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Homestead Exemption

If you have received notification that your homestead exemption has been revoked and you owe taxes for prior years, we may be able to help you.  In Florida, you may only claim the homestead protection on one property.  Special exceptions may exist if you are married, but the general rule is that you can only claim one homestead.

Therefore, if you are a seasonal resident and have a second home, your homestead could be jeopardized if you are receiving another homestead exemption in another state.  Florida may revoke your homestead retroactively even if you are receiving that homestead exemption unknowingly in another state.

We recently discovered that our Florida residents who also maintain a home in Ohio were unaware that Ohio was providing them with a homestead exemption.  This caused the Florida resident to lose their homestead and created a large tax liability for the Florida homeowner.  We understand that Pinellas County itself has approximately 100 cases namely dealing with Ohio residents.  We have assisted our clients in reversing the denial of the homestead exemption in Florida thereby saving them thousands of dollars in taxes.

Contact us for a FREE consultation regarding the granting or denial of homestead protection in Florida.  We are here to assist you.

Benefits to Purchasing an NFA Trust

Even with the new requirements of ATF Rule 41F, there are still significant benefits to purchasing an NFA Trust. (1) You may name other individuals as Co-Trustees so that they are permitted to use the Class 3/Title II weapons.  Note that if you purchase the weapon individually, no one else is permitted to use item.  (2) You will name at least one beneficiary to receive the items upon your death or incapacity, thereby passing the items to the person YOU designate.  (3) The named beneficiary will complete ATF Form 5 and will not have to pay the tax stamp to transfer the items into their name.

ATF Rule 41F

As of July 13, 2016, the new ATF Rule 41F went into effect. This new rule applies to all “responsible persons” who are completing a new Application for the purchase or manufacture of a Class 3/Title II weapon.  At this point, there has been no clarification as to the term “responsible person.”  However, under “Definitions,” on Form 5320.23, it states:  “Examples of who may be considered a responsible person include settlors/grantors, trustees…”

You will need to submit the following to the ATF with your Application (Form 1, 4 or 5): (a) two fingerprint cards; (b) two 2” x 2” photographs, and (c) two Responsible Person Questionnaires (Form 5320.23).  In addition, the completed Application and Form 5320.23 must be sent to your Chief Law Enforcement Officer (“CLEO”) advising them that you are in the process of purchasing the Class 3/Title II weapon.  The CLEO does not need to sign this form.

Rule 41F even applies to anyone who has previously created a gun trust and has purchased Class 3/Title II weapons under the trust. Once you purchase a Class 3/Title II weapon under Rule 41F and submit fingerprints and photograph, and if you purchase another weapon within 24 months, you do not need to resubmit fingerprints and photo.  You will, however, need to complete ATF Form 5320.23 and provide it along with the new Application to your CLEO.  In addition, if a Co Grantor, Co-Trustee or a beneficiary who is 21 years of age or older lives outside of the jurisdiction where the trust items are held, that person will also need to send a copy of the Application and ATF Form 5320.23 to their CLEO.  Feel free to call our office should you have any questions regarding the new Rule.

ALERT: FIRPTA – WITHHOLDING RATE TO INCREASE TO 15%

FIRPTA is a tax law passed in 1981 that requires foreign persons to pay U.S. income tax on the gains they make from selling U.S. real estate. The duty is on the U.S. national buyer (and not the settlement agent) to deduct and withhold a portion of the sales price and report the sale to the Internal Revenue Service (IRS). Buyers can withhold less than the statutory amount if they obtain a determination of the specific amount of tax owed by the foreign national using IRS Form 8288-B. In most cases, the settlement agent is the party that actually remits the funds to the IRA, but the buyer is held legally responsible. Additionally, until the tax is paid in full, the government obtains a security interest in the real property.

For more information, please click here.

ATF Rule 41F

We have had several phone calls from our gun trust clients regarding ATF Rule 41F which will go into effect on July 13, 2016. For those persons whose Form 1 or Form 4 applications are pending prior to July 13th, there should be no effect on your purchase and application.
Beginning on July 13, 2016, anyone who submits their application (with or without a gun trust) to the ATF must submit the application with fingerprints and a 2” x 2” photo (like a passport photo) of all “responsible parties.” The photo must have been taken within one year prior to the date of the application. Each responsible party must also complete ATF Form 5320.23. In addition, you must provide a copy of the application and ATF Form 5320.23 to your local chief law enforcement officer (CLEO). Speaking on the trusts we prepare in our office, “responsible parties” are the Grantors and Trustees. Beneficiaries are not considered “responsible parties” because they are not given the authority “to receive, possess, ship, transport, deliver, transfer, or otherwise dispose of a firearm for, or on behalf of, the trust.” (Rule 47F, § 479.11 Meaning of terms)
If you are using our Trust and if you submit a subsequent application within 24 months of ATF approval of Form 1 or Form 4, the responsible persons should not need to resubmit fingerprints and photographs unless the trust has been modified within that time period.
If you have any questions regarding this new Rule, feel free to call our office.

I am a Realtor and I have a buyer who is looking to change a few words in a contract. Is there any reason I shouldn’t make these changes for my client?

The field of real estate is riddled with risk and reward. Although Realtors have an increased knowledge of real estate and contract law, there have been many instances in which improper drafting of contracts leads to litigation, a damaged reputation, loss of commission, and in some cases, revocation of the individual’s license.

In a case before a Florida appeals court, a transaction broker assisted in drafting a contract for the purchase of real property.  The contract required the balance of payment at closing and in an addendum prepared by the broker, the following language appeared:

If buyer does not close by January 26th, 2005 the buyer is to pay seller 12% interest, which is to be paid monthly. Failure to do so makes this contract null and void, and all monies paid are nonrefundable.  Seller will only carry a mortgage for an additional six months from January 26th, 2005.  Therrien v. Larkins, 959 So. 2d 365 (Fla. 5th DCA 2007).

At closing, the buyer believed he had three options, one being that he could tender a note and mortgage as “payment” of the purchase price.  The lower court agreed and held that the seller needed to close the transaction.  However, the seller believed the contract was not intended to permit the buyer to purchase the property by offering a note and mortgage.  On appeal, the court agreed with the seller.  It held that because the contract did not grant the buyer a specific right to present a note and mortgage at closing, the seller was not obligated to close by accepting the note and mortgage.  (Id. at 367).

The court had this to say about the drafting:

…the contract and addendum in this case were drafted by a transactional broker on a FAR/BAR form.  This lawsuit is an excellent example of why lawyers, and not brokers, should draft contracts in complex real estate transactions. Had the broker suggested that an experienced real estate attorney draft the contract, he might now be enjoying the $22,500 commission called for in one of the less ambiguous clauses of the contract. (Id. at 369).

Real estate professionals commonly find themselves in precarious situations while trying to assist their clients.  To protect your real estate commissions and keep your reputation intact, work with a real estate attorney to draft or revise contract language.  This will limit the potential risks and allow you to reap the profession’s rewards.

A title company gave me gift cards for referring my closings to them. Can I get in trouble for this? Is this legal?

In Florida, a real estate licensee may not receive a referral fee/kickback (or anything of value) for referring buyers to a title company.  There are several national and state laws that prohibit such kickbacks and proscribe hefty civil and criminal penalties for violations.  One of the most prevalent laws is the Real Estate Settlement Procedures Act (RESPA) (codified at Title 12, Chapter 27 of the United States Code, 12 U.S.C. §§2601-2617).

RESPA was enacted in 1974 to provide consumers with disclosures about closing costs and to prohibit kickbacks and referral fees.  RESPA covers transactions involving federally related mortgage loans (e.g., home purchase loans, refinances, lender approved assumptions, property improvement loans, equity lines of credit, reverse mortgages).  Certain transactions are not covered under RESPA, including: cash sales; sales where the individual home seller takes back the mortgage; and rental property transactions.

Section 8 of RESPA prohibits anyone from giving or accepting a fee, kickback, or anything of value in exchange for referrals of settlement service business.  A violation of this section can result in a civil or criminal case being filed against the real estate agent.  In a civil lawsuit, a person who violates Section 8 may be liable to the person charged for the settlement service in an amount equal to three times the amount of the charge paid for the service.  In a criminal case, a person who violates Section 8 may be fined up to $10,000 and imprisoned for up to one year.

Section 9 of RESPA prohibits a seller from requiring the home buyer to use a particular title insurance company, either directly or indirectly, as a condition of sale.  Buyers may sue a seller who violates this provision for an amount equal to three times all charges made for the title insurance.

In addition to the Federal penalties, Florida law may also penalize real estate agents under these circumstances.  Pursuant to section 475.05, Florida Statutes, the Florida Real Estate Commission has the power to create rules, enact bylaws, and decide questions of practice regarding real estate agents.  One of the regulations enacted by FREC, pertaining to kickbacks, is Fla. Admin. Code R. 61J2-10.028 (2012), which states:

Any real estate licensee who receives, or makes any arrangement or agreement to receive, directly or indirectly, any kickback or rebate, for the placement of, or favor in, any business transaction which forms a part of, or is incident to, any transaction(s) negotiated or handled by said licensee, is a violation of Section 475.25(1)(b) or (d), Florida Statutes…unless prior to the time of the placement of, or favor in, said business transaction, the licensee shall have fully advised the principal if any and all affected parties in the transaction(s), which the licensee is handling, of all facts pertaining to the arrangement of kickbacks or rebates.

A violation of this regulation may result in any one or all of the following punitive measures: license suspension or revocation; probation; a fine of up to $5,000.00 per offense; or reprimand.  §475.25, Fla. Stat. (2012).

Due to the increasing crackdown on questionable real estate practices (especially in the foreclosure arena), real estate licensees and title companies would be well-advised to follow these laws closely.  Otherwise, a $100.00 gift card could result in license revocation, or worse.

Leasing Restrictions on Condominiums

I bought this condo to lease however, the Association said I could not lease it.  Is that legal?

Funny you should ask.  In the past month, I have had occasion to review two separate legal issues on this very subject.  In the first instance, person owns a condo that is underwater.  The person decided to rent out the unit.  The Declaration of Condominium prohibited leasing unless the HOA approved the unit owner for a leasing permit.  A leasing permit was only allowed for 25% of the total number of units.  What does that mean? Once 25% of the units are rented out, you are placed on a waitlist until a leasing permit becomes available, if at all.

Another person came to me because the HOA recently amended their Declaration to include a 20% cap on leasing.  The Declaration at the time of purchase contained no previous leasing restrictions.

Are leasing restrictions on condominiums valid? The Florida Supreme Court addressed this issue in a case we will call Woodside. Woodside Vill. Condo. Ass’n, Inc. v. Jahren, 806 So. 2d 452, 456 (Fla. 2002).  In Woodside, the Court explained that Florida law   “expressly recognizes that a declaration of condominium may contain restrictions concerning the use, occupancy, and transfer of units.” In Woodside, the Declaration was amended to include leasing restrictions after two owners purchased their units.  The Declaration at the time of purchase contained a leasing provision that permitted an owner to lease their unit without prior HOA approval for a period of one year or less.  The amended leasing provision required all leases, subleases and assignments of leases to be approved in advance by the HOA, and restricted the lease term to a total of nine (9) months in any twelve (12) month period. The Court explained that since Florida law and the Declarations provided broad legal authority to amend the declarations, “courts have recognized the authority of condominium unit owners to amend the declaration on a wide variety of issues, including restrictions on leasing.”  For those reasons, the Court found that “the lease restriction amendment was properly enacted under the amendment provisions of the Declaration, and that the respondents took title to their units subject to the amendment provision set out in the Declaration and authorized by statute.”

Properly adopted leasing restrictions will be presumed valid unless the restriction is arbitrary, against public policy, or in violation of some fundamental constitutional right. The Court in Woodside recognized the concerns leasing restrictions impose on purchasers of condominiums for investment purposes, but explained that the Court is constrained to the view that this issue is better addressed by the Legislature.

In sum, Florida law permits leasing restrictions.  Declarations that previously contained no leasing restrictions at the time of purchase which are subsequently duly adopted to impose leasing restrictions, will subject both current and new owners to those restrictions.

written by Beejal P. Thakore, attorney at Davis Basta Law Firm, P.A.

Spousal Joinder on Sales Contracts for Homestead Property

Florida’s homestead law is one of the most generous in the United States.  Florida’s Constitution provides that homestead is (1) exemptfrom forced sale; (2) devise and alienation is restricted; and (3) homestead affords tax exemptions.  Of primary importance to real estate agents are the restrictions on alienation of homestead property.

Article X, section 4(c) of the Florida Constitution is clear that both spouses must join in a transfer of homestead property.  However, when real estate is owned by only one spouse, and homestead status is not obvious, the requirement that both spouses sign a sales contract may be overlooked.  This situation arose in Florida and was the subject of an appellate decision known as Taylor v. Maness, 941 So. 2d 559 (Fla. 3d DCA 2006).

In the case, a husband (Mr. Maness) entered into a contract to sell a home that he was living in by himself (while his wife temporarily resided elsewhere); title to the home was vested solely in the husband’s name.  The contract was not signed by the wife, and she refused to sign the deed at closing.  The buyers (Mr. and Mrs. Taylor) sued for specific performance on the contract, fraud in the inducement, and negligent misrepresentation.  In considering whether the wife could be forced to specifically perform the contract, the court said that the contract could not be enforced by specific performance because of the constitutional homestead exemption from forced sale.  The court determined that the property was homestead property as the permanent residence of the husband and wife; and the wife had a marital homestead interest in the property that protected the property from sale without her consent.

The buyers argued that the failure to file a homestead tax exemption on the property was an indication that the home was not the couple’s homestead.  However, the court stated: “failure to claim the homestead tax exemption is not evidence that the property is not in fact homestead.”

The most important aspect of this case for real estate agents is that it emphasizes the importance of ascertaining whether property is a homestead at the outset.  A real estate agent (based on the outcome of the case) should never rely on the fact that no homestead tax exemption is filed when determining whether a property may be subject to homestead protections.  Because Florida’s homestead law is liberally construed in favor of protecting a family’s home, a thorough inquiry must be made into homestead status any time one spouse attempts to convey real estate without the other spouse’s signature on the sales contract.