Sunday, October 22, 2017

Termination of Condominiums (Bulk Owner)

Many condominiums in Florida have been subject to bulk buy-outs, either due to poor sales from the great recession or, in the case of older buildings, due to an aging ownership, high special assessments or major future repairs (roof or concrete restoration).  This issue has led the Florida legislature to recognize that, in certain circumstances, continued operation of a condominium “may create economic waste and areas of disrepair which threaten the safety and welfare of the public or cause obsolescence of the property for its intended use and thereby lower property tax values.”

To address this issue, the Florida legislature amended Florida Statute Section 718.117 to create a termination procedure outside the Declaration of Condominium process which generally requires unanimous approval of all owners in order to terminate the condominium under existing condominium documents.  Specifically, the termination under this new section is “not an amendment subject to Florida Statute Section 718.110(4)” which sets forth that “no amendment may change the configuration or size of any unit in any material fashion, materially alter or modify the appurtenances to the unit, or change the proportion or percentage by which the unit owner shares the common expenses of the condominium and owns the common surplus of the condominium unless the record owner of the unit and all record owners of liens on the unit join in the execution of the amendment and unless all the record owners of all other units in the same condominium approve the amendment.”
The procedure often raised by bulk owners is known as an Optional Termination.  Specifically, this type of termination may be initiated pursuant to a Plan of Termination of the Condominium as follows:
1.     Must be approved by at least eight (80%) percent of Unit Owners.
2.    If proposed by a Bulk Owner (an owner who directly or through affiliates controls 80% or more of the voting units), then, in addition, the following requirements:
            a.     Payment to owners of “at least 100 percent of the fair market value of their units.”
            b.        “Provide for payment of a first mortgage encumbering a unit to the extent necessary to satisfy the lien, but the payment may not exceed the unit’s share of the proceeds of termination under the plan.”
            c.       Include special notice within any proposed Plan that states:   
                       i. “The identity of any person or entity that owns or controls 25 percent or more of the units in the condominium and, if the units are owned by an artificial entity or entities, a disclosure of the natural person or persons who, directly or indirectly, manage or control the entity or entities and the natural person or persons who, directly or indirectly, own or control 10 percent or more of the artificial entity or entities that constitute the bulk owner.
                       ii. The units acquired by any bulk owner, the date each unit was acquired, and the total amount of compensation paid to each prior unit owner by the bulk owner, regardless of whether attributed to the purchase price of the unit.
                       iii. The relationship of any board member to the bulk owner or any person or entity affiliated with the bulk owner subject to disclosure pursuant to this subparagraph.
                       iv. The factual circumstances that show that the plan complies with the requirements of this section and that the plan supports the expressed public policies of this section.
Once the Plan of Termination is presented to the owners, it must be approved by Bureau of Condominium within forty-five days of presentation.  If no owners object (see below) and the division approves the Plan (or if no approval, no rejection with forty-five days) then the termination may proceed as outlined within the Plan.
Once the Plan is presented to owners, should five (5%) percent or more of the total voting interests of the condominium reject the plan of termination by negative vote or by written objection, the plan of termination may not proceed.  In addition, if rejected by the required voting percentage, “a subsequent plan of termination pursuant to this subsection may not be considered for 24 months after the date of the rejection.”
By way of example, if a condominium consists of one hundred units, then it would require the holder of not less than eighty units to vote to proceed with a plan of termination, and five or more-unit owners reject such plan, then termination will not be permitted.  All such rejections should be made in writing and if the plan has been submitted to the Bureau of Condominium, that the written objection be filed therewith.
With the continuing strength in the rental market and the ongoing failures at many condominiums, termination and conversion thereafter into apartments will continue to be a viable process for distressed condominiums and their owners.
Michael Posner, Esq., is a partner in Ward Damon a mid-sized real estate and business oriented law firm serving all of South Florida, with offices in Palm Beach County.  They specialize in real estate and can assist associations in all legal matters including bulk termination. They can be reached at 561.594.1452, or at mjposner@warddamon.com
            

Saturday, September 30, 2017

What Lawyers Do, a Specialization Guide

          Two things struck me this week regarding my profession. First, my son is trying to decide what type of lawyer he wants to be when he graduates from law school next spring. Second, while binge watching Better Call Saul, I was struck by Saul’s attempt to label himself an Elder Law Attorney simply by drafting a few wills.  Putting aside that a lawyer who drafts wills is considered a Trust and Estates attorney, not an Elder Law attorney, I began to think about all the areas of practice in which we, as lawyers, specialize which, in many ways, are unknown to the public who think lawyers, know or should know, all areas of the law.

          There are two main branches of practice, commonly divided between trial attorneys and transactional attorneys. Historically, and in actual practice in some countries, the trial attorneys were known as barristers. These attorneys present all cases in court at the direction of solicitors who handle the actual day-to-day practice of law and who handle all client relations. In many cases, the barrister receives the trial materials merely a day or two before the trial, presenting the case prepared by the solicitor. Barristers were forbidden to meet with clients or to even form partnerships with other barristers. However, many barristers banded together in groups called chambers in which they could share resources, office space and clerks.

          In the United Kingdom for example, barristers are still the most common trial attorneys though the fusion of practice between barristers and certain solicitors is continuing to expand in the United Kingdom. Barristers still wear horsehair wigs, stiff collars, bands, and a gown when appearing in court in the United Kingdom. 

          In the United States, the separation of barristers and solicitors has been eliminated and anyone who is licensed as an attorney may appear in any state court in which they are licensed. However, appearances in federal court still require an application, and in some cases also require the taking of a test. In many jurisdictions, including federal, admission to the appellate bar also requires an application and in some cases an examination. Admissions to the Federal Bankruptcy Bar requires both admission to the federal District Court for the applicable bankruptcy court, and passage of an examination and a minimum of continuing legal education credits. Admission to the United States Patent and Trademark bar requires passage of a very difficult exam and a scientific or engineering undergraduate degree.

          Most lawyers today have a jurist doctorate degree issued by one of the United States’ one-hundred fifty plus accredited law schools. Many law schools also now offer certificates to their students, which allows a student to “major” in a specific area of law while in law school. These programs require the students to take a specific coursework in their “major,” and also to take one or two additional classes beyond the normal number required to graduate. Some programs also require maintaining a minimum GPA in the specialized area. Upon graduation, the student receives a separate certificate indicating the completion of the specialized coursework program.

          In addition, there is also post-law school graduate work for further specialization. The most common is the Masters in Law in Tax, commonly known as the LLM degree. Many tax attorneys practicing today hold this graduate degree.   Other LLM’s are available today including LLMs in international, real estate, health or environmental law.

          On television, lawyers appear to handle a variety of legal matters including criminal and civil, transactional and litigation. While there still are some lawyers who handle a wide variety of cases, most lawyers specialize in a limited area of law. In litigation, there are lawyers who specialize in criminal cases, family law cases, commercial litigation, or civil litigation. Transactional lawyers also specialize, including areas such as real estate, corporate, intellectual property, licensing, sports law and other areas.

          In Florida, lawyers who specialize in a specific area may, after practicing five years, stand for one of the many certification exams offered by the Florida Bar. These exams, when passed, allow a lawyer to state that they are Board Certified in that specific area.   There are currently twenty-six areas of law for which lawyers may become Board Certified. This list continues to grow and includes both litigation and transactional areas of law. 

          Armed with this knowledge, it makes it easier for you to properly select a lawyer to represent you in whatever matter your legal needs require. Choosing the correct lawyer is the first step to resolving your legal needs, and selecting someone who is not qualified to handle your case can lead to poor representation and an unhappy outcome.


Michael J Posner, Esq., is a partner in Ward Damon a mid-sized real estate and business oriented law firm with offices in Palm Beach County and a Board Certified Real Estate Attorney who handles a variety of real estate matters throughout South Florida.  He can be reached at 561.594.1452, or at mjposner@warddamon.com

Saturday, March 11, 2017

President Trump and Real Estate

   Many people believe that Trump will be good for business and real estate, due to his career which was heavily involved in commercial and real estate.  This is yet to be seen, but right out of the gate Trump had an effect on the real estate market by his issuance of his first Executive Order on inauguration day.

          The issue in question was the action by President Obama, in the waning days of his administration, to reduce the premium for mortgage insurance on mortgages guaranteed by the Federal Housing Administration (FHA).  These loans are usually financed with only three to five percent down, and as such, require mortgage insurance to cover the possibility of a deficiency upon default due to the limited amount of equity in the property.

          The mortgage insurance premium is a monthly fee tied to the loan size, loan term and includes an upfront premium of 1.75% of the loan amount and between 45 and 105 basis points (0.45% to 1.05%) annually on the loan balance, paid in monthly installments with the principal and interest payments.

          Earlier in January, 2017, President Obama directed a 25-basis point (0.25%) cut in the premium which was estimated to save consumers, on average, at least $25.00 per month.  This decision was based, in part, on the belief that the funds that insure these mortgages have sufficient reserves to allow for a premium reduction. However, only four years ago, taxpayers funded a 1.7-billion-dollar bailout of the FHA to fund shortfalls in the insurance fund due to a large number of loan defaults.

          In response to the action by the outgoing President, Trump issued an Executive Order cancelling the reduction.  This action was taken, in part, as a reaction to the Obama administration adopting new policies as it prepared to leave office, but was also taken due to the concern that a premium reduction puts taxpayers at risk due to decrease in the insurance funds available to the FHA to cover defaults.

          Another issue on President Trumps agenda is reducing or eliminating the mortgage interest deduction. Currently married homeowners who itemize their taxes can deduct interest on mortgages of up to one million dollars ($500,000 for single persons).  The deduction is supported by Realtors, home builders and bankers who use it as a selling point to potential home buyers.

          However, the number of home owners who itemize is not as popular as some believe.  At least a third of homeowners have no mortgage, and many lower and middle income homeowners do not itemize their taxes, losing any potential deduction from the interest that they pay on their mortgage.   The Tax Policy Center states that the mortgage interest deduction mostly benefits wealthier Americans.  “Instead of turning renters into homeowners, homeownership tax expenditures encourage middle- and upper-income individuals to purchase more expensive homes, take on more debt, or buy second homes.”

          Trump’s plan is to cap total available deductions at $100,000.  This cap will only affect the wealthiest, since even on a $500,000-dollar loan at five percent, the total interest deduction in year one of the loan would be $25,000.  However, when you consider other deductions that come into play such as property taxes, charity, medical expenses and the like, the cap will affect some homeowners, especially wealthier homeowners who now have deductions that far exceed $100,000.

          The National Association of Realtors will strongly oppose any measure to reduce the mortgage interest rate deduction, as they believe that this will impact home ownership.  With ownership levels continuing to fall, the President of NAR has said that NAR is “adamant about protecting tax deductions for residential mortgage interest and property taxes—for primary and secondary homes.”


          Michael J Posner, Esq., is a partner in Ward Damon a mid-sized real estate and business oriented law firm serving all of South Florida, with offices in Palm Beach County.  They can be reached at 561.594.1452, or at mjposner@warddamon.com

Binding Arbitration (The Wells Fargo Dilemma)

     Wells Fargo Bank was recently caught opening thousands of unwanted accounts, resulting in millions of fees charged to unsuspecting customers.  After an investigation, Wells admitted its failures and has promised to make things right by its customers.  Since then a number of class action lawsuits have been filed, and Wells has, to-date, successfully stopped the lawsuits, invoking the arbitration clause of the standard Wells Fargo bank account contract, as follows:

You and Wells Fargo Financial National Bank (the “Bank”), including the Bank’s assignees, agents, employees, officers, directors, shareholders, parent companies, subsidiaries, affiliates, predecessors and successors, agree that if a Dispute (as defined below) arises between you and the Bank, upon demand by either you or the Bank, the Dispute shall be resolved by the following arbitration process. However, the Bank shall not initiate an arbitration to collect a consumer debt, but reserves the right to arbitrate all other disputes with its consumer customers. A “Dispute” is any unresolved disagreement between you and the Bank. It includes any disagreement relating in any way to your Credit Card Account (“Account”) or related services. It includes claims based on broken promises or contracts, torts, or other wrongful actions. It also includes statutory, common law and equitable claims. A Dispute also includes any disagreements about the meaning or application of this Arbitration Agreement. This Arbitration Agreement shall survive the payment or closure of your Account. You understand and agree that you and the Bank are waiving the right to a jury trial or trial before a judge in a public court. As the sole exception to this Arbitration Agreement, you and the Bank retain the right to pursue in small claims court any Dispute that is within that court’s jurisdiction. If either you or the Bank fails to submit to binding arbitration following lawful demand, the party so failing bears all costs and expenses incurred by the other in compelling arbitration.

Many consumers and lawyers have fought the use of this provision.  They argue that it unfair due to the cost, privacy, the possible bias of arbitrators and, most importantly, the inability to bring a class action lawsuit (which allows one case to be brought by many consumers who have similar claims).  Instead, the arbitration cases must be brought against the bank one at a time.  Wells argues that the parties agreed to these terms when the accounts were opened. However, lawyers have argued that since the fake accounts were never agreed to by the consumer, the terms of the standard contract they signed to open prior, legitimate accounts, does not apply.  So far Wells has been successful in moving lawsuits to arbitration.  Eventually the issue may be decided by an appellate court, but for now, consumers need to be aware of these clauses in their dealings with large corporations.

While arbitration is generally binding on the parties, mediation is another method of resolving disputes prior to court or trial.  Mediation is non-binding, which means that the mediator cannot rule on the case, and if the parties do not agree to a settlement, the matter continues to litigation.  Mediation either occurs through contract, a pre-suit statutory requirement, or by court order (which occurs in almost all civil cases today).

For example, in the most common real estate contract used in South Florida, all disputes under the contract must be settled by mediation prior to any lawsuit being instituted:

Buyer and Seller shall attempt to settle Disputes in an amicable manner through mediation pursuant to Florida Rules for Certified and Court-Appointed Mediators and Chapter 44, F.S., as amended (the "Mediation Rules").  The mediator must be certified or must have experience in the real estate industry. Injunctive relief may be sought without first complying with this Paragraph 16(b). Disputes not settled pursuant to this Paragraph 16 may be resolved by instituting action in the appropriate court having jurisdiction of the matter

In Homeowner Association disputes, matters may be resolved by either pre-suit mediation or binding arbitration, depending on the nature of the dispute.  Disputes regarding condominium associations can be subject to mandatory nonbinding arbitration depending on the nature of the claim.  This special type of arbitration results in a final decision of the arbitrator, but is subject to all regular appellate rules, making the ability to appeal the arbitration decision no different than a decision by a trial court.

In and of itself, arbitration, as a method to resolve disputes, is not better or worse than court.  It is often faster and cheaper than litigation, and many people prefer the privacy that a public trial does not provide.  It also offers more finality, as the grounds for a trial court appeal do not apply, though under certain limited circumstances, the arbitration decision can be appealed. 


Michael J Posner, Esq., is a partner in Ward Damon a mid-sized real estate and business oriented law firm serving all of South Florida, with offices in Palm Beach County.  They can be reached at 561.594.1452, or at mjposner@warddamon.com

Wednesday, November 23, 2016

Allowing Pets in Apartments, Homes and Associations

      With the increased level of pet ownership, issues regarding “faux emotional support animals” (a situation where an owner/tenant is bending or breaking the rules to obtain a pet accommodation when pets are banned) and the need to attract more tenants and buyers, many apartments, landlords and condominium associations have started to adopt pet friendly rules.  If you are considering allowing pets as a landlord or association, you should consider adopting special rules and regulations to control the living and activity of any pet allowed in your property.

     The starting point should be the registration of any permitted pet.  This would include an application describing the pet, its weight, color, breed, sex, vaccination status, county registration and spay/neuter information.  Each owner should also be required to provide a current vaccination and rabies certificate from their local veterinarian.

     A set of rules should be provided to each owner with specific limitations and restrictions.  These could include a requirement for annual vaccination, a limitation on the number of pets (and no guest pets), a limitation on certain breeds; a weight limitation (many owners/associations have a twenty to twenty-five pound weight limit); a leash requirement; a specific place for pet defecation; a solid waste removal requirement and provisions to prevent breeding, noise/barking; restrictions on leaving pets on a balcony or outdoors; restrictions on leaving pets alone for long periods; and a removal policy for any violent or aggressive behavior against other owners and guests.  All Rules should be acknowledged that they have been read by a tenant/pet owner.

     A pet deposit is often a special condition of landlords that permit pets.  The deposit should be separate and apart from the security deposit.  The deposit can be either refundable or non-refundable.  Most deposits are in the $200 to $300 range.  For Associations, a common area deposit can be used to include damage caused by owners and their pets to common areas.

     All pet owners should be required to provide appropriate renter’s insurance which should provide coverage for both damage caused by the pet and for any personal injury caused by the pet, be it a simply excited dog knocking someone over or a vicious cat or dog that bites or scratches someone on the property.  Some basic renter policies exclude or limit animal coverage, especially as it relates to certain breeds, so this issue must be reviewed before allowing certain pets.

      For associations and apartment buildings that have had solid waste issues, it is now common to require DNA registration of all approved pets and to adopt a fine for failing to pick up after a pet goes on common areas.  As part of any approval of a pet, the animal’s cheek is swabbed and the dog’s DNA is registered by a company that provides a monitoring service.  If uncollected feces are found, the solid waste is collected and a small sample sent to the testing company.

     Once tested and compared to the DNA information on file, the testing company can determine if any registered dog is the responsible pet.  Once identified, the pet’s owner can then be fined for the violation plus the cost of the test.  The average cost for a service like this is about $50 per pet at the registration phase and $75-150 to test the feces to determine a match.  Combining DNA testing, fines for violations and Poop Bag Stations can eliminate most issues relating to uncollected waste.

     Proper planning, deposits and rules can go a long way to eliminate most issues relating to allowing pets.  This will expand the pool of buyers/tenants and prevent common problems from hidden pets, faux ESA animals or unregulated animals in places where pets are permitted but no procedures have been adopted.

Michael J Posner, Esq., is a partner in Ward Damon a mid-sized real estate and business oriented law firm serving all of South Florida, with offices in Palm Beach County.  They specialize in real estate and can assist landlords and associations in addressing animal issues.  They can be reached at 561.594.1452, or at mjposner@warddamon.com

Monday, October 31, 2016

Guest Blog: Protect Yourself from a Lawsuit by an Unlicensed Contractor

By Richard Lansing

          Every home owner in the country wants to get as much as they can for as little as possible. That is reasonable, but it can lead people down some risky paths. One of those paths, which is quite commonly utilized by first time buyers especially, is the hiring of an unlicensed contractor.

          Some needed home repairs and a simple web search leads a homeowner to get measurements from a gentleman who shows up at your door. He is dressed reasonably nice for a contractor (jeans and a polo), and all his construction equipment looks right. He takes measurements, provides a quote that is almost too good to be true (1/3rd less than the first contractor you called) and the next week he and his crew are ripping out your kitchen sink or replacing the master bathtub.

          What happens when Mr. Contractor gets injured? It might seem “fair” that he’d have to pay his own medical costs. Businesses should carry insurance, after all. Except that without a license, your contractor cannot apply for a business license. According to construction consultant Lyle Charles, “the reality is that home owners often end up carrying that burden when the contractor is uninsured. It is one of the dirty secrets of low-cost home renovations.”

          In order to become a licensed contractor, there are a few things a person must demonstrate to the state a number of items, and usually take a competency exam. Contractors must pass a contractor’s exam in order to acquire a contractor’s license. A contractor must also carry insurance when you register as an LLC, or other business entity. That insurance protects employees and the job site.  To protect the public, Florida actively pursues unlicensed contractors by performing sting operations in conjunction with local police.

          As you can imagine, all this licensing and exam work takes time and costs money. Contractors who charge more for their work have earned the right to do so through state licensure. They carry liability insurance that protects you, the homeowner, from the consequences of their on-the-job injuries.

          Before you hire that unlicensed contractor, stop and think about the potential hazards:

          Natural Disaster: If your home was recently damaged by a natural disaster, the unlicensed contractor may not be able to perform the work legally. That could limit your insurance settlement.

          Property Value: Someone unlicensed who performs major work, such as adding a room to your home, could reduce the property value because the addition will not have the proper permits or be built to the building code. Plus, homeowners are required to disclose unlicensed/unpermitted work when selling their home.

          Protection from Injury: Not just of the contractor, but the surrounding area. If the contractor drops a heavy tool on a car, for instance, whatever dent or scratch is left behind might end up costing you for the repair. The same goes for personal injury claims if that contractor hurts a neighbor. 

          Damages: If an unlicensed contractor fails to complete the work, does it in a poor manner or causes damage, the unlicensed contractor might disappear entirely, and often cannot be found if you need to sue.

          There is both good news and bad news. Before we continue, it’s best to speak directly with an attorney, as they will provide recommendations more directly related to local laws you must comply with regarding permits and association requirements for repairs. That said, there are some general guidelines you can keep in mind when you’re looking for a contractor and considering going with someone who is unlicensed.   

          You can file a lawsuit against an unlicensed contractor if there are damages to your property, or if he causes injury somehow (either to himself or someone else). Being unlicensed is, in some ways, actually a bigger risk than whatever risks come from the job itself. As a homeowner dissatisfied with a job, you can also stop payment to the contractor or refuse payment altogether. Most unlicensed contractors also do not write up agreements, so there is no contract that details their responsibility. Prices change, homeowners refuse payment, and accidents happen.

          Generally, if you try and sue an unlicensed contractor you will probably have to show the two of you attempted to work out a solution between yourselves. It should not cost you much more than a few thousand dollars in attorney’s fees to get some representation on your side if you need it for a default (if the contractor doesn’t show). You’ll have to wait a few years to collect, but once that default is renewed you can send the bill to collections and hope for your money to arrive.

          If you decide to file a lawsuit, consult an attorney familiar in construction law over someone who is general practice. That expertise will come in handy, as the intricacies of construction law require someone well versed.


          Going with an unlicensed contractor might sound great because you will save on the upfront costs, but it can cost you in the long run. There is simply too much risk with injury lawsuits, property damage and a lack of dispute resolution, to chance hiring a contractor who does not carry a license. 

Sunday, October 9, 2016

Renting or Buying 2016

       The dream of home ownership is as American as hot dogs, baseball and apple pie.  At least that was the theory until the great recession that ruined home ownership for millions.  With the economy mostly recovered, mortgage interest rates at all-time lows and rents rising, is it now better, once again, to own or rent.

          Homeownership levels continue to fall with the level of ownership hitting a 50-year low last quarter.  Currently only 62.9% of households are owner-occupied.  Ownership levels are highest for seniors, and at an all-time low for millennials at 34.1%. The decline is due to several factors

          On strictly financial basis, using a five-year period of ownership and making some basic assumptions (your mileage may vary), renting versus owning is nearly a wash, with homeownership slightly less expensive:

                                                            Renting                            Owning
                                                 
Monthly Payment                                $1,350.00                        $   954.83         
Taxes/Insurance                                           20.00                             400.00
HOA Assessments                                        0.00                              100.00
Maintenance                                                 0.00                              250.00

Monthly Costs                                     $1,345.00                        $ 1,704.83

Down Payment                                                                            $50,000.00

Five Year Cost                                      $80,700.00                    $152,289.80

Less Interest on Down Payment (2%)   ($5,204.40)                    

Less Increase in Value (3%)                                                        $(39,818.00)

Less Principal Reduction/Equity                                                 $(69,105.00)

Interest Expense/Deduction                      $520.40                      $(7,636.80)

Plus Costs of Purchase/Sale                                                         $28,185.00

          Total Cost                                  $75,495.60                       $63,915.00

          This chart is based on a $250,000 home, a $50,000 down payment, an association payment of $1,200 a year, rent averaging $1,350 a month over five years, maintenance costs of $3,000 per year, a sales price of $278,750 after five years, plus the renter investing the $50,000 at an average of 2% and the homeowner’s home value increasing at a rate of 3% per year.  Given these factors, the savings over five years is approximately $12,000.  This includes costs of purchase of $5,000 and costs of sale (including a real estate commission of $23,185). 
                                                                                         
          Longevity: Determining whether to rent or own is dependent on several important factors.  First, how long do you plan to stay in your next home has to be determined, because one of the best benefits of home ownership is tied to longevity of ownership.  Our sample favors renting through year three, with each year thereafter supporting buying.

          One key factor tied to longevity is how mortgage loans are front loaded with mostly interest.  Fixed Rate Mortgages are amortized to provide a fixed monthly payment over the life of the loan.  Initially the payments are mostly interest, with only a small amount going to principal.  A typical $250,000 house with a $200,000 loan will only have principal reduced by $19,000 if sold within the first five years.  It takes nearly 20 years to reach a 50% reduction in the loan balance.

          Tax Deduction:  One benefit of homeownership is the ability to deduct mortgage interest paid on loans to acquire and improve the home. This can be worth thousands in tax savings during the early years of a mortgage.  However, many people do not have enough deductions to make itemizing their taxes worthwhile, and this benefit is lost if the homeowner cannot itemize their taxes.

          Maintenance:  One drawback of homeownership is the requirement of maintenance of the home from lawns, to painting, to repairs and replacements.  Renters mostly rely on the landlord to handle maintenance, repair and replacement costs.  Homeowners have to bear the full cost, which can be very expensive.  A new a/c system costs over $2,000, and a new roof can run from $7,500 to $30,000 depending on whether its shingle, cement or barrel tile roof system. 

          Down Payment:  The down payment is the largest bar to home ownership, especially for younger and first time buyers.  Typically, the down payment is twenty percent of the purchase price.  This is a large sum that may be difficult for many to accrue, and even the three percent down payment on an FHA loan may still act as a bar when coupled with closing costs that easily exceed $5,000.  Renters only usually need first last and security, which is far less than the full down payment, but can be equal to the FHA down payment.  Taking the twenty percent down payment and investing in an indexed fund instead of buying can often result in a substantial gain versus homeownership, which has seen both large value increases and decreases in recent years (the S&P has returned 78% over the last five years).

          Portability.  Renting is for a fixed term, customarily for one year.  Many leases provide a right to terminate early for a two-month rent penalty (an attempt to make this a Florida law did fail).  This ability to move quickly is often better for single and married couples without children.  Having to move for a career opportunity as a homeowner can mean carrying a mortgage and paying rent on two places until the first owned home is sold.

          Given the initial costs, down payment, the burden of maintenance, the loss of the ability to move quickly means that the decision to buy instead of rent can be difficult for many people, especially if they are likely to need to move in less than five years.  Committing to longer term ownership is when the decision becomes in favor of homeownership, ultimately saving money in the long run.

Michael J Posner, Esq., is a partner at Ward Damon, a mid-sized real estate and business oriented law firm serving all of South Florida, with offices throughout Palm Beach County.  Michael specializes in real estate law and business law, and can help sellers, buyers landlords and tenants with their real estate issues.  Michael can be reached at 561.594.1452 or by e-mail at mjposner@warddamon.com.