BizLawBuz …. The Power of Know

Contractors Facing $75,000 Fines Unless Certified in Lead-Safe Practices

When it comes to lead-based paint, the Environmental Protection Agency has long regulated its use, detection and disclosure. The EPA recently expanded its regulation in the area by requiring contractors who renovate, repair or paint pre-1978 homes, child care facilities and schools to be specially trained and certified in the removal and containment of lead-based paint.

Although lead was eliminated as a paint ingredient over 30 years ago, it remains on the walls in countless structures, often buried under several layers of newer paint. Many common activities can cause dust or chips containing lead-based paint to be released into the air: sanding, scraping, or even something as simple as replacing an old window.

These new regulations affect anyone that conducts renovations or repairs for a profit. The certification requirement went into effect April 22, 2010, but the EPA recently announced a grace period for those not yet certified. As long as an individual renovator has enrolled in a training course by September 30, 2010, and has completed the course by the end of the year, no fines will be imposed. Contracting firms that are not yet certified, on the other hand, will be subject to fines beginning October 1, 2010.

The fines for violation of the new rules are enormous, up to $75,000 per incident. These are clearly not regulations that can be ignored! A list of the 15 currently-accredited Michigan trainers and other information about lead-safe practices can be found at www.epa.gov/lead.

Lee Flaherty

When they’re selling what we want

As I prepare for my upcoming wedding, I am increasingly bombarded with vendor contracts asking me to pay this and waive that. And I will tell you that I am often tempted to do exactly that, especially when the vendor appears to be selling what I want. But, as an attorney, I am always asking (sometimes excessively) the “what if” questions and making sure the answers to those questions are in the contract. Initially, this was uncomfortable for me, as it may be for some of you. First of all, we tend to hire people with whom we are comfortable, and with whom we enjoy working. Second, we may be in unfamiliar territory when negotiating contracts, or specific types of contracts. And, finally, we may see asking tough questions as being negative or putting up road blocks to what we want. If you are parents of a groom- or bride-to-be you might run into resistance from vendors and children alike when asking these same questions.

Ask questions first
But, these “what if” questions and their answers are essential. Clients often come in with a contract issue saying “I never thought anything like this would happen,” and we are forced to look at the contract for what is sometimes an unpleasant answer. Here are examples of the “what ifs” I asked my photographers:

• What if something happens to your equipment during the wedding?
• What if something happens to your computer after the pictures are downloaded?
• What if your children get sick and you need to leave?
• What if you get sick or there is another emergency?
• What if we are dissatisfied with the replacement photographers you select in the event you are unavailable?
• What if there is a snow storm between Grand Rapids and Detroit on the day of the wedding?

The second step, of course, is making sure that the answers to the “what-ifs” are in the contract. Hand write changes into the contract if you must, but resist the temptation to accept “Just trust me,” or “That has never happened before.”

Minimize the surprises
Of course, things will go wrong. But, you can minimize the surprises and anticipate the solutions if the contracts you sign have the answers. So, take some time, do a little “negative” thinking, and come down with a case of the “what ifs.”

We strive to make “doing business” profitable and advantageous for you. Please call us if you need help crafting the “what-ifs!”

Julie Pfitzenmaier

A few years ago, terms like “short sale,” “upside down,” and “under water,” were not even part of our lexicon. Today, they are common place. Following some 15 years of steady appreciation, peaking in 2006, home values in Michigan have since declined 45% on average. In Oakland County, distressed sales now account for approximately 93% of all home sales. If a short sale becomes your only option, here are some basics to keep in mind.

1. A short sale results when the seller owes more money on the mortgage than the home is worth. As a result, the seller is forced to negotiate a discounted payoff of the underlying mortgage debt with the mortgage lender in order for the sale to take place. Sellers want to avoid having to pay money against the mortgage at closing and to obtain a waiver of any deficiency. Buyers want clear title and a quick closing.

2. It is absolutely essential that a short sale contingency be included in the listing agreement for the property and in the purchaser agreement. Such contingencies will provide that the sale is contingent upon the ability of the seller to negotiate a short sale with its mortgage lender upon terms and conditions that are acceptable to seller, in seller’s sole discretion. If the seller is unable to get such an approval, the purchase agreement can be terminated, buyer’s deposit refunded, and seller has no obligation to the realtor under the listing agreement.

3. Mortgage lenders have very specific, detailed and comprehensive procedures that must be followed, exactly, in order for a short sale to be considered. Substantial documentation must be provided, and there must be full and accurate disclosure on the part of the seller. Failure to accurately disclose such things as hardship, income and assets, may result in the short sale being later set aside on the basis of fraud. The process is detailed and time consuming (as long as 6 months or more), ultimately resulting in either the rejection of the request or a statement of the terms upon which the mortgage lender will agree to the short sale.

4. Mortgage lenders are not required to waive the balance owing on the mortgage. They may require that some, or all of it, be paid by the seller at closing, or that the balance owing will remain payable by the seller under the original mortgage note or a new promissory note.

5. A short sale will impact the seller’s credit rating and may adversely impact the ability to obtain certain types of mortgages in the future. And, any part of the loan deficiency that is forgiven must be reported by the mortgage lender to the IRS on Form 1099-C. Whether or not the forgiven debt is taxable depends upon a number of factors, including whether or not the home was the borrower’s principle residence, when the forgiveness took place, and so on.

Based upon historic trends, many believe that it will take another ten years or more for homes to regain the value that has been lost in the past 4 years. Distressed sales (short sales) are therefore a fact of life that will be with us for years to come.

Duane L. Reynolds