1. Legislative Update Roy Kaufmann
GCAAR 2006
Legislative Update
Roy Kaufmann
Roy L. Kaufmann, Jackson & Campbell, P.C.

2. Agent Recommends Home Inspector
Selling Agent recommends a particular home inspector
Inspector gives favorable report
Buyer removed inspection contingency and closes
Rear Wall later collapses
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3. Buyer Alleges 2 Claims
First: Violation of DC Consumer Protection Procedures Act by recommending the services of an inspector which proved to be of deficient quality.
(28 DC Code 3901): “It shall be a violation … for any person to: (d) represent that goods or services are of particular standard, quality, grade, style, or model, if in fact they are of another” 
Roy L. Kaufmann, Jackson & Campbell, P.C. - 3

4. Buyer’s Second Claim
Agent violated DC law governing fiduciary duties of real estate agents to clients.
§ says: “a) A licensee engaged by a buyer shall: 2) Promote the interests of the buyer by: Disclosing to the buyer material facts related to the property [and] (4) Exercise ordinary care”
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5. Proving Negligence at Trial
Expert Testimony:
to show the degree of learning and skill ordinarily possessed by an agent practicing in this geographic area
To use the care and skill ordinarily used in like cases by reputable agents under similar circumstances and to use reasonable discretion and best judgment.
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6. In this case
Plaintiff decided not to produce expert testimony. Instead, plaintiff relied upon the two laws we looked at:
Consumer Protection by participating in the “misrepresentation” of the qualifications of the inspector
Duty to exercise ordinary care.
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7. Court of Appeals Finds:
Consumer Protection Act does not make a guarantor out of the person who recommends a service provider
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8. Court Also Finds
DC Law governing fiduciary duty does NOT present a meaningful standard of care.
At trial, Buyer failed to present expert testimony about standard of care expected of agents and how the agent was supposed to have breached that standard.
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9. Agent Prevails Because the Court found that
A) a person who refers a service provider is not a guarantor and
B) no breach of standard of care shown
Claims NOT proved against Agent
901 A.2d 174
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10. Word to the Wise
Negligence is when you fail to maintain the standards of the industry
Standards Change
Resources Change
“I’ve always done it this way” won’t work
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11. GWU’s Expansion GWU sought to expand its campus
DC Board of Zoning Adjustment (BZA) issues limitations which GWU ignores
Neighbors file suit to enforce BZA order
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12. Court Finds
Neighbors do not have a “property interest” in asking BZA to enforce its order
441 F. Supp 2d 84 (2006)
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13. Lis Pendens “Let’s file a lien against the property”
Latin for "a suit pending," a written notice that a lawsuit has been filed which concerns the title to real property or some interest in that real property.
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14. Lis Pendens Suit has to be filed first
Title or Interest (not liability)
Recorded at Recorder of Deeds
Clouds Title
Suit for improper use
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15. Foreclosures At time of a regular settlement, 2 documents executed
Note
Deed of Trust
Two Remedies available in event of default:
Sue on the note and forget about the property
Foreclose on the Deed of Trust
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16. Foreclosure on Deed of Trust
Non-judicial foreclosure (no one goes to court)
Advertisement, Auction, Right to redeem
Judicial Foreclosure
Go to Court and have the court supervise the foreclosure process
Rarely used in DC because more expensive and slower, but sometimes required
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17. Tax Sales
July Auction
5% must be in the kitty – must be augmented through auction
Bid starts with amount in newspaper ad: one year’s taxes
Increments are surplus (no interest earned)
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18. Tax Sales It’s an Industry Very specific statutory requirements
Title search
Suit filed within one year
File Lis Pendens
Posting
Service of Process
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19. Tax Sales
Owner and some interested parties have right to redeem until the end
The only effective way to stop a tax sale is to redeem.
Redemption = pay all taxes and costs of suit
Could be multiple foreclosure actions
New law versus old
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20. Note that Law Requires Filing the Lis Pendens
In olden days, if you filed a lawsuit in DC Superior Court and added the words “Real Property” or initials “RP”, there was imputed notice to the public that there is a lawsuit pending.
Common law “lis pendens”
Title Abstractors would search for these when doing title search
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21. Lawsuit Tax Sale Foreclosure
Plaintiff relied upon old system and put “RP” on the Complaint, but did not record a Lis Pendens.
Property owner entered into a contract with a third party during foreclosure
Third party searched ROD (“Recorder of Deeds) records and found no Lis Pendens
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22. Issue of Case
Was the filing of the lawsuit with the designation of “RP” enough to invoke the common law theory of Lis Pendens?
Answer: no: The statutes over-ride common law. The statute is clear that Lis Pendenses have to be filed at ROD to be effective. 905 A.2d 181 (D.C. 2006)
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23. US Supreme Court Weighs In
Notice of Tax Sale mailed to owner by certified mail
Returned to government as undelivered
Court holds that 14th Amendment (“Due Process”) requires the government to take additional reasonable steps to provide notice if the original notice is returned.
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24. DC Meets That Standard Government mails two notices
Newspaper advertisement
After suit is filed
Posting on property of the summons
Newspaper Order of Publication
Personal service
Court may consider Service by Publication
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25. What is this Document?
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26. It’s Not a Survey, it’s a LOCATION DRAWING!
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27. Title Insurance Wouldn’t Help the Buyer with the Shed
Exclusion: Encroachments, overlaps, boundary line disputes, variations in area, party walls, roads, ways, streams, easements … or other matters which would be disclosed by an accurate survey of the land and which are not shown by public records.
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28. Additional Exclusion Rights of parties in possession (as to shed)
This should have been ascertainable upon visual inspection.
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29. Lesson to Learn
You and client should understand difference between a location drawing, survey and ALTA Survey
Reviewing the land with location drawing in hand.
Initialing drawing at closing
Requesting deletion of “survey exception”.
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30. Law Change: Recordation & Transfer Taxes
2.2% for residences under $400,000 (includes both taxes)
All other transfers: $2.9%
On non-exempt deeds of trust 1.45% (mostly applies to commercial or construction loans)
Effective this past October 1.
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31. Exemptions from Recordation/Transfer Taxes
Recordation: to RECORD the deed (usually paid by purchaser)
Transfer Tax: usually paid by Seller
2 taxes are equal in dollars
Exemptions from these 2 taxes are found in different volumes of the DC Code and are not parallel (though, the dissimilarities are often ignored)
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32. Exemption from Recordation Tax
Between H & W/Domestic partners or between children IF no consideration paid
Between former H/Ws if incident to a divorce
Deeds from a Personal Representative under a will, distributing the property (if there is a sale, there will be a recordation tax).
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33. Exemptions from Recordation Tax
Deeds involved with Lower Income Abatement Program
Application must accompany filing of deed
3 benefits:
Buyer pays no recordation tax
Buyer pays no real estate taxes for 5 years
Buyer receives a CREDIT for the transfer tax
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34. Exemptions from Recordation Tax
No tax on a mortgage filed simultaneously with deed, unless the mortgage exceeds purchase price, i.e. construction to permanent
Deeds INTO a revocable trust
Deeds out of a revocable trust ARE taxed unless due to death of Grantor
From General Partnership to LLC
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35. New DC Tax Credit
For installation of an alternative energy source or energy saving measures (i.e. 25% of the cost of substituting double-paned windows, caulking of windows, etc.). Effective this year.
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36. Percentages Vary
High-efficiency hot water heater or heater or insulation of duct work, thermal windows: 25%
Insulation of walls, floors, ceiling: 20%
High-energy appliances or ceiling fans: 20%
Energy-efficient lighting: 15%
Programmable Thermostat: 10%
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37. Tax Credit is Limited
Annual credit cannot exceed $500 ($2,000 if new construction) BUT, you can carry forward any unused credit over 5 years.
47 DC Code
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38. Rent Control Ceilings Abolished
Old Law
New Law
Ceilings
Complex, labor-intensive
Abolished
Rent increases
Every 180 days
Once a year
Cap
Per Ceiling (no cap)
Generally, 2% + CPI
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39. Rent Control Abolished
Old Law
New Law
Caps on Vacant Units
OK to raise to rent charged for substantially similar unit
No more than 30% of rent charged for vacant unit
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40. Non-Titled Spouses and Domestic Partners
Dower Abolished in 2001
Prior to that, spouses had to be found
Trouble, cost, inconvenience, delays
When dower was abolished this requirement was relaxed by the title industry
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41. Requirements Resurfaces
15 DC Code 502 reset the requirement of signatures on deeds of trust of spouses and domestic partners who may “reside” in the property.
Again, inconvenience
What does “reside” mean?
Dual residences, military, FSO
Intrusive questions
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42. New Law Proposed Write to your Councilperson!
Bill will fix this by correcting to eliminate the need for spousal/domestic partner signatures unless s/he is on title.
Take a moment to write your councilmember to support Bill
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43. New Office of Tenant Advocate
Provides Education to Tenants
Ambulance chasing
Represent interests of tenants in legislative, executive and judicial issues, including advocating changes and reviewing landlord petitions representing the tenants’ interests.
Advising Tenants on filing complaints against landlords, organize tenant participation in building-wide inspections
Representing tenants in court or administrative proceedings.
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44. The Bear: TOPA (“Tenant Opportunity to Purchase Act”)
1980 Originates to address:
Housing crisis
Severe shortage of rental housing
Condo Conversion depletes rental housing stock
Lower Income, elderly most affected
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45. Have the Objectives Been Achieved?
Statistics seem to show that the law has not affected the rental housing stock at all.
When a tenant group partners with a developer, usually the units do not remain rental (elderly, disabled excepted)
Is purpose to retain rental stock or assist first-time buyers?
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46. Practical Results
Sellers have uncertainty and time delays: for 5 or more units, tenants have 420 days from date of notification to negotiate and close
For single family, it can be up to 195 days and 2-4 units, up to 277 days.
Even after these periods pass, the tenants may not be able to close and 3rd party contract is lost.
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47. 2005 Amendment
95/5 tightened up, as the definition of “sale” was broadened.
Exemptions were developed to a “sale” that triggers TOPA rights
If the landlord/seller wants to claim an exemption, he generally has to fill out a special form available from DCRA
DCRA has no forms
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48. Specifics: Definition of “Tenant”
Definition of tenant: a tenant, subtenant, lessee, or other person entitled to the possession, occupancy or benefits of a rental unit.
Problem with definition: besides those who have a lease, who else is included? What are “benefits of a rental unit”?
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49. “If the names of 2 or more persons appear on a rental agreement, those persons shall determine which person may exercise a vote under this Act”.
Note: are we talking now about a rental agreement having to exist? What happens if there is a disagreement between the two people? With whom does seller have to negotiate?
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50. Task Force Suggests
“Tenant” is the “head of household” rather than waiting for a “vote” of the occupants
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51. Conversion Tax 5% of sales price
Lien recorded at time of filing of condo declaration
DC has no form
Penalty for underestimating the 5%
If a unit has not closed within 2 years of filing of lien, you owe the tax anyway and must pay it.
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52. Definition of a “Housing Accommodation”
Current definition: any structure containing 1 or more rental units, excluding hotel, motel, rooming house IF the landlord has been paying the “hotel sales tax” IF the occupant has been there for less than 15 days.
Obvious problem
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53. Task Force Suggestion Delete the 15 days language
Add foreign government properties, nursing homes, hospitals, university dormitories, etc.
Task force decided to KEEP single family dwellings as subject to TOPA
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54. Exclusions from “Sale”
To decedent’s estate, even if for consideration (i.e. money paid by heirs), only if
To spouse, domestic partner, children or lineal descendants.
consideration is given to charity.
Query: What if no consideration is paid? Cannot leave property to my mother? My nieces? My death triggers TOPA rights?
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55. Exclusions from definition of “Sale”
Life-time transfer without consideration to wife …. Parents, grandparents
Query: If I am alive, I can transfer to my mother without worrying about TOPA. If I die, that is a problem. Any transfer to nieces or lifelong friends triggers TOPA
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56. Exclusions
Exempt if caused by change in the form of an entity owning the property, if without consideration
Partnership to LLC, etc.
Transfers in and out of a revocable trust
Transfer pursuant to court order
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57. What is NOT Excluded
Transfers among the existing owners (i.e. buying out another person’s interest)
Transfers to non-immediate family members
Transfers to charities
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58. Task Force Recommends Exclude any transfers under a Will
Changes in form of entity only if operational control of the entity is not changed
Exclude charities (only 501-c-3’s), transfers among co-owners
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59. How to Claim Exemption?
Must Send Special Notice on DCRA Form to tenants and to DCRA
DCRA has no forms
If you forget to send the forms (for example, if you are dead), there is a presumption that the transfer is not exempt. (I.e. that you are not dead.)
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60. Title Companies Need Certainty
Title insurance insures that no tenants have any rights (i.e. to purchase the property) and that the purchaser has clean title.
Need to know if tenants have exercised rights, or have rights lapsed because of deadlines.
DCRA supposed to issue a form signifying whether any notices from tenants have been received.
No forms designed by DCRA yet.
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61. Time Frames: Law versus Task force: 1 Rental Unit
Current
Proposed
Response to Offer of Notice
30 days
15 days
Negotiation
60 days plus 15 days right of first refusal
30 days + 15
Time to Close
60 days plus 30 days if financing needs it
same
Maximum
190 days
90-105
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62. Time Frames: Law versus Task force: 2-4 Units
Current
Proposed
Response to Offer of Notice
15 days jointly, + 7 days indiv.
30 days
Negotiation
90 days plus 30 if not jointly plus 15 days right of first refusal
90 days + 15
Time to Close
90 days plus 30 days if financing needs it
90-120
Maximum
277 days
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63. Task Force Recommends Single Unit Class 2-4 5-21 More than 21 units
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64. Resources dcgis.dc.gov Then Real Property
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68. DC Site (top) vs. Google Earth
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69. Newsletter www.JacksCamp.com RKaufmann@Jackscamp.com Roy Kaufmann
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