Do You Have Clear Title to Your Real Estate?
A problematic trend seems to be emerging with banks failing to properly discharge liens of previous property owners. Recently when I’ve been assisting clients in the sale of both commercial and residential real estate we’ve encountered significant problems caused by banks that failed to properly discharge liens of previous owners after my clients purchased the property. These lien discharge problems have in some instances almost caused sales to be terminated and have caused significant delays resulting in hardship and increased costs for the parties to the transaction.
The Problem
When you, as a purchaser of real estate, close on the purchase of property, most often a seller has an existing mortgage that must be paid off with closing proceeds. This is typically done by the title company as the closing agent or perhaps an attorney who is handling the acceptance of funds from a purchaser and disbursing those funds to pay various liens on a property that must be satisfied to give the purchaser clear title. The problem arises when loans and mortgages are paid with closing proceeds and the bank receiving the funds fails to record a “Discharge of Mortgage” or lien document evidencing the loan has been paid in full. This problem has been further complicated recently with the chaos in the banking industry including the multiple acquisitions and requisitions of certain bank entities. A bank that received a mortgage payoff five years ago may have been sold as an entity several times making it next to impossible to determine the location of loan records. 
Real estate sellers then list their properties for sale – not realizing the mortgage of the seller that sold them the property still has a lien on the property – resulting in a severe complication of not being able to provide clear title to the next purchaser. Not being able to produce a clear title to the next purchaser in a timely manner results in providing a purchaser with the right to terminate the transaction. This problem, and the possible loss to the seller, cannot be readily fixed because it could take several weeks to obtain a discharge of a mortgage that was actually paid several years before. In one instance, a colleague of mine represented a client selling a residence that was foreclosed on and almost lost the ability to avoid the foreclosure by selling the property and paying the balance owed on the foreclosed mortgage within the redemption period. In addition, with the glut of both commercial and residential inventory on the market, it is risky to give any hard-to-find purchaser the smallest of excuses to terminate a transaction based on an objection to the condition of your property’s title.
The Solution
Before or at the time of listing your property for sale, ask your real estate professional to assist you in causing a title search. Conducting a title search first will help you determine whether there are any undischarged mortgages or liens that you are not aware of. Once armed with this information you can initiate, sooner rather than later, the process of obtaining all discharge documents that should have been recorded at the time of the previous sale of the property. Many County Register of Deeds offices have records available online so you may be able to check your property’s title yourself as well.
The bottom line is to avoid surprises when trying to sell your real estate in these challenging times.
Dan A. Penning
Many employers, in the interest of finding information about applicants or current employees, periodically or routinely conduct internet searches with the name of the person about whom the company desires more information. Many employers discover positive information about the applicant that was not evident on the applicant’s resume and application; however, employers also happen upon other valuable information as well, that indicates an applicant’s faults that may affect job performance if the applicant were to begin work for the company. Facebook, Twitter, Google profiles, MySpace, and LinkedIn can be goldmines for discovering indicators that will not be apparent in the application materials submitted by the applicant to the employer. Although these searches are commonly conducted by employers, the use of internet searches to make hiring decisions regarding certain applicants for a position can expose an employer to liability under Anti-discrimination Laws, whether federal, state or local, Privacy Rights, and the Fair Credit Reporting Act, amongst other laws.
However, background checks such as these are not protected under the Fair Credit Reporting Act unless the investigation is conducted by a third party reporting agency. If the employer conducts its own background checks on applicants, the employer does not enjoy the protections of the Fair Credit Reporting Act. Using a third party is not without risk, however, because the third party search must be conducted in compliance with the Fair Credit Reporting Act.
As we have mentioned in previous emails and other communications from our office, it is important that children, once they reach the age of majority (18 in Michigan), execute a Financial Power of Attorney form and Medical Power of Attorney. A Medical Power of Attorney allows the individual nominated in the document the right to have access to medical records and be involved in medical decision making. A Financial Power of Attorney allows the agent designated to handle financial matters on behalf of the young adult. For students going to school out-of-state, the question arises whether to have legal documents created in the student’s home state, the state in which they attend school, or both. While the laws in most states are comparable so that a Power of Attorney created in one state usually will be respected in another, that is not always true.
Recently, many of my estate planning clients have asked questions about Lady Bird Deeds and when it is appropriate to use these instruments in estate planning. Like any planning tool, a Lady Bird Deed can be helpful in some situations, but is not appropriate in all cases. The use of a Lady Bird Deed in the wrong situation can lead to unintended or negative results.
The most common type of deed that people are familiar with is where there is an outright transfer of ownership from one party to the other, such as in the sale of a residence. This most common type of transaction utilizes a “fee simple” deed which is used to convey property from one (or more) owner to another. When Person “A” conveys real property to Person “B” by a “fee simple” deed, Person “B” becomes the owner of the property immediately upon the execution of and delivery of the deed.
In some situations, Lady Bird Deeds can also be used as part of Medicaid planning and, in fact, that is where they first became very popular. A Lady Bird Deed may work well where someone who is currently receiving Medicaid benefits as a way to pass the property at their death without the necessity of probate. This is true because Medicaid policy provides that a Lady Bird Deed is not a “divestment” (transfer of assets that results in a penalty).
In addition, certain transfers invalidate the ability of an individual to claim a homestead exemption in the state of Michigan with respect to their residential property taxes.
As a majority of Michigan children begin school this week, there are a few things parents can put in place now that will help their children and themselves address an unexpected emergency situation if it should arise.
When I suggested to my son, Casey, he could bypass the weekly “Team Trivia” competition he gave me a very matter-of-fact reply of “No Dad, I have to go for the team.” So off we went to the Village Inn to meet up with “Casey’s Team” for an evening of burgers and “I’ve got that one, it’s The Matrix” or “Luxembourg” as “the northern most country beginning with the letter “L” to not play in the last winter Olympics.” Luckily the Coopers were on hand to offer up “entropy” for “the science of boiling and cooling water,” and “Baltimore” as the “location of John Hopkins Medical Center and University.” Another round of high fives and beaming smiles as the points began adding up.
During this summer many clients and friends spending time at summer cottages stopped by The Depot to say hello, and some even stopped in just to see Spike, The Depot’s resident cat.
This is a very special evening when business owners come together to sponsor an event for “locals” to say “thank you” to our community for a great summer. We are proud to be one of three senior sponsors, along with Hansen Foods and Bahle’s of Suttons Bay.
The software involved in the New York case is titled BusyBox. It is described as a series of small utility-type programs that are tailored for and embedded in various products, such as wireless routers, firewalls, modems, internet radios, PDAs, media players, and HDTVs. Various manufacturers use the BusyBox software and its source code to make their products work. Although BusyBox and its source code are available without charge, the use of BusyBox is subject to the GNU General Public License (or “GPL”). GPL is an open-source copyright license. Although the software is free, the license places requirements on further distribution of the licensed software. For example, if a product is embedded with BusyBox software, the product’s manufacturer/distributor must provide the source code and any upgrades or modifications available on the same terms, i.e. without charge. The GPL also prohibits licensees from distributing the software under a license that is more restrictive than the GPL. Gartner, Inc., a leading international IT firm, estimates that 85% of companies use open-source software in some fashion (Source: www.groklaw.net).
BusyBox claimed that Westinghouse, in addition to 13 other distributors, infringed the copyright license in the software. Westinghouse distributed HDTVs that were embedded with the BusyBox software while, at the same time, imposing more restrictive licensing terms than those in the GPL. The more restrictive licensing terms included a limitation for “personal, non-commercial purposes only.”
Several weeks ago, I shared a poem written by Emily Perl Kingsley entitled, “Welcome to Holland.” (
One Saturday morning, we packed our provisions for the day and headed over to the 
Remember, whatever disappointments you may experience in your vacation that was supposed to take you to your version of “Italy,” that sometimes the experiences you have in “Holland” are even more special and meaningful.
For the time being, the Senate has again abandoned efforts to impose a “carried interest tax” on venture capitalists, investors, and managers of family businesses. The tax would have increased the 15% capital gains tax rate on certain investors’ profits to the top income tax rate, which is scheduled to hit 39.6% on January 1st (H.R. 4213). The share of investors’ profits is called “carried interest.” It might appear at first glance that it’s perfectly fine for investment managers to be taxed at higher rates on their “carried interest.” But venture capitalists and investors don’t reside exclusively on Wall Street. The law was written so broadly that it could have hit approximately 6.5 million people invested in real estate partnerships that own anything from a single dwelling to sizable commercial properties.
In reality, the proposed legislation could have imposed a higher tax rate on any partnerships invested in particular assets. The higher rates would apply to investment gains and also to gains from the sale of the partnership, and therefore, a sale of the family business would not qualify as a capital gains transaction. Family operations are commonly formed as partnerships and managed by a family member. Under the proposed legislation, the managing family member could be subject to the “carried interest tax.” For a family partnership to gain liability protection and also not be subject to the higher taxes, an outsider – not a family member — would have to manage the partnership. The House version of the legislation exempted family farms and ranches held in partnerships. Other family partnerships would have had to wait for the Treasury Department to exempt them through regulations.
Recently, many of my firm’s clients who own multiple acres of land in northern Michigan have been contacted by petroleum company representatives and offered oil and gas rights leases for their land. While many of these companies are reputable and offer fairly standard terms in their leases, they are generally trying to secure leases that are most favorable to them. The landowner should be aware of provisions that can be included to protect their investment and maximize the owner’s financial return.
A “Pugh Clause” protects the landowner by requiring the oil and gas company to release certain land subject to the lease after termination of the lease term that has not been pooled into the land subject to the royalty payment in the event an active well results from the lease and exploration. For example, an oil and gas company may only pool an apportion of the leased land for royalty purposes and without a Pugh Clause, the companies in some instances can tie up the entire parcel subject to the lease even though they are only paying royalties on a portion of the land.
