Example of how House Bill 631 will help Buy and Hold Investors

The Florida Legislature Strengthens Laws to Remove Unwanted Parties from Your Property 

The governor signed House Bill 631 into law on March 8, 2018, to update Florida law on ejectment, unlawful detainer, and customary use.   So what does this mean?

First, let’s suppose the company owning the building next to yours puts up a fence ten feet over your property line, claiming to have a recorded deed to a strip of your land.  You think the deed is bogus.  To get rid of the fence you would likely file an “ejectment” action.  “Ejectment” is a kind of eviction action in which the party in possession claims a right to be there under a written instrument in its chain of title (usually a deed, easement, or other serious title instrument).  An ejectment action gives you the chance to prove your superior title to the property (after which you would eject the neighbor’s fence). Case closed.  The amendments to the Bill modernize the statute to clarify the process and documents necessary to establish an ejectment action in Florida.

Second, suppose you leased your house to a guy for Gasparilla Parade week (let’s call him Ed).  Ed takes possession of your house under a one week lease.  While he’s there, Ed invites one of his friends (call him Jeff) to live with him for the week without your permission.  A third guy Ed vaguely knows (call him Jim) lets himself into the house, picks a bedroom, and makes himself at home with no one’s permission.  Now the week is up and Ed, Jeff, and Jim all refuse to leave.  How do you get your house back?  You’d file an unlawful detainer action against Ed (who overstayed his lease), an unlawful entry action against Jeff (who was invited by Ed but not allowed by you), and a forcible entry action against Jim (who, in effect, forced his way into the house without anyone’s permission).

The new law revises, clarifies, and streamlines the procedures to remove all these unwelcome parties.  Better for you (but worse for Ed, Jeff, and Jim), the new law also allows for an award of damages equal to double the reasonable rental value of property if you establish that a defendant’s possession was willful and wrongful.   The new law further provides for an alternative method of service permitting a plaintiff to post a complaint in a conspicuous place on the property.  That’s handy if Jim won’t come to the door.  Think about this, by the way, before you rent your house for Gasparilla.

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Reconsider Your Florida Single Member LLC

A Florida single-member LLC is formed just like a multi-member LLC. You file the Articles of Organization with the Division of Corporations and pay the appropriate fee. Obviously, the major difference with a single-member LLC is that there is only one member. But this distinction has created a serious consequence for Florida business owners.

The primary protection offered by the LLC entity structure is that it provides limited liability protection for members. In other words, the entity shields members from creditors in various ways.

For example, if a member of a Florida LLC is sued and a creditor seeks payment for debts, the assets of the LLC cannot be seized in order to pay for the debt because these assets also belong, at least in part, to other members. As well, should the LLC itself be sued, a creditor cannot seize the personal assets of LLC members as a means of paying the debt.

In these cases, creditors are generally held to using what are called charging orders to remedy debt collection. What is a charging order? A charging order is an order issued by a court directing an LLC's manager to pay to the debtor-owner's personal creditor any distributions of income or profits that would otherwise be distributed to the debtor-member. Pay attention to the fact that creditors in Florida can only obtain the owner-debtor’s financial rights with the charging order - they cannot participate in the actual management of the LLC.  Thus, the creditor cannot order the LLC to make a distribution to the debtor/member. This makes the charging order a weak remedy for a creditor. 

Unfortunately, in 2010, the Florida Supreme Court found that the charging order limitation does not apply to single-member LLCs in Florida. This means that any Florida single-member LLC is not treated by the court system like other LLCs, but instead like a sole proprietorship. (Olmstead v. Federal Trade Commission). In a worst-case scenario, a creditor seeking repayment from a single-member LLC in Florida could seize control of the company, redirect distributions and liquidate assets until the debt is paid.

To avoid application of Florida’s single member LLC rules and obtain the fullest limited liability possible, a Florida LLC should have at least two members. The second member can be a spouse or relative as long as that person is treated as a legitimate co-owner of the LLC. If the second owner is added merely on paper as a sham, the courts will likely treat the LLC as a single member LLC. To avoid this, the co-owner must pay fair market value for the interest acquired and otherwise be treated as a "real" LLC member--that is, receive financial statements, participate in decision making, and receive a share of the LLC profits equal to the membership percentage owned.

Unfortunately, the majority of real estate professionals create single member LLC's, but this is an easy fix, and worth the minimal time and money invested in the correction. Call Richards Law Firm, PA to make the change and get your LLC documents in order. 

What does the new HOA Estoppel Law Say?

Florida House Bill 483 passed and goes in to effect Saturday. This bill is a win for the real estate consumer in that it makes the delivery of estoppel certificates a more uniform practice.

The highlights you should  know are as follows:

1. It caps fees that can be charged for the preparation and delivery of an estoppel:
a) $250 for unit owners who are current
b) Additional $100 for "expedited" estoppel requests
c) Additional $150 can be charged for owners who are delinquent

2. Requires that the estoppel require certain information

3. Estoppel certificate is to be issued within 10 days of written request of owner or owner representative

4. If the closing does not occur and a proper request is made the fee for the estoppel is to be refunded.

As always, if you're just a glutton for punishment, the full bill as provided by the FLTA can be found by clicking HERE. 

Tax Deed vs. Tax Certificate

Just like Subject To's vs. Assumptions, Tax Certificates vs. Tax Deeds fall under the category of terms investors use interchangeably, but really they are two different things. To know (and remember) the difference it’s helpful to also understand the basics of how the tax sale process works.

Tax Certificate:

When a property owner becomes delinquent on their property taxes the county issues a tax certificate for the owed amount. There are investors who are attracted to these certificates because they earn interest. When the owner finally remembers to pay their taxes they must pay the money owed to the county, and they also must pay all of the accrued interest owed to the certificate investor. The key point to take away here is that a tax certificate investor is entitled to earn interest in the investment,  but has no ownership interest in the property. 

Tax Deeds:

If after two years the property owner has not paid the amount owed to satisfy the certificate holder that certificate may be redeemed by the certificate investor. Once that certificate is redeemed, the clerk begins the tax deed sale process by running title and sending notice to all interested parties per statutory requirements. After all notice and statutory requirements are met by the clerk, the property is auctioned at the tax deed sale. When an investor purchases a property from the tax auction they receive a tax deed and now own the property. The bid amount goes toward satisfying the certificate holder and fees owed to the Clerk.

So the short answer to the difference between tax certificates and tax deeds is that owning a tax certificate gives you the right to earn interest on the certificate amount; whereas owning a tax deed means you actually have title to the property. 

If you're interested in more investing information like this follow our FaceBook page Richards Law Firm ,PA and join the Land Trust Investors Group. Don't just follow - participate in the discussion!

Real Estate LIVE! Radio 1340 AM

​I was recently invited by the host of Real Estate Live! with Michele the "Queen of Real Estate Radio" to discuss a few topics of interest to investors. Video of the show is posted to YouTube. Check it out!

https://www.youtube.com/watch?v=2zndUd4pHbM

WARNING: Land Trusts Are Legal Documents!

I recently had a conversation with a great investor from Ohio. He had hired a company based in Las Vegas to draft a trust document, and a bunch of other stuff to help him on his journey into wholesaling.

He was kind enough to let me see the trust document created for him. There was no mention of any statute from any state saying that this document was a trust under the laws of....X. There were no instructions telling him to put that language in the Deed that would place property into the trust, and for some reason the seller was named as a party to his trust. Basically, this guy just had a weird contract that allowed his seller to still have an interest in the property - even after he gave them funds to close. At the risk of sounding harsh- this guy was taken advantage of, and he would need a ton of experience to be able to manipulate these documents into something workable.

I know I always say, "A trust is just a piece of paper" which is true, but it's a legal piece of paper. There is a little bit of "know how" that comes with drafting and using these pieces of paper, Once you know the basics you can really take off and start using them to your advantage, but you need to get the basics down first.

After my conversation with this nice man from Ohio, I now have two new goals: One is to never ever have one of my clients feel the way this guy did today, and the second is to be sure my clients have every opportunity to understand what they are using and how to use it.

If you're interested in getting free info, tips or updates about land trusts email me at info@teachmelandtrusts.com.

Play Back of Live Land Trust Q&A Event

I held a Facebook Live event that was a general Q&A on land trusts. Click the link below for the play back. Also, to be sure you don't miss more Live events like the FaceBook group Land Trusts for Investors and Richards Law Firm for details on upcoming events.

Live Land Trust Q &A Event Play Back