Property owner objects to hosting county utility

After request for compensation is denied, does any recourse exist?

Benny Kass
Inman News®

DEAR BENNY: I purchased vacant land (over 1/2-acre) a little away from the city in a country living-style neighborhood. At the time of purchase, the lot was overgrown and mostly couldn’t be accessed except in one corner where a pumping station existed. I did not obtain a survey; I just looked at the county records/maps and purchased the land.

A couple years later, a neighbor complained about one of the trees being dead on the property. The county code enforcement was after me to remove the dead tree.

In the process of removing the tree, I met with the neighbor who mentioned to me about the pumping station being on my property (which I was not aware of), and he also said the previous owner was getting paid from the county every month for having the station on the land.

During the process of tree removal I decided to clear the land as well. Then, I approached the county about the pumping station and asked them to pay me or remove the pumping station. The county attorney sent me a letter indicating that neither will happen because the pump existed when I bought the land and the arrangement of the payment was between the previous owner and the county.

Do I have any recourse with the county to get paid or have it removed? I’m trying to sell the land but nobody seems to be interested at this time. The local Habitat for Humanity wants me to donate the land to them or let them buy it at a discount. Now that I cleared the land, I’m having to incur expense to keep it clean. Any helpful advice would be appreciated. –Majid

DEAR MAJID: Why did you buy the land without talking with an attorney who practices real estate law? I know that readers will immediately say, "Kass is just pushing for more legal fees." I can’t stop what you think, but let me explain.

My law firm has been representing real estate clients for many years, and our practice primarily involves residential real estate. When I am first retained, I tell the client that I will insist on reviewing (or drafting) the following: (1) the sales contract and all addenda and attachments; (2) the loan documents if the client is obtaining a mortgage loan; (3) the appraisal (under law, buyers are entitled to get a copy of the appraisal they paid for); (4) the title report; (5) the HUD-1 — unless my office is conducting the settlement (in the West, you guys call it "escrow"); and (6) a survey.

I must review all of these documents before closing and while the buyer has the right to back out of the contract, based on any contract contingencies. Had I represented Majid, I believe that I would have discovered the pumping station on his property. The title report would probably reflect some document about that, and the survey would also have shed some light on this.

Additionally, many states have laws requiring sellers to disclose unusual conditions in the property. Does your state have such a law? If so, did your seller fully disclose the existence of the pumping station?

The only suggestion I can make is that you should retain a good attorney in your area, and have the attorney explore the situation with the county. I am curious why the county was paying the previous owner and is not willing to pay you.

In the future, however, readers should understand that buying a house is, for most consumers, the largest investment they will ever make. When we buy a car, we at least kick the tires; when you buy a house, you have to do a lot more research.

DEAR BENNY: I am 78 years old, own two homes and have been a widow since 2008. At the time of my death I want to give one or both of the homes to my daughter. She will be the sole beneficiary of my estate. She lives in one home and I live in another that is valued around $240,000, and her home’s assessed value is about $200,000.

I paid $322,000 in 2004 for my home/condo, and the principal balance is $140,000. I paid $225,000 in 2008 for my daughter’s home, which is in my name only, and the principal balance is about $177,000.

In the past, I understand that it is best for her to inherit one or both of these properties and not for me to give her one as a gift. Financially, is this still true? –Dolores

DEAR DOLORES: In general, it makes a lot of financial sense to let your children inherit the property rather than give it to them during your lifetime. It’s all about money and taxation, so let me explain.

Let’s take your home, for which you paid $322,000. That is the tax basis of your property. In my example, we will ignore any major improvements that you may have made, since they will increase your tax basis.

If you give your daughter the house, her basis will be the same as yours. Under the tax law, the basis of the gift giver becomes the basis of the gift receiver (giftee). So if she just wants to sell it after you die, and can get only the current value, she will have no profit but she cannot take a loss.

However, if she inherits the property, she takes advantage of what is known as the "step up" in basis; in other words, the value of the property at the time of your death becomes her tax basis. So if the property is worth only $177,000, that is her basis. If she wants to sell, she will have no profit and no loss.

In general, when the property is worth more than the original purchase price, it makes sense to inherit so as to get the higher tax basis. But, as in your case where the property is worth less than you initially paid for it, you and your daughter have to discuss the options. If she wants to rent out the property, it would make sense for you to give it to her now, since she could then depreciate it based on the higher value. On the other hand, if she plans to sell, it really makes no difference.

But I cannot provide specific legal or financial advice, and I strongly urge you (and your daughter) to consult a financial counselor to make sure that you are going to do the right thing.

DEAR BENNY: I have a reverse mortgage. It is in my name only. My estranged wife gave me a quitclaim deed. She did not qualify anyway. She does not want this house, and neither do any of the kids.

I am 76 and when I die, the mortgage becomes due, but no one except me is responsible. Can my heirs just divide the personal property and tell the mortgage company to come get the keys?

My will is out of date and I’m getting it updated to remove any reference to real property. Should I have the lawyer be executor ?

I have no qualified adult in the family that could do the job. I know how hard the job is, as I had to do it when my son died in 2007. –R.D.

DEAR R.D.: Yes, you must get your last will and testament updated; the laws have changed over the years and you do not want to burden your children if your will causes them financial complications.

In addition to a will, I always strongly recommended that readers should also have: (1) a durable power of attorney; (2) a living will (also called an advance directive) telling everyone whether you want that proverbial plug pulled if you are brain dead; (3) and a durable power for health. Some people combine both durable powers, but often you want different persons to handle your financial affairs from your health matters.

As for your house, under the current rules regarding reverse mortgages, on your death, the loan becomes due. The lender cannot get more than the value of the house. So if the house has no equity (i.e., the reverse mortgage is equal to or greater than the value of the house), your children should just tell the lender to take a deed-in-lieu, and give them the keys and a deed to the property.

But, if there is equity, why should your children lose out? They can sell the house, pay off the reverse mortgage, and divide up the net sales proceeds.

Should the attorney be the executor? I know that lawyers who draft wills for their clients do put themselves in as the proposed executor. I don’t think it’s a good idea; the potential for a conflict of interest is too great. Of course, if there really is no one else and you have had a long-standing relationship with that lawyer, then go for it.

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 benny@inman.com.

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