Statutes of Limitations are not misspelled works of art by Rodin. They are laws limiting when you can sue someone, designed to discourage unreasonable delay in bringing civil lawsuits and criminal prosecutions. In general, an unexcused failure to start a case on time (within the required statutory period) legally prevents a court from hearing the case. While there may be some commonality, each state has different statutes of limitations. For a good summary of Ohio’s statutes of limitations, check out: www.clelaw.lib.oh.us/PUBLIC/MISC/FAQs/Limitations.html.
In the context of Ohio real estate, most of us remember that the statute of limitations for recovering real estate (ORC 2305.04) is 21 years, because adverse possession claims must be for 21 years or more. Other statutory time requirements impacting Ohio real estate actions are: fifteen years to sue on written contracts (ORC 2305.06); six years to sue on oral contracts (ORC 2305.07); two years for civil actions for bodily injuries and injuries to personal property (ORC 2305.10) and four years for civil actions for injury or damage to real property (ORC 2305.09).
In the recent case of Coughlin v. Acock Associates Architects, 2011 Ohio App (5th Dist.). LEXIS 2695, John Coughlin (the Plaintiff-Appellant) remembered to be nice (and perhaps a little naive), but forgot about the oral contract and real property damage statutes of limitations. In 1998, Coughlin had entered into an oral contract with Acock Associates Architects, LLC to design a new Master Bedroom addition to their home. They then engaged Michael Matrka, Inc. to do the construction. Coughlin testified that soon after completion of the project in 2002, water leaked from the windows and skylights. For a number of years thereafter, Coughlin hired a roofer to repair the leaks, but the leaks persisted, got worse, and caused structural damage. Coughin testified that the contractor told them they could expect maintenance issues after the construction due to the “unique and complicated characteristics” of their house.
Whether Coughlin was too nice to consider litigation earlier, too naïve in his belief of the contractor’s claims, or both, the result was the same: he waited too long. The Court explained that the four year property damage statute of limitations started when Coughlin first discovered the damage, or with reasonable diligence, should have discovered the property damage. Coughlin’s testimony clearly indicated the problems were discovered more than four years before the action was brought. The Court further explained that the six year oral contract statute of limitations begins when a plaintiff discovers the omission to perform as agreed. As soon as the structural damage occurred, Coughlin was deemed to have discovered that the design of a structurally sound addition with leak free skylights was certainly an omission to perform as agreed. Unfortunately for Mr. Coughlin, this discovery was more than six years prior to initiation of the lawsuit.
The morals of this story? First of all, oral contracts are “not worth the paper they are not written on”. Not only would a written contract help to better spell out and prove important details, the statute of limitations for written vs. unwritten contracts is fifteen vs. six years. Second, being a nice person is a laudable first step, but “know when to say when”. I have found that most architects and contractors do excellent work, and if there is a disagreement or problem, they are willing to work with you (in fact, in some construction situations, a short statutory work-out period is a required pre-requisite to litigation). However, if an amicable solution is not possible, litigation before eight years of raining inside your home, or at least before the applicable statute of limitations runs may certainly be warranted.
Appraisals Can Make Or Break Your Deal
For every action, there is an over reaction. When we had the mortgage meltdown a few years ago, part of the blame was placed on collusion between lenders and 'friendly' appraisers keeping appraisals high to justify the amount of money being lent. Whether that blame is valid or not, the over reaction affecting the real estate lending market today is a strong tendency among appraisers to play it safe and place a low value on the property.
Add to this the fact that all the foreclosures and short sales are suppressing property values. In the past such sales would not impact the appraised value of a property. However, when these transfers account for such a large percentage of the transactions they cannot be completely ignored.
Finally, the Dodd-Frank Act passed last year now regulates the appraisal process, such as adding Independence requirements and regulating the fees charged. In response, many lenders, particularly the larger mortgage lending operations, now farm out appraisals to an appraisal management company who arranges for the appraisals and takes a cut of the fee. The appraisers are pressured to keep the fees low but still churn out appraisals quickly. Experienced appraisers are being shunted aside for ones that are cheaper, less experienced and often unfamiliar with the community where the appraised property is located. Their appraisal reports are more susceptible to inaccuracies and as a result further suppresses the valuation of the property.
As a buyer or property owner, you cannot do much about the lower values assigned due to all the foreclosures and short sales that affect the comparables. You can however, push the lender to have the appraisal conducted early in the loan process to allow time for you to review it carefully and try to address inaccuracies, or find a new lender.
Add to this the fact that all the foreclosures and short sales are suppressing property values. In the past such sales would not impact the appraised value of a property. However, when these transfers account for such a large percentage of the transactions they cannot be completely ignored.
Finally, the Dodd-Frank Act passed last year now regulates the appraisal process, such as adding Independence requirements and regulating the fees charged. In response, many lenders, particularly the larger mortgage lending operations, now farm out appraisals to an appraisal management company who arranges for the appraisals and takes a cut of the fee. The appraisers are pressured to keep the fees low but still churn out appraisals quickly. Experienced appraisers are being shunted aside for ones that are cheaper, less experienced and often unfamiliar with the community where the appraised property is located. Their appraisal reports are more susceptible to inaccuracies and as a result further suppresses the valuation of the property.
As a buyer or property owner, you cannot do much about the lower values assigned due to all the foreclosures and short sales that affect the comparables. You can however, push the lender to have the appraisal conducted early in the loan process to allow time for you to review it carefully and try to address inaccuracies, or find a new lender.
Landlords, Be Vigilant--watch for signs of illegal activity
Nothing can make a landlord sicker than walking into a recently vacated apartment and discovering it was used for illegal drug activity or worse. I recall an episode of Holmes on Homes a couple of years ago where the contractor star of the show helped out a home owner whose rental home was trashed by tenants using it for a pot growing operations. The damage was catastrophic.
Often there are no warning signs initially when the rental application is being taken, as such individuals will take great care to appear respectable and stable or will send in a ringer to rent the apartment or house on their behalf. As a landlord, the last thing you want is to face disputes with your other tenants and neighbors, police action on your property or massive damage to your property. Any or all of these consequences can result if you ignore the warning signs.
One sign of illegal activity is frequent visitors--particularly visits that last only a few minutes in duration and those where the visitors bring along easily hocked items such as consumer electronics and leave without it. You or your property manager should work to keep a dialog going with your tenants, or even, if renting a home, the neighbors. These are the people that can tell you about the activity they observe.
Other signs may be:
The bottomline, as a landlord you should know your property and your tenants so you can become sensitized to anomalies that might indicate a problem is brewing.
- Sudden, unusual spike in utility use--drug operations need a lot of water and electricity. Out of the blue, you may be receiving tenant complaints about water pressure when that hasn't been an issue before.
- Odd mechanical noises that may relate to a large number of fans in operation. Have you been receiving complaints regarding unusual noises?
- Windows that are blacked out or otherwise blocked during the day to keep people from seeing the activity inside.
- Tampering around the meters--some tenants are smart enough to know their use of water and electricity can raise suspician and try to tamper with the meters to mask their usage.
- Avoiding interaction with the landlord and/or property management.
- The person(s) primarily occupying the unit or house is not the person who completed the rental application.
The bottomline, as a landlord you should know your property and your tenants so you can become sensitized to anomalies that might indicate a problem is brewing.
Increasing CMBS Deliquencies -- What Does It Mean?
Delinquencies in commercial real estate loans that are sold as commercial mortgage backed securities (CMBS) have been steadily increasing over the past year. The rate of seriously delinquent loans a year ago was 7.95% and today it is 9.14%. (See post by Mark Thomton at REJournals.com)
According to Mr. Thomton's article some of the increase is a result of a technical change in how some services are reporting the data....but not all of it. Delinquency rates for CMBS loans for office, hotel and multi-family housing properties are increasing, although loans for office properties still perform better than those for hotel, multi-family and industrial properties. Surprisingly, retail property, while still experiencing a slightly higher delinquency rate, is now performing better than the other major property types. The other good news is that delinquencies for industrial property loans, while still higher compared to other property types, declined this month.
CMBS loans had been increasing significantly in the past year. I often represent clients who finance their acquisition of commercial property with a CMBS loan. I've seen more CMBS loan transactions in the past year than I has seen in the prior 2 years combined.
This steady increase in seriously delinquent CMBS loans is not good news for lenders or borrowers; particularly after hearing last month that S&P acknowledged faults in its formula for rating new loan pools. This news also comes on top of concerns over European debt, lousy job numbers, discussions about a possible double dip recession (although who out there feels like the first recession ever really ended?)
The end result? Spooked investors who will think twice about buying more CMBS, making it more difficult for lenders to sell their loans. All of this impacts the costs of the loans, and therefore there will be fewer of them. Bad news for both lenders and potential borrowers, who are left with fewer options, all of which will be more expensive.
For more info, see Mark Thomton's article titled "CMBS delinquency hits all-time high," and see also, "Commercial Mortgages Up, But For How Long?" by Eliot Brown at the WSJ 'Developments' blog.
According to Mr. Thomton's article some of the increase is a result of a technical change in how some services are reporting the data....but not all of it. Delinquency rates for CMBS loans for office, hotel and multi-family housing properties are increasing, although loans for office properties still perform better than those for hotel, multi-family and industrial properties. Surprisingly, retail property, while still experiencing a slightly higher delinquency rate, is now performing better than the other major property types. The other good news is that delinquencies for industrial property loans, while still higher compared to other property types, declined this month.
CMBS loans had been increasing significantly in the past year. I often represent clients who finance their acquisition of commercial property with a CMBS loan. I've seen more CMBS loan transactions in the past year than I has seen in the prior 2 years combined.
This steady increase in seriously delinquent CMBS loans is not good news for lenders or borrowers; particularly after hearing last month that S&P acknowledged faults in its formula for rating new loan pools. This news also comes on top of concerns over European debt, lousy job numbers, discussions about a possible double dip recession (although who out there feels like the first recession ever really ended?)
The end result? Spooked investors who will think twice about buying more CMBS, making it more difficult for lenders to sell their loans. All of this impacts the costs of the loans, and therefore there will be fewer of them. Bad news for both lenders and potential borrowers, who are left with fewer options, all of which will be more expensive.
For more info, see Mark Thomton's article titled "CMBS delinquency hits all-time high," and see also, "Commercial Mortgages Up, But For How Long?" by Eliot Brown at the WSJ 'Developments' blog.
CLE Update: Real Estate Boot Camp
The seminar will be held in Philadelphia but attendance and participation is also available via Video Webcast.
Click here for more information.
CLE Update: Advanced Issues in Real Estate Law
Topics will include Title Risks and Title Insurance Coverage, Curing Title Defects, Environmental Issues, and Advanced Foreclosure Issues.
For more information go to www.nbi-sems.com or call 1-800-930-6182.
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