Real Estate Liens – When Do They Expire?

Untitled design

Mortgages – Mortgages expire five years after their maturity date.  If there is no maturity date on the mortgage then it will expire in 35 years.  See M.G.L. c. 260 § 33.

Writ of Attachment – These expire six years and 90 days after they are recorded at the registry of deeds.  M.G.L. c. 223 § 114A and REBA Title Standard No. 49.

Writ of Execution – These also expire six years and 90 days after they are recorded at the registry of deeds.  M.G.L. c. 236 § 49A and REBA Title Standard No. 47.

Federal Tax Liens – Such liens expire 10 years after their assessment date.  26 U.S. Code § 6502 and REBA Title Standard No. 54.

Massachusetts Tax Liens – These expire 10 years and 30 days after their assessment date.  M.G.L. c. 62C § 50(a) and REBA Title Standard No. 55.

UCC Financing Statements – A financing statement will expire five years after it is filed.  M.G.L. c 106 Art. 9 § 9-515.

Municipal Betterments or Assessments – The lien will expire 30 years after it is recorded at the registry of deeds.  M.G.L. c. 80 § 12 and REBA Title Standard No. 22.

Child Support Liens – A child support lien will expire 10 years after the lien is perfected.  M.G.L. c. 119A § 6 and REBA Title Standard No. 83.

Real Estate Tax Lien – These liens do not expire after they are recorded at the registry of deeds.  See M.G.L. c. 60 § 37A and REBA Title Standard No. 18.

Massachusetts Estate Tax Liens – A Massachusetts estate tax lien expires 10 years after the date of death, provided additional conditions are satisfied.  Refer to REBA Title Standard No. 24.

Federal Estate Tax Liens – Federal estate tax liens also expire 10 years after the date of death.  Again, additional conditions must be satisfied before the lien will expire.  See REBA Title Standard No. 3.

Extensions

Keep in mind that most liens can be extended.

A creditor can extend his lien by filing an extension in the registry of deeds before the lien expires.

Any Questions?

If you have any questions regarding real estate liens, don’t hesitate to contact me at justin@jrmccarthy.com.

Real Estate Agents – Who Needs One?

Untitled design

Most real estate agents receive a 5 to 6.25% commission when they sell your home.

Their commission is deducted from the money you receive for the sale.

So if you sell your house for $200,000, the real estate agent will receive between $10,000 and $12,500.

That’s a lot of money.

And it causes many sellers to question whether using a real estate agent is really worth the expense.

Here’s my advice.

What a Real Estate Agent Does

First, you need to understand what a real estate agent does.

An agent helps you market your house.

This means pricing, advertising, and showing the home to perspective buyers.

The agent assists you in sale negotiations.

They also act as advisors during the sale process.

If you have questions about what lawyer to use or where to find a good repairman, the agent should be able to give you guidance.

Who Needs an Agent?

If you’re inexperienced with real estate, you should consider hiring an agent.

Also, if you’re too busy to market your home or deal with sale negotiations, you should think about using an agent.

Most sellers have little experience in the field or just lack the time to deal with selling their home.

So, for most people, hiring an agent makes sense.

Nevertheless, there are many sellers who can do without an agent.

Here are some examples.

The Seller Knows the Buyer

A real estate sale between two people who know each other can usually be done without an agent.

I often assist clients who are selling real estate to a neighbor, a family member or a friend.

In those scenarios, the real estate agent is usually unnecessary.

Typically the seller’s lawyer will assume some of the agent’s jobs (e.g., producing the Purchase & Sale Agreement, holding the buyer’s deposit in escrow, etc.)

The lawyer may charge a bit more for this—a few hundred dollars perhaps.

But you’ll save thousands by avoiding an agent.

The Seller Has Experience with Real Estate

People who have some experience with real estate can usually sell their property without an agent.

I recently represented a seller who had worked as a real estate paralegal.

She understood the sale process and the paperwork.

No agent was used and the sale went smoothly.

Likewise, someone who has been through the sales process two or three times will often have enough experience to manage the transaction without an agent.

Again, the seller will need the lawyer to handle some of the paperwork customarily done by the agent.

Any Questions?

If you have any questions about selling your home with or without an agent, please feel free to email my office anytime:  justin@jrmccarthy.com

 

Adding Family Members or Loved Ones to Your Deed – Pros and Cons

beige rose flowers near brown concrete house
Photo by Elina Sazonova on Pexels.com

There are two advantages to adding family members or loved ones to your deed.

Pro #1 – Avoid Probate

First, if you die, your house will instantly pass to the persons you’ve added.

This means that the property will not go through the probate process.

Avoiding probate will save a lot of time, money, and aggravation.

Pro #2 – MassHealth

Second, it can reduce the penalty you incur if you apply for MassHealth.

When you apply for MassHealth assistance with long-term care, you will need to disclose the value of your assets.

The more assets you own, the more you will be required to spend before the state will assist you.

When you add people to your deed, you lose a portion of ownership in your home.

This can substantially reduce the size of your estate and, consequently, make it easier for you to qualify for MassHealth.

If done properly, it can also prevent MassHealth from attaching liens on your property after you die.

Best for Single or Widowed Homeowners

So who would benefit most from these advantages?

Usually it’s a single or widowed homeowner who is about 70 or older.

Married homeowners hold title to their home jointly.

This means that if one dies, the other will instantly own the home in its entirety.

There’s no need for probate.

Furthermore, a married MassHealth applicant can usually transfer assets to a spouse without incurring penalties.

Single homeowners don’t have these advantages.

There are two disadvantages to adding people to your deed.

Con #1 – It Complicates Things

First, it will make dealing with the home more complicated.

The people you add to the deed will need to consent to everything you do with the property—sell it, mortgage it, lease it, etc.

If any of the new owners refuse to cooperate, you’ll need a court order to resolve the matter.

Con #2 – It Creates Liability

Second, it could make your real estate susceptible to the new owners’ creditors.

Say, for instance, that you add your son to your deed.

He then falls behind with his bills and his creditors take him to court.

If they win at court they can attach liens to any real estate he owns.

This could include your home.

So if you have a family member or loved one facing legal problems, you should think twice about adding that person to your deed.

Caveat – Always Consult an Attorney

It may seem simple to rewrite your deed and just add a few names to it.

But drafting deeds can be very technical.

Adding or omitting just a few words here or there can completely thwart whatever it is that you’re trying to accomplish.

Therefore, it’s important that you consult an attorney.

Most attorneys will charge anywhere from $100 to $500 to draft a deed.

You’ll also need to pay a $125 fee to record the document at the registry of deeds.

How Much Does It Cost to Buy or Sell a Home?

Untitled design

The cost of buying or selling a home varies.

But there are a few expenses that are paid in almost every purchase or sale.

Seller’s Expenses

The seller will usually need to pay for the following:

  • Realtor’s commission – 5 to 6.25% of the sale price
  • Lawyer’s fee – $500 to $1,000
  • Stamp tax – $4.56 per $1,000
  • Payoff of seller’s mortgage or other liens
  • Payoff of seller’s outstanding city or town fees (e.g., real estate taxes, final water bill, etc.)

All expenses will be deducted from the check that the seller receives at the time of the closing.

Here’s an example.

Sally sells her house for $100,000.   Her realtor’s commission is 5%.   Her lawyer’s fee is $500.  And she has a mortgage with a current balance of $50,000.

The calculation would look like this.

$100,000 – Purchase Price

– $50,000 – Mortgage Payoff

-$5,000 – Realtor Commission

– $500 – Legal Fee

– $456 – Stamp Tax

 $44,044 – Due to Sally at closing

Keep in mind that other small fees such as registry recording costs and final municipal bills may also need to be deducted.

Buyer’s Expenses

The buyer will pay for more services.

At the very least, the buyer will pay for the following.

  • Lawyer’s fee – $500 to $1,000
  • Title Exam – $150 to $250
  • Land Survey – $150 to $250
  • Owner’s Title Insurance – About $3.75 per $1,000
  • Municipal Lien Certificate – $25 to $50
  • Registry of Deeds Recording Fees – $125 for a deed

If the buyer is getting a bank loan to purchase the property, then there will be additional charges.

  • Loan Origination Fee – about $500 to $1,000
  • Appraisal – $350 to $450
  • Tax Services – About $20
  • Flood Certificate – about $10
  • Registry of Deeds Recording Fees – $175 for the mortgage, $65 for the municipal lien certificate
  • Lender’s Title Insurance Policy  – this expense will vary depending on the type of policy your lender requires (standard or expanded) and whether you are also purchasing your own title insurance policy (i.e., an owner’s policy).  Here’s a link that will allow you to calculate the cost of title insurance.

The lender will also require the buyer to set aside about two to three months of real estate taxes and homeowners’ insurance payments.

This money will be put into an escrow account and managed by the bank.

The bank may also require you to pay interest on the mortgage from the day of the closing to the end of the month.

Finally, you may need to purchase mortgage insurance.

It’s difficult to give a good ballpark number for the average buyer’s closing costs.

If you’re buying the property with cash, ask your lawyer upfront for a good closing cost estimate.

If you’re getting a loan, the bank will provide you with a document called the “Good Faith Estimate” or GFE.

The GFE will break down most of the expenses that you will need to pay on the day of the closing.

The expenses that you pay cannot greatly exceed what the lender estimated.

If the closing expenses do exceed the estimate by more than 10%, the lender will need to pay the difference.

How to Dispute Debt

Untitled design

Have you received a letter from a debt collector?

If so, here’s how to dispute it.

Your Rights

First, know your rights.

You have 30 days to dispute a creditor’s claims.

The dispute should be done in the form of a letter.

The letter should be sent to the creditor or the creditor’s collection agency via certified mail.

If the creditor fails to respond to your dispute letter, then you may have legal claims against the creditor if the matter goes to court.

Dispute Letter

Debt can be collected by the creditor directly or by the creditor’s agent—usually a debt collection agency or an attorney.

Your dispute letter should be sent to whoever is attempting to collect the debt.

In the letter’s subject line clearly identify the account at issue.

Include the following:

  1. Your name
  2. Your account number with the creditor
  3. If the collection agency has its own account or file number, include that as well

Keep in mind that for many large creditors and debt collection agencies you’re just a number.

So it’s important that you get the numbers associated with your account correct.

The first line of the letter should clearly state that you are disputing the debt.

For example, “I hereby dispute this debt.”

You should then demand that the creditor or its agent provide you with copies of the following:

  1. The original agreement or contract between you and the creditor
  2. A breakdown of what is owed to the creditor—principal, interest, late fees, etc.
  3. If the creditor or the creditor’s agent has added collection costs or legal fees, you should also ask for a breakdown of those expenses.

Finally, you should demand that all collection calls stop immediately.

Additional Options

If you believe that the creditor or its agent used “unfair or deceptive” business tactics against you, consider sending an additional letter based on M.G.L. c. 93A.

Here’s a link to the state’s website explaining how 93A works.

You may also want to file a complaint with the Consumer Financial Protection Bureau.

The complaint form is easy to fill out and you’ll usually get a response from the CFPB within a couple weeks.

Lastly, if the creditor has damaged your credit score by making a negative credit report against you, then you may have additional claims under the Fair Debt Collection Practices Act.

 

Do-It-Yourself Estate Planning – Always a Bad Idea

Untitled design

Never write your own will.

I don’t care how many do-it-yourself books you’ve read or how many seminars you’ve attended.

Writing your own will is always a bad idea.

Here’s why.

Wills Are Inexpensive

Here in western Massachusetts you can easily find an experienced attorney who will draft a basic will for $100 or $200.

The cost may rise based on your circumstances.

For instance, you may pay more if

1. You have a large estate (over $1 million).

2. You’re remarried and you have children from a previous marriage.

3. You want to make an unusual bequest (e.g., leave your estate to a charity, donate your body to science, etc.).

But for everyone else a simple and inexpensive estate plan will work.

So, rather than waste your time and money on a do-it-yourself will, simply call a few lawyers in the area and find one who’s willing to assist you for a reasonable price.

Mistakes Are Costly

At best, you’ll save a few hundred dollars by drafting your own will.

However, if you make a mistake it could cost your estate thousands of dollars.

A mistake could also add months or even years to the probate process.

Here are some very common mistakes that do-it-yourselfers often make:

1. They name far too many heirs in their will.

2.  They make too many itemized bequest (e.g, “my jewelry to my niece”, “my antique clock to my grandson”, etc.)

3.  They make conditional gifts.  For example, “I leave $10,000 to my granddaughter, if she graduates from college.”

4.  They fail to give adequate authority to their personal representative.

These are just a few of the errors a layman is likely to make.

Any one of them can cost thousands of dollars in legal fees and court costs to correct.

D-I-Y Wills Are Always Given Extra Scrutiny

Here’s a common scenario.

A local lawyer drafts a will for an elderly client.

A few years later the client dies and the family contacts the lawyer to probate the will.

The lawyer brings the will to probate court.

The lawyer knows the court clerks and they know him.

They’ve seen his wills for years

They know that he’s a competent estate planning attorney.

After a quick glance at the paperwork to ensure that there are no glaring defects, the will breezes through the probate process.

This happens because the clerks assume that the will was done correctly.

The opposite happens when a stranger goes to probate court to file a do-it-yourself will.

The clerks are likely to assume that something is wrong with the will.

They’ll closely scrutinize it and they’ll be far more likely to spot an error.

3 Bad Reasons for Going to Law School

Untitled design

There’s only one good reason to attend law school:  you want to practice law.

This means using the law to help people—help them dispute a debt, start a business, plan their estate, etc.

People who attend law school for other reasons are often wasting their time and money.

In fact, recent surveys show that many young lawyers are unhappy with their career choice and regret their decision to attend law school.

I believe that much of this unhappiness and regret stems from their misguided reasons for attending law school in the first place.

Here are three terrible—but very common—reasons people choose law school.

1. You Like to Argue

If you enjoy arguing, then you’ll probably hate the law.

This is because most legal problems are fixed through negotiation and compromise.

Not argument.

In fact, lawyers who like to argue often get the worst results for their clients.

Arguing wastes time.

It creates hostility.

And it often leads to litigation.

Most lawyers want to avoid this.

Instead, a good lawyer will resolve his clients’ legal problems in the quickest, most cost-efficient way.

He argues for his clients when necessary, but he doesn’t go out of his way looking for a fight.

So if you want to argue find another profession.

2.  It Will Look Good on Your Resume

Every year law schools admit many students who have no intention of practicing law.

Why are they there?

They’re there because—in their minds—a law degree will look good on their resume.

It will make them more competitive in some other field—teaching, accounting, lobbying, etc.

No other professional schools experience this anomaly.

Think about it.

Who would get a doctorate in dentistry or pharmacy in order to get a job outside of those professions?

It makes no sense.

Law school is meant for only one type of person—an aspiring lawyer.

If you have other career goals in mind, then direct your time and talent elsewhere.

3.  You Want Justice

If you have high ideals about justice, then the law is going to let you down.

Good people get screwed on a regular basis in courthouses and government offices across America.

Why?

There are a number of reasons.

But none is more common than procedural regulations.

They are countless.

And they often delay or completely thwart a person’s access to real justice.

As a lawyer you’ll often do no more than ensure procedural rules are followed.

You won’t be making grandiose arguments about justice and equality.

Instead, you’ll be filling out government forms, tracking deadlines and dealing with apathetic bureaucrats.

It’s not a bad job.

But it’s certainly not a heroic fight for justice.

Who Needs an LLC?

Untitled design (6)

Are you starting a business?

If so, then you’re probably getting all kinds of unsolicited advice.

And you’ve almost certainly been told that “You have to form an LLC.”

But, contrary to general opinion, not every business needs to form an LLC.

Cost

In most states, forming an LLC is easy and inexpensive.

Simply file some paperwork with the state, pay a one-time filing fee (usually $50 to $200), and your LLC is up and running.

Here in Massachusetts, things are never that simple.

Instead you’ll need to file your certificate of organization with the Secretary of the Commonwealth and pay a start-up fee of $500.

Each year after that, you’ll need to pay an additional $500 fee known as an “annual reporting fee.”

This certainly won’t be the largest expense you pay as a business owner.

But why give the government more money than you already have to?

How an LLC Works

To know if an LLC is right for your business, you first need to understand how LLCs work.

An LLC protects your personal assets (e.g., your house, your personal bank account, etc.) in two ways.

Personal Injuries

First, it will protect your personal assets if an LLC member or employee, other than you, behaves negligently and injures someone.

For instance, say you own a landscaping business.

One of your employees, while driving the company’s truck, runs a red light and causes an accident.

In that scenario only the LLC’s assets would be at stake if the company were sued.

Your private property would be off limits.

However, say that you were the one driving the truck.

You ran the red light and caused the accident.

In that case, both your assets and the company’s assets would be subject to any court judgment that resulted from the crash.

Debt

Second, in some cases, an LLC can protect your private property from creditors.

If you incur a debt in only the LLC’s name, then only the LLC’s assets can be seized or made subject to liens if the LLC defaults on the debt.

Unfortunately, the vast majority of creditors negate this advantage by having you sign a “personal guaranty” in order to receive their loan.

This means that both the LLC and you personally are taking responsibility for paying the money back.

Thus, if you default, both your business and personal assets could be lost.

Corporate Taxation

There is one last advantage to forming an LLC.

You have the option of filing a corporate tax return.

This means that at least a portion of your profits could be taxed at a much lower rate.

Here’s an (overly simplified) example.

You form a sole-member LLC.

The LLC earns $300,000 a year.

You need only $100,000 to live and pay your personal bills.

You could file an income tax return for that $100,000.

Then file a corporate tax return for the remaining $200,000 and have it taxed at a much lower rate.

There is one caveat, however.

You will need to treat yourself as an employee of the LLC.

This means that you will need to pay payroll taxes and all other expenses associated with having an employee.

So Who Needs an LLC?

Now that you know how an LLC works, it’s easy to see who can benefit from forming one.

Employers and Business Partners

If you’re hiring employees or working with business partners, it makes sense to form an LLC.

Like I said, if they hurt someone on company time, your personal assets would likely be protected if the injury caused a lawsuit.

On the other hand, if you’re operating a single-member business, then this isn’t an issue.

Your negligence would put both your business and personal assets at risk.

Financially Successful Businesses

If your business is making more money than you need for personal income, then you could also benefit from an LLC.

Speak with an accountant and see if it’s worth it to file a corporate tax return and potentially reduce the burden of paying a hefty personal income tax each year.

Businesses Incurring Debt

Finally, if you anticipate incurring a lot of debt, then you should consider forming an LLC.

Again, most creditors will demand that you personally agree to pay them back.

Nevertheless, there are some private lenders, landlords, and other easy-going business people who will not require a personal guaranty.

Therefore, having an LLC may be to your advantage.

How to Handle Boundary Line Encroachments

untitled-design1.png

Is part of your neighbor’s fence, shed, driveway or deck on your land?

If so, it’s important that you address the matter.

Doing nothing could lead to you losing part of your land.

Adverse Possession

According to Massachusetts’ law, if a person openly and continuously uses your land without your permission for 20 years or more, that person can take ownership of the land he used.

This is the doctrine of adverse possession.

For example, say your neighbor builds a fence.

The fence extends five feet onto your property.

It remains in place without your permission for 20 years.

At that point—after 20 years of the fence being on your property—you can no longer force the neighbor to move it.

In fact, the neighbor can seek a court judgment establishing his ownership of the portion of your land encompassed by the fence.

So how do you prevent this from happening?

Get a Survey

First, have your land surveyed.

The average survey costs between $150 and $200.

The survey will show if there is in fact a boundary line encroachment.

It will also show the extent of the encroachment.

Once you’ve confirmed that there is a boundary line issue, you have two options.

Allow the Encroachment

If you don’t mind the encroachment, you can simply give your neighbor written permission to be on your land.

This should prevent any future claims of adverse possession.

Your written authorization should do all of the following:

  1. Clearly describe the encroachment
  2. Expressly permit the encroachment
  3. State that you may revoke your permission at anytime

The document should be signed, notarized and recorded in your county’s registry of deeds.

The recording cost will be $75.

Demand That the Encroachment be Removed

If you want the encroachment removed, it may take some work.

Start by sending a “No Trespass” order to your neighbor.

Here’s an example.

The law is defined in M.G.L. ch. 266 § 120.

You should have the notice delivered by the sheriff’s department.

It will cost about $50.

If the neighbor ignores your notice, then you will need a court order forcing him to remove the encroachment.

At that point, you will almost certainly need to hire an attorney.