Law News and Tips
Fred L. Vilbig © 2018
It’s spring – at least according to the calendar. And for a lot of people, that means it’s time to start house hunting. If you’re going to move, early summer is probably the best time since the kids will be out of school and the weather should be okay. We’ve moved in February, and that was pretty unpleasant. So what’s involved in finding a house, getting a loan, and closing the deal? I’m going to focus on the contract. I am an attorney after all.
Most people work with a realtor. Realtors help buyers meet sellers. Some people already know each other, so a realtor may not be necessary there, but they can be helpful.
Once you find a home, you need a real estate contract. There is a standard residential form that realtors and most attorneys use, and it covers most situations. If there is something unique about your deal, there are places to include that.
The contract talks about financing. If you’re paying cash or don’t need to worry about financing, you can just check a box. Most people, however, need to find financing, so you can check the other box. You need to put in some limits on the loan amount and the interest rate to protect yourself, but that should be pretty easy to figure out. You just don’t want to have to close if you don’t get the loan you need to.
There are all kinds of riders (attachments) you can add, and a realtor or a real estate lawyer can help you wade through those. They can be pretty important depending on the deal.
You’re going to want to get title insurance. What that does is it protects you against buying a problem. Maybe the seller doesn’t really own the property; maybe there are easements that will keep you from using the property the way you want; or maybe the fence or driveway is on your neighbor’s property.
That last point brings up the survey. A regular title policy includes exceptions to coverage regarding survey matters. Your bank may require a “survey,” but it probably is what we call a “drive-by survey.” The surveyor can literally drive by the property and never get out of their car. Title companies won’t delete the survey exceptions without what we call a “stake-in-the-ground” survey. So be careful.
And if you’re buying a previously owned home, you’re going to want to insist on a detailed inspection. There never perfect, but they give you your best protection.
And something else for buyers to remember: your real estate agent gets paid when the deal closes; and the more the purchase price, the more they get paid. I know they are supposed to be working for you, but there is a built-in conflict of interest. Just something to think about.
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Lawyers read court cases… At least most do. When we were in law school, we better read them. You don’t want a law professor calling on you in class when you’re unprepared. They can be pretty mean. I think that’s a job requirement.
Then when you get out of law school, you keep reading cases for several years. It’s kind of like being an intern studying medicine. Most attorneys don’t feel really comfortable practicing law in till they been doing it for maybe five or six years. After a while, though, lawyers get a handle on the law and start skimming relevant cases instead of reading them completely.
I have to admit that cases can be pretty boring. A lot of times there talking about rules. There are lots of rules. There are rules for jurisdiction, rules for venue, rules for what arguments can and must be made in a particular cause of action. Those rules can be really boring.
But under every case there is a story. A lot of times the story is buried under a lot of rules talk, but there is a story down there somewhere. Sometimes the story is sad; sometimes the story is funny; and sometimes it is just perplexing.
One case recently caught my eye because of the story, but also because of the rule. As you may recall from some earlier columns, we’ve had a number of situations where mom and dad have both died, and a child (usually a son) who was living at home refuses to leave.
The case in question, Kocina v. Johannes, was the opposite. Kocina owned an apartment complex. She hired Johannes’ son to maintain the complex in exchange for a furnished apartment and utilities. Tracy Johannes moved in with her son. At some point, the sun notified Kocina that he was quitting. Kocina offered to renting the apartment. He said no, and left… With his mother staying in the apartment. Kocina provided Jahangir, with notice to vacate the apartment. When she didn’t, Kocina sued for wrongful detainer.
There are two ways to evict a tenant. The first is referred to as “rent and possession”. If you don’t pay the rent, there is an expedited procedure to get you out. At trial, the only question is “Did you pay all the rent due?” If not, the judge will ask if you can pay it then and there. If you can, the case is dismissed. If you owe rent and can’t pay it that day, you’re out.
The other way to evict a tenant is through a wrongful detainer action. This is much more involved where the landlord has to prove that you breached some provision of the lease, other than rent – too loud; failure to keep the apartment clean; too many or any pets at all. Those kinds of things.
When a landlord has a tenant, to evict the tenant for wrongful detainer, the landlord has to give the tenant one month’s written notice. The month in question is tied to the rental period. If the rental period starts on the 15th of each month, then the landlord has to give notice before the 15th of one month and can’t evict the tenant until the 15th of the next month. If the landlord doesn’t give the tenant notice until the 16th, then he or she has to wait two months to evict.
In the case of Tracy Johannes, she argued that the landlord didn’t give her the full 30 day notice. It turns out that in her case, it didn’t matter. The court ruled that since Tracy Johannes was not the tenant (that was her son), the landlord didn’t have to give 30 days’ notice. Tracy Johannes was not a tenant; she was just a wrongful possessor. Written notice was required, but once notice was given, a wrongful detainer action can be commenced.
This is helpful in probate or trust matters where a brother or sister is refusing to leave the deceased parents’ home. So long as written notice is given, there’s no need to wait 30 days to commence an eviction. This is particularly helpful when the holdover is during a high utility use time of year. It is important in administering an estate for a trust to keep costs down.
Many baby boomers are finding themselves stuck between their children’s generation and that of their parents. We were recently caught in that dilemma with my in-laws. It turned out that the amount of their Social Security checks roughly equaled the premiums on their Medicare insurance. That didn’t strike me as such a good deal.
I think a lot of people are getting stuck in this conundrum. It’s a difficult place to be, and the rules governing Medicare and Medicaid are impossibly confusing. The US Supreme Court once referred to the Medicaid rules as “Byzantine construction… almost unintelligible to the uninitiated.”
Those are pretty harsh words from the Supreme Court. In my career I have done a lot of tax law. I can say that the Medicaid rules make tax law look fairly simple. However, without getting into the deep thicket of Medicaid details, I think we can break Medicaid down into two general categories.
When most people think of Medicaid, we think of the program implemented to assist financially distressed individuals to pay for their medical needs. It covers a limited number of treatments. In order to qualify, the applicant has to be financially needy in one of two ways.
The first classification of qualified applicants is those individuals who are “categorically needy.” People are “categorically needy” when they have less than $1,000 of “countable assets.” In addition, they cannot have monthly income equal to or greater than $834. Individuals who fall into this category are the people we would typically think of as Medicaid qualified.
There is, however, a second class of Medicaid beneficiaries. These individuals are referred to as “medically needy.” In Missouri (and the laws vary somewhat from state to state), “medically needy” applicants must have less than the $1,000 of countable assets. However, with regard to income, “medically needy” individuals simply must not have enough income to cover their qualified medical expenses. For instance, if the cost for a person in a nursing home is $6000 per month and they only earned $3,000 per month, Medicaid can make up the difference. That person would fall into the “medically needy” category.
In both of the classifications, there is a limitation on what are “countable assets.” Countable assets are any assets an applicant owns (or owned during the five years immediately preceding the application for Medicaid benefits where the assets were not exchanged for something of value – that is, gifts), but it excludes certain assets. For instance, a person’s house is not included in “countable assets” for qualification purposes, but the State will put a lien against the house for any Medicaid benefits paid. When the house is sold after the recipient’s death, then the State will collect any Medicaid amounts it paid out of the sales proceeds. So the exclusion of the house from countable assets is only temporary.
People for years have been trying to get around the Medicaid rules to have the government pay for their nursing home costs. When I started practicing law 35 years ago, it was pretty simple. Congress caught on, though. First, they made it illegal for grandma to transfer assets to qualify for Medicaid. If she broke the law, surely they’d put her in one of those nice prisons with good medical care. That seemed like a good option to some clients.
Congress caught on, though. So they made it a crime for family or advisors to help mom or dad plan to qualify for Medicaid. As you can imagine, this was disturbing to a lot of influential people. The concern was that it would paralyze legitimate planning for fear of violating the law. So once again, Congress caught on.
Beginning in 2006, when an individual applies for Medicaid, he or she has to add back the value of any assets transferred for less than fair market value during the immediately preceding five-year period (the “look back.”). If an asset was transferred for less than fair market value during the look back period, then the government calculates a penalty by dividing the value of the gift by a Medicaid factor. This calculation determines the number of months that the applicant will be disqualified. The disqualification basically runs from the date when the value of the applicant’s countable assets drops below the maximum permitted amount. It turns out that the disqualification can run for longer than five years. Timing an application is critical!