --Renee

DEAR RENEE: First, this may not be the best time to sell, considering the state of the economy, but it certainly would make sense for you to do your homework. ...CONTINUED

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