DEAR BENNY: I own a home that I bought approximately three years ago. I was going through my paperwork and realized that my initial appraisal was done on the house and indicated that it contained five acres. However, I bought only 2.5 acres. It appraised at exactly what I bought it for, so what does this mean? I have a loan based on a house that would not have appraised at the selling price when I bought it. –Sherina
DEAR SHERINA: I don’t mean to be critical, but hopefully this will be a lesson for you. It is probably too late — almost three years later — to do anything about this.
You should have reviewed the appraisal before you took title to the property.
However, this may have created a problem with your local real estate taxing authority. They may list your property as having five acres, so I suggest that you obtain a new appraisal and then review your tax assessment with the government’s assessor.
DEAR BENNY: After making a loan using your property as collateral, who is the owner — the bank or the owner (person who obtained the loan from the bank)? What period of time belongs to the bank and what period belongs to the owner? –Lili
DEAR LILI: The short answer is that the person who obtained the loan remains the owner of the property.
Here’s how it works: You own a house and get a loan from a bank. Although there are a "carload" of papers that you have to sign (many of which in my opinion are unnecessary), the three most important documents are (1) the HUD-1 settlement statement; (2) the promissory note; and (3) the deed of trust.
Let’s quickly look at each document:
HUD-1: This is the settlement (escrow) statement, which spells out all costs involved in your real estate transaction. I recommend that you keep this document forever because it will assist you when you file your tax return, and if the IRS should investigate your tax situation.
Promissory Note: This is basically an "IOU." You promise to pay the lender XX number of dollars, and the terms and conditions of the loan are — or should be — carefully spelled out in this document.
Deed of Trust: This is the mortgage document. In some states, only a mortgage is used. The deed of trust conveys your property "in trust" to one or two trustees selected by your lender. This document is recorded among the land records in the county where your property is located. In some states the trustees hold "legal title" to the property (in trust) while in other states the trustees have only "equitable title." These are legal technicalities that should not concern you.
When you pay off the loan, the deed of trust must be released by filing a release document with your local recorder of deeds. Sometimes the lender does this, and sometimes they just send you the form for you to record.
However, if you do not make your mortgage payments and go into default, the trustees have the "power" to sell your property at a foreclosure sale.
Clearly, you never want to hear from your trustees until the loan is paid.
Different states have different procedures about foreclosure, so I can provide only a general overview of the property.
But rest assured, so long as you are current with your mortgage, you own the property.
DEAR BENNY: Last summer we hired a contractor for a complete renovation of our kitchen, and the job is now nearly complete. However, during the final phase the job supervisor became unresponsive and then disappeared. After a few weeks we discovered that his shop had its license pulled by the state board because their workman’s compensation insurance and contractor’s bond had expired (actually, just before work on our job began). As the contractor’s staff are laying low and some of their employees, subcontractors and suppliers have not been paid, all appearances suggest that they are out of business for good.
Though we consider ourselves fortunate because the job was nearly finished, is there some action we can take to isolate ourselves from the financial mess sure to ensue? We paid all but a tiny fraction of the amount listed on the original contract, and spent more than that completing the job. Under the circumstances we would like to simply call it even and be done with it.
Would it suffice to send them a certified letter stating that — though they failed to satisfy their obligations under the contract — we are now prepared to consider the matter closed and that we have no financial obligations to the contractor, his employees, subcontractors or suppliers ?
If so, is there a standard form for such a letter? –J.S.
DEAR J.S.: I am unable to provide you specific legal advice, because contractor and mechanic’s lien laws vary from state to state. I strongly recommend that you retain local counsel to advise you.
You are indeed fortunate that most of the work was completed before the contractor walked off the job. I have counseled too many clients who have paid considerably more to their contractors when very little work was done.
In some states, the unpaid subcontractors may still have the right to file mechanic’s liens against your property. That’s why your attorney should get involved immediately.
Furthermore, in some states, if a contractor is unlicensed, the homeowner has the right to a refund of all of the moneys that were paid to that contractor, regardless of the quality or the quantity of the work.
I also suspect that you signed what I call the "two-page-special" contract. That is a simple contract prepared by most home improvement contractors that merely spells out in general terms what work will be done and how much the job will cost.
In my opinion, any homeowner entering into a home improvement contract where the cost of the job is more than $5,000-$10,000 should use an American Institute of Architects (AIA) form. That spells out a number of consumer protections, such as how and when to terminate the contractor as well as when and how they are to be paid.
DEAR BENNY: I purchased a parcel of land for cash. A year later I applied for a construction loan to build a house. We just completed paying for the construction loan. The house and lot are fully paid for. Is the deed for the land sufficient or do we need to apply for a deed to include the house? –Joe
DEAR JOE: Good question. When you bought the land, you received a deed to that property. The fact that you built a house on the land does not change the situation. You own the land and the house that is built on it. You do not need another deed.
One suggestion, however: Make sure that the construction loan has been released from land records now that it has been paid in full.
DEAR BENNY: Our neighbors have an enormous digger pine that butts up against our shared fence. About 40 feet up, the tree leans over the property line covering part of our yard and the back of our house. An arborist deemed the tree healthy and determined it leans to reach sunshine as other tall trees in our same neighbors’ yard block it. The tree drops a gazillion pine needles, sap and most nerve-wracking: heavy, spiky pinecones up to 10 inches long. The pinecones have damaged our rain gutters and landscaping. The sap has also damaged our landscaping and stains our patios due to the sheer amount of it. The base of the tree is pushing over the fence.
We have asked our neighbor to remove the tree (the city also requires a permit) and have offered to pay half, but he refuses, citing the cost. We cannot simply trim up on our side, as the arborist determined that would make the tree unstable due to the large size.
This tree poses a danger to our children and our property. It is also costs us money that goes beyond simply picking up a few leaves. Do we have any recourse? Can we force them to remove it? –Frustrated MT
DEAR FRUSTRATED: I cannot give you specific legal advice because "tree law" differs from state to state. However, since I represented a couple here in Washington, D.C., with a similar problem, here’s my suggestion.
First, you (or better yet your attorney) should send a formal letter to the neighbors, explaining your frustration, demanding that they agree to share the cost of removing the tree. This is just to establish a track record.
Next, have your attorney consider filing a lawsuit against the neighbors, claiming that their tree is a private nuisance. This worked in my case. The next-door neighbors claimed that my clients’ only remedy was to trim the overhanging branches and cut the roots. However, when we had an expert arborist testify that any such activity would kill the tree, and possible cause damage to property and injury to person, the judge determined that there was a private nuisance. The judge directed the neighbors either to remove the tree or cable it so that it would not fall down when my clients removed all parts of the tree from their side.
Litigation is never fun. It is time consuming, expensive and — more importantly — always uncertain. However, if you cannot get satisfaction from your neighbor — or the city — you may have no alternative but to file suit.
Benny L. Kass is a practicing attorney in Washington, D.C., and Maryland. No legal relationship is created by this column. Questions for this column can be submitted to firstname.lastname@example.org.
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