Illinoisattorneyblog by Richard A. Magnone

An interesting story on electronic assets and estate planning

2011-10-20T10:37:00.000-05:00

The article comes from the BBC in England, but reinforces the points I have made on this blog about the need to consider digital assets in an estate plan.

Are attorneys 24/7?

2011-08-01T18:28:00.000-05:00

As some of my readers may know, my office was the victim of the extreme flooding that has happened in the northwest suburbs over the past few weeks. Our office itself was unharmed (we're on the 4th floor!), but the basement of the building we are located in was flooded and is without power for at least the next week.

What to do? Well, we went into emergency action mode. We got everything up and running. Faxes are forwarded to Mr. Reda's house. Our computer server was hosted remotely so we can all access the office from home. We all communicate via email and text. Last, but probably most important, our phones were forwarded to the home of our paralegal. She has been dutifully answering the phones without the benefit of our voicemail system.

She remarked that she took one call over the weekend from a caller looking for an attorney. She explained to them that the office was closed - after all, it was the weekend. The caller, irritated, said "I thought attorneys were 24/7". How far we have come from the days when attorneys got off work at noon on a Friday or took a week to respond to a letter.

These days, everything is immediate. Fax, email, phone. Its all fast. And it takes away from an attorney's real ability to help a client... by THINKING. A monkey can whip up a form. Heck, Legalzoom can give you a form. Is it the form you need? Maybe. Maybe not.

As for attorneys, we have lives outside of work. Yes, we strive to make our client's problems our own and to help our clients. We respond to calls quickly (usually within one business day). But no, we are not 24/7. For that, go to Wal-Mart.

Hooray! Private residential loans are now allowed again!

2011-07-20T10:17:00.001-05:00

Last year, the Illinois Residential Mortgage License Act of 1987 was amended to, among other things, remove the exemption from mortgage licensing from private persons or entities who originate less than three residential mortgage loans in any given year. The law effectively made it illegal for a dad to give a 5% home mortgage loan to his son. The law also made it illegal to sell a property by way of articles of agreement for deed.

Good news! The State of Illinois has once again amended the Illinois Residential Mortgage License Act of 1987 and as of July 14, 2011, the exemption allowing limited private residential loans has been re-added as follows:

205 ILCS 635/1-4(d)(1.8) Any person or entity that does not originate mortgage loans in the ordinary course of business, but makes or acquires residential mortgage loans with his or her own funds for his or her or its own investment without intent to make, acquire, or resell more than 3 residential mortgage loans in any one calendar year.

This should help out with private transactions on hard to move properties and opens up one additional area of possibility - the articles of agreement for deed aka installment land contract - for sellers looking to move a parcel of real property.

What's the rush when it comes to probate?

2011-06-03T15:16:00.000-05:00

My partner, Ed Reda, provides some thoughts on probate and post-death activity:

We often get calls from people whose loved one has just passed away. And by “just passed away” I mean only hours earlier. Frequently they are very concerned about what steps must be taken - immediately - now that their loved one has died. My standard answer is that the only thing that needs to be done immediately is to call the undertaker.

This perception that something needs to be done almost immediately is a vestige of the old Illinois Inheritance Tax, which was repealed in 1981. In the days of the Illinois Inheritance Tax, all assets of a decedent were automatically frozen until a written release could be obtained from the Illinois Attorney General. It wasn’t an onerous or time consuming task to obtain the release, but, people did not want their loved one’s assets tied up - for even a few days. So, some attorneys would counsel their clients to get to the bank right away and close all of grandma’s bank accounts before her obituary appeared in the paper or the news of her death had become public.

The Illinois Probate Code does require that all original copies of a decedent's will be filed with the Clerk of the Circuit Court within thirty days after the date of death. This requirement does not mean a probate estate must be filed, but only that the will itself be brought to the court and turned over to its repository of Last Wills for safekeeping.

The son of one of my oldest clients reminded me of the day his father died. Notwithstanding the fact that I never counseled people to rush to the bank, his mother insisted that they go to the bank and close her husband’s bank accounts, even though her husband had died just minutes earlier. Upon entering the bank that morning, the son told me that the bank guard greeted his mother with “Good morning Mrs. Clay. How’s Mr. Clay today?” Her answer was a classic – “Not good. He’s not feeling well at all today.”

So, when someone close to you dies, take your time to plan their funeral and mourn your loss. There seldom is anything of a legal nature that can’t wait until after the funeral.

Facebook posts lead to criminal charges

2011-05-05T10:10:00.000-05:00

If you follow this blog, you may have seen my articles about estate planning and the internet. In those posts, I have indicated that we are at an interesting time where law and technology are intersecting and the law is adjusting, albeit slowly, to new technology. The Chicago Tribune published a May 4, 2011 story about a woman who was charged with aggravated battery after getting into a bar fight. This is just one more example of how the legal world is reacting to the online world. Users of social media need to be cautious about what they say and who they say it to. Understanding privacy controls is of extreme importance.

This advice does not extend only to criminal law. I have heard anecdotal evidence of employers who scan thier employee's facebook pages to determine what they are doing on their "sick days". Mortgage lenders have reportedly reviewed social media sites to determine if a borrower's "hard luck" story is true or false. Personal Injury defense attorneys even check social media sites to see if people who claim injuries are, in fact, actually injured. Social media is a double edged sword. It opens up the world to the user and, at the same time, it tracks the user's every word... or admission.

Interesting times for Illinois lawyers

2011-04-27T17:19:00.000-05:00

The Rules Committee of the Illinois Supreme Court is seeking comments on a proposal to allow jurors to question witnesses in civil trials. The Supreme Court of Illinois in a news release today indicated that anyone wanting to testify at a public hearing needs to let the Committee know in writing by May 13, 2011 and anyone wanting to offer written comments needs to do so by May 6, 2011.

Such a proposal is a sea-change in the way litigation would be done in Illinois. Currently, jurors are not allowed to question a witness. The Supreme Court release indicates that about half of the states in the US allow jurors to question witnesses.

A hearing will be held on the topic on May 20, 2011 at 10am in Room C-500 at 160 N. LaSalle, Chicago.

The proposed amendment can be found here

Time to Make a Will?

2011-04-25T14:12:00.000-05:00

My partner, and the smartest attorney I know, Ed Reda, penned today's blog post about the "right time" to make an estate plan. Is it ever too late to make a will?

At various times in our life, most of us have thoughts about the need to make a will. Most of us put that task off by telling ourselves we will get to it later. But is there a time when it is too late to make a will? Surprisingly, the answer is a resounding “Yes.” Here is an actual fact pattern that happened to me today.

I received a call from a fellow we will call Ralph indicating that his friend, Dave, was in Resurrection Hospital and wanted to make a will. I asked Ralph what was Dave’s medical condition and he replied that Dave had Stage IV lung cancer and was receiving hospice care. I asked Ralph why he was calling me instead of Dave. He replied “Dave is really weak and can’t hold the phone. He asked that I get an attorney for him.”

The red flags popped up all over. First, any time someone other than the client calls to engage your services, an attorney should proceed with caution. Does this person have an ulterior motive? Why isn’t the client calling? Ralph’s response to my question didn’t put me at ease. Any time an attorney is called to a hospital to do a will, there is a stronger than normal chance that some heir or relative, disappointed in the terms of the will, can challenge the competence or capacity of the client after his or her death. The reason is obvious–people in hospitals are not well, and therefore, oftentimes not thinking clearly or in charge of their emotions.

Finally, wills prepared and signed shortly before a person’s death are also often subject to challenge. Once again, a person days from their death is likely very sick and oftentimes, because of either their medical condition or the medications they are receiving, not completely lucid. When the client is in hospice care, suffering with Stage IV cancer and too weak to hold a phone, the risks of the will being challenged, and the attorney being criticized for preparing it (or worse, being sucked into litigation) increase exponentially.

For all of the above reasons, I declined to accept this assignment. I feel somewhat badly for Ralph’s friend, since he may die without a will, or without a will that expresses his current feelings. But, he has brought that problem on to himself. A person truly can wait too long to make a will.

Reminder on Capital Gain Tax Law Change for Primary Residence

2011-03-31T10:58:00.000-05:00

A change in the Housing Assistance Tax Act of 2008 changed the rules regarding capital gains on the sale of a primary residence. Under the prior system, homeowners were able to exclude up to $250,000 ($500,000 for married couples) worth of capital gains on the sale of a primary residence. One of the rules in order to qualify for the capital gain exclusion was that a property owner had to use the real estate as a principal residence for at least two of the previous five years. As such, homeowners with rental and vacation property began to sell their primary residence without capital gain and then moved into their second home or rental property so that they could avoid capital gain upon sale of that property also.

The Housing Assistance Act of 2008 sought to close that loophole. The new law will allow the exclusion of a portion of the capital gain based upon a new formula that seeks to take into account years that the real estate was not used as a primary residence. Use of the real estate as a primary residence has been termed "qualifying use" and use of the real estate for other purposes is called a "non-qualifying use".

Beginning on January 1, 2009, capital gains are determined based upon the following formula:

(Time of non-qualifying use after 1-1-09) divided by (time of total ownership) = % of exclusion

One benefit here is that non-qualifying use for periods before January 1, 2009 do not count for purposes of making the calculation. Obviously, properties that have been used exclusively as a primary residence will be eligible to exclude the entire gain up to $250,000 ($500,000 for married couples).

As a result, property owners who have held non-primary residence real estate for long periods of time can still take advantage of major tax savings by converting non-qualified property into qualified property (because all non-qualifying time prior to 1-1-09 is not included). It makes sense to evaluate capital gains strategy based on this law.

A small timeout to protest

2011-03-11T11:06:00.002-06:00

Governor Quinn imposes internet sales tax. Really?

No, Gov. Quinn, really?

For you doctor's, dentists, and other service professionals out there... time to register your LLC

2011-01-20T09:50:00.000-06:00

As of January 14, 2011, the Illinois Department of Financial and Professional Regulation (IDFPR) is requiring Limited Liability Companies formed by dentists, doctors, social workers, clinical professional counselors, social workers, veterinarians, clinical psycologists, marriage and family therapists, or any other profession licensed by the IDFPR to register with the Department's Division of Professional Regulation.

The LLC will need to disclose basic information about the LLC and the licensee or licensees responsible for LLC's operation. All LLCs must be licensed within 90 days and the IDFPR intends to begin enforcement against companies that are not licensed.

The fee for registration is $50 upon initial application and $40 per year on renewal. The form can be found here.

Other Digital Assets and Estate Planning

2011-01-18T11:05:00.001-06:00

Here is part seven in my series on digital assets and estate planning. Interestingly, the rest of the world is picking up on this topic. Here is a recent article from the new york times on digital assets.

There are a number of other types of digital assets that deserve consideration when planning an estate. These can be web site accounts or actual assets in digital form. Here is a brief general survey.

Photos
Flikr: Flikr was acquired by Yahoo in 2005. Shortly thereafter, they adopted a policy of requiring their users to turn in their old Flikr accounts in exchange for a Yahoo! Account. Based on my web research, users were not very happy about this trade. Guess what Flikr's new policy is. You can find out in part six of this series.

Picasa: Picasa is owned by Google and follows the Google protocol for a deceased user.

Smugmug: Smugmug does not have a specific death policy, but its terms of service indicate that they will disclose personal information to comply with a court order. Smugmug Terms of Service:

We also disclose personal information when we believe it is appropriate to comply with the law (e.g., a lawful subpoena, warrant or court order) or with requests of law enforcement authorities; to enforce or apply this Policy or our other policies or agreements; to initiate, render, bill and collect for amounts owed to us; to protect our or our customers' rights, property or safety; to protect our customers from fraudulent, abusive, or unlawful use of, our Site; or if we reasonably believe that an emergency involving immediate danger of death or serious physical injury to any person requires disclosure of communications or justifies disclosure of records without delay.

Video
Youtube: Youtube is owned by Google and follow's the Google policy of allowing heirs actual access and control over the account. Accounts left inactive for nine months will be deleted.

Music

itunes: With itunes, we encounter at least two different types of digital asset planning issues. The first is the same as with the email accounts - who owns the account and how do we access it or transfer it. The second issue is that the actual digital media in the account may be difficult to transfer. Songs, movies, audiobooks, podcasts, ringtones, etc. are not physical in the way that a CD or DVD are. In January of 2009, itunes went "DRM-free". That is, all of the content purchased on itunes no longer contained digital rights management. Upon death, itunes will allow a user to cancel an account, however, that will also disable the ability to re-download the music and other content. A cancelled account cannot be re-activated. Apple does not allow a procedure for account transfer, however, they will allow an account holder to change or remove billing information. This will allow an account to have access to content already purchased but will not allow for the purchase of new content on the Decedent's prior billing arrangement. A less attractive option is to let Apple disable the account which will allow the use of the content but does not allow the content to be re-downloaded.

Currently, to delete an itunes account, send an email to iTunesStoreSupport@apple.com with the following information in addition to requesting to delete or disablethe account:
1.    The billing address listed on the account
2.    As well as one of the following:
    A)     The last four digits of the credit card used for the iTunes Store account
    B)     The order number of the most recent purchase
    C)    The name of any item purchased using the account
Apple will verify the information and disable or cancel the account (whichever is your request), and send you an email confirmation.

Rhapsody: Rhapsody does not have a death policy. A Rhapsody account can be terminated over the phone at 1-866-563-6157. The company also has an online form for the same procedure, but this requires a username and password.

Pandora: Pandora will delete an account upon notice from a deceased user's relatives sent to Pandora via email at pandora-support@pandora.com from either the email account associated with the Pandora account or from another email address with the birth year of the decedent and the decedent's zip code.
social networking

Social Networking

MySpace: MySpace will not provide any login information for an account and MySpace will not let anyone have access to edit, delete, or change any content or settings on an account. MySpace will honor a request to close an account. MySpace will also consider and possibly honor requests to remove certain content. MySpace requires an email to accountcare@support.myspace.com with proof of death, such as a death certificate or obituary.

Facebook: Facebook will not provide any login information for an account. Facebook will allow a deceased user's account to be memorialized, deactivated, or deleted. Anyone can ask that an account be memorialized by filling out a form on the facebook website that can be found here. When an account is memorialized, Facebook removes certain more sensitive information like status updates and restricts profile access to confirmed friends only. The user's "wall" remains and friends can still add content to the wall. Facebook will, however, honor requests from "close family members" to close an account completely. Just recently, Facebook annonced a new feature that will allow a user's entire page to be downloaded.
Linkedin: Linkedin has an online form that can be submitted to notify the service that a user is deceased. the form can be found at http://tinyurl.com/2ecom3s and can be submitted electronicly or faxed to 402-493-3548. The form, however, requires an email address registered to the deceased member's account

eCommerce

Many people make money on the internet. Sometimes they make lots of money. The internet has given small time operations big time leverage. Many people operate simple ebay storefronts, design clothing through cafepress or zazzle, or self publish and sell books. Even a popular website or blog can be monetized through advertising. These businesses should be treated like any other business. An estate personal representative must determine whether the business should be sold or liquidated and must consider the possibility that the business may have accounts payable, accounts receivable, work in process, or product that must be delievered.

PayPal: PayPal is one of the most common methods of internet money exchange. It is possible that any person who does commerce on the web will have a PayPal account. These accounts are similer to a checking account although some also act like a credit card and can be liabilities. An estate personal representative should check to see if there is a cash balance in a PayPal account or a balance due and owing on a PayPal credit card.

PayPal does not allow access to an account but will allow an account to be closed. A PayPal account of a deceased user can be closed if an estate personal representative faxes to (402) 537-5732 the following:
1.    A cover sheet that states the account holder is deceased and the executor wants to close the PayPal account
2.    A copy of the death certificate for the account holder
3.    A copy of the deceased account holder’s will or legal documentation that provides the information regarding the executor
4.    A copy of a photo ID of the executor

If the documentation is in order, any funds in the account will be issued in the account holder's name and the account will close. PayPal's customer service can be contacted at 1-888-221-1161.

eBay: eBay does not allow for the transfer of a user account or feedback to any other person. If a user dies, a personal representative can send a fax along with a phone number and a copy of a death certificate to (877) 349-1798 to request that an account be closed. eBay will delete the entire eBay account and all information from its database.

Ecommerce: According to a September 2010 survey of the Pew Research Center, fifty-eight percent of Americans go online to research products and services they are considering purchasing. Many purchase through companies such as Amazon, Newegg, Buy.com, and a myriad of other online shopping websites. Most of these websites keep billing information on hand and should be closed or deleted upon a user's death.

Domain names: Domain names can have value related to a business. A Network Solutions account or godaddy account can be transferred to change the owner of the intellectual property. Domain names are registered for a period of time and can expire. A personal representative would be wise to check the "whois" database to determine if any domain names might expire during the pendency of estate administration.

Cloud computing: More and more work, play, and business is being done on the "cloud" (ie. data and programs are now remote and accessed with a browser rather than residing on a local computer). Because of its cost effectiveness and ready access, Google Docs is being adopted by many computer users. Luckily, Google has one of the most friendly policies on account transfer. Other collaboration sites such as the now defunct GoogleWave can also contain digital assets.

Offsite backup: Like cloud computing, many computer users employ offsite backup for their digital assets. Companies like carbonite, idrive, and mozy provide remote storage space offsite for a fee.

The list goes on and on: Many people, including people in the older generation, live a great portion of their life online. The items described here only begin to scratch the surface of accounts that need to be tended by a personal representative or dealt with in an estate plan. Other important websites are financial accounts such as etrade, ameritrade, schwab, online credit cards, online checkbook services such as mint.com, and online tax return preparation websites. There is also a need to consider addressing dating websites such as match.com or eharmony.com. People in all professions have personal and business web pages and blogs that could be monetized or are part of a larger business and have value. Artists and writers may have valuable information on their websites. Many technophiles have ditched their home phone and adopted a skype or vonage account. Streaming of movies over netflix or hulu premium is commonplace in lieu of cable or satellite television. Most of these services are billed to a credit card on an ongoing basis. Terms of service must be checked and accounts should be shuttered.

State of Illinois Security Deposit Rate Set

2011-01-06T23:34:00.000-06:00

Okay folks, the interest rate for security deposits on properties covered by the State of Illinois Security Deposit Interest Act (generally, 25 or more units) for 2011 is 0.195%.

Once again, this rate is greater than the Chicago rate, so Chicago landlords governed by both the Illinois Security Deposit Interest Act and the Chicago Residential Landlord Tenant Ordinance should use the Illinois rate for 2011 rentals.

City of Chicago Sets 2011 Security Deposit Interest Rate

2011-01-03T16:14:00.000-06:00

The City of Chicago City Comptroller, Steven J. Lux, has released the security deposit interest rate for the coming year. The rate is determined by the City Comptroller based upon the average rates of interest as of 12-31-10 of a number of types of Chase Bank accounts.

The rate to be applied pursuant to 5-12-080 of the Chicago Residential Landlord Tenant Ordinance for leases governed by the periods from January 1, 2011 through December 31, 2011 is 0.073 percent.

I will publish the State of Illinois rate as soon as I learn it. Keep in mind, last year the State of Illinois rate was higher than the City of Chicago rate, so landlords governed by both the City of Chicago and State of Illinois law should have used the State of Illinois rate.

Renting Versus Buying in a Real Estate Down Market

2010-12-30T11:15:00.003-06:00

I met yesterday with two of my favorite clients. They recently closed on and moved into a new home. They were fortunate that they were not required to sell their current condo in order to qualify to purchase their new house.

The problem? After many months on the market, their home has not sold. They came to me looking for advice about the possibility of renting out their condo. They were smart to ask.

First time landlords have a lot to learn, especially if they own Chicago property. There are a myriad of laws to navigate (Chicago Residential Landlord Tenant Ordinance, Illinois shared utility laws, federal lead paint regulations, federal fair housing laws, just to name a few).

A proper lease, with all required disclosures, must be used. There are many forms that purport to be "standard" forms that are either insufficient or detrimental to the landlord.

The lease term must be considered. Is a year lease a good idea? Maybe month to month should be considered if a property will remain listed, as any buyer will have to take subject to any existing lease.

Tenant screening is of vital importance. New landlords may be "tricked" by professional tenants. Making a bad choice of tenant is the worst problem a landlord can create and the best lease in the world will not make the eviction process faster. New landlords need to learn the ins and outs of credit reports and reference checking.

Financial terms such as how much, if any, security deposit to take must be considered. Also, procedures for dealing with deposits must be established in advance of offering a lease or accepting a deposit.

An understanding of the laws and procedures of renting needs to be explored by prudent property owners considering taking their property off the market in favor of becoming a landlord. Before undertaking such a plan, a few hours if advice and drafting from a landlord tenant attorney can save thousands of dollars in simple mistakes made by first time landlords.

Lender Deviations from the New Good Faith Estimate

2010-12-14T23:20:00.001-06:00

In an effort to reduce consumer confusion when it comes to obtaining a loan, the federal government enacted reforms to the Department of Housing and Urban Development began, on January 1, 2010, to require the use of a standardized form of Good Faith Estimate (GFE). The concept behind the reform makes sense, but in reality, not much has changed.

The charges on a good faith estimate are now broken into three parts. The first part contains fees that CANNOT change. These are your lender fees. The goal is to impair a lender's attempts to pull a bait and switch on a borrower. There is no tolerance for any deviation between this part of the terms of the good faith estimate and the actual costs at closing.

The second section of the GFE presents fees that cannot increase by more than 10%. This is where you will find title charges, recording fees, and certain other fees the lender can find out by doing a bit of due diligence. Keep in mind, the lender does NOT set these fees. Nonetheless, the actual fees charged at closing cannot increase by more than 10%.

The problem? Well, remember, the lender does not control these fees, so they may turn out to actually be higher than the lender estimates. If they do go up by more than 10%, the lender must either re-disclose the GFE or pay down the difference. I have seen lenders pick up the difference, but more commonly, they have to put the closing on hold and re-disclose. Even if a borrower wanted to pay the higher cost difference and close anyway (because perhaps the borrower's failure to close would constitute a default or require the payment of a penalty for failing to close on time), the federal law would prohibit the closing.

In reality, what seems to happen today is that the good lenders get the estimates right while the bad lenders over-disclose. The lenders now have been playing the game long enough and are smart enough to not get caught with an unanticipated increase in most cases.

The third section contains fees that can change no matter what. There is no guarantee for these fees. They can vary significantly.

Finally, although the GFE specifies fees, it does not do a good job at predicting the amount necessary to bring in to close. There are charges that are variable - the amount of per diem interest paid at closing changes based on when the borrower closes. Also, in some jurisdictions where tax bills are imminent, borrowers may have to TI (title indemnity) for property taxes. All kinds of things can change and unanticipated situations can spring up.

Thus, there is no rule of thumb or standard for how much the GFE can differ from the actual costs. A borrower need to do some homework to get the best estimates available. Remember, the GFE is only an estimate and it is usually made in the barest of good faith.

Dealing with Email of a Decedent

2010-11-30T18:31:00.005-06:00

Here is part six in the series of articles on virtual estate planning

Emails and email accounts, like physical letters, are the most obvious and most commonly discussed form of virtual asset. As I mentioned in a previous post, there are two types of email services: POP based and web-based. POP based email is usually downloaded to a local computer and suffers from less confusion about property rights in the email than web-based email (that is not to say that POP based email is without its own set of issues).

Web based email services rely on "off-site" servers administered by e-mail service providers. Web based email accounts and their contents are a form of digital asset. These assets are governed by the contract that establishes the account, commonly known as the "Terms of Service" (this is that page that most people don't read and just click "okay" and then "next" to move on in the process of establishing an account). There is no uniformity among email service providers, so each is feeling its own way in the digital world when dealing with the death of a user.

I will discuss a few of the web based service providers and their current policies for dealing with the death of an account user. These policies are constantly changing, so please, do not rely on the information here. Always check the current terms of service.

Yahoo!: Yahoo's policy on deceased person's accounts has not changed since the resolution of the Ellsworth Estate. Per their terms of service, there is no right of survivorship and a Yahoo account is non-transferrable. Upon receipt of a death certificate, Yahoo! will freeze an account for 90 days and then terminate the account and delete the contents. Basically, without a password, the only way for a personal representative to obtain access to a Yahoo! account is with a court order. Obviously, time is of the essence and a savvy probate practitioner will query a client early in the probate process about email accounts so as not to miss the termination deadline.

Google Gmail: A Google account stays open forever unless a request is made to delete the account. Google will provide access to the account of a deceased person. Access will be granted within 30 days after Google is notified of the death of an account holder if the person notifying Google provides the following: Information to be provided to Google (faxed to 650-644-0358 or mailed to Google Inc., Attention: Gmail User Support, 1600 Amphitheatre Parkway, Mountain View, CA 94043): 1. the full name and contact information of the person seeking access to the account, including a verifiable email address; 2. the Gmail address of the individual who passed away; 3a. a full header from an email message received at the verifiable email address from the Gmail address in question and 3b. the entire contents of the message; 4. proof of death; and 5. one of the following: a) if the decedent was 18 or older, proof of authority under local law that the person making the request is the lawful representative of the deceased or his or her estate or b) if the decedent was under the age of 18 and the person making the request is the parent of the account holder, provide a copy of the decedent’s birth certificate.

In addition, Google will provide information faster than the stated policy of thirty days thirty day processing time pursuant to a valid court order.

Microsoft Hotmail: Hotmail is a part of the Microsoft WindowsLive service. If Microsoft is notified via email that an account holder is deceased, they will "freeze" and preserve an account for six months during which a requester must complete an authorization procedure to obtain account information. If the process is not complete within six months, Microsoft will delete the account. Like Yahoo!, account contents will be turned over but the password will not be provided nor reset. Microsoft will not transfer an account.

Per the MicrosoftLive Solution Center:
Please note: While this process allows for the release of the account contents to you, we will not provide or reset the password for this account. This process does not allow for the transfer of account ownership; however, once your documentation has been verified, we can close the account at your request. This policy is in place to protect the privacy and security of all Hotmail users. Upon authentication, we will also close the account at your request.

Instructions to for the WindowsLive account procedure are here.
Hotmail will mail a CD filled with the contents of the Hotmail account. Information that must be provided to Micorosoft (faxed to 425-708-0096 or mailed to Microsoft Corp., Attn: Online Services Custodian of Records, 1065 La Avenida, Building 4, Mountain View, CA, 94043): 1) a photocopy of the user's death certificate; 2) paperwork from the requestor stating that he/she is the benefactor or executor to the deceased's estate and/or holder of a Power of Attorney and are next-of-kin; 3) a photocopy of the requestor's driver's license or a government issued identification; 4) a document with answers to the following questions about the account, for verification purposes: account name, first and last name on the account, date of birth, city, state and zip code, approximate date of account creation, approximate last date of sign in, a physical mailing address

Editorial comment: obviously Microsoft is unaware of the difference between a power of attorney agent and a personal representative. Technology is sometimes as backwards as the law is to technology in its application of legal concepts

Obviously, there are other email providers out there. They will all have different requirements for access to and turnover or cancellation of an email account. Consult the terms of service for those accounts to see what the playing field looks like.

click here for part five

What Attributes to look for in a Real Estate Agent

2010-11-12T19:33:00.002-06:00

There are four main attributes for finding a good real estate agent: knowledge, comfort, trustworthiness, and reputation.

Knowledge:
I look for an agent with expertise in a limited geographical area and a limited type of property. In a large metropolitan area like Chicagoland, it is impossible to find an agent who can competently cover a whole city or all of the suburbs and just as difficult to find an agent with the expertise to handle all types (commercial, residential, leasing, etc.) of deals. Location, location, location. Don't use a suburban real estate agent for a south side property. Don't use a commercial broker to find a residential property. Find an agent who knows and works a particular area and with a particular type of property. The right tool for the job! Such an agent will have a basic knowledge of property values, common problems or pitfalls (ie. this property is near the freight train line that comes through in the early morning or is on the landing path for the local airport), and local customs and practices (ie. customary tax proration in the city versus a collar county). Most real estate deals are pretty smooth and just about any agent could handle them. However, when a deal does not go as planned, choosing the right agent becomes critical. The right agent will have a good level of experience so that the agent will know how to handle the "off" situation.

Comfort:
A real estate buyer or seller will spend plenty of time on the phone with an agent and possibly even more time in the agent's personal company. Some buyers spend weeks in the real estate agent's car driving from showing to showing. The client must be comfortable and get along with the agent. This is a matter of personal taste. An agent that some consider to be pushy or short to some may be forceful and to the point for others. An agent who is non-confrontational and collegial to some may be too withdrawn and without enough fight for others.

Trustworthiness:
Most people know that a real estate agents is only paid when a transaction closes. As a result, bad agents sometimes work "for the deal" rather than working "for the client". Avoid agents that do not put the client's best interests first. These agents are easily found out when they begin to play "devil's advocate" a little too much with regard to price, repair requests, or contract terms or when they "babysit" a deal too much to make sure it closes on time (because they need the commission check to eat). Trustworthiness is important when a client needs an agent who knows the law and does not cross over the line. A good agent will find novel and smart ways to solve problems; a bad agent will suggest an illegal or unethical course of dealing and merely suggest that "everyone does it". This behavior is commonly demonstrated by the "bad" agent who has no problem with "off the HUD-1" credits or who smooths over inspection issues by downplaying the importance of those issues to the client.

Reputation:
The best way to find a good real estate agent is to ask someone who has recently been through the real estate buying or selling process or, better yet, to ask someone in a related real estate profession. Attorneys and mortgage brokers know the good agents and the bad agents and can usually help a client find one or more who might be the "right" fit. There is no substitute for experience. It is better to get a referral to a good agent up front than to get stuck with a bad agent only to learn that the agent is bad at the closing table.

A real estate deal is one of the largest transactions that most people will engage in during their lifetimes. The choice of an agent should not be left to random chance, the cheapest quote, the luck of the draw, the first guy who called back, or whoever was "on the desk" when the client called in to the broker's office. A prospective client should always interview multiple agents. Choose the one with the best blend of qualities and the results should pay off.

Landlords Subject to New Tax Requirements for 2011

2010-11-12T14:08:00.006-06:00

The brand new Small Business Jobs Act of 2010 enacted by President Obama in September, 2010 includes a new provision that affects landlords.

Beginning in 2011, all landlords must provide 1099-MISC forms to all service providers for payments in excess of $600 during the year. Previously, only landlords who rented property as a "trade or business" were required to make a filing. Now, the law extends to any and all landlords, even those who rent out a bedroom or make a short term rental. The law amends the definition of being engaged in the "trade or business" of renting property to include "a person receiving rental income from real estate".

As such, all landlords must issue a 1099-MISC to any service provider who the landlord pays more than $600 in any given year. This means that if you rent your property and pay an attorney to help with an eviction and pay an invoice for $1400, you must issue the attorney a 1099-MISC. Same goes for landlords who, say, pay a cleaning service $75 per month ($900) to clean their rental property.

The law does provide three exceptions. First, it excludes active members of uniformed services or intelligence employees who are renting their primary residence while on assignment. Next, the law excludes any individual who receives rental income of not more than the minimal amount as determined by the IRS regulations. No such regulations yet exist. Finally, it provides a hardship exception for landlords, as determined by the IRS regulations. Again, the IRS has not issued any regulations as to what sort of hardship might be sufficient to excuse performance.

Interestingly, the law also provides for increased penalties for failure to file informational returns.

The 1099-MISC forms must be filed in early 2012, however, landlords must begin the process of maintaining their records beginning as of January 1, 2010. The prudent landlord will collect the name, address, and federal employer identification number (FEIN) from people they pay for goods and services. This means landlords must also become facile with IRS form W-9.

Prudent landlords will be keeping their books current beginning with the new year. Better yet, prudent landlords will want to get a "landlord tune-up" for 2011 from the attorneys at Reda | Ciprian | Magnone, LLC.

All kinds of virtual assets

2010-11-11T22:58:00.003-06:00

Here is part five in my series on digital assets. Today, I will touch on the general concept of why digital assets are important to an estate planner or probate attorney. Wikipedia defines "digital assets" as email, social media, and other online accounts, protected by a password and right to use a specific account. Widespread internet technology adoption has created a class of assets, virtual or digital assets, which estate representatives and their legal counsel need to address. These assets can have material value. Today's estate planners need to be able to recognize these assets and the special attention that they call for. Proper planning for virtual assets today can lead to smooth estate administration tomorrow.

There are more classes of virtual assets than one might think. The issues related to these assets are generally issues of content and access. For the most part, content is an easier issue as most content belongs to the creator and the creator's estate. Some terms of service might change that analysis. For example, Facebook was recently in the news for its claims that it had ownership over everything posted there. Access is the harder issue. Access is easy to deal with when a representative has the decedent's username and password. Be aware that even the use of a username and password by an Executor or Administrator may be a violation of certain terms of service. Things get more complex when a username and password are not available. These materials will seek to point out virtual assets that estate planners and probate practitioners need to consider and how to access them.

Beginning in the next installment, beginning with email, I will provide brief general information on how to deal with a particular account upon the death of an account holder.

Click here for part four
Click here for part six

A small side note on law and technology in Illinois

2010-11-10T10:15:00.006-06:00

This is the fourth installment in my series on estate planning for virtual assets.

As I have already mentioned, the normally law creeps forward at a snails pace. Technology flies forward at a fast pace. In comparison to each other, technology is going light years faster than law. This disparity in development leads to some confusing, discordant, and unintended results.

One example of the result of these differences comes from an attempt made by the State of Illinois with respect to sexual predators. As of January 1, 2010, the Illinois legislature amended the Illinois Criminal Code to make it a crime for a person convicted of a sex offense to access or use social networking websites.

Here is the statute:

730 ILCS 5/5-6-3(8.9) Conditions of Probation and of Conditional Discharge.
(8.9) if convicted of a sex offense as defined in the Sex Offender Registration Act committed on or after the effective date of this amendatory Act of the 96th General Assembly, refrain from accessing or using a social networking website as defined in Section 16D-2 of the Criminal Code of 1961;

The Illinois legislature defined the term "social networking website" in the law:.

720 ILCS 5/16D-2(h) Sec. 16D-2. Definitions. As used in this Article, unless the context otherwise indicates:
(h) "Social networking website" means an Internet website containing profile web pages of the members of the website that include the names or nicknames of such members, photographs placed on the profile web pages by such members, or any other personal or personally identifying information about such members and links to other profile web pages on social networking websites of friends or associates of such members that can be accessed by other members or visitors to the website. A social networking website provides members of or visitors to such website the ability to leave messages or comments on the profile web page that are visible to all or some visitors to the profile web page and may also include a form of electronic mail for members of the social networking website.

Although you cannot discount the good intentions of the Illinois legislature and the noble goal of keeping sexual offenders off of places like facebook and myspace, the new law, unfortunately, demonstrates the inability of the law to keep up with and define the current state of "Web 2.0". The statutory definition of a "social networking" website is so overly broad that nearly any modern commercial webiste, blog, site with a message board, shopping site, or Linkedin will satisfy the definition.

There's a lot of shakeout left before the law can properly deal with web-related technology issues. Until then, we'll just need to do our best.

Click here for part three
Click here for part five

The Ellsworth Case with Yahoo!

2010-11-09T18:14:00.003-06:00

I will continue with part three in my series on digital assets with a discussion of the Estate of Justin M. Ellsworth and his family's troubles with his Yahoo! email account.

The case easily illustrates the complexity of dealing with e-mail accounts. The 2005 Michigan probate was the estate of a marine Justin Ellsworth, who was killed in Iraq. Mr. Ellsworth's parents sought to recover the contents of their son's Yahoo! e-mail account. Yahoo refused Justin's parents' request based upon its Terms of Service (TOS) which indicate that a Yahoo! account is non-transferable and terminates at death.

Yahoo's terms of service:
No Right of Survivorship and Non-Transferability. You agree that your Yahoo! account is non-transferable and any rights to your Yahoo! ID or contents within your account terminate upon your death. Upon receipt of a copy of a death certificate, your account may be terminated and all contents therein permanently deleted.

Yahoo argued that they needed to enforce the privacy rights of their account holders. Elsewhere in the terms of service, Yahoo indicated certain instances upon which it could release private information.

Yahoo's terms of service
You acknowledge, consent and agree that Yahoo! may access, preserve and disclose your account information and Content if required to do so by law or in a good faith belief that such access preservation or disclosure is reasonably necessary to: (i) comply with legal process; (ii) enforce the TOS; (iii) respond to claims that any Content violates the rights of third parties; (iv) respond to your requests for customer service; or (v) protect the rights, property or personal safety of Yahoo!, its users and the public.

Justin's parents were able to obtain an order from the Oakland County Michigan probate court ordering Yahoo to turn over the emails in the account. Yahoo complied with the court order, although the account password itself was never provided to the estate. Instead, Yahoo produced a CD containing the emails and indicated that it would also produce paper copies to the family.

The case brings a number of important questions to light. What exactly is the actual property owned by the estate? Is it the underlying source code? Is it the writings of the account holder? What about writings other people wrote to the account holder? What about the privacy rights and copyright rights of email senders and recipients?

With respect to copyright issues, the estate certainly had copyright in the emails composed by Justin Ellsworth and possibly implied consent for use of those emails received by Justin Ellsworth. It is important to note that Yahoo never made a claim of ownership over the emails in Justin Ellsworth's account. In fact, their TOS explicitly rejects this.

Yahoo's TOS:
Yahoo! does not claim ownership of Content you submit or make available for inclusion on the Yahoo! Services

Even if an estate has a copyright in the material contained in an email, the estate may not necessarily have the right to access the information. It can be argued, and Yahoo did argue, that the contractual rights in Yahoo's TOS trump the estate's copyright. In other words, they limit the family's access to the copy of the copyrighted materials. Their argument can be simplified by saying that they are merely a holder of the email content and the right of access to the content disappears upon the death of the account holder. The Yahoo account was governed by contract law and, by accepting the terms of service, Justin agreed that his account was not transferable.

The case raises many questions and provides few answers. Nonetheless, it is clear that the law will not have ready made answers to the questions raised by technology related or virtual assets.

Click here for part two of this series
Click here for part four of this series

A new breed of assets for planners

2010-11-08T11:42:00.004-06:00

The vast majority of probate estates are straightforward... and tangible. Or maybe it is right to say that the vast majority of probate assets are tangible assets. Until recently, obscure intangible assets were rare. Technology has transformed even the most mundane estates into a walk through the world of contract and intellectual property law. Email or the asset that constitutes email creates a whole new set of questions for attorneys to address. Before the internet, personal correspondence was a simple concept. Someone wrote on a piece of paper. Certainly, the law of intellectual property and copyright might make an appearance in a theoretical review of the laws related to a physical letter, but it is pretty clear that physical letters are tangible assets that form part of a decedent's personal estate.

E-mail is a letter in electronic form. That's simple enough or at least it may seem so. If only it were that easy. The situation is made even more complicated because of the different ways email can be processed. There are at least two types of e-mail: POP-based and Web-based. POP-based email is usually downloaded to and stored on a local computer or other device. Web-based email is remotely accessed in via a password in a remote account and stored in one or more jurisdictions by an e-mail provider. Already, the issue of ownership of e-mail has become murky. What exactly is the e-mail and who should it belong to?

There is still an unsettled debate as to the exact nature of e-mail. Again, POP-based email is seems easy enough to deal with if it is all downloaded to a central computer and that computer is gifted to the same person who is the intended recipient of the e-mail. However, what if the electronic correspondence is of value and the recipient of the computer is different from the recipient of the e-mail? What if the e-mail is stored on multiple devices such as a desktop computer, cell phone, iPad, and netbook computer? Web-based email presents even more problems. What if the web-based account provider does not provide for transfer of the email account? What if the personal representative does not have a password? In a "normal" estate, one of the first things a personal representative is counseled to do it to have the U.S. Mail of a decedent forwarded to the representative's address. What about electronic mail? What if the decedent was receiving bills via email? Will the representative be able to get to the account?

These issues only begin to scratch the surface of a complex area that is still very much developing on a day to day basis. In the next installment, I'll give an example of this complexity in practice - the case of the Estate of Justin M. Ellsworth and Yahoo! email.

click here to go to part one
click here to go to part three

Probate and estate planning law and virtual or digital assets

2010-11-05T23:12:00.003-05:00

Here is a topic I will spend a few posts on. Technology is moving at a blistering pace. Unfortunately, the law rarely moves fast enough to keep up. According to a Pew Research Center August 2010 report, 66% of all adults in America have a high speed broadband internet account. The world of modern technology and widespread access to the on-line world has created new challenges to estate planners, probate attorneys, and their clients as new forms of assets and doing business are created and evolve. Most of these new challenges created by the online world have not yet been addressed directly by the law. At the dawn of the internet, there were certainly technology issues, but they were relatively minor in comparison to today's issues. The widespread adoption of the internet and other modern technology has brought new issues to the fore. Just as people must plan for their mortal death, they must also plan for their digital death. Careful estate planning and probate practitioners should be proactive to minimize the confusion and complexities caused by the advance of modern technology. Tomorrow's executors, administrators, heirs, and legatees will benefit from a focus on technology today.

click here to go to part two

Hardship Letters are Hard

2010-09-28T11:36:00.002-05:00

In the wake of the housing bubble, many homeowners have sought various non-foreclosure remedies from their lenders. These range from loan modifications to short sales and deeds in lieu of foreclosure.

In almost all instances, the loss mitigation department of the lender will require, among other things, that the delinquent borrower produce a "hardship letter". Google the term and you will find LOTS of examples. In fact, there is one very common one that seems to be repeated over and over on many sites. Here's an old but excellent article on how "Not to write a Hardship Letter". The article actually picks apart this "common" hardship letter and explains what a bank loss mitigation specialist is looking for when they read a hardship letter.

Court clarifies rule on eviction notices

2010-09-07T12:20:00.003-05:00

The Illinois Appellate Court of Illinois in a new case, Figuero v. Deacon, has clarified the law with respect to the service of a notice of termination of tenancy when a tenant is in actual possession of a premises.

735 ILCS 5/9-211 provides the rules related to service of demand or notice for an eviction as follows: "Any demand may be made or notice served by delivering a written or printed, or partly written and printed, copy thereof to the tenant, or by leaving the same with some person of the age of 13 years or upwards, residing on or in possession of the premises; or by sending a copy of the notice to the tenant by certified or registered mail, with a returned receipt from the addressee; and in case no one is in the actual possession of the premises, then by posting the same on the premises.”

The court determined that the list of methods for service of process are exhaustive and, as the forcible entry and detainer action (eviction) is a special statutory proceeding that is in derogation of the common law, the statute must be strictly enforced. Factually, the landlord did not deliver a copy of the termination notice to the tenant but instead posted the notice on the door and slid another copy under the door. To proceed with the case would violate the tenant's due process rights. As a properly served notice of termination is jurisdictional, the case could not proceed.

Landlords would be well advised to serve notice either through personal service or certified mail (with certified mail having the additional difficulty of requiring proof of delivery) when processing an eviction of their tenants.

Tips for Renters

2010-08-03T14:22:00.002-05:00

Here are some tips for renters looking to find the right place.

1) Always remember that there are lots of rental units on the market. This is a renter's/buyer's market. If something does not smell right, walk away.

2) Consider using a real estate agent. In the downturn, many real estate agents have gotten into the game of showing apartments. It costs nothing from the renter's pocket to use an agent. Agents have access to MLS listings and can pre-arrange appointments to walk a potential renter through a number of units on the same day.

3) Tenants should be familiar with the Chicago Residential Landlord Tenant Ordinance and their rights under it vis a vis security deposits, prohibited lease provisions, and other required disclosures. It is actually better to find a landlord who complies rather than either 1) a landlord ignorant of the law or 2) a landlord who does not comply with the law.

4) Check the cook county clerk of the circuit court website to see if your potential landlord is a party to any lawsuits, especially foreclosures. You can also check the recorder of deeds website to see if there are any lis pendens recorded against the property. Building code violations can also be a good clue that the landlord has a big problem. Landlords involved in foreclosures are usually not going to be good landlords nor will a tenant's tenancy likely extend the full term.

5) If the landlord agrees that anything is to be done before a tenant moves in, the tenant should not move in before the work is done. This should be a provision in the lease excusing the tenant from performance until the landlord completes any necessary work. For instance, if a landlord is supposed to paint a bedroom but does not, a tenant can safely assume that most likely this is 1) probably the landlord's normal practice and 2) the yob will probably never get done. Tenants should negotiate a small hold fee or security deposit until any of those sorts of things are completed. A landlord who waits on those sorts of things is likely waiting for the tenant's deposit to have the money to do whatever work needs to be done or does not really intend to do the work.

6) Tenants should not spend their own money on a rental unit until they are sure that they will be staying/leasing. I was contacted a few months ago by a lady who told me that she had terrible allergies. After doing massive remodeling in the property, she told me she discovered mold in the unit and it was hazardous for her to live there. The landlord had committed numerous CRLTO violations that would give her a right to terminate the lease. The tenant declined to move because she "spent so much money fixing the place up". True story. Don't do this.

7) Plan in advance. A tenant should look in plenty of time before needing to move. Tenants should not get caught in a situation where they must move and then might have to accept a less than optimal situation.

8) Tenants should inspect a rental unit THOROUGHLY. Check under the kitchen sink or in places where water flows for mold. See how drafty the windows are. Listen for traffic/train noise. Make sure everything works (turn on anything that might leak and let it run for a while to be sure). Make sure there are no stains in the carpet being hidden. Look "UP" - at the ceilings for signs of water damage or repairs to water damage. Document the condition of the place. Take pictures. Sign something that indicates any bad conditions that exist at the start of the tenancy so there is not question as to who is on the hook at the end of the tenancy.

9) Prospective tenants should talk to other tenants in the building to get a sense of the landlord's responsiveness and practices. If things are bad, other tenants will usually say so.

10) Tenants should go with their gut and should not act stupid. Trust instincts when they say "run". Do NOT trust a landlord that does not have paperwork or copies available - if you don't get your lease and receipt up front, you might never get it.

I could probably go on and on, but those should give tenant's a good head start on having a successful run as a tenant.

"TI" Time for Taxes

2010-07-22T15:48:00.003-05:00

Cook County taxes are supposed to come out in September. Everyone, including lenders, knows this.

Cook County taxes usually come out later and sometimes much later. Lenders don't care.

We are now entering "TI Season". That's the time where lenders begin to require home buyers who escrow their tax payments to place funds in a TI for the second installment of Cook County real estate taxes. "TI" stands for "title indemnity". It is simply an escrow held by a title company so that the title company can provide insurance over some issue. TIs are not only used for taxes, but at this time of year, that is their most common purpose.

The process works like this. The lender says "taxes will be out in September and we will not have our buyer set up in our system in time to make that tax payment, so we will need the title company to guarantee that the taxes for 2009 second installment taxes are paid". The title company says "ok, we'll guarantee that the taxes will be paid, but we'll need to hold some money for those taxes and once the tax bill comes out, we'll pay the bill and return any overage in the TI account to the home buyer".

In order to accomplish this, the home buyer will have to put one and one half to two times the first installment tax bill into the TI account with the title company and will have to pay a TI or title indemnity fee, a fee for a tax bill, and a tax payment fee. These fees regularly range from $150 to $200.

Rumors we have heard say that the tax bill this year may come out as late as December 15, 2010. That means that from here on out in 2010, any buyer expecting to escrow for property taxes can also expect to fund a title indemnity for the second installment of 2009 taxes.

Note: this is not a problem in counties other than Cook County. In all other Illinois counties, the tax bill comes out in one bill and both the first and second installments are already know.

Will County Foreclosure Mediation

2010-06-07T15:18:00.003-05:00

Just hours ago, the Illinois Supreme Court announced a program that will use mediation as a means of possibly reducing the burden of foreclosures in Illinois. The program will begin in the Circuit Court of Will County. Court has proposed this new program as a way to prevent vacant and abandoned homes and to keep families in their homes. The program will require any residential foreclosure complaint to be scheduled for mandatory pre-mediation. The mediation will focus on determining, with an outside mediator, whether or not a loan modification or other resolution can be found. If not, the mediation can be used to facilitate a consent foreclosure or the waiver of any deficiency against the borrower. Lenders will be required to participate in the program in food faith or face sanctions, including the possible dismissal of the foreclosure.

The program will be paid for by an increase in plaintiff's filing fees for each foreclosure from $276 to $426.

Fannie Mae's new rules for post-shortsale buyers

2010-06-02T15:44:00.003-05:00

Many people wonder "what is the effect of a short sale on the ability to get a loan in the future"?

Fannie Mae, the company that securitizes mortgage loans, making them more affordable and the entity largely responsible for the guidelines that regulate most conventional mortgages, has provided a bit of an answer. Fannie Mae has released announcement SEL-2010-05 which sets forth the new requirements for home buyers to obtain a new loan if they have participated in a "pre-foreclosure event" (ie. a pre-foreclosure sale, a short sale, or a deed in lieu of foreclosure). Until now, there was no policy on short-sales. The new regulations go into effect on July 1, 2010.

For borrowers with a pre-foreclosure event in their past, there will be a waiting period before a new loan can be obtained. The amount of downpayment provided by the borrower will affect the length of the waiting period. The periods are as follows:

20% downpayment - 2 years
10% downpayment - 4 years
less than 10% downpayment - 7 years

The waiting period begins upon the completion date of the pre-foreclosure event. In addition, after 2 years with 90% LTV and with extenuating circumstances, a lender may be able to obtain an exception to the waiting period.

Guidelines can change on a regular basis, but for know, property owners considering a short sale or a deed in lieu of foreclosure will at least have an idea of some of the consequences of the pre-foreclosure event.

Pre-Closing Possession

2010-04-20T10:36:00.003-05:00

For one reason or another, a Buyer may need to take possession of real estate before a closing. For instance, if there is a "dry-closing" (ie. one where the lender fails to fund but all other parts of the closing are done and the lender's funding should take place shortly thereafter), a Seller may be willing to allow a Buyer to take early possession of real estate. Most attorneys disfavor pre-closing possession. Why? Mostly because of liability concerns. What if the deal fails to close? What if the Buyer discovers a condition in the property that causes the Buyer to decline to close? What if the Buyer burns down the property? What if the Buyer's property moved into the real estate is stolen?

A proper and well thought out pre-closing possession agreement can address some of those concerns. While granting possession only at the time of closing is preferable, sometimes pre-closing possession is necessary.

What happens if, having transferred possession, the property is destroyed? In such as case, the Illinois Uniform Vender and Purchaser Risk Act shall apply. Unless specifically disclaimed or modified, all real estate contracts in Illinois are subject to the Act.

The act provides first that when neither legal title nor possession of the real estate have been transferred, in the case that all or a material portion of the real estate are destroyed without purchaser's fault, the Seller can not enforce the contract against the Buyer.

The act makes provision, however, for pre-closing possession. When either legal title or possession of the real estate has been transferred, in the case that all or a material portion of the real estate are destroyed without Seller's fault, then in such a case, the Buyer is not relieved of the duty to purchase the real estate.

Thus, if a buyer takes pre-closing possession of a property and the real estate burns down, the Buyer is still on the hook to buy the property.

Sheriff Dart Fined for Slow Evictions

2010-03-17T17:40:00.003-05:00

Cook County Sheriff Tom Dart who gained fame a few years ago by refusing to enforce evictions is foreclosure cases has been slammed by a Cook County Judge and ordered to pay a landlord $1400 for taking until February 16, 2010 to enforce an eviction order entered on August 24, 2009. That's about a six month wait. The Sheriff's office argues that manpower shortages, eviction backlogs, and a problem with the eviction order caused the delay.

Landlords are often surprised that it takes so long for the Sheriff to enforce an eviction. In my experience, the winter is always worse for evictions. Because of the holiday eviction moratorium and the delays caused by inclement weather, evictions in the winter used to back up quite a bit. These days, despite changes in the procedures at the Sheriff's office that allow for less time spent by the officers enforcing evictions, evictions take six to eight weeks in the good times and ten or eleven weeks during the winter.

Worse yet, the Sheriff's office has procedures in place to assist the elderly, disabled, and people with children with their move out. This sounds good in theory, but in practice, it adds a great deal of time to the process. There are bad apples out there among the ranks of both Landlords and Tenants, however, a Landlord with a mortgage can't afford to wait as long as it currently takes to get their tenants out.

Convenience Accounts in Illinois

2010-03-06T16:00:00.003-06:00

Beginning on Janaury 1, 2010, a new law, the Illinois Banking Convenience Account for Depositors Act, went into effect. The law provides a new way to add another person to a bank account without making the account a gift or a pay on death with that other person. Illinois banking institutions may now offer "convenience accounts". The person establishing the account can designate another party who will have the right to deposit and withdraw from the account without the right to take over the account as a gift upon the death of the person establishing the account. This can be an effective tool for people who need help doing bills or doing bank transactions but who do not wish to have a co-owner or to remove the account from that person's other estate planning instructions. The law has a sunset provision, so it expires in 2015.

Where there's a will...

2010-02-23T22:03:00.005-06:00

I received a call from a lady today who told me that her cousin had passed away. The caller was power of attorney agent for her cousin. After the cousin died, the lady tried to go to the bank to get into the cousin's safe deposit box. The bank refused her access to the box. She told me that the bank indicated that she could get a "court order" to enter the box. I suspect that the bank was talking about opening a probate estate to get "Letters of Authority" to represent her deceased cousin's estate. I aksed the lady if there was an estate plan. She told me it was probably in the safe deposit box.

Uncommon? Nope. Most people, quite correctly, keep their important documents, their will or other estate planning documents, in their safe deposit box. But what happens if the executor, power of attorney agent, or other family member is not listed as a person authorized to access the box?

The State of Illinois comes to the rescue. The Safety Deposit Box Opening Act (755 ILCS 15) allows an "interested party" to provide an affidavit to any bank controlling a safe deposit box of a deceased person to file an affidavit with the bank indicating that the person is interested in filing the deceased person's will or making arrangements for the deceased person's funeral and the person believes the box may contain the will or burieal documents of the deceased person and the bank in control of the box may then open the box to search for a will or codecil to a will. If a will or cedecil is found, the bank has a legal obligation to file the will or codecil with the probate court will depository in the County where the bank is located.

As a result, it makes a lot of sense to keep a will in a safe deposit box. The real trick is letting everyone know where the bank is.

Looking for a Speaker?

2010-02-18T21:09:00.002-06:00

In the last month or so, I have developed a pretty darn good (if I say so myself) presentation on the plethora of laws (local, state, and federal) affecting Chicago landlords when making a lease. I've presented the seminar to a group of ReMax agents and their clients and will be presenting again next week for Real Living Helios. I would be happy to make that same presentation to any interested landlord groups, real estate brokers or their clients. Anyone who is interested can feel free to contact me at http://illinois-attorney.com/contact.

Hey, Buyer, is a short sale for you?

2010-02-17T16:13:00.002-06:00

Short sales get you a house at a big value, but they come at a cost! I would say that, for one reason or another, only about 50% of the short sales that our office handles for Buyers actually close. The reasons they fail to close are many and varied. Most commonly, they fail to close because the Seller's bank does not approve the short sale offer, the buyer can't get financing, the real estate's value changes during the long wait between contract and closing, a new buyer is found, or the buyer gets sick of waiting. This is not to say that short sales do not close, but they are a challenge.

During a short sale transaction, the Buyer has to serve two masters - one who says "wait, we need the Seller's bank to approve this deal" and the other who says "as soon as the Seller's bank is ready, you had better be ready to close at a moment's notice". It can be difficult to serve both masters at once. In a short sale transaction, patience is a virtue. The main question for a short sale buyer is “How long can you wait?” The answer is easier if the property the question is not necessary for immediate residential occupancy. For someone who really needs to move into their new short sale purchased home, a short sale is a disaster waiting to happen. Delays are the norm. A short sale Buyer can't count on the contract closing date. Despite all the waiting, once the Seller's lender approves the sale, all of the parties must act fast to close the deal. Oftentimes, the short sale approval may only have a window of a week or so. A Buyer might feel like a yo-yo with all the waiting and edge of the seat preparedness. When the Buyer requires a loan to complete the purchase, because underwriting takes time, loan programs change, and lenders generally do not act quickly, the Buyer's lender may not be able to meet the Seller's lender's time table for closing.

Many Buyers do not want to waste money on their short sale transaction until they know that the deal will “happen”. If a lender does not approve a short sale, the Buyer could be out real money spent on appraisals, inspections, lender fees, rate locks, and attorneys fees. Thus, they try to hold off on obtaining an appraisal or inspection until they know the Seller's lender approves the deal. Oftentimes, the Seller will not agree to delay these items. From the Seller's perspective, the Seller does not want to spend months obtaining a short sale approval only to see the Buyer pull out because of inspection issues. As for the Buyer who wants to wait to get the lending process started, they might find that their lender is unable to close in time.

Even if costly items can be delayed, the delay may make the deal more difficult. If an inspection is performed after the Seller's lender's has approved the short sale, the buyer should not expect any inspection credits (to get those would require going back to square one in the Seller’s short sale approval process) and short sale sellers usually have no money of their own to put into the deal!

The short sale Buyer trades a great price for any right to complain about much of anything, including legal rights. The Seller's lender controls the game. Any short sale seller represented by a competent attorney will work to reduce the Buyer’s right to require a closing absent the approval of all third parties who are owed money. The Buyer generally has to play along. Again, this is part of the trade off for a “great” price, as the lender is normally swallowing a big loss. If the price is not great, the Buyer should not do the deal. After all, there are lots of properties for sale on the market these days.

After overcoming all of tribulations of getting to the closing closing table, the majority of short sale closings that do close usually require more than one day to close! A short sale closing begins like most others. However, the title companies usually need the seller’s lender to sign off on the sale or their payoff letter. This process usually causes delays. I have personally witnessed a seller's lender take a week to approve their already approved short sale payoff letter. Short sale closings can take a full day. They can be re-scheduled several times. They can take multiple days to close. All of these are possible in a short sale.

A short sale Buyer who is flexible, patient, and willing to "play the game" can find a real bargain in the real estate market. They just have to be willing to do what it takes to get that bargain.

Taxes and taxes and taxes

2010-02-03T14:33:00.003-06:00

Many folks will be seeing the first installment Cook County real property tax bills showing up in their mailbox shortly. This year, the County is looking for 55% of last year's full year bill. Then, when they raise your taxes in the fall, it will not seem like such a shock. Thanks for that Mr. Stroger.

In addition, the Assessor has implemented a bit of a shell game for reassessments. Beginning in 2009, the County has adjusted the formula used to arrive at an assessed value. Generally, the county has reduced the number of property classes and reduced the percent of fair market value for the classes to arrive at an assessed value. This can be confusing because a mere review of the assessor’s raw information comparing assessed values for 2008 to 2009 (or thereafter) will not be effective to adequately assess the change in assessed value.

To really have an “apples to apples” comparison of the two amounts, it is necessary to “back out” the figures to the assessor’s fair market value. A truly detailed review of the situation would compare the client’s increase to the median increase in their township.

Finally, residents in the north and northwest suburbs will be receiving their reassessment notices shortly. Be on the lookout and be aware of the time limits to appeal these taxes.

New Procedure for Evictions

2010-01-21T11:23:00.001-06:00

Effective January 25, 2010, the Circuit Court of Cook County is now requiring all new municipal law lawsuits must be filed along with a civil cover sheet. The sheet is available on the Clerk of the Circuit Court's website. The form is number CCM 0520.

In addition, beginning on February 1, 2010, the Sheriff's office will charge $10 for each return of service computer printout requested.

Horizon Realty and the Twitter case

2009-07-28T23:52:00.002-05:00

Wow. PR nightmare. I do not know the people at Horizon Realty, but they really have dug a hole over their comment that "We're a sue first, ask questions later kind of an organization" in response to the twitter comments of former tenant Amanda Bonnen. Clarifying their position that the comment was "tongue in cheek" in a written statement later in the day, Horizon also indicated that they are embroiled in a CRLTO dispute with their former tenant. I would hate to be the defendant in that case if the Plaintiff tenant was able to get the case to a jury trial.

What interest rate should a Chicago landlord use? That depends!

2009-02-13T16:38:00.004-06:00

There is a new twist on security deposit interest this year. The Section 5-12-080 of the CRLTO requires Chicago landlords with rentals covered by the ordinance to pay interest on security deposits at the rate set by the City (the same applies to Evanston). That rate, for 2009, is 0.12%.

In addition, the State of Illinois also has a law that applies to interest. The Illinois Security Deposit Interest Act is applicable to all landlords of residential real property containing twenty five (25) or more units in a single building or a complex of contiguous parcels. That interest rate, for 2009, is 0.25%.

As a result, a Chicago (or Evanston) landlord, covered by the Illinois Security Deposit Interest Act (ie. one with 25 or more units) must actually pay the State of Illinois rate rather than the Chicago rate! The penalty for violation of the ISDIA is a bit different from the Chicago ordinance, but it is a penalty nonetheless. Don't get caught with this mistake in 2009!

Be careful how you sign that!

2009-02-12T18:16:00.005-06:00

Oftentimes, clients or potential clients bring me a contract or other document after they have signed it. Sometimes, by then, it is too late for me to help the client get out of a jam. I was recently shown a document where a client signed a contract, believing his signature to be on behalf of his corporation, that was signed individually by the client. That is, the client thought he was obligating his company under a contract, but did not sign the document properly and thus, obligated himself personally. As a result, all of the benefits of the typical corporate liability shield are now gone.

How should someone go about signing a contract on behalf of their corporation? Like this:

ABC Widgets, Inc.
(signature)
by: (typed or printed name of person signing above)
its: (officer position of person signing)

Now, the world is on notice that a corporation is on the hook and not the person, individually, who signed the contract. This is part of the "corporate formalities" that are required to take advantage of the corporate liability shield. By signing as suggested, it is clear to the other party and outside third parties that a corporation is on the hook - not the signer. Anytime that all of the elements of a corporate signature are missing (ie. corporation name, signed by officer, position of officer), it is possible that an opposing party could go after the personal assets of the signer - not good!

Similarly, if you wish to obligate another party, make sure you are clear who the other party is. Is it a corporation? an individual? a partnership? The type of entity will make a major difference when it comes time to seek a remedy for breach, but that's another story.

Phonecall of the day!

2009-02-11T11:17:00.003-06:00

I just fielded a phonecall from someone who found me on the web wondering "is it okay to take the hinges off of my tenant's door so that they just leave"? Apparently, the caller had already served the tenant with a five day notice and was now ready to engage in self help.

After I gathered my senses at such a question, I quickly remembered that this is exactly the reason why the landlord tenant laws have been slanted so far in favor of tenants. Just to be clear, because it seems to not be obvious to some landlords, there are only two people who can return a rental property to the landlord: (1) the tenant... voluntarily and (2) the sheriff after the landlord has obtained an order for possession from a judge. Other than those two scenarios, changing the locks, removing the door, cutting the electricity, moving someone else in, and any other nonsense that the landlord can think up is a wrongful eviction.

Landlords need to treat their rental business like what it is: a business. That means learning the rules and understanding how to move within the system. That means having a lease that complies with the CRLTO or other applicable laws (depending upon the location of the property).

Evictions cost lots of time and money. Lawsuits from tenants cost money. In these tougher economic times, landlord's can't afford to not do it by the book. They also need to build into their business plan the potential cost of an eviction and the cost of being in compliance with the law.

The Illinois forcible entry and detainer act provides that a tenant who is wrongfully or constructively evicted is entitled to an abatement of rent for the eviction period and also entitled to compensatory damages for any losses that were a result of the wrongful act. It is worse in Chicago. Under 5-12-160 of the CRLTO, a landlord is subject to a daily fine of between $200-$500 plus the tenant has a civil remedy to recover the greater of two months rent or twice the tenants actual damages plus court costs and attorney's fees. Landlords: don't lock out your tenants.

Exclusions from CRLTO

2008-01-25T23:03:00.000-06:00

The City of Chicago Residential Landlord Tenant Ordinance strictly governs the conduct of most landlords within the City of Chicago. Nearly all rental property within the City limits is regulated by the CRLTO. Some rental units, however, are not covered by the strictures of the Ordinance.

In fact, Section 5-12-010 provides in part that the CRLTO "...applies to, regulates and determines rights. obligations and remedies under every rental agreement entered into or to be performed after the effective date of is chapter for a dwelling unit located within the City of Chicago, regardless of where the unit is made, subject only to the limitations contained in Section 5-12-020".

Section 5-12-020 of the Chicago Residential Landlord Tenant Ordinance sets forth the various exclusions from coverage of the ordinance. The most common exclusion from coverage arises under 5-12-020(a) of the CRLTO in situations where a building both (1) contains six or fewer units and (2) the landlord resides in the building. Even when the ordinance does not apply in the case of owner occupied buildings of six units or less, the provisions of Section 5-12-160 continue to apply.

Unfortunately for many condominium owners throughout the City of Chicago, the test for exclusion under 5-12-020(a) is a two part test. As a result, if a condominium owner owns a single unit in a four unit condominium building but does not also reside in the building, that condominium is governed by the CRLTO. Similarly, a single family home in the City of Chicago that is leased out is also governed by the CRLTO. Many landlords are surprised to find that their tenancies are governed by the ordinance. Usually, when they find out, it is too late.

The remainder of the exclusions in 5-12-020(b)-(f) provide for exemptions for various hotels, hospitals, purchasers of real estate who allow a seller to retain temporary possession, employee housing, and co-op property occupied by the co-op shareholder under the proprietary lease. The exclusions are quite limited and specific, with many being defined elsewhere in the City of Chicago code.

Relief for Tenants when Landlord is Being Foreclosed

2008-01-09T15:42:00.000-06:00

Effective January 1, 2008, the State of Illinois has enacted Public Act 095-0262 amending 735 ILCS 5/15-1701 of the Code of Civil Procedure to allow tenants a right of possession during a foreclosure. Under the old law, tenants could be evicted shortly after the entry of an order for possession in the foreclosure action.

Under the new law, in the case of a foreclosure where a tenant is current on his or her rent, an order for possession entered in a supplemental petition for possession in the foreclosure must allow the tenant to retain possession of the property covered by the tenant's rental agreement for the shorter of: (1) 120 days following the notice of the hearing that has been properly served upon the tenant or (2) through the duration of the tenant's lease.

As a result, tenants will have at least the balance of their lease if less than 4 months remain or up to 4 months after they receive notice that their landlord is in foreclosure. Tenants will still have to pay their rent. The law provides the additional right to possession only if the tenant continues to pay rent in full during the 120 day period. In addition, the right only extends to a case of "foreclosure where the tenant is current on his or her rent". This can lead to a few questions.

Who is entitled to rent during the pendancy of the foreclosure action? Is it the landlord, the mortgage holder foreclosing the loan, or the court appointed receiver? Generally, payment should be made to the landlord. However, many landlords in arrears refuse to accept rental payments. In such a case, the tenant should be careful to tender the rent payment to the landlord. If the payment is denied, the tenant should tender the rent payment to the court appointed receiver and/or mortgage holder. In either case, the tenant should get a receipt for payment! If neither the court appointed receiver/mortgage holder or the landlord will accept the rent, the tenant should appear in court and attmept to have the court order one of the parties to the suit to accept the rent.

Changes at the Chicago Water Department affect home sales in Chicago

2007-12-13T09:10:00.001-06:00

On November 12, 2007, the Chicago City Council passed a number of amendments to the Municipal Code of Chicago that affect the City of Chicago Water Department and real estate transactions in the City of Chicago.

It is expected that, beginning December 17, 2007, the City of Chicago will increase double price charged to obtain a "Full Payment Certificate" also known as a "Water Certification" from $25 to $50. (See changes to 11-12-530)

In addition to the fee increase, the City has reinstated the requirement that a "Full Payment Certificate" be obtained for condominium property. In addition to the normal requirements for obtaining an FPC, a condominium request must also include a paid assessment letter current for the month of closing that includes the condominium unit number, the condominium assoication water account number, the name of the condominium unit owner, a statement from the association that the condominium association pays the water bill, and a statement from the association that the to be conveyed unit's monthly assessments are paid in full and up to date. (See changes to 11-12-531)

The alleged policy behind the FPC is that the City is given a final chance to make a seller pay their water account in full before being allowed to sell property and flee the city. Is this really necessary for condominiums where the association is responsible for payment of the water bill?

So what does this mean to sellers of property in the City? Increased fees and more hassles. Condominium Sellers who will be selling early in any given month will need to pre-pay their assessments so that they can timely obtain a paid assessment letter that conforms to the City's requirements. The new law will also likely cause a major disruption in obtaining FPCs.

If the City needed more money, they should have just imposed a new tax on the sale of real property. Instead, they increased the bureacratic workload by forcing hundreds more people to stand in line to obtain FPCs for condominium units where the association already pays the water bill.

Do we need to get a C.L.U.E.?

2007-10-12T10:59:00.004-05:00

All real estate buyers will be required by their lender (and good sense) to obtain hazard insurance. In most cases, the insurance is an afterthought, but maybe it should not be. The Multi-Board 4.0 Real Estate Contract contains a provision that allows a buyer to check with an insurance agent to determine if the property being purchased can qualify for form HO-3 hazard insurance at "preferred permium rates" and provides an out from the contract if that detemination is made and timely notice provided to the seller.

When underwriting a homeowner's policy, insurance companies usually review claims information and can deny coverage to a potential buyer based upon prior claims at the property address. In such a situation, a buyer will be forced to purchase "non-standard" coverage or coverage through the government, usually at extremely high premium rates.

In any event, in order to make a determination about policy availability at preferred rates, Buyers need to get involved with an insurance agent much earlier in the buying process. Generally, the insurance agent will order up a "C.L.U.E. report". C.L.U.E. stands for "Comprehensive Loss Underwriting Exchange" which is basically a database that tracks prior claims against a property. The company that runes C.LU.E. currently indicates that the report has information about the most recent seven years of claims activity.

This information can be interesting potential buyers and may be a valuable resource when purchasing a home. A Seller can now obtain a version of a C.L.U.E report stripped of personal information (such as social security numbers) for their buyers for about $20. The information contained there can be valuable to prevent the purchase of a lemon or to provide piece of mind to a buyer that there is not a history of problems at a particular property. In any event, insurance inquiries must be made earlier in the process.

Merger of damages - does the landlord owe you 10 times damages?

2007-09-21T17:18:00.000-05:00

Section 5-12-080 of the Chicago Residential Landlord Tenant Ordinance sets forth the requirements a that Chicago landlords covered by the ordinance must follow. Among these are the requirement to provide a receipt for a deposit; to keep the deposit in a segregated account; to pay interest on the deposit; to return the deposit within a prescribed time period or to properly deduct from that deposit; and to properly transfer the deposit upon a change of ownership of the property.

Section 5-12-080(f) provides:

"If the landlord or landlord's agent fails to comply with any provision of Section 5-12-080 (a) - (e), the tenant shall be awarded damages in an amount equal to two times the security deposit plus interest at a rate determined in accordance with Section 5-12-081. This subsection does not preclude the tenant from recovering other damages to which he may be entitled under this chapter."

Thus, in addition to the regular damages a tenant can recover for a landlord's violation of the ordinance, a tenant can also recover a penalty of two times the deposit as a penalty. (As an aside, the ordinance also provides elsewhere that a prevailing tenant can recover attorney's fees and court costs from the landlord)

I have found that when a landlord violates the ordinance, he or she usually does it in a big way. That is, if the landlord fails to return a deposit, it is also likely that the landlord did not provide a receipt for the deposit, that the landlord probably commingled the deposit and that the landlord likely violated many of the other requirements of the CRLTO.

Accordingly, many tenant's attorneys will bring a multiple count complaint against a landlord for various violations of the CRLTO. Until recently, these attorneys would plead for (and sometimes get) a penalty for each and every violation of Section 080 of the ordinance.

In the middle of 2006, a case was decided by the Illinois Appellate Court, KRAWCZYK v LIVADITIS, that clarified the situation. In that case, the Court followed two prior appellate decisions and determined that "the payment of a security deposit is a singular event and the RLTO does not specify double damages for "each" violation of 5-12-080".

Thus, a landlord can only be penalized once for violating Section 080 of the ordinance, regardless of the number of counts against the landlord. Following the KRAWCZYK ruling, a landlord who commingles a security deposit, does not provide a receipt for a deposit and fails to pay interest on the deposit will only be charged with a single penalty of two times the deposit (in addition to any other legal damages).

I am not sure I agree with the court's reasoning in this case. Frankly, the application of a single penalty actually encourages a landlord to violate the ordinance. Because ordinance violations cannot be cured, the penalty has a chilling effect on landlords becoming compliant.

For example, a landlord who commingles (and thus, has violated the ordinance and now owes two times as a penalty if sued) has no incentive to later segregate the account (except to segregate it and hope the statute of limitations passes) and even less incentive to pay interest or follow any of the other requirements of Section 080 because no matter what the landlord does, the landlord is on the hook for a penalty capped at two times the deposit.

Regardless of my belief that the decision has a chilling effect on landlord compliance, I am amazed at the number of tenant's attorneys who try to bull landlords with multiple claim counts and wild assertions that they are due the penalty for each violation. I recently spoke with another attorney dealing with a four count complaint. The tenant's attorney offered the landlord's attorney to settle the case, based on a security deposit approximately $1000, for about $10,000 claiming that he was entitled to eight times the deposit if he prevailed on all of the counts. Either this tenant's attorney is not very smart or he is smart like a fox. Landlords need to be careful of traps like this one.

If the landlord's attorney merely stipulated to the violation, he likely would pay no more than $3000 plus some interest and some minimal attorneys fees. Some deal!

Major changes to evictions in Cook County

2007-09-16T00:33:00.000-05:00

Evictions in Cook County are never fun and are never fast - just ask any landlord. Until this year, the Sheriff typically enforced a court order for possession in about three weeks. Currently, the timeframe for removing a tenant in Cook County is more like six to ten weeks. Within the last few months, I have had the unfortunate opportunity to witness some serious delays in the enforcement of orders for possession by the Sheriff of Cook County.

In at least two cases, my clients have reported that despite thier presence to meet and "greet" the Sheriff (Having a "greeter" on behalf of the landlord is a requirement of the Sheriff in the enforcement of the order for possession obtained in an eviction order), the Sheriff did not appear to enforce the order. Upon checking into the situation, in both cases, the Sheriff indicated that he was present to enforce the orders and no one was at the property to meet him, so the evictions were called off. That means we need to pay an additional fee and get back at the end of the line. To add insult to injury, the landlords took time from work and were present at the property all day! It is possible that the Sheriff is telling the truth (ie. the landlord was present and the sheriff was present and they were unable to recognize each other). Unfortunately, there is no way to coordinate this process with the Sheriff. The Sheriff's eviction desk is of no help (they can tell you what happened the day after it happens, but they do not coordinate "just in time evictions"), so the system is, at best, handicapped.

In another recent case, the Sheriff called to indicated he would be out to evict the tenant "tomorrow". On the morning of that expected eviction, the Sheriff called my office to tell me that the eviction was cancelled and that the Sheriff would handle the eviction "tomorrow". After spending half a day at the building on the prior date, my client sat at the property on the new eviction date from 8am to 2pm (the time period provided by the Sheriff). The Sheriff never appeared. As one would expect, the landlord was fairly upset. When I followed up with the Sheriff's office the next day, they indicated that they were unable to make all of the evictions scheduled that day and that they would reschedule it "some time in the future". The Sheriff had no further information. Unfortunately, a short time after the two failed dates, the eviction order became "stale" (too much time had elapsed between the entry of the order and enforcement). The expiration was, in large part, due to the fact that the Sheriff failed to enforce the order in a timely fashion. I must admit that the tenant added some time with some fairly frivilous motions to extend their stay. As a result, the landlord had to motion the court to extend the court order, give notice to the tenant (adding to the landlord's expense in attorney fees and costs and providing yet another opportunity for the tenant to delay or stall the process) and the order could then be re-placed with the Sheriff (and we would get back in line at the beginning to wait again).

Luckily for us, the tenant got tired of waiting for her things to be thrown on the street and decided to leave on her own.

The current delays for the enforcement of an eviction are akin to those that occur in the winter months as a result of inclement weather and the Holiday moratoreum (extremely long). I don't fault the Sheriff for this as I suspect that the volume of evictions is overwealming considering the state of the economy.

As of July 19, 2007, the Sheriff has implemented a new procedure, I suspect, to increase the number of evictions that can be performed in a day and to reduce the current backlog of evictions. Prior to the new procedure, the Sheriff actually moved the tenant's property from an apartment as part of the eviction.

Effective August 06, 2007 the Cook County Sheriff’s Office will no longer arrange moving services for evictions. Landlords are now responsible for making arrangements to have the tenant's personal property removed from the real property after the Sheriff has enforced the Order for Possession and tendered possession of the real property to the plaintiff. In conjunction with the change, the cost of an eviction has decreased from a deposite of $225 to $60.

Despite my hope that the new rule will reduce the long wait for Sheriff enforcement, I suspect that landlords will now face a slew of new problems relating to the actual eviction of their tenants.

Two problems come to mind immediately.

First, the landord will have to deal with the problem of actualling moving the property. Likely, this will require the landlord to employ a professional moving company or some form of paid movers. I assume that the professionals will charge a greater amount than the Sheriff had charged, thereby increasing the landlord's eviction costs. The landlord will also have to determine when and where to actually remove the property. Should the landlord wait 24 hours? Should the landlord do it immediately? Should the landlord store the property and give the tenant an opportunity to retrieve the property? Should the landlord move the property to the curb or ally? A spokesman for the Sheriff recently indicated that once the eviction is processed by a Sheriff's officer, the landlord is free to move the property to the curb or ally regardless of weather conditions or other circumstances.

Second, landlords may have to deal with the recently dispossessed tenant's claims of property damage or theft by the landlords. It is easy for a tenant to claim that he or she had an expensive television and lots of cash among the tenant's possessions and can claim that the landlord stole those items or broke them while transporting them to the curb. Because the Sheriff will not be present, tenants and landlords could be prone to physical confrontation over the tenant's personal property.

I don't know how these issues will shake out, but I am certain that until some procedure is formalized, landlords and tenants will get into further disputes.

What about Caveat Emptor?

2007-08-03T11:03:00.000-05:00

Perhaps the biggest change in legal philosopy over the past 50 years could be summed up in that the law has changed from a world of "caveat emptor" to one of "I am my brother's keeper".

There is no area of law where this shift can be demonstrated better than in the field of corporate law. Fifty to one hundred years ago, the likes of Conrad Black and Kenneth Lay would have roamed free like the captains of industry that preceded them. Today, the law favors consumer protectionism over the technical protection of corporate officers, directors and shareholders.

Corporations and other limited liability entities like limited liability companies and limited partnerships are formed by entrepreneurs in an effort to limit the entity's owner's risk. A properly formed and run entity should be able to insulate its owners, directors and agents from personal liability for the actions of the entity.

In certain cases, however, a court may still reach through the liability shield and reach the individuals behind a limited liability entity's actions. The concept, known as "piercing the coprorate veil", is one in which a plaintiff is able to break through the limited liability protection of the entity to receive relief from a shareholder, officer or other agent of that entity.

Illinois employs a two-prong for piercing the corporate veil: (1) there must be such unity of interest and ownership that the separate personalities of the corporation and the individual no longer exist; and (2) circumstances must exist such that adherence to the fiction of a separate corporate existence would sanction a fraud, promote injustice, or promote inequitable consequences. People ex rel. Scott v. Pintozzi, 50 Ill. 2d 115, 128- 29 (1971).

So, generally, if it can be demonstrated that a person exercises control over a corporation such that the person running the corporation is using the corporation as an alter-ego in a situation where some person is harmed, then the corporation liability shield can be broken and the person in charge can be personally responsible for the corporate action.

The Illinois courts have indicated that a non-shareholder of an Illinois corporation can be found personall liable for the actions of and damages done by the corporation. In the case, Fontana v. TLD Builders, the Illinois courts found a non-shareholder personally liable for the actions of the corporation when it was demonstrated that the corporate officer and not his shareholding spouse was found to have a unity of interest with the corporation and the building contractor corporation had caused over one million dollars in damage to a customer. The corporation was not properly capitalized and failed to follow many of the typical corporate formalities.

Corporations and limited liability entities need to take a long hard look at how they conuct operations. Directors and shareholders need to understand and document what they are doing. In all cases, gross negligence is going to be subject to liability. However, if a corporation wants its liability protection to have real meaning, then the corporation will need to adhere closely to the corporate formalities in a material way.

Ever hear of the Chicago Residential Landlord Tenant Ordinance?

2007-07-18T10:59:00.001-05:00

These days, I am finding more and more work related to the Chicago Residential Landlord Tenant Ordinance (CRLTO) from landlords who have run afoul of the provisions of the Ordinance without knowing that the ordinance exists!

Nearly all of these landlords have called me for reasons not related to their own issues with the ordinance. Instead, these issues are discovered during the course of discussions about tenant evictions, lease reviews or other "bad tenant" related issues and worse yet, when the issue comes up in regard to a real estate transaction!

Most of the folks I speak with are disappointed (and sometimes disbelieving) when I begin to explain the ordinance requirements and the penalties for failure to comply to them. The CRLTO governs most residential real estate tenancies in the City of Chicago (there are a few exceptions to the ordinance, but nearly all landlords must abide by the provisions). The ordinance supercedes any common law of Illinois and any terms of a lease or other agreement between the parties. The CRLTO governs all sorts of issues related to the landlord tenant relationship, from the proper care and feeding of security deposits to invalid, illegal or unenforceable lease terms all the way to the obligation of the landlord to make himself or herself known to a tenant. The penalties for violation of the CRLTO are severe.

After I inform a client of the serious repercussions of violating the CRLTO and, usually, a moment of silence and disbelief, the landlord asks me if I am serious. Unfortunately, I am. The CRLTO exists, it is real, it is slanted in favor of the tenant and Landlords need to comply with it. This has been confirmed time and again by the appellate courts and the Supreme Court of the State of Illinois.

While I don't want to discuss the merits of the CRLTO here, I do think that attorneys need to do a better job informing clients of the obligations under the CRLTO and landlords need to do a better job complying.

I will be writing in this blog regularly about the ordinance, its penalties and how landlords can better comply. I will also lobby herein for some reasonable amendments necessary to make the ordinance more "workable".

When do I call an attorney to help sell my house?

2007-03-01T10:01:00.000-06:00

When do you need to get an attorney involved in selling your house? The quick answer is right away.

The first time you should consult an attorney is before you sign a listing agreement with a realtor. Many of the "standard" or "form" listing agreements are heavily slanted against the seller or contain provisions that surprise sellers when they actually find out what the agreement says, usually when it is too late to do anything about it.

Most of the listing agreements in the Chicagoland market indicate that a real estate broker's commission is earned once the broker has produced a "ready, willing and able" purchaser of your property. "But what if the deal does not close, I don't owe a commission, right?" Wrong. If your buyer defaults on the transaction after satisfying all of the buyer's contingencies (ie. the buyer defaults and fails to close), the seller likely owes the real estate brokers a commission.

In reality, many real estate brokers do not try to collect this commission. They want to keep goodwill with their seller client and they understand that they will get a commission when the property does eventually sell. But what about the selling agent who is out a commission and what about the listing agent who has had a falling out with the seller during the course of a deal. They may want their commission... and they are entitled to it.

There are more than a few reasons to take a look at the listing agreement before it is signed. Among others, the attorney can assist a seller to determine the rights and obligations of the seller if the seller finds the buyer without the help of the agent; if the seller has any right to avoid a commission for people who looked at the house before it was listed; and in the event that the real estate agent acts as dual agent. Other questions can be answered such as how does the seller terminate the agent relationship?; is a commission owed to the agent if the seller gets a contract after terminating the agent?; or are there any "hidden fees"? (sometimes a commission will actually be "5% of sale price plus a $225 processing fee). In most cases, under the terms of the "standard" listing agreement, the real estate agent will come out on top in regard to those issues.

Many real estate agents are excellent to work with and understand some of the shortcomings of the form listing agreement. In fact, many are very willing to make modifications to the agreement so that the seller can preserve some rights and better deal with some of the situations which can arise during the course of an agency agreement.

Hello!

2007-02-14T09:03:00.000-06:00

This page will be the blog spot and brother site of www.illinois-attorney.com which is the website for Reda Ciprian Magnone, LLC, attorneys at law. Our firm practices in the areas of real estate law (residential, commercial, landlord-tenant); probate (deceased person's estates, minor's estates, disabled person's estates); corporate law (business organizations, purchase and sale of business, contracts); and estate planning (wills, trusts). I hope to periodically keep this blog up to date with information and musings on the law as related to those topics. As always, please know that you should not rely upon the information contained in this blog as "legal advice" as every factual situation is different. Please, always consult an attorney before acting to understand your rights and duties.