Easements

Photo by Gamweb

Photo by Gamweb

Easements are one of those seldom thought-of items that when they do rear their ugly head can be a source of frustration and even litigation.  The right of a third party—a person or entity—to access and/or use land that you own for a specific purpose, easements come in many varieties of scale and impact. Some are minor, such as a neighbor needing part of your driveway in order to gain entry to his yard; others, falling under the term “easement appurtenant,” could be as potentially disruptive as a beach access road or path open to the public crossing over your property.

Among the most common property easements are those held by utilities and the Department of Transportation. Such easements allow power companies to install and maintain towers and power lines and entitle the DOT to expand a road and replace water pipes as the need arises. Property owners can still utilize this portion of the land as long as their use does not impede the easement holder’s ability to use its easement. Erecting a non-permanent fixture such as a fence is permissible, while putting in a garage or other type of permanent structure will be considered to unduly interfere with the rights of the easement holder.

Regardless of the type of easement, property values could suffer because of the potential for unsightliness and inconvenience. In addition, easements don’t typically come with expiration dates, so even as a new owner of a property you’re still inheriting the previous owner’s responsibility to observe the easement holder’s rights and privileges. It’s also important to note that no matter the percentage of land under an easement, property owners are still obligated to pay taxes on the entire parcel.

Given the potential headache an easement can become, it’s crucial that you’re fully aware of any restrictions and requirements tied to a property before proceeding with a sale. Thankfully, there are several options available to you in order to determine the number and type of existing easements.

If you are purchasing a home, typically you would obtain title insurance along with that purchase. As part of the title insurance process, a title company conducts a search to ensure that the title is legitimate and will also generate a report that details any and all issues associated with the property, including easements, outstanding mortgages, liens, judgments or unpaid taxes.

If there is a suspected issue concerning easements on your property you can hire a title insurance company, or private title searcher, to perform a search for easements on the property in question. Depending on the complexity of the search, they may charge a fee for their services, but a good title company will provide you with a comprehensive report.

The deed to the property is another source of information and will have the easements listed and defined as part of its legal description. If a copy of the deed isn’t readily accessible you can obtain one from the county clerk or recorder. Be sure to have the address, parcel number, and current property owner’s name when making the request.

Similarly, the county or city zoning/mapping department is often in charge of keeping records of surveys and plot maps. These documents will contain information on a specific property’s easements, including the exact measurements of the portion of the property considered the easement.

Lastly, you can also contact the utility company or public works department with equipment on the property and request easement information as well as the particular rights of the easement holder.

No matter how you do your research it’s well worth the time and effort to be informed of any easements or other issues related to the property you want to purchase, before a sale is finalized.

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Preparing Your Home For Sale – A Seller’s Dilemma

Custom KitchenIf you’re a homeowner interested in selling your house, most likely you’re already taking several factors into consideration, such as where you’re going to move, whether you want to downsize or upgrade, and if you want to hire a real estate agent to assist in the marketing of your current home. But the main question probably weighing most heavily on your mind is “How much is my current home worth?”

As a seller of course you want to do everything you can to maximize the amount of money your existing home can bring in, and how you achieve this depends on the type of situation and market you’re entering into. Obviously if you’re interested in selling to a developer who is only going to tear the house down you’re going to sell your home as is. And if you’re lucky enough to be in a seller’s market, most likely only minimal or cosmetic repairs (e.g., replacing worn carpets, fixing leaky faucets, painting touch-ups) are necessary to still bring in a buyer willing to pay your asking price.

Conversely, if you find yourself in a buyer’s market where fierce competition requires repairs to set your property apart from a crowded field, or you’re looking for ways to increase your asking price, you may want to consider investing in a remodel or redesign, including adding square footage to your existing home. Your immediate reaction, not surprisingly, may be that the normal preparations required to put your home up for sale are stressful enough without adding the headaches and costs involved with a remodel or addition. The potential financial upside, however, is something that deserves your attention.

If your home is worth $1 million but could be sold for $1.6 million after investing $200,000 in an upgrade, wouldn’t you do it? This is not a hypothetical scenario. As of this writing unimproved homes in the Los Angeles area that commonly sell for $1.5 million are going for as high as $3 million after being upgraded. The real estate industry thrives on the “added-value” philosophy. It’s why most realtors “stage” a house before selling it. Renovating your home offers an even greater opportunity to reap a higher price. This is, after all, how flippers make their living.

The possibility of making a substantial profit, however, doesn’t diminish the fact that undertaking a remodel project is a major decision and an intimidating one. The challenge is determining how much of an investment you need to make in order to benefit financially, and at the beginning of the process it can be difficult to know where to focus your time and energy. Apart from appraising the state of the current housing market, a good start is to tour homes similar to yours up for sale, preferably in the same neighborhood or surrounding area. Pay attention to the features and amenities those sellers are touting and where they have concentrated their remodeling dollars. If enough homes are showing a consistent trend in certain rooms or exteriors, you may want to consider following suit.

This is an exhausting, time-consuming process, and a great way to limit the burden you have to shoulder is to hire a broker with construction experience. Stern Mosey’s co-owner, Harvey Stern, is also a licensed real estate broker with over twenty years of experience. If you’re selling your home and looking for an honest and thorough appraisal of what it may need to generate a larger profit, contact Harvey here or email him at harvey@sternmosey.com.

We all know preparing a home for sale is a stressful process whatever the situation and circumstance. Whether you decide to leave your house in its current state or embark on a remodel and/or addition it is imperative that you do your due diligence beforehand to make an informed decision, one that will ensure a sizable return on the effort you put forward.

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HOMEOWNERS & CONTRACTORS: READ THIS FIRST!

Photo by Rishichhibber

Photo by Rishichhibber

Under California Business and Professions Code Section 7159 (b) a home improvement project costing over $500 cannot legally go forward without a written contract in place. It behooves all parties involved for their mutual protection to create as thorough a document as possible, spelling out in specific terms the obligations and rights of the contractor, the homeowner, and even the architect or designers.

A good rule of thumb in drafting a contract is to detail everything agreed to between homeowner and contractor. This includes but is not limited to the following: what work is to be performed; the project start date and completion date; total cost of the project; payment schedule; who is responsible for obtaining the necessary building permits; what materials are to be used and who will pay for them. In the case of materials the contract should indicate the quality, quantity, weight, color, size, and brand name of each. (See Business and Professions Code Section 7159 for a complete list of contract requirements.)

The contract should also be very clear about the financial terms agreed to; beyond total cost and payment schedule, it should identify the amount of any down payment required (according to Business and Professions Code Section 7159 (d) (8) not to exceed 10% of the total budget or $1,000, whichever is less*), as well as any cancellation penalty. Regarding cancellations, the contract must state that any party may terminate the contract without penalty within three (3) days of signing provided that the terminating party put the cancellation in writing and mail it prior to midnight of the third day (Business and Professions Code Section 7159 (e) (6)).

Even after a contract has been written to the satisfaction of all parties, reviewed by an experienced attorney if necessary, and is signed, the contract may need to be amended after the project begins. A change in the design plans, the materials used, a foreseeable delay in the project completion date, whatever the cause of an alteration to the original terms of the contract, these amendments must be put in writing as “change orders.” (Click here to read our post on change orders and the importance of including a “changes” clause in your contract.) A proper change order lays out the specific modification to a contract term and how said modification affects the project budget. (See Business and Professions Code Section 7159.6.) Once a change order is signed by all parties it becomes a legally enforceable part of the contract.

The more time spent thinking about what a particular home improvement project will demand, and clarifying each aspect in writing using unambiguous language, the less opportunity there is for misunderstanding and confusion which can lead to long delays, bad reputations, and potential legal problems.

*See the Contractors State License Board website for exceptions to this rule. 

 

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DANGERS IN REMODELING CHANGE ORDERS

It is imperative that construction contracts provide a clear and concise directive in dealing with the fluid course every project takes. Doing so will greatly aid in avoiding the confusion and mistakes that often lead to costly and laborious legal action between disgruntled parties.

While there is no such thing as a perfect construction contract, this guide will address the importance of keeping control of costs by making a provision for change orders.

Much like a construction contract, there is no perfect set of construction plans. Even the most meticulous scope of work is subject to change due to any number of unforeseen circumstances before or during the construction process.

Should the client decide to make alterations to the design specifications, desired materials are unavailable or found to exceed the costs outlined in the budget, or conditions at the worksite require amendments to the original plan and/or changes in personnel, a provision for such changes should be made in the construction contract.

While it is impossible to predict every such event, a competently written construction contract includes a “changes” clause that accounts for the likelihood of a request to add to or delete from the original scope of work.

The language of these clauses does vary depending on the contract, but most contain provisions allowing the client unilateral powers to modify the plan and specifications, and compelling the contractor to perform said modifications.

Other common provisions include a means for both parties to agree on how the revisions will affect budget and schedule, and a means for both parties to agree on how to handle any disputes that may arise concerning same.

The changes clause also addresses the prudent legal protocol to follow when parties wish to move forward with adjustments to the original scope of work.

For the protection of all involved and as required by the Contractors State License Board for residential projects, the clause should mandate that any modifications to the contract be done in writing, in the form of a change order, and specify the change in work. It should show any and all adjustments to the budget and schedule as finalized in the present contract.

Typically a change order is prepared by the architect or the contractor based on his/her discussion with the client. The change order must be signed by all relevant parties to ensure proper payment for the work performed.

On a more practical basis, if you wish to preserve your working relationship with your Contractor, having a written change order will prevent differences in memory and the resulting disagreements that go along with it.

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