The 1031 Exchange – An Effective Real Estate Investment Resource

A 1031 exchange is known as a like-kind exchange and can be an effective tool for those who have investment real estate.  When selling investment real estate, most people face a significant tax burden. A like-kind exchange can significantly reduce or even eliminate this burden, by deferring a capital gains tax which might otherwise arise at the time of the sale of investment property.

The 1031 Exchange Rule
Property can only qualify for a like kind exchange if the taxpayer follows specific rules as laid out by the US tax code. Investment properties can only be exchanged for properties that are another investment. For example, you cannot trade a business property for a residential property unless the residential property is going to generate income. One or more rental condominiums can, though, be exchanged for a multi-family home. The second (and perhaps most often violated) rule for a 1031 exchange is how the proceeds of the sale are handled. For example, you cannot take the proceeds from one sale and buy or pay off another property you own. This type of transaction will result in all proceeds being taxable. And very important, neither the taxpayer nor his or her representatives (attorneys and accountants included) can handle the proceeds during the exchange. The funds must be handled by a qualified intermediary. [Read more...]

Security Deposit – Treble Damages and Legal Fees

In an ongoing case,  a management company prepared a check to a tenant who had recently vacated an apartment.  The inspection of the unit disclosed no damages or defects.  An assistant property manager mailed several such checks, but one of the security deposit checks was not sent. It was later discovered that the check in question had become attached to another file.  The assistant realized the error approximately 1 week after the check was to be mailed and promptly mailed it to the former tenant.  The check arrived 5 days after the 30 day deadline.  The tenant hired an attorney who demanded 3x the security deposit plus legal fees due to the late receipt.  Management company responded with an apology and an offer of 2 months which was rejected.  The case will likely go to trial, the issue being whether the legislature intended for inadvertent mistakes on the part of employees of a landlord to require treble damages and legal fees.

Land Court – Adverse Possession Claim

A commercial client barred a neighbor from renting parking spaces on its property.  The neighbor alleged ownership due to “adverse possession” claiming she had maintained sole control over the parking area in question for a period of 20 years.  The case was tried before the Land Court.  Due to careful preparation and detailed discovery, it was shown that the plaintiff could not have exercised control over the client’s parking area and a verdict for the client was issued.

Personal Injury – Serious Head Trauma

Our client was riding a motorcycle in a rural road in W. Massachusetts when he was attacked by a large German Shepard dog.  The attack caused the client to fall from his motorcycle and in so doing, his ankle and leg were broken.  In addition  the fall resulted in serious head trauma.    A lawsuit was filed against the owner of the dog and the person with whom the owner left the animal unattended despite clear instructions to keep the dog in its designated enclosure or on a leash.  After lengthy negotiations with the insurers for both the dog owner and dog caretaker,  a six significant settlement ( in six figures) was reached on behalf of the client.

Brookline Zoning Board of Appeals – Deeded Parking Spaces

Our clients were aggrieved by a decision of the local Zoning Board of Appeals, granting a developer the right to relocate their previously deeded parking spaces.  An appeal was filed with the Land Court.  After negotiations, the developer granted the clients indoor garage spaces, in return for their ceding their previously deeded outdoor parking spaces.

Probate Court – Sibling brings suit against executor

Our client was named by his last surviving parent as the executor of her estate.  Part of his duties as executor was to sell the family home and dispose of valuable antiques and art work.   One of his siblings brought suit alleging that her brother the executor sold their mom’s house for less than fair value and failed to properly account for the personal property (including art work) in the home.  The case went to trial in the local Probate Court.  Due to detailed discovery, including the deposition of the plaintiff, numerous interviews with other siblings, the real estate broker who listed and marketed the property and the attorney who guided the executor through the probate court process, the plaintiff’s allegations were proven to be without merit. The Court rendered a verdict in favor of the defendant.

Commercial lease terms and security deposit

Additional Info: I’ve recently exited a commercial lease in Brookline in good standing, however the landlord has sent a letter indicating there are deficiency repairs that I deem unreasonable (amount ~$10k) for an 1 year lease of monthly rent $2.3k. I find that unreasonable and would like to know what consequences I would face if I decide simply not to comply.  Would I need to hire an attorney to represent me?

Attorney Answer:

In virtually every commercial lease, the landlord requires a security deposit of typically 2 month’s rent, at the time the lease is signed.  Assuming there is such a security deposit, it becomes incumbent upon the tenant to hire counsel and seek the release of the disputed monies.  Unlike residential leases, there are no statutory protections for commercial tenants beyond the usual remedies.   If, for some reason, the landlord did not require a security deposit, I would suggest a firm written response to the landlord’s demand, laying out in as much detail as possible why you do not feel the repairs are required or not the responsibility of the tenant.  Thereafter, you would wait to see if further discussions/negotiations are warranted or simply wait for the landlord to back down or initiate legal action.

Can a new owner of a commercial property break a lease of a current tenant once the sale is final?

Additional Info: We are looking into purchasing a building in Newton that is zoned commercial to use for our business. The current owner just signed a 3-year lease with the lessee that is currently occupying the building. Can we make an offer on the property contingent upon negotiating to have the current tenants vacate? Or do the current tenants have legal rights to stay through their lease term?

Attorney Answer:

A purchaser of commercial real estate takes title to the property subject to any existing leases.  It is certainly within the realm of possibility to make an offer to purchase subject to negotiating with the current tenant to relocate, making the desired space available.  If I were representing the seller, however, I would counsel a very short time period for such negotiation to occur, and would insist that the buyer (you) bear all costs related to the possible move by the existing tenant.

We’d like to convert a Chestnut Hill property to condominiums.

Additional Information:

Do I need a special permit to convert a 4 unit apartment building in Chestnut Hill into condos?

ATTORNEY ANSWER:

No – but if you are in Brookline you need to file a copy of the Master Deed with the Town – assessor and Building Department and complete a condominium conversion certificate.   [Read more...]

Property zoned as 3 unit multi family dwelling, can we convert to 4 condos?

Additional Information:

My wife and I are considering buying an investment property in Newton.  It is zoned as a multi family dwelling with 3 separate units.  We are considering buying it and building out the fourth floor to create 4 units, and then converting into 4 condominiums.  Is this doable?

ATTORNEY ANSWER:

The first step is to check with the Newton Building Department to determine if the specific property can be converted into 4 units.  If the answer is yes, and the conversion may be done as a matter of right, you can proceed accordingly.  If you are told the conversion cannot happen without Zoning Board of Appeals approval you may want to make your purchase contingent upon such approval.

Once approval is obtained either by right or after Zoning Board hearing, in Newton a homeowner can convert a property into condominiums without having to obtain approval.  [Read more...]