Archives for January 2014

Two Words On “Attitude” …

Captain Jack Sparrow, channeling Charles R. Swindoll …

Captain Jack Sparrow - AttitudeThe longer I live, the more I realize the impact of attitude on life. Attitude, to me, is more important than facts. It is more important than the past, than education, than money, than circumstances, than failure, than successes, than what other people think or say or do. It is more important than appearance, giftedness or skill. It will make or break a company … a church … a home. The remarkable thing is we have a choice everyday regarding the attitude we will embrace for that day. We cannot change our past … we cannot change the fact that people will act in a certain way. We cannot change the inevitable. The only thing we can do is play on the one string we have, and that is our attitude. I am convinced that life is 10% what happens to me and 90% of how I react to it. And so it is with you … we are in charge of our Attitudes.  Charles R. Swindoll

Confused By Documentary Stamp Tax and Intangibles Tax? Everyone Else Is, Too!

DocstampLast week I attended a Continuing Legal Education (CLE) seminar on Florida’s documentary stamp tax and non-recurring intangibles tax and I left feeling as though I knew less about about them than when I walked in. Now, of course, that’s not entirely true – a lot of good information was conveyed and I did learn things I didn’t know before. However, it did leave me keenly aware that Florida’s documentary stamp tax and intangibles tax are confusing even to the experts who study them closely.

I don’t really know why they’re so confused. The general rules are pretty simple: (1) any instrument that conveys any interest in real property for consideration is subject to Florida’s documentary stamp tax; and (2) any obligation to pay money that is secured by Florida real property is subject to Florida’s non-recurring intangibles tax.

With regard to documentary stamp tax, deeds, easements and options are just a few of the instruments that convey real property interests that are subject to the doc stamp tax so the list of instruments subject to tax is probably broader than most people realize. But, other than figuring out if a conveyance of a real property interest is occurring it’s all pretty simple.

Well, except that some conveyances are made for no consideration, such as gifts of property, transfers between spouses for estate planning purposes, transfers due to divorce, and so on. And sometimes even if you don’t think there’s any consideration the State has defined certain situations where consideration is “deemed” to have been given even if no money changes hands, so the definition of “consideration” can be confusing. But, really, other than figuring out if a conveyance of a real property interest is occurring and whether consideration is being given or is deemed to have been given, it’s all pretty simple.

Well, except that there’s also a long list of specific exemptions – situations where you would think tax would be due but the State says it’s not. And some of the exemptions aren’t very clear. But, really, other than figuring out if a conveyance of a real property interest is occurring and whether consideration is being given or is deemed to have been given and whether any random exemptions apply, it’s all pretty simple.

Oh, I forgot. Documentary stamp tax is also due on obligations to pay money (such as a promissory note) executed or delivered in the State of Florida. Executed OR delivered. In state. So a borrower and lender can take one step over the state line, sign a note, and no tax is due? Or take a boat out into international waters? True! As long as it is signed AND delivered outside of the State of Florida. So let’s just always do that, right, because we’ll save money, right? Not so fast. The tax is capped at $2,450 if it’s not secured by real estate so travelling out of state is generally not worth the trouble and expense because the cap makes it cheaper to just pay the tax in most cases. Why $2,450? The State is smart enough to have calculated the average cost that a person is willing to tolerate paying before going to all the effort to travel out of state with their banker just to execute and deliver a note. Pretty clever, huh?

[Update Feb. 13, 2014 – Question posed to me: What about an out of state lender with an out of state borrower who wants to sign a note while he’s here on vacation? With no other connection to the State of Florida except that he’s vacationing here. Tax is due because the note was executed in-state. Crazy!]

 Ok, I lied. I understand exactly why everyone is so confused. It’s because, sometimes, Florida’s documentary stamp tax makes no sense whatsoever!

At least Florida’s intangibles tax is pretty easy to understand. If you have an obligation to pay money secured by Florida real property the intangibles tax is due. Period. End of story. I think.

And so it goes. Just call your trusted commercial real estate attorney (hey, maybe that’s me!) if you have questions about Florida’s documentary stamp tax or non-recurring intangibles tax. It’s confusing enough that occasionally he or she (or I) may not have the answer immediately and might have to do a little research to get you the right answer, we might even have to call the Department of Revenue to figure it out, but it will be worth it (a) to save tax where tax can be saved, and (b) to avoid a Florida Department of Revenue inquiry if tax should be paid, but isn’t.

As always, thanks for reading. Please send your questions and comments and SHARE this article with others!

BH

SHOW ME … I mean … WIRE ME THE MONEY!!

showmethemoney-Jerry-Maguire-1I exchanged emails today with another real estate attorney and was amused when I saw this statement as part of her email signature in bold, red letters:

DO NOT DELAY YOUR CLOSING: Due to recent changes in the real estate industry, we can only accept wire transfers. Cashier’s checks do not immediately clear and are not “COLLECTED” funds and will no longer be accepted at closing. Our wiring instructions will be provided.

It’s a bit “in your face” but I understand it. During the real estate “bubble” of a few years ago claims against title insurance underwriters for fraudulent cashier’s checks and other fraudulent activities increased dramatically. That trend continues and, with new technologies, the risk of fraud has become even greater. For example, one M.O. that has been employed, now that checks can be deposited simply by sending a photo of the check to your bank, has been for a person receiving a check at closing to take the check from the closing, deposit it by phone, return and claim that they would actually prefer a wire instead of the check. When the closing agent takes the (now already deposited) check back and then sends the recipient a wire instead, he or she will then have paid twice! The potential scenarios can seem crazy, I know, but with the recent tightening of attorney trust accounting rules and the severe penalties for any discrepancies or errors, we (attorneys) simply can’t take any chances.

ASIDE: Coincidentally, as I was typing this I received an emailed “Fraud Alert” (common these days) from a title underwriter describing a new scheme that has been detected. In this one, the fraudster hacks into a realtor’s or other service provider’s email and directs the closing agent to wire money to the fraudster’s account instead of the person’s whose email they’ve hacked into. Another technique made possible by modern technology! In the alert they recommend that we actually call the recipient to confirm that the email containing their wire instructions was authentic – good grief, one more administrative hassle to deal with at closing!

With regard to cashier’s checks, specifically, many people don’t realize that even cashier’s checks may take a few days to “clear” our trust account and some even get offended if we don’t accept theirs or state that it might cause a delay. However, under no circumstances are we allowed to disburse funds that are not confirmed as being “collected,” that is, confirmed by our bank as being in our account. If you don’t want to risk delaying the closing until we confirm that the funds you are providing are actually “collected,” be prepared to wire the funds. If you absolutely must provide a cashier’s check, be prepared to provide it far enough in advance of closing (i.e. several days) so that the check will clear in time for closing. Personal check? Ummm, not happening.

Thanks for reading! Drop me a note and let me know what you think!

BH

Permit Me! Increased Construction Permits Send A Positive Signal!

constructionAs reported in Orlando Business Journal, Orlando-area construction permit values are up 47% over the prior year, which is a clear indicator that home builders and commercial developers are looking toward increased growth and a more robust economy in 2014. Advance planning and accurate forecasting are critical components for success in the commercial real estate market, so the professionals obviously expect the demand and the resources (financing, etc.) to be conducive to future sales activity.  I hope they’re right! In my own practice I’ve seen an uptick in activity from home builders, including, in some cases, purchases of raw land for future development. That’s a market that has been virtually dead for several years now as developers gobbled up previously developed (but sometimes dilapidated and abandoned) projects and vacant lots. By purchasing raw land they are telling me that (1) the inventory of available, suitable, ready-to-build lots is dwindling, and (2) they believe it is, once again, becoming economically feasible to purchase and develop raw land. If you have land or commercial property to sell or are interesting in buying commercial real estate, please engage an experienced commercial real estate attorney early in the process so he or she can guide you through the process as smoothly and efficiently as possible.  BH