- Stark & Stark Shareholder Quoted in Star Ledger Article
Real Estate Tax Appeal Shareholder, Timothy P. Duggan, was quoted in the November 22, 2008 Star Ledger and Trenton Times article Reducing property taxes is possible, but not likely. The article discusses the recent rise in the number of homeowners filing for property tax appeals in New Jersey in the wake of the declining housing market and recent economic downturn. Mr. Duggan advises homeowners to take the necessary preliminary steps in understanding the tax appeal process in order to increase the chances that their appeal is heard and granted.
You can read the full article here. (PDF)
- The Next Shoe - Private Mortgage Insurance Policy Rescissions
It is hard to know when the proverbial “next shoe” will drop in the current economic crisis but recently credit lenders in my practice have experienced attempted policy rescissions for their mortgage insured accounts where suddenly and without any notice the private mortgage insurer (the “Company”) has attempted to rescind its insurance policy on specific accounts. This is especially true for policies issued on mortgage accounts closed during 2005-2006, the peak years of residential real estate values. Their letter often contains language to the effect that the application’s underlying appraisal was “false, incorrect or incomplete” and was “material to the decision to insure” or something similar thereto. The reality is that private mortgage insurers now realize that they are likely to be hit with a rash of claims on loans they have underwritten since the real estate bubble has burst and home values in many geographic regions have declined precipitously. Rather than brave the tempest and honor their policies they have elected to get in front of the wave through this novel rescission approach.
Attempted private mortgage recessions such as these, need to be handled promptly by qualified counsel. The credit lender’s appraiser should be put on notice and invited to put his carrier on notice of the pending claim. The appraiser should also be requested to review the appraisal used for the original underwriting to make certain that the facts contained therein are accurate and to verify the comps used. There should simultaneously be a demand for the insurance company’s new appraisal. Payments should be made to the Company in the regular fashion even if they are returned initially. Counsel should review the Company’s Master Policy and any exclusions and give the Company any required notice pursuant thereto in anticipation of the pending litigation.
While this recommended course of action often puts credit lenders and their appraisers (often with mutual business interests and longstanding relationships) at odds, New Jersey’s Entire Controversy Doctrine makes a second lawsuit against the appraiser itself impossible. Counsel, experienced and sensitive to these relationships, can normally soften the prospects of the pending suit by a telephone call explaining the circumstances and promising full cooperation in the litigation prior to issuing his written demand.
If litigation is commenced it is imperative to ascertain if the financial institution has other insured loans with the Company and it is normally advisable to seek declaratory relief in the Complaint seeking to maintain coverage on all those other loans where policies exist. Additionally, it may be time to take stock and ascertain the possible exposure of those other loans since the Company’s intentions to “rescind” its policies may signify well-founded concerns for its adequate capitalization. Prudence would suggest that a lender at least recognize the additional risks such mortgage insured loans may poise to a lender’s portfolio. Certain or all of these loans may well be singled out for “special handling”.
If the lender has any concern about the appraisal questioned or any other appraisals insured by the Company then it should hire an independent review appraiser to offer an independent view on the appraisal or appraisals. If there are any weaknesses in the case it is better to know up front. This may well affect the negotiation strategy with both the Company and the appraiser’s insurance company.
In these “recession” situations, it’s a simple “shoe-in” to seek guidance and move swiftly in order to preserve the credit lender’s rights. Normally the bank’s counsel will need a copy of the notifying letter, a copy of the appraisal used by the Company to determine that the underlying appraisal was “false”, a copy of the original appraisal and a copy of the Company’s Master Policy currently in effect with the credit lender.
- Exclusion of Gain from Sale of Principal Residence
When selling a home, whether due to an employment move, trading up, or downsizing, a homeowner-taxpayer should be aware that special tax treatment applies under certain situations when the sale is of the taxpayer's principal residence.
Under certain circumstances, a single taxpayer can exclude up to $250,000.00 of gain on both federal and state income tax returns and married taxpayers can exclude up to $500,000.00. For married couples, the $500,000.00 exemption requires that they file a joint return in the year their residence is sold.
The determination of whether gain on the sale of a residence can be excluded from a homeowner's income for tax purposes depends on whether the property has been owned and used by the taxpayer for a period of two or more years during the five year period preceding the sale. The five year period ends on the date title is transferred. The two year time period, for both ownership and use, does not need to be a consecutive. The time can be aggregated over the five year period. There is, however, a limitation on how often this exclusion of gain can be used. The exclusion can only be applied to one sale every two years.
For married couples to qualify for the up to $500,000.00 exemption, in addition to filing a joint return, either the husband or wife must meet the ownership requirement and both spouses must meet the use requirement. In addition, neither spouse shall be ineligible for the exclusion because he or she sold a property within the past two years. If the married couple does not share a principal residence, an exclusion of up to $250,000.00 is available on a sale that qualifies as the principal residence of one of the spouses.
If a single homeowner, who is eligible for the exclusion of gain benefit, marries someone who elected to use the exclusion benefit within the two years prior to the marriage, the now married taxpayer is only allowed a maximum exclusion of $250,000.00. If a taxpayer has more than one home, only the sale of the principal home qualifies for the exclusion of gain benefit.
There is an exception to the two year requirement for sales which permits a reduced amount of gain to be excluded from income. A reduced exclusion can apply to a sale resulting from a change in the taxpayer's place of employment, health, or certain unforeseen circumstances. In such situations, a taxpayer is provided a reduced exclusion based on the portion of the two year period for which ownership and use requirements are met.
The Taxpayer Relief Act of 1997 modified Section 121 of the Internal Revenue Code to provide this exclusion of gain benefit. It replaced the prior law which provided rollover and one-time exclusion provisions for the sale of taxpayers' residences and replaced it with a simpler law which no longer requires a taxpayer to continually "trade up" to benefit from substantial tax savings.
- Partition Actions When Property Co-Owners Can't Agree
What happens when co-owners can’t agree on how to share the ownership responsibilities of a piece of real estate? Perhaps it is a residence, a commercial property or vacant land and the owners cannot agree on how to share the payment of taxes, costs of maintenance, or need for improvements to the property. Perhaps they cannot even agree on selling the property to resolve their disputes. In cases where co-owners cannot work out a resolution on their own, one or more may need to resort to the Courts for a solution.
New Jersey provides an equitable remedy known as partition. The term “partition” means the division of property among co-owners. Real property held by co-owners as a tenancy in common or a joint tenancy (but not by spouses as tenants by the entirety or by N.J. registered domestic partners) may be p
