A 1031 exchange is known as a like-kind exchange and can be an effective tool for those who have investment real estate.  When selling investment real estate, most people face a significant tax burden. A like-kind exchange can significantly reduce or even eliminate this burden. The 1031 Exchange Rule Property can only qualify for a like kind exchange if they follow specific rules as laid out by the US tax code. Investment properties can only be exchanged for properties that are another investment. For example, you cannot trade a business property for a residential property unless the residential property is going to generate income. The second (and perhaps most often violated) rule for a 1031 exchange is how the proceeds of the sale are handled. For example, you cannot take the proceeds from one sale and buy a pay off another property you own nor can you purchase from one

The number of people in Rhode Island who rent out space in their home…an extra room or an apartment…is skyrocketing. But many people don’t realize that doing so can create legal problems. Craigslist reports that the number of people offering to rent a room in a home has nearly doubled over the last year or so. Some of this is due to the economic doldrums. But another phenomenon is that many baby boomers whose children have grown up and moved away have houses that are larger than they need, yet they don’t want to move – or they can’t sell because they owe more on their mortgage than their home is worth. Often, these people rent out extra space to generate income. That’s all fine – but many people who rent out a room or convert a garage into a studio apartment don’t realize the complexities of landlord-tenant law. Even

A very comon scenario: A RI couple put down a $45,000 deposit on an $885,000 home, and signed an agreement saying the purchase was contingent on the couple’s being able to get a mortgage for the remaining $840,000. Sometime later, the couple told the builder that they weren’t going to apply for a mortgage and weren’t going to go through with the deal. The builder refused to return the $45,000 deposit, and the case went to court. The result? The builder got to keep the $45,000 deposit. A couple couldn’t back out of a deal just because their income went down and they thought they could no longer get a loan. If a “mortgage contingency” in a contract says that the purchase is contingent on the buyer’s being able to obtain a mortgage, this creates an obligation on the buyer’s part to actually apply for a mortgage, the Court decided. A buyer can’t just

In Rhode Island, when an apartment is rented, the tenant pays a security deposit that can be applied if he or she damages the property. Usually, unless the lease says otherwise, the tenant is liable only for damageto the property…not for ordinary wear and tear. The landlord is typically supposed to maintain the property and perform routine upkeep. Security deposits are normally a small matter, but in some cases, tenant damage can be a big issue. Two recent cases at opposite extremes show that it’s important to speak with an attorney if you have any questions or concerns. In one case, a landlord leased a house and 25 acres to a married couple. The couple had two dogs, and the wife apparently also kept some horses on the property. Significantly, the couple also agreed in the lease to return the property in the same condition in which they received it.

If a tenant hires a contractor to make improvements to a property, but the tenant doesn’t pay the contractor in full, can the contractor sue the landlord for the difference? It sounds unlikely, but it happened in one case recently. Former Boston Celtics player Dana Barros leased a warehouse and hired a contractor to make improvements so he could turn it into a sports complex. Later, the contractor believed it hadn’t been paid in full, so it went to court against Barros and against the owner of the warehouse. The warehouse owner argued that it couldn’t be sued because it was merely the landlord; it never signed an agreement with the contractor. Most states have what are called “mechanic’s liens, such that if a contractor isn’t paid in full by someone for work on a property, it can place a lien on the person’s interest in the property.

A couple who purchased a condo in a building that turned out to be contaminated with toxic chemicals can recover only 65% of their losses, because they could have arranged an environmental inspection of the property before they bought it but didn’t do so,  a Court of Appeals recently decided. The couple bought a condo unit in a converted factory. The developer had installed a vapor barrier, but never actually decontaminated the dangerous chemicals on the site. The buyers claimed that the seller’s real estate agents assured them the site was safe. It appears the agents believed that was true at the time, but when they later found out that the site still had problems, they didn’t say anything. According to the court, the agents could still be liable, because even though they didn’t technically lie, they had a legal obligation to tell the buyers about the problems once they

Many people are surprised to discover that their standard homeowner’s insurance policy does not cover them in the event of a flood. If you want flood insurance, you generally have to buy a separate policy. Typically these policies are sold by private insurers, but are backed by the U.S. Government through the National Flood Insurance Program. Some federally backed mortgage programs require homeowners to buy flood insurance if they live in a high-risk area. Some private lenders require this as well, and they may require it even if the property is not in a high-risk area. You should note that just because a property is not in a high-risk area doesn’t mean that flooding is impossible. High-risk areas are typically low-lying regions that are subject to storm surges or overflowing rivers, but even property in a very low-risk area can still be flooded due to heavy rainfall, drainage system failures,

Owning a home provides a lot of tax advantages. Sometimes, though, the rules can be tricky. Here’s a brief introduction to some of the many tax rules involved in buying, selling, or refinancing a home. But remember, the rules are complicated, and there are always exceptions. You’ll want to consult your RI real estate attorney or tax advisor to see how the general rules apply to your specific situation. If I own a home, can I deduct my mortgage interest payments? Yes, home mortgage interest is generally deductible on your federal income tax return on loan amounts up to $1 million. To get the deduction, you’ll need to itemize your deductions on Schedule A. For most people, this is the primary tax advantage of owning a home. Your lender will typically send you a notice at the end of the year telling you how much of your payments were for

Hiring an architect to design a home, a commercial building, or a new addition can be very exciting. But there can be some traps for the unwary in the fine print of the contract, and you’ll want to have an attorney look it over in order to protect your rights. Here’s just one example: Who owns the architect’s drawings and plans? You might assume that you do, since you’re paying for them. But one of the most commonly used standard contracts says that the architect, not you, has all ownership rights (including copyrights) in any drawings, plans, or specifications that the architect creates. What does that mean? It means that if the contract with the architect is terminated for any reason, you have to return all the documents to the architect, and you no longer have a right to use the plans for your building! There is a provision that