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Community Property

The origins of the concept of community property are ancient. Briefly said, the phrase “community property” refers to a form of property ownership that exists between a husband and a wife in which each party has a one-half interest in all property acquired by the labor of either party during the course of the parties’ marriage.

Perhaps the most widely recognized form of community property is the amount of wages earned by one party during the course of a marriage. Several states, mostly clustered in the southwestern United States, continue to recognize the concept of community property.

Fact Scenario I

Daria and Jay were high school sweethearts. They married when they were both only 18 years of age. Jay worked for a while as a carpenter until he saved enough money to begin his own business. Daria raised the couple’s three children. Jay’s construction business was quite successful. The income from Jay’s construction business is community property.

Community property is the converse of what is known as “separate property.” Separate property refers to property which belongs to one spouse or the other individually. Separate property includes property owned by a spouse prior to the marriage, as well as property obtained by either spouse through a gift or inheritance during the marriage. Notably, separate property can become community property by agreement or gift, or where the parties commingle their assets in such a way as to make the origin of the assets untraceable.

Fact Scenario II

Prior to her marriage to Jay, Daria’s father died and left Daria $100,000 in savings bonds. After Daria married Jay, Daria cashed in the bonds and placed the entire $100,000 in a checking account titled jointly in the names of Daria and Jay. Some of the money was used as a down payment on the couple’s first house, which was later sold and another purchased thereafter. Daria also used some of the money to pay the couple’s bills, including car payments and medical expenses. By her actions, Daria may be deemed to have converted her separate property into community property.

The law with regard to community property and separate property varies from state to state. Thus, the laws of the various states must be consulted individually for details.

Sacramento Inspections and Punch Lists

When a buyer works with a builder to plan the construction of new home, the buyer will have an opportunity to look at models, drawings, plans and specifications. The combination of these documents gives the buyer a general idea of what the home will eventually look like. As the construction progresses, the idea takes form; however, until the process is complete and the buyer has actually walked through the completed structure, the buyer has no idea whether everything has been completed as imagined and in a workmanlike manner.

If the buyer does not walk through the completed home and perform a detailed inspection before the closing takes place, the buyer will have waived the right to have the builder complete overlooked items in a workmanlike manner.

The Vision Takes Form

A buyer can get a good idea of how the construction is progressing by scheduling regular walk-throughs of the property. Usually, contractors will not allow a buyer to walk on the property on a whim, but a contractor will agree to walk-throughs that are scheduled to correspond with the completion of each phase of the project. At those times, the buyer will have an opportunity to make sure that the contractor’s creation matches the progress that should be completed within that phase and that the progress corresponds to the buyer’s vision.

Ask Questions and Check for Understanding

Walk-throughs are opportunities to ask questions about each phase of the construction project. Details should be noted, and completion should be documented. If payment is to be made upon the contractor’s completion of a phase, the buyer should notify the person responsible for making the payment if the project is not proceeding according to schedule.

Final Walk-Through and Punch List

The final walk-through takes place just prior to closing. At that time, the contractor essentially is representing that he has completed the project according to the agreed-upon models, drawings, plans and specifications. What remains is for the buyer to walk through the home and determine whether everything has, in fact, been completed, or if there are items that remain undone or missing. Any missing or defective construction that the buyer can observe should be noted on a punch list.

A punch list is a document that identifies items that have been overlooked in the plans or that have to be remedied before the buyer determines that the home is acceptable. The inspection can be done by the buyer or by a trained home inspector. Either way, completion of a punch list is a form of insurance because it gives the contractor a set period of time within which to complete the items. The period is usually one that is reasonable, and it may be extended by agreement of the parties.

Merger

If the buyer does not fill out a punch list, the buyer asserts that he or she accepts the home as it has been tendered to him or her — defects and all. In such case, the buyer waives his or her right to require the contractor to complete or remedy any overlooked items or faulty construction that is readily apparent. If a punch list has been completed, it will usually be made a part of the closing documents and will not merge into the deed at closing. If the contractor fails to complete the items on the punch list in a workmanlike manner and within the time specified, the buyer may file a lawsuit to compel completion or to obtain damages for the cost of having the work completed by another contractor.

Tangible and Intangible Property

Tangible and Intangible Property

Property is an external thing that can be owned or possessed. Property can be divided into two categories: tangible and intangible. The word tangible refers to something that has a definable physical form that can be felt or touched. The word intangible refers to something that cannot be perceived by the senses.

Tangible Property

Tangible property consists of real property and personal property. Real property is property that does not move, such as land and the things that are attached to or built on that land.

Personal property is property that can be moved or any other tangible property that can be owned. Personal property is also called chattels. Chattels that are attached to the land and that cannot be removed without damaging the land are called fixtures. Examples of fixtures are built-in bookcases and ceiling fans.

Intangible Property

Intangible property consists of property that lacks a physical existence. Examples of intangible property include checking and savings accounts, options to buy or sell shares of stock, the goodwill of a business, a patent, and spousal love and affection.

Know Your RESPA

Not a lot of people like dealing with acronyms, as they find them confusing, but if you are in real estate this is one that you need to know: RESPA — The Real Estate Settlement Procedures Act.

The regulations that accompany RESPA actually represent one of the biggest shifts in the real estate industry since the Real Estate Settlement Procedures Act came into being. What do the new regulations mean? In most instances, they mean you will need to redefine your sales and marketing strategies. It may seem a bit confusing since you’ve likely been doing just fine prior to this new wrinkle being introduced.

Here’s a bit of history about the RESPA, which has a significant impact on everyone involved in real estate transactions. It came into being with the stated goal of standardizing the buying of residential real estate and the reforms in it, among other things, raised the bar for making disclosures to consumers and also streamlined loan processes.

What the RESPA was intended to accomplish is to provide consumers with the benefits of cost savings and better, more transparent disclosure of things such as settlement fees, loan terms and costs. You can well imagine how pleased buyers were to have this new legislation working “for” them and making their ultimate purchase less confusing financially.

Let’s deal with the “less financially confusing” part now. The US Department of Housing and Urban Development (or HUD for those who want another acronym to learn) figures that the more information about the loan application process a consumer has — all the way through settlement — the more informed consumers are; thus, they make smarter purchases. That makes sense if you stop to think about it, but also be aware that HUD has another objective and that is ensuring there is a competitive market for settlement service providers.

So what do we have in the final analysis? The RESPA rules and regulations now include changes to two previous forms (HUD-1 and the Good Faith Estimate document) and the term “required use” has finally been spelled out so people understand what it actually means.

The most interesting change, however, is one that deals with the yield spread premiums lenders pay for loans, and the fact it must be stated as a credit to the borrower upon closing. These reforms have been a long time coming and are a refreshing change to the industry, not to mention a benefit for consumers.

Security Deposits on Rented Premises

What Is A Security Deposit?

Very often, when a landlord and a tenant enter into a lease agreement, the landlord requires the tenant to make some type of payment to the landlord in addition to the first month’s rent. The payment serves as security that the tenant will return the leased premises to the landlord, at the end of the lease term, in substantially the same condition as when the parties entered into the lease agreement.

How Much Can A Landlord Charge For A Security Deposit?

The amount a landlord can charge for a security deposit is governed by state law. The law varies from state to state. Usually, the amount of a security deposit is one to two months’ rent. The lease agreement between the parties should set forth the amount of the security deposit, as well as the manner of payment.

How Must The Landlord Maintain The Security Deposit During The Tenancy

Here again, the law of each state varies. Many states require landlords to maintain security deposits in a separate account and to pay simple interest on the security deposit to the tenant at the time the landlord returns the security deposit.

Deductions Against The Security Deposit/Tenant’s Accounting

The answer to this question lies in the applicable state law and the lease agreement between the parties. Typical items of deduction are as follows:

  • unpaid rent
  • repairs for items beyond normal wear and tear
  • refuse removal

Typically, when a landlord makes a deduction against the security deposit, the landlord must notify the tenant of the reason for the deduction and provide the tenant with some type of evidence (for example a receipt) as to the basis for the deduction.

The law of most states requires landlords to return security deposits within a fixed number of days and provides penalties in the event a landlord fails to make a timely return of a security deposit.