Wisconsin Business Law Blog : Waukesha, New Berlin, Oconomowoc Corporate & Real Estate Lawyer & Attorney

I have been writing Title Insurance on Real Estate Closings for a number of years. My underwriter is Attorneys' Title Guaranty Fund, Inc. ("ATG"), which only writes title insurance through its attorney-members.

In the past year or so, I have received dozens of inquiries about people considering either buying or selling under conditions of a "short sale," where the proceeds of the sale will not be sufficient to cover the balance of the underlying mortgage. Fortunately, for buyers, sellers and lenders, there is a way to do a transaction when such conditions exist. It is difficult, but it can be done.

• Email This
• Print
• Comments
• Trackbacks

It is common in exclusive real estate listing contracts for agents to include provisions regarding "Protected Buyers." Included in many standard Wisconsin listing contracts is a clause that a "Protected Buyer" includes a potential buyer who "negotiates directly with Seller by discussing the potential terms upon which the buyer might acquire an interest in the Property." Subject to various other provisions, an agent is entitled to a commision on a sale to a Protected Buyer even if the listing contract has expired. A recent Appellate Court held that based upon the particular facts of that case, the buyer was a Protected Buyer and the agent deserved the commission because there was "two way" communication between the buyer and seller on certain aspects of the transaction (i.e. the negotiated). However, in the opinion, the court noted that merely advertising a house on-line or the fact that a potential buyer solicited certain information from Seller (without more) does not necessarily mean there was a "negotiation" between Seller and Buyer. See http://www.wicourts.gov/ca/opinion/DisplayDocument.pdf?content=pdf&seqNo=64865

• Email This
• Print
• Comments
• Trackbacks

The recent recession and real estate bust has left many with property that is "upside down." By that, I mean that more is owed on the property than what it is worth. This means that there is no longer any positive equity in the property.

Sometimes owners of such upside down property cannot afford to continue payments on such properties. Ordinarily, they would face foreclosure. Short sales are an alternative to foreclosure.

• Email This
• Print
• Comments
• Trackbacks

Did you ever wonder what happens when two unmarried people split up and then argue over who should get what? A recent Wisconsin Court of Appeals case, Leonard v. Lynn, 2009AP2026, for which the Wisconsin Supreme Court denied certiorari on January 11, 2011, gives us the answer, which may surprise many.

• Email This
• Print
• Comments
• Trackbacks

The Wisconsin Supreme Court, in the recent case of Bank Mutual v. S.J. Boyer Construction, Inc., et al, found that those who guaranty a note may remain liable on their guarantees, even when the lender releases the primary obligor in its quest to shorten the redemption period when foreclosing. The Supreme Court determined that when the statute says that all who are "personally liable for debt secured by the mortgage" are to be released, it means those on the note, and not those on the guarantee, which stems from a different obligation than the note.

• Email This
• Print
• Comments
• Trackbacks

 A Power of Attorney (POA) is often used in Estate Planning, Business and Real Estate transactions. The creator of the POA, called the "principal" gives someone else, called the "agent" the authority to sign on behalf of the principal and bind the principal as if the principal had signed.

On September 1, 2010, Wisconsin's new POA statute, Chapter 244, Wis. Stats., became effective. The new law does not change the validity of existing POA's, but expanded on and clarified much existing law surrounding POA's.

The law now sets forth rules regarding reimbursement and compensation of agents. It sets forth agent duties and rules. Beyond that, the two most significant changes are: 

1. a POA now becomes effective upon execution, unless otherwise stated in the POA; and
2. all new POA's are durable, unless otherwise stated.

Durable POA's continue to be effective, even if the principal making the POA becomes incompetent.

POA's are useful in estate planning, because they allow changes to occur after the principal becomes incompetent. Such changes may have the result of protecting assets and thereafter qualifying the principal for Title 19 benefits. Wisconsin law permits the agent to make such changes, but only if the power to do is is expressly set forth in the POA document. Likewise, any other act by which the principal's estate may be used, including self-dealing by the agent, must be clearly set forth in the POA.

Even when the principal gives the agent the power to make gifts or diminish the principal's estate, the law limits such gifting to the annual federal gift tax exclusion amount per donee, unless specific language expands such limit. In addition, the agent must make such gifts "in the principal's best interest." The factors to determine such "best interest" are:

• Email This
• Print
• Comments
• Trackbacks

Wisconsin foreclosure law generally allows a lender the option to shorten the debtor’s redemption period in return for agreeing not to go after the “debtor” for any “deficiency” after the sale of the real estate (i.e. if a property sells for less than the amount due the lender at the foreclosure auction, the lender has no right to go after debtor personally for the difference if lender elects a shorter redemption period). In Bank Mutual v. S.J. Boyer Constr., 2009 WI App 14, the appellate court concluded that a lender was also prohibited from going after a “guarantor” of the “debtor” if the shorter redemption period is chosen by the lender. This appellate court decision was recently overruled by the Wisconsin Supreme Court in Bank Mutual v. S.J. Boyer Construction, Inc., 2010 WI 74 (July 9, 2010). In summary, the Wisconsin Supreme Court held that by choosing a shorter redemption period the lender is precluded from seeking a deficiency judgment against the “debtor,” but the lender may still seek a deficiency judgment against the “guarantor” for any deficiency resulting from the sale at auction. Given that many, if not most, of relatively smaller commercial real estate projects are developed in single purpose limited liability entities where lenders require personal guarantees from owners of the entities (and others), this decision appears to be quite beneficial for lenders in that it allows them to, among other things, speed up the sales process without giving up the ability to go after the guarantors for any difference between the sale price and the balance of the amount due the lender

• Email This
• Print
• Comments
• Trackbacks

On December 17, 2010, President Obama signed into law the Tax Relief Act of 2010, PL 111-312 (known by its full name of "Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010"). This law extended most of the Bush Era tax cuts for another two years. In addition, some provisions were added that are a benefit to most Americans.

• Email This
• Print
• Comments
• Trackbacks

It is common that at a foreclosure sale the mortgagee Bank will submit the winning bid at the amount owed on the mortgage of the property at issue.  But what if the amount owed is significantly less than the “market value” of the house?  Can the court under Wisconsin law refuse to confirm the sale as unconscionable?  The answer in Wisconsin appears to be  - the court can only refuse to confirm the sale  if there is a demand by the Bank for a deficiency judgment and either the price is inadequate due to a mistake, misapprehension or inadvertence or the price is so inadequate that it shocks the conscience of the court.  In other words, if the Bank doesn’t seek a deficiency judgment, then mere inadequacy of price is not a sufficient reason for a court to fail to confirm a sale.  Such propositions were set forth in a recent unpublished Wisconsin Court of Appeals decision, Countrywide Home Loans, Inc. v. Daniel J. Russ, et al, Appeal No. 2009AP2873. 

• Email This
• Print
• Comments
• Trackbacks

In the recent Wisconsin case of Griswold v Rogich, decided by the Wisconsin Court of Appeals, it was held that a buyer could reasonbly rely upon a Seller's representation in a Property Condition Report, even after an inspector pointed out that certain problems may exist and that further experts should be called in.

• Email This
• Print
• Comments
• Trackbacks

Back on March 30th I wrote that homebuyers needed to act fast to meet the then fast approaching expiring deadline for closing on the purchase of a residence.  Since then, Congress has acted once again by extending the closing deadline from June 30 to September 30, 2010, for eligible homebuyers.  Again, for qualifying purchases in 2010, you have the option of claiming the credit on either your 2009 or 2010 return.

Deadlines

• You must have purchased, or entered into a binding contract to buy, a principal residence on or before April 30, 2010.
• If you entered into a binding contract by April 30, 2010, you must close (go to settlement) on the home on or before September 30, 2010.

Please consult your tax advisor as to the other details, requirements and qualifications that must be met to claim the credit. 

• Email This
• Print
• Comments
• Trackbacks

The following was posted by Thomas Kertschner of the Journal Sentinel on July 5, 2010:

Oak Creek - The Common Council, which was hit by a storm of denunciation after it considered using eminent domain to acquire a 94-year-old farmer's property, will be asked Tuesday to pay the man's $9,081 legal bill.

The request comes from Michael Schober, the attorney who represents Earl Giefer.

Giefer's family has said it has no interest in selling the farm at 10523 S. Howell Ave., which has been in family since the 1800s.

City officials had argued that the 25-acre property would impede plans for a business park nearby and believe the farm qualifies as blighted.

The council decided June 1 to stop discussions of the possible use of eminent domain.

• Email This
• Print
• Comments
• Trackbacks

The Wisconsin Legislature recently adopted a law which prohibits municipalities from considering the proposed use of property in reviewing requests for land divisions within their extraterritorial authority.  The result is that where a business intends to acquire property outside of a city or village but within 3 miles of its limits, the city or village cannot refuse to accept a certified survey map or other land division because the intent is to use the property for commercial or industrial purposes.

Many municipalities have not gone through the procedures required to zone property outside of their boundaries, but have extraterritorial platting authority, giving them approval authority regarding land divisions within 3 miles of their incorporated boundaries.  Recent court decisions have indicated that the proposed use of the property being divided may be taken into consideration in deciding whether the land division should be approved.  The new law is apparently in response to those court decisions.

• Email This
• Print
• Comments
• Trackbacks

My good friend, Ed DeFrance, at Baird, just sent me an article Baird puts out about the new health care law and a new tax which will affect high income filers. It seems that if you have household income over $250,000, starting in 2013, a new Medicare Tax of 3.8% will apply to interest, dividends, capital gains, rents and royalty income. This is in addition to

• Email This
• Print
• Comments
• Trackbacks

Buying residential real estate in Wisconsin almost always entails using an "Offer to Purchase," also known as form WB-11. In a recent article written for the March issue of the Wisconsin Lawyer magazine, entitled "Using the New, Flawed Residential Offer Form," Richard J. Staff criticized the current draft of the form which requires mandatory use by real estate licensees in Wisconsin after March 1, 2010.

Staff points out problems with the new form that relate to:

• closing prorations
• financing contingencies
• the "gap" endorsement
• conveyance of title

• Email This
• Print
• Comments
• Trackbacks

A recent Court of Appeals case, Town of Cross Plains v. Kitt's Korner, Inc. 2008AP546 illustrates the risk involved in opening a new business on the assumption that a possible change in zoning will not effect its operation if the business is already up and running.

In that case, an adult entertainment business was opened on a parcel which, at the time it commenced operation, was zoned in such a fashion that such a business was not a prohibited use.  The owner of the business naturally incurred costs in the start up of the business.  The owner was aware of the fact that an ordinance amending the zoning to prohibit such a business on the land in question was coming up for vote, but apparently believed that his expenditure, and the actual operation of the business for a period of time prior to any adoption of the proposed ordinance, would create a situation in which his business would be "grandfathered in" even if the amendment to the zoning ordinance was adopted.

Although the law does recognize that, in certain fairly rare circumstances, expenditure of funds based on a reasonable reliance that zoning will not be changed can create vested rights which will not be impacted by zoning changes, the Court of Appeals held in this case that there could be no reasonable reliance because the owner was aware of the pending vote on the ordinance amendment, but chose open the business regardless.  Expenditures made were made despite the fact that the owner new that zoning prohibiting the business was contemplated and could be adopted.

When opening a business, it would be prudent not only to review current zoning, but also to inquire whether any modifications in zoning are being considered.

• Email This
• Print
• Comments
• Trackbacks

The Wisconsin Supreme Court in the case of Walgreens v. City of Madison ruled that in assessing the value of leased commercial property, an assessor must take into account the actual rent and terms of a lease applicable to the property in determining its value under the income approach.  The lease is question in that case imposed rents significantly below market rates, and the City of Madison had argued that market rates were to be used in assessing the property.  The Budget Bill as adopted by the legislature would have in effect "reversed" the Wisconsin Supreme Court's decision, making market rental rates applicable.

Governor Doyle has used his veto power to veto this portion of the Budget Bill.  Therefore, the court's decision will stand.  This will allow lessors and lessees of property to structure creative lease arrangements without fear that the lease terms will be disregarded in determining the  property's assessed value and, therefore, the property tax to be imposed.

• Email This
• Print
• Comments
• Trackbacks

One of several provisions of Wisconsin's 2009 Budget Bill unfavorable to business has been amended in the Senate's version of that Bill.

The Bill had provided that owners of property zoned for commercial, industrial or residential purposes would no longer qualify as agricultural property, and therefore no longer be entitled to favorable "use value" assessment for property tax purposes.  Owners of such property which remained undeveloped would lease it to farmers for production of crops until it could be sold for commercial or industrial purposes.  While in use for agricultural purposes, Wisconsin law allowed the owners of such property to take advantage of favorable tax treatment based on its agricultural use.  The Assembly version of the Bill had provided that such land would not be deemed "agricultural property" even if used for agricultural purposes.

The Senate amendment would allow owners of such land to continue to qualify for favorable property tax treatment while waiting to sell or develop their property.

• Email This
• Print
• Comments
• Trackbacks

The 2009 Wisconsin Budget Bill contains proposed changes in condemnation law which may substantially impact on the ability of business property owners to successfully challenge condemnation or contest the amount of compensation awarded.

The Wisconsin Department of Transportation is sponsoring the proposed modifications.  Currently, an owner of land subject to condemnation may recover attorneys fees incurred in litigation with a condemnor.  The DOT's proposal would limit the amount of an owner's attorneys fees paid by the condemnor to 1/3 of any increase in the amount proposed as an award by the condemnor prior to an attorney's involvement.  For example, if an owner is offered $50,000 for property, and through litigation the award is increased by settlement or judgment to $200,000, resulting in an increase of $150,000, the amount of attorneys fees for which the condemnor is liable will be $50,000.

The DOT claims that this change in the law will not result in any decrease in the amount an owner receives for the property being taken.  However, the likely result will be that property owners will be less likely to contest condemnation and condemnation awards, and more willing to accept the amount they are initially offered.

The fact that the law currently allows the owners of business property to recover all their attorneys fees provides owners with a great deal of leverage in negotiating successful compensation awards when their property is taken by the state.  If the law is changed as proposed, the governmental entity seeking compensation will be placed in a much better position, and property owners will be much more inclined to accept the governments offer rather than contest the matter through litigation.

• Email This
• Print
• Comments
• Trackbacks