New California Homeowners’ Insurance Requirement

  • November 6, 2018

New California law mandates additional homeowners’ insurance requirement. In response to the massive destruction caused by numerous California wildfires over the past several years, California is taking steps to enact laws that seek to fund wildfire prevention and protect consumers impacted by wildfires. One of the biggest issues that homeowners’ who lost their homes are facing, is the unfortunate discovery that they are underinsured. Outdated or inaccurate replacement cost estimates are often the cause of the problem. For homeowners with replacement cost coverage, a new law, which goes into effect January 1, 2019 will require insurers to provide, every other year before policy renewal time, an estimate of the cost to rebuild or replace the home in a way that complies with existing insurance regulations. The new law is aimed at improving the information available to policyholders so they can make informed decisions about how much coverage to buy. The law goes into effect July 1, 2019, and has several exceptions. See Ins C §10103.4 (added by Stats 2018, ch 205).

No matter where you live, it is always advisable to review your insurance with your insurance broker regularly. Insurance is one of those products that we consider to be a key piece of your asset protection plan. We know that buying insurance is not a particularly sexy or gratifying purchase, but if you ever need it, you will be glad you did.

Real Property Disputes: Local or Transitory?

  • October 31, 2018

Real Property Disputes: Local or Transitory?  Where do we go from here?

In the law, some cases are considered “local” actions, while others are described as “transitory.”  What does that mean? Essentially, some cases must be decided only in a court of the one particular state that is connected to the subject of the case. Those are called “local actions.”

On the other hand, most lawsuits are “transitory” and can be litigated in any state that has jurisdiction over the parties, based on their residence or presence in the state.  Sometimes several states might be potential venues for a transitory action, and the litigants may engage in “forum-shopping” because they prefer the laws of one state over another.  When multiple states might be the venue of a transitory action, there are rules to help rank which state is a better venue than others.  Typical examples of transitory actions are contract disputes, injury claims, and class-actions.

Quiet title actions, probate of real property and judicial foreclosure actions are all examples of “local actions” involving real estate that must be heard in the state in which the property is located.

We recently handled a case from California that addressed issues arising from both local and transitory actions.  A trust estate was being litigated in California, but the estate included property located in Nevada.  In that instance, the court – applying long-established exceptions to the local action rule – entered orders determining the parties’ respective interests in real estate located in Nevada.  The Nevada Supreme Court recently upheld the entry of the California probate court’s order that the defendant “trustee” had no interest in the Nevada lands she had conveyed to herself.  The ruling was based on the fact that the California probate court had proper jurisdiction over the trust and the parties who were all of its trustees and beneficiaries.

The same exception to the local action rule applies in a variety of other settings, the most common of which are divorce proceedings.  In a divorce, a court in State “A” can divvy up property of the spouses located in State “B” and any other states.  The Court’s power to do this stems from its jurisdiction over the owners – the divorcing spouses.  Likewise, in a partnership dispute or dissolution, if the court has jurisdiction over the partners or the partnership, it can divvy up their real estate, no matter where it is located, and the courts where the land is located must give effect to the decree partnership dissolution (or the divorce decree) which divides the land.

Cases involving a mixture of local and transitory actions can be complicated.  Incline Law Group, LLP has the experience to guide you through the process.

Residential Leases – What is Missing from your Lease Agreement

  • August 17, 2018

What’s missing from the residential lease you drafted?

DIY Leases

As we near the end of the summer, the housing market is hot.  The rental market is even hotter.  Landlords are seizing opportunities to rent their property due to the shortage of rental units in our area.  We often see landlords and tenant entering into written leases that were either drafted by a non-lawyer or downloaded off of the internet (we often refer to these as the DIY (Do It Yourself) Lease). These leases are often missing key terms which make it very difficult for either party to enforce the terms of the lease.   NRS 118A.200 sets forth a number of provisions and clauses that must be contained in a residential lease agreement, otherwise, the lease is considered unlawful.  For example, one provision that is often omitted from a DIY lease is that a tenant has the right to display the flag of the United States. While this may seem obvious or unnecessary to include for some landlords, failure to do so violates NRS 118A.200.

Bear Box (Bear Proof Trash Container)

NRS Lease Provisions

Even if a lease includes the provisions as required by NRS 118A.200, many leases we see are contractually deficient and can expose the landlord to liability.  We often see leases that do not contain terms that related to local and property specific factors.  For example, in the Lake Tahoe area, securing trash in bear-proof containers is a great concern due to the wildlife that lives here.  Failure to properly secure trash can lead to severe fines against the property owner as well as bears being deemed a nuisance and subsequently euthanized.  Any lease in the Lake Tahoe area should include specific provisions relating to wildlife and trash so that it is clear that the tenant is responsible for securing trash and will be held accountable for the tenant’s failure to adequately do so.  This is just one of many location-specific examples in the Lake Tahoe area but it should be noted that almost every geographic location in Nevada and California has specific issues that should be addressed in the lease.

Having an attorney draft, or at least review, your lease is relatively inexpensive and is certainly less expensive than attempting to enforce an unlawful or invalid lease.  If you would like us to take a look at your lease or draft one for your rental property, do not hesitate to contact us.

Marijuana Tenants Update – March 2018

  • March 15, 2018

In October, 2015, Incline Law Group published a blog about how the state laws regarding medical marijuana, along with the issuance of the Cole Memo, impacted landlord tenant law.  The article compared the dynamics between the California and Nevada State Laws with that of the Federal Government along with the Federal Government’s ability to prosecute those who violate the federal marijuana laws.

Since that time, both California and Nevada have legalized recreational marijuana.  However, the federal government still considers marijuana to be a Schedule 1 drug, making it illegal for both medical and recreational users.  Former Deputy Attorney General James Cole released the “Cole Memo” in August 2013, which provided guidance to federal prosecutors with regard to marijuana prosecution.  The Cole Memo essentially directeMarijuana Leasesd federal prosecutors not to prosecute certain uses of marijuana if the use did not violate the local state law, which has allowed the industry to blossom.  The Cole Memo also provided landlords who rented to tenants that were involved in the marijuana business a sense of security so long as the landlord and tenant complied with local laws.

In January, 2018, current Attorney General Jeff Sessions, announced the withdrawal of the Cole Memo.  As previously mentioned, the federal government has the right to seize property used in the cultivation, manufacturing or selling of cannabis.  This can include real property where the owner is merely a landlord who does not participate in the cannabis business.  Under the guidance of the Cole Memo, this risk had been significantly reduced.  Now, due to the withdrawal of the Cole Memo, it is expected that prosecution of all marijuana related crimes, whether or not legal under state law, will increase.  This means that any landlord who has a tenant in the marijuana industry, or even a recreational user who is growing their own plants for private use, again risks prosecution under federal law, including, but not limited to the government seizing the landlord’s property.

While the Cole Memo was not legally binding, it provided many landlords with enough confidence that they would not be prosecuted for renting to those in the marijuana industry.  However, all leases must now be revisited based on the withdrawal of the Cole Memo or landlords could be subject to criminal penalties.

If you have questions about your lease and what your legal risks may be, please contact our office.

(Published March 2018)

Leases and Medical Marijuana Tenants

  • March 15, 2018

The State of Nevada legalized the use and cultivation of medical marijuana in 2014 and began allowing cannabis businesses to operate in 2015.  While California voters approved the use of medical marijuana some two decades ago, California law makers only put into place a regulatory scheme in 2015 thereby allowing dispensaries to operate legally.

Medical Marijuana and Leases

Cannabis law is currently a very fluid and rapidly changing area of law.  The legalization of medical marijuana at the state level presents significant conflicts with federal law in numerous areas including drug policy, banking laws, criminal law and so much more.  Under federal law, the use, cultivation and sale of marijuana – medical or not – is illegal.  As a result of the past war on drugs, federal law provides some very severe penalties for violations of federal drug law, including forfeiture.

The federal government does have the right to seize property used in the cultivation, manufacturing or selling of cannabis.  This can include real property where the owner of the real property is merely a landlord who does not participate in the cannabis business.  While the federal forfeiture laws do have an “innocent owner defense” many state cannabis laws require the lease to specifically state that the lease is for purposes of cultivation, manufacturing or selling.

As noted above, this is a rapidly changing area of law.  Just two days ago (October, 2015) the Federal District Court for the Northern District of California issued a ruling (a somewhat scathing decision, in fact), based on the 2015 Appropriations Act, halting the Department of Justice from expending funds to enforce federal laws that interfere with state laws that authorize the use, distribution, possession or cultivation of medical marijuana.

Until the conflict between the state and federal laws governing the use and sale of marijuana are entirely resolved, providers of services, goods and property, including landlords (both commercial and in some cases residential) are advised to seek legal counsel and to address new contract and lease provisions such as “escape clauses” and stated compliance with state cannabis law.

(this post was originally published in 2015)

Things to Consider When Buying Property in Tahoe

  • February 15, 2018

Things to consider when buying property in Tahoe.

Winter is a great time to buy in the Truckee/Tahoe area.  Whether you are looking to purchase a new primary residence or just a vacation home, there are a number of legal issues that you will want to consider.

  • TRPA/Building Restrictions. The Tahoe Basin is under the jurisdiction of a bi-state federal agency known as the Tahoe Regional Planning Agency (TRPA).  TRPA’s mission is, primarily, to preserve the environmental health and sustainability of the Lake Tahoe Region.  TRPA has the authority to establish and enforce land use planning, building and development restrictions.  The TRPA code may limit a homeowner’s ability to build, remodel, landscape and otherwise improve their property.

If you are purchasing within the jurisdiction of TRPA, it is important that you understand what you can and cannot do with your property with regard to improvements and the timelines for permitting and/or building within the Tahoe Basin.  Certain activities like grading and digging are generally prohibited October 15 through April 30.  If your property is within a scenic corridor or within a sensitive zone (like a stream zone) you may be subject to additional TRPA oversight.  TRPA does not make redevelopment, remodeling or improvement impossible, but it is important that you be aware that TRPA restrictions may impact your intended use of your new property.  There is a great deal of information available on the TRPA website.

  • Homeowners’ Associations. If you are looking at purchasing a condominium or town home that is within a homeowners’ association you should carefully review any applicable Covenants, Conditions and Restrictions (CCRs).  The CCRs will dictate any use restrictions on your property.  For many second home buyers in Tahoe, rental restrictions are very important.  Some Associations may limit the length of rentals or prohibit them entirely.  If you are intending to rent out your new house as a vacation rental or on a longer term basis, you should carefully review the CCRs for provisions relating to rentals.  It is also important that you understand if you will be required to pay monthly assessments, whether there are any planned or pending special assessments and the general financial health of the Association which should be evident in the operating and reserve budgets and financial reports.

 

  • Title Report/Title Insurance. An often overlooked document in the mountain of paperwork that you wade through when purchasing a home is the preliminary title report issued by the title company in preparation for the issuance of title insurance at the close of escrow.  The title report provides a list of recorded documents that will be excluded from title insurance coverage.  It is very important to review this list of exceptions and exclusions.  Often you will see easements affecting the property, any recorded use restrictions (like CCRs) and sometimes you may see issues relating to TRPA building covenants or restrictions.  The title insurance policy that you obtain will not insure against loss resulting from a claim that is related to a title condition that was listed on the exceptions list.  More importantly, certain title conditions can impact your intended use of the property (for example, if there is a public easement for beach access that goes right by your new master bedroom window….you may want to know about that).  It may be possible to remove some title exceptions and/or to insure around others.  You may want to seek legal counsel to understand the impact and possible removal of certain types of exceptions.  Your realtor should be able to guide you on when it is advisable to seek legal counsel to assist with title issues.

 

  • CA vs. NV? While the Tahoe Basin is one big beautiful region, there is one major tax difference that should be pointed out in case you are not already aware:  The State of California has individual and corporate state income tax, the State of Nevada does not.  When buying a second home that is intended for your personal vacation use, this may not be an important issue.  However, if you are intending your new Tahoe home to be your new primary residence, it is worthy of consideration.  Additionally, if you intend to rent out your property, thereby generating income, the rental income is likely to be subject to income tax – not such a big deal if you are already a California state taxpayer, but if you are a Nevada resident, you may be subjecting yourself to California income tax on that rental income.  Food for thought, and depending on circumstances, a reason to get in touch with your tax professional for guidance.

 

  • Real Estate Agents. As with any community, the Truckee/Tahoe area has many excellent realtors and a few that may not be quite so excellent…Chose an agent/broker by asking questions of both the realtor and people that you may know in the community.  Realtors that live and work full time in the community, and have for some time, are going to understand the many unique aspects of homeownership in Tahoe such as why you want to think twice about a long steep north facing driveway or when you should investigate your grand remodel plans with TRPA.  Many of the communities around the Lake and in the Truckee Area have a local Board of Realtors.  They can often be found online and may be a useful place to do a little research.

 

The Truckee/Tahoe Area is an amazing region rich with unparalleled beauty, outdoor adventure and close knit communities.  If Incline Law Group, LLP, can ever be of service to you in the purchase of your Tahoe home, or with other legal needs, please feel free to contact us.  Until then, we will see you out there!

How Should I/We Hold Title to My/Our Property?

  • February 15, 2018

How Should I/We Hold Title to My/Our Property?

When you get to the closing on your new home, the escrow company will often ask, “How do you want to hold title?”

The answer to this question may depend on a number of factors, such as whether you are married, whether you are purchasing the property with someone else or whether you have a trust for your estate.  There may be other factors such as whether this is a property intended for investment or whether you are purchasing in the name of a corporation or LLC.

But for most individuals, the most common options are fairly straight forward.  It should be noted that the discussion below is not exhaustive and that there may be other forms of vesting that could be of benefit in your specific circumstances.  Similarly, not all states are community property states and for those that are, the existence and terms of pre or post-nuptial agreements are critical to vesting decisions.  Vesting is the way we describe how the title to the property is held – with different forms of vesting comes different rights and obligations of joints owners that are not discussed here.  It is important that you consult with an attorney to determine the best form of vesting for your circumstances.

This post is broken up into 4 parts which are intended to cover the most common forms of vesting in the four most common circumstances: Part I) if you have a trust; Part II) if you are purchasing property in your name only; Part III) if you are unmarried and purchasing with another person; and Part IV) if you are married.  As a bonus, since we are talking about title(s), if you can name the artists for each of these songs titles, please post your answers!

Part I: A Matter of Trust

Generally if you have a trust, and the property is intended as your primary residence, you will likely title it in the name of the trustee of your trust.  This is true whether you are single or married and often if you are purchasing with someone else to whom you are not married. You should always consult with your estate planning attorney when transferring property into or out of your trust.

Part II: All the Single Ladies

If you are purchasing property as an unmarried person and in your name only, the vesting is pretty much just that, as an individual (you may see this written as a an unmarried woman/man or single woman/man which is a coded reference to whether you are divorced or never married – if you object to this, as I do, you can simply request that title be vested in your name as an individual).

If you are married, but you are purchasing the property as your separate property, the title will generally read just that: Jane Smith, a married woman as her sole and separate property.  In community property states, in order for your spouse to disclaim any community property interest in the property s/he may be required to sign a Quit Claim or Interposal Deed.

Part III: Our House

If you are purchasing property with another person that is not your spouse, you really have two choices:  “joint tenants” or “tenants in common”.  With joint tenancy, each owner has an undivided equal interest in the property.  More importantly, joint tenancy comes with an automatic right of survivorship.  This means that when one joint tenant/owner dies, his/her interest automatically transfers to the remaining owner(s).  If one of the joint tenants transfers her/his ownership interest during their lifetime, this can destroy the joint tenancy and convert the ownership to tenancy in common.

More than one owner can also own property as tenants in common.  In this case, each owner will own a percentage of an undivided interest in the property i.e. the ownership interest does not have to be equal.  With joint tenancy there is no right of survivorship and when one joint tenant dies the interest is freely transferable to the decedent’s heirs.  In Nevada, if the type of vesting is not specified, our statutes provide that the default vesting is tenancy in common.

Part IV: Love and Marriage

Married couples can also hold property as joint tenants or tenants in common.  However, both California and Nevada have the option for married couples to hold property as “community property” or “community property with right of survivorship”.  The community property with right of survivorship vesting carries two very important benefits, namely the automatic right of survivorship when one spouse dies and a tax benefit known as a “step up in basis”.

What this means is, when one spouse dies, the surviving spouse gets the benefit of a readjustment of the tax basis in the property up to the current value.  This is important if, say, a married couple purchased the house in 1970 for $100,000.  At the time of the death of the first spouse in 2016, the house is valued at $700,000.  The surviving spouse elects to sell and downsize, without the step up in basis the surviving spouse could be subject to capital gains tax on the difference between the original basis of $100,000 and the new value of $700,000.  If the property was vested as community property with right of survivorship, the surviving spouse would get the tax benefit of the step up in basis.

If a married couple holds title simply as community property (without the right of survivorship), they can take advantage of the step up in basis, but the transfer of title to the surviving spouse will not be automatic and may require probate.

As noted above, there are many ways for individuals to hold title to real property.  This post only discuses a few of the most common.  Because there are tax and legal consequences to how title is held, it is important that you consult with an attorney to help you sort out the best approach for your needs.  And do keep in mind that you can always change the vesting after close of escrow!

PROPOSED LAND SWAP – CRYSTAL BAY LAKE ACCESS AND INCLINE FLUME / BULL WHEEL

  • July 28, 2014

By Andrew N. Wolf, Attorney, Incline Law Group

The owners of the Ponderosa Ranch and the former Stack Estate on the Crystal Bay waterfront have proposed a land exchange with Washoe County. The Ponderosa Ranch contains a portion of the Incline Flume Trail and remnants of the Bull Wheel that was reputedly part of the Great Tramway of Incline used to hoist logs from what is now Incline Village up to the fluming system that sent logs to Virginia City.  The Incline Flume Trail — running from the Third Creek area of the Mount Rose Highway, through the Diamond Peak Ski Resort and all the way to Tunnel Creek Road — still contains remnants of the box flume that was constructed circa 1870s.

The county owns a number of public alleyways that project from County roads to the Lakeshore. One of the public alleyways extending from the County road to the lakeshore in Crystal Bay, eight feet wide by 200 feet long, lies between 44 and 61 Somers Loop, properties that are owned or controlled by the same group which controls the Ponderosa Ranch on the West side of Incline Village.  Several years ago, an attempt was made to abandon this particular alleyway to the adjoining parcels and the request was denied by Washoe County. The current owner has proposed a land exchange in which the alleyway would be traded for a parcel to be split off the Ponderosa Ranch property containing a portion of the Incline Flume Trail and the historic Bull Wheel.

To be clear, the alleyway that is proposed to be traded is not the public stairway that is located between parcels located at 22 and 90 Somers Drive.

There have been strong sentiments expressed on both sides of the issue.  On one side, opponents of the exchange note that public lake access is a limited and valuable commodity that cannot be replaced.  They point out that if public agencies want ownership of the privately held portions of the Incline Flume Trail or Bull Wheel, they have powers of eminent domain which can be used to acquire those lands for fair value.  On the other side, supporters of the land exchange would like the recreational resource of the Flume Trail and the historic resource of the Bull Wheel to be placed in public hands, so that the trail can be kept open, and properly marked and maintained. Over the years, the owners of the Ponderosa Ranch land have blocked access and/or posted no trespassing signs upon the portion of the Flume Trail that crosses private property.  Supporters of the exchange also note that the Crystal Bay alleyway to be swapped is extremely steep and may not be capable of any formal use, development or improvement.  Washoe County currently keeps it closed for safety reasons.

Washoe County has taken the initial step of exploring the concept of an exchange by authorizing appraisals of the affected lands and other investigative studies which are apparently being funded by proponents of the exchange.

Opponents of the exchange also argue that a decision to abandon a scarce Crystal Bay public lake access should not be mixed together with an analysis of whether the Incline Flume and Bull Wheel area should be acquired for public use, such as via eminent domain. They argue the questions are completely separate.

This is an important local issue.  Interested and concerned citizens can follow and attend public meetings and write their elected officials. The Washoe County staff report of May 13, 2014, and various public comments concerning the proposed land exchange can be found here:
http://www.washoecounty.us/large_files/agendas/051314/28.pdf

FANNIE MAE CHANGES MORTGAGE ELIGIBILITY RULES AFTER SHORT SALE AND DEED IN LIEU

  • July 15, 2014

By Cassell von Bayer, Attorney, Incline Law Group

One of often cited selling points for homeowners to undertake a short sale rather than a foreclosure sale is the ability to purchase a new home with financing in a shorter period of time. While all lenders have different eligibility requirements, most lenders current guidelines fall within a 2 to 5 year waiting period after a short sale or deed in lieu of foreclosure. While FHA guidelines may allow a borrower to obtain a new mortgage within one year of a short sale, those guidelines provide for several restrictions and FHA loans require significant and very costly mortgage insurance premiums.

Fannie Mae continues to be one of the largest mortgage holders and has up until now provided borrowers with mortgage eligibility two years after a short sale. Aside from FHA and VA loans, Fannie Mae has maintained the shortest wait periods after a derogatory credit event such as short sale or foreclosure. As of August 16, 2014 that will change. For all loan applications taken on or after August 16, 2014, Fannie Mae will impose a four year waiting period after a short sale and seven year waiting period after a foreclosure sale. Equally as important, for loan applications taken before August 16, 2014, the lender must document that the short sale or deed in lieu was completed two or more years from the disbursement date of the new loan. Similarly, where your credit report shows a “charge off”, meaning a lender, such as a second mortgage holder after a short sale, has reported the account charged off for accounting purposes, borrower’s may be subject to a four year waiting period. The new rules were issued on June 17, 2014, and as noted go into effect August 16, 2014. For the specifics please see: https://www.fanniemae.com/content/release_notes/du-do-release-notes-08162014.pdf

It is difficult to imagine that these new restrictions will aid the housing recovery or the reconstitution of the American Dream.