Dower and curtesy were abolished by the New Jersey Legislature as of May 28, 1980. (N.J.S.A. 3B:28-2). In New Jersey, the statutory rights of dower and curtesy gave the non-owning spouse a right to a life estate in one-half of the real property owned by the other spouse at the time of that spouse’s death. N.J.S.A. 3B:28-1. Dower and curtesy interests were created upon the acquisition of the property by a spouse in that spouse’s name only - or upon the date of the marriage between the two spouses, whichever date was later - until May 28, 1980. Property acquired on or after May 28, 1980 is not subject to dower or curtesy, nor is property acquired before that date by an unmarried person who later married on or after May 28, 1980.

In the situations where dower and curtesy interests still exist, the non-owning spouse must sign the deed conveying the property for the owning spouse to be able to convey clear title to a purchaser. For that reason a purchaser will want the non-owning spouse the sign the contract of sale along with the owning spouse. It is immaterial whether the real estate which is subject to a dower or curtesy interest is the marital residence or not.

In part to eliminate the ability of a decedent to disinherit his/her surviving spouse, the Legislature reformed our probate laws and created a right for the surviving spouse to seek an elective share of the decedent’s estate under certain circumstances (which this article does not address). N.J.S.A. 3B:8-1 et seq. As part of the probate reform legislation effective May 28, 1980, dower and curtesy were abolished, but a right of “joint possession” in the principal marital residence was created. N.J.S.A. 3B:28-3. This right provides that every married person shall be entitled to joint possession with his or her spouse during the marriage of real property occupied by them jointly as their principal residence if acquired by only one spouse on or after May 28, 1980. The effect is that title to property acquired on or after May 28, 1980 and occupied by spouses as a principal marital residence cannot be transferred without the consent of both spouses. All other real property owned by either spouse which is not the principal marital residence may be transferred without the consent of both spouses.

While there still remain instances where dower and curtesy may still exist, the protection provided to spouses since May 28, 1980 is now by means of the “right of joint possession.”

A short sale is when the proceeds from the sale of a home are not sufficient to fully pay off all outstanding debts which are secured by the property (mortgages) after first deducting the homeowner’s costs of selling the property.  In such instances, the selling homeowner can either bring funds to closing to make up the difference, or obtain approval from his mortgage holders to accept a reduced amount to satisfy his outstanding loans. 

Unless a homeowner is able to pay off all of the mortgages which are secured by his property, the homeowner will not be able to convey good title to a buyer.  If the homeowner is unable to obtain a sales price which enables him to pay off all loans and closing costs, and he does not have the funds to make up the difference, then he may want to try to obtain approval from his current lender(s) to accept an amount less than the full amount due on its mortgage.  For a lender, this may be acceptable to obtain repayment of a substantial amount of its loan and to avoid the costs and delay of foreclosing on the loan.  This will generally mean that the Seller will not receive any funds from the sale of his home.

In order to obtain such approval from a lender - which may or may not be granted - the homeowner needs to contact his lender(s) to determine what information they will need to make their decision.  This usually includes a financial statement of the homeowner, copy of a contract of sale, appraisal, and other pertinent documents.  Generally, a lender will not consider approving a short sale without a clear economic hardship on the part of the homeowner and an existing default or pending foreclosure.

Until recently, forgiveness of a debt under these circumstances, could trigger a taxable event according to the IRS.  This means that if a lender forgave a part of the mortgage debt by accepting a reduced amount in full satisfaction of the loan, then the amount forgiven could be deemed taxable income to the homeowner.  This was so even though the homeowner received nothing from the sale.  However, in December 2007 Congress passed the Mortgage Forgiveness Debt Relief Act of 2007.  This Act amends the Internal Revenue Code to exclude from gross income amounts attributed to a discharge of indebtedness incurred to acquire a homeowner’s principle residence.  The amount of the debt forgiveness can be up to $2.0 million.  Thus, a homeowner is now able to sell his home for less than what is owed on it without incurring an additional tax liability.   This exemption for forgiven debt, however, is only temporary and expires within three years.

   
Senior citizens who are residents of the State and are of the age of 65 or more years and meet certain income requirements are entitled to a deduction of $250.00 (N.J.S.A. 54:4-8.41).

   
Citizens and residents of the State who are less than 65 years of age and are permanently and totally disabled, and meet certain income limitations are also entitled to a reduction of $250.00 in their real estate taxes.  (N.J.S.A. 54:4-8.41).

   
The surviving spouse/civil union partner of a deceased citizen and resident of this State who had been entitled to a deduction as a senior citizen or due to a permanent and total disability shall also receive the real property tax deduction so long as he or she shall remain unmarried (or has not entered into another civil union) and reside in the same dwelling for which the deduction had been granted, upon the same conditions.  This is so even if the spouse/civil union partner is under the age of 65 and not permanently and totally disabled, provided, however, the surviving spouse/civil union partner is 55 years of age or older at the time of death of his/her originally qualifying spouse/civil union partner.  (N.J.S.A. 54:4-841a).

   
Citizens and residents granted a deduction as a senior citizen, or for being permanently and totally disabled, as referred to above, are entitled to receive any homestead rebate or credit if they meet the compliance requirements.

 
In order to obtain the deductions referred to above, a qualifying resident must file a written application requesting the deductions. (N.J.S.A. 54:4-8.42).  Forms for this may be obtained from the local tax assessor.  Once obtained, the person who has been allowed a deduction is required to file an annual statement of his/her income on forms obtainable from their local tax assessor.

   
Citizens and residents of this State who are honorably discharged as war veterans, and their surviving spouses/civil union partners, (provided they have not remarried or entered into another civil union) are also entitled to a $250.00 deduction in their real property taxes. (N.J.S.A. 54:4-8.11).  This deduction does not have any income limitation requirements.  Written application must be submitted on forms provided by the local tax assessor to obtain this deduction.  Once a claim has been filed with and allowed by the tax assessor, the deduction shall continue in force from year to year without the need to file any further claim forms unless so required by the tax assessor.  (N.J.S.A. 54:4-8.16).  In certain cases, New Jersey state law provides for a total exemption from real property taxation for honorably discharged veterans suffering certain disabilities and their qualifying spouses/civil union partners. (N.J.S.A. 54:4-3.30).

The easiest is if the original mortgage was discharged and returned to the homeowner’s possession and the homeowner can locate it.  The original mortgage, marked as paid and discharged, can then be sent to the county clerk’s office for recording.

If the discharged mortgage has not been recorded, and cannot be located, the mortgage can be discharged of record by the filing of an affidavit provided the provisions of N.J.S.A. 46:18-11.5 et seq. apply.  The New Jersey Legislature enacted this law in 1999 to provide a relatively simple and expeditious means of removing mortgages from the record when a lender has failed to have a mortgage discharged, or canceled of record, in a timely manner.

Pursuant to this law, an attorney-at-law or licensed title insurance producer who has caused a “residential mortgage” to be paid can obtain its discharge by filing a detailed affidavit which sets forth the steps taken to obtain a discharge of the mortgage from the lender.  Specifically, the person signing the affidavit (the “affiant”) must attest to the following:
    1. Payment was made to the lender in accordance with a current, written pay-off letter, as defined by ... the Act;
    2.  the affiant knows that the lender received the payment;
    3.  a notice was sent to the lender by registered or certified mail at least 30 days after payment was received, advising it of the affiant’s intention to cause the mortgage to be discharged by affidavit;
    4.  a second notice was sent to the lender at least 30 days after the first notice was received; and
    5.  at least 15 days have elapsed since the lender received the second notice.

The affidavit with the above information is then attached to a discharge prepared by the affiant, and recorded.

If the facts surrounding the payoff of an old mortgage do not fit the requirements of N.J.S.A. 46:18-11.5 et seq., then a court action under N.J.S.A. 2A:51-1 et. seq. can also be commenced.  This type of action requires the filing of a complaint in Superior Court and thus is a more time consuming and costly endeavor.
 
Some mortgages are old enough that they are no longer enforceable.  Mortgages which have a maturity date at least 20 years last past, are no longer enforceable.  The New Jersey court ruled in Security National Partners v. Mahler, 336 N.J. Super. 101 (App. Div. 2000) that the statute of limitations for enforcement of a mortgage is 20 years.  Thus, a lender’s right to enforce a mortgage expires 20 years after the last payment is due.

First enacted in 1968, and comprised of a modest fee, the Realty Transfer Fee law has been amended several times, most recently in 2004.  Each time, not surprisingly, the Realty Transfer Fee has been increased on higher priced real estate.

The Realty Transfer fees are calculated on a sliding scale, with the rate per $500.00 of sales price increasing as the sales price increases.  The table below summarizes the standard rates:

    Sales Price                        Realty Transfer Fee
    $500.00 to $350,000.00                $2.00 to $2,105.00
    $350,000.00 to $1.0 million                $2,105.00 to $9,575.00
    $1.0 million to $2.0 million                $9,575.00 to $21,675.00
                and $6.05 per $500.00 in excess of $2.0 million

A reduced Realty Transfer Fee is available to senior citizens, blind persons, and disabled persons on the sale of one-or two-family residences which they own and occupy, and on the sale of low and moderate income housing.

Those reduced fees are:

    Sales Price                        Realty Transfer Fee
    $500.00 to $350,000.00                $.50 to $650.00
    $350,000.00 to $1.0 million                $650.00 to $4,675.00
    $1.0 million to $2.0 million                $4,675.00 to $11,475.00
                and $3.40 per $500.00 in excess of $2.0 million

Certain deed transfers are exempt  from the Realty Transfer Fee under N.J.S.A. 46:15-10.  The most common of these are:

    •    Deed for consideration of less than $100.00;

    •    Deed between husband and wife, or parent and child;

    •    Deed by an executor or administrator of a decedent to a devisee or heir to effect distribution of the decedent’s estate in accordance with the decedent’s will or the intestacy laws;

    •    Deed recorded within 90 days following the entry of a divorce decree which dissolves the marriage between the grantor and grantee;

    •    Deed conveying a cemetery lot or plot;

    •    Deed in specific performance of a final judgment;

    •    Confirmatory or corrective deed; and

    •    Deed of a receiver, trustee in bankruptcy or liquidation, or assignee for the benefit of creditors.       

In 2004, legislation was also passed requiring non-resident Sellers to file an estimated Gross Income Tax on the transfer of real property as a condition to recording the transfer.  The estimated Income Tax payment is determined by multiplying the Seller’s gain, as computed for tax purposes, times the highest Gross Income tax rate of 8.97%.  However, in no case may the estimated payment be less than 2% of the sales price paid.

Finally, there is a Realty Transfer Fee due from the Buyer for purchases of residential property in excess of $1.0 million.  This is commonly referred to as the “Mansion Tax” and is 1% of the purchase price.  Thus, if the “Mansion Tax” applies, the minimum transfer tax paid by the Buyer is $10,000.00.

Now, however, it is not unusual for a home buyer to use the internet or a mortgage broker to find a lender for them with whom they have had no prior contact.  And thus begins a confusing journey for a homeowner who may someday be in financial distress and need to find the ultimate holder of their mortgage. 

In recent years a process called “securitization” has made mortgages much more easily available to home buyers.  At the same time, this process has made it much more difficult for a borrower to locate the ultimate holder of their mortgage with authority to modify the terms of their loan. 

The process begins when a borrower  goes to a mortgage broker or lender who originates their loan.  The loan is then assigned to a servicing company which collects the homeowner’s mortgage payments which are available for distribution to investors.  A Wall Street investment bank then gathers thousands of these loans and packages them together to create  mortgage-backed securities which generate an income stream from the loan payments to be distributed to investors.  The securities are in the form of investment trusts.  Once these loans are gathered and placed in a trust, the trust issues bonds which are sold to investors.   A trustee bank oversees the trust, including the servicers of the loans, on behalf of investors.  At each stage - the gathering of loans into a trust, the servicing of loans, there are agreements setting forth the responsibilities of the overseeing party.  This agreement binds the servicer of the mortgage and controls what a servicer can do to assist borrowers who are behind in their loan payments.  Because the borrower makes their mortgage payments to the servicer, the servicer is their primary contact in this process.

It is the limitations which are frequently imposed on a servicer to modify existing loans in a trust which have been creating difficulties for buyers in distress who are attempting to resolve their problems with their lender prior to a foreclosure action being instituted.  Such borrowers are finding it increasingly difficult to find a party who has the authority to make substantive modifications to their mortgages to alleviate or “work out” a borrower’s immediate financial problems. 

The extent to which mortgages are now securitized (60% of the home mortgages made in the U.S. in 2006 went into securitized trusts) has added to the difficulties the mortgage industry is currently facing.  Often, there is no easy way to find a responsible party who can help a borrower find a solution when a borrower is facing financial distress, leaving the commencement of a foreclosure action more likely.

The reason municipal real estate taxes are adjusted at closing, i.e., apportioned between the buyer and the seller as of the day of closing, and paid at closing is because the taxes become a lien on the property on and after the first day of January of the year for which they are assessed.  N.J.S.A. 54:5-6.

Unless the sales contract provides otherwise, municipal taxes are adjusted based on the current year’s assessment.  If taxes for the current year have not yet been determined at the time of closing then the amount of the taxes for the last assessed year will be used as the basis for computing the apportionment between the buyer and seller.  N.J.S.A. 54:4-56.

While municipalities should have their budgets and tax rates in place by July 1st, sometimes they do not.  This means that taxes are frequently adjusted based on the prior year’s taxes, even after July 1st.  The 1st and 2d quarter tax bills are actually estimates for the current tax year.  Once the municipality’s budget and tax rate are adopted, the full annual taxes are assessed and the 3d and 4th quarter final bills are sent out.  The 3d and 4th tax quarter bills, when added to the 1st and 2d quarter estimated bills, total the full year’s taxes.  Usually, the municipality sends out the estimated tax bills for the 1st and 2d quarters along with the 3d and 4th quarter final bills.

When improvements or newly constructed homes are built after the date for the regular tax assessment by the municipality, an added assessment is made and  billed in October of the year in which the improvement is completed provided it is completed before July 1st.  The added assessment usually commences the first full month following the issuance of a Certificate of Occupancy or Approval which is proof of the completion of the improvement.  If the improvement is completed after July 1st, then the bill for the added assessment taxes for the improvement is usually sent out to the homeowner  in October of the following calendar year.

Frequently, homeowners pay their real estate taxes by means of a monthly escrow payment to their mortgage company, which in turn makes the quarterly tax payments for them.  As a result, many homeowners may be unaware of the method by which the municipality bills their real estate taxes.

    Through two New Jersey Supreme Court cases, our Supreme Court recognized that encroaching branches may constitute an actionable nuisance and that a common law right exists to cut off overhanging branches to the property line, but no further. 

    In Ackerman v. Ellis, 81 N.J.L. 1, 79 A. 883 (Sup. Ct. 1911) the New Jersey Supreme Court held that tree branches which overhang the premises of another may constitute a nuisance. In such instances, the person over whose land they spread is entitled to an action for damages against the person responsible for their presence there.

    In Wegener v. Sugerman, 104 N.J.L. 26, 138 A. 699 (Sup. Ct. 1927) the New Jersey Supreme Court held that a landowner may lawfully cut overhanging branches of trees or hedges, but may not destroy the tree or hedge on the neighbor’s land.  This form of self-help was found to be acceptable to the Court.

    The New Jersey Appellate Division addressed damage caused by tree roots to a neighboring property owner’s wall in D’Andrea v. Guglietta, 208 N.J. Super. 31, 504 A.2d. 1196 (App. Div. 1986).  That case held that damages were properly awardable in the absence of proof that the wall owners were aware of tree roots in the vicinity of their wall before it was damaged.  The encroachment, this time by tree roots, was recognized as a nuisance.  However, this Court distinguished between tree branches and tree roots, which are largely underground, evident only upon digging down, their extent and girth uncertain and unpredictable, they are not commonly pruned or otherwise tended and their severance may endanger the tree’s stability in high winds and rainstorms.  208 N.J. Super. at 34.  The Court found that the “relatively uncomplicated law governing invasion of adjoining property by tree branches may not be fairly applicable under all circumstances to tree roots”.  208 N.J. Super. at 35.  The Court held that injury to an adjoining property caused by the roots of a planted tree was actionable as a nuisance and damages were recoverable, in the absence of any pleading or proof that the damages were avoidable or that complaining party had “come to the nuisance.”  208 N.J. Super. at 36.  In D’Andrea, when the adjoining property owners installed their wall, they saw no evidence of the neighbor’s trees roots in the vicinity of their wall, nor was there proof before the Court that they could have foreseen the direction and extent of the tree roots’ growth.  It should be noted however, that the D’Andrea case did not involve self-help, but only a claim for damages.

    Existing Mortgages.  All recorded  mortgages will act as a lien against the property.  This includes any home-equity loan and lines of credit which are secured by a mortgage in addition to primary mortgages.  Payoff statements can be obtained from the lender prior to closing so that the mortgage lien can be paid off from the closing proceeds.  It is important that home-equity and line of credit accounts be terminated prior to or at closing and representations be made by the borrower that no additional withdrawals have been made beyond the amount indicated in the payoff statement.

    Existing Judgments. State and Federal judgments entered in New Jersey state courts or Federal District Courts of New Jersey will act as liens against the property.  This is because all real estate is liable to be levied upon and sold by executions to be issued on judgments obtained in any court of record of New Jersey for the payment of money when the judgment is properly docketed.  Judgments can be discharged by Court order, filing a warrant of satisfaction with the appropriate county clerk which is signed by the judgment holder or his attorney of record which authorizes the county clerk to satisfy the judgment of record, or by the acknowledgment of satisfaction on the record by the county clerk after the sheriff or other officer returns an execution of judgment issued as satisfied.

    Real Estate Taxes and Assessments.  Municipal real estate taxes, as well as municipal improvement assessments, water charges and sewer charges all act as liens against the property and must be paid off at closing.  In addition to a search for municipal liens, a buyer should also perform a search for prospective assessments.  This is because municipal improvements are not liens against the property until the property is actually assessed.  However, this may be long after the improvement has been completed and the assessment passed.

    State and Federal Tax Liens. Liens can be imposed against a property for various death taxes, i.e., New Jersey Transfer Inheritance Taxes, New Jersey Estate Taxes and Federal Estate Taxes incurred as a result of a homeowners death.  These liens can be discharged upon the payment of the taxes, if any, and the issuance of a tax waiver or discharge of lien from the appropriate taxing authority.

Whether you are a seller concerned about what debts have to be paid at closing or a buyer who is seeking title to a property “free and clear of any liens” it is important to know to what extent such liens affect the marketability of title to your property.

Real estate held by a decedent’s estate is subject to liens for the payment of any New Jersey Transfer Inheritance Tax, New Jersey Estate Tax, Federal Estate Tax and debts of the decedent.  

The N.J. Transfer Inheritance Tax is a state tax imposed on the transfer of property  made upon the death of a New Jersey resident and certain non-residents, or made by such a decedent in contemplation of death. N.J.S.A. 54:34-1 et seq.  The Inheritance Tax lien lasts for a period of fifteen years following the date of death. N.J.S.A. 54:35-5.  This lien is discharged when the tax is paid or a bond given to the State.  The N.J. Division of Taxation issues a tax waiver which is then recorded in the county clerk’s office of the county in which the property is situated.  Tax waivers can be obtained before a return has been audited by the State upon submission of the estate’s Inheritance Tax return and payment of an amount deemed sufficient by the Inheritance Tax Bureau of the N.J. Division of Taxation.

New Jersey also imposes an Estate Tax on estates of  resident decedents dying after December 31, 2001  if the gross value of the estate exceeds $675,000 .  N.J.S.A. 54:38-1 et seq.  A New Jersey estate may be subject to the N.J. Estate Tax even if it is not subject to the Federal Estate Tax.  The N.J. Estate Tax also becomes a lien against property.  The N.J. Estate tax lien exists as a lien against the property as of the date of decedent’s death until paid.  N.J.S.A. 54:38-6.  This lien can be discharged in the same manner as the N. J. Transfer Inheritance Tax lien by the issuance of a tax waiver from the N. J. Division of Taxation.

The Federal Estate Tax may be imposed on estates in the amount of $2.0 million for decedents dying in 2007 ($3.5 million commencing 2008). The Federal Estate Tax becomes a lien on the property in the estate for ten years from the date of death. I.R.C. §6324 (a)(1).  To discharge the lien, a Certificate of Release of Estate Tax Lien can be obtained from the IRS and recorded with the County Clerk in the county in which the property is located.

If a tax waiver or release of lien cannot be obtained prior to closing, the buyer’s title company will frequently agree to escrow funds to cover any possible liability and to insure that the selling estate will obtain and record the waiver or release.

Finally, real estate of a decedent is liable for the debts of the decedent for one year after date of death.  N.J.S.A.  3B:22-22.  If the property is being sold within a year of decedent’s death, the buyer’s title company with generally require information concerning the assets and debts of the estate and a bond from the executor before agreeing to insure the property.        

Some agreements which address common issues include:

Use & Occupancy Agreements: Sometimes a Seller seeks to remain in the home after closing and the Buyer agrees to this.  In such event, an agreement commonly called a Use & Occupancy Agreement should be prepared.  It should spell out what daily charges the Seller will be paying for the right to remain, what other charges, such as utilities, telephone, cable, the Seller will be paying, the date Seller will be vacating the premises and what happens if the Seller vacates either earlier or later than that date.  In addition, the Agreement should identify what other obligations the Seller may have such as providing proof of liability insurance, responsibilities for maintaining the property, and what condition the property is to be in when the Seller finally vacates.   The parties should determine if they want to hold funds in escrow in the event of any damage to the property while Seller remains (and when the Seller actually moves out), and/or for other charges, and what happens to the escrow if any damage or charges exceed the amount of the escrow.

Inspection Escrows: Sometimes the parties agree that the Buyer has a right to perform an inspection - let’s say of a pool or air conditioning system after the closing.  This can occur when the closing is in the winter and the weather does not permit a proper inspection.  In such an instance the parties should be very specific about the type of inspection, the time period within which it must occur, the amount to be held in escrow, when to release the funds and what occurs if the cost of any repairs is more than the amount held.

Repair Escrows: Sometimes the Seller agrees to make a repair which cannot be completed by the closing date.  Again, the Agreement should be in writing and the parties should provide a detailed summary of what the Seller is obligated to do and when.  Provisions should be made in the event of a delay in completion of the repair.  And again, if an escrow is held, the Agreement should provide what occurs if the cost of repair exceeds the amount of the escrowed funds.

What’s important to remember is to always put the Agreement in writing and make provisions in the event things don’t go according to plan!

Realtors - A real estate agent who represents a Buyer's interests in buying a new home can be a wonderful resource. The real estate agent can initially assist by recommending the best geographic area for a Buyer to look based on the Buyer's lifestyle, commuting requirements and school needs, among other factors. Real estate agents are an excellent source of information about various communities a Buyer may be considering - from the services a community provides its residents, to their form of government, to the rating the municipality's school system has attained within the State. The real estate agent will also guide a Buyer through the process of making an offer on a home and can provide expert advice regarding the offer a Buyer plans to make. Real estate agents assist throughout the transaction by arranging for engineering inspections, pre-closing inspections and resolving numerous issues which may arise before the closing of title.

Attorneys - Attorneys will review a contract and provide legal advice regarding the contract and modifications to protect the Buyer's interests during the transaction. This usually occurs during the three (3) day attorney review period found in all realtor prepared contracts. The Buyer's attorney negotiates any needed modifications to the contract. The attorney is frequently involved in negotiating a resolution of any issues raised as a result of the Buyer's home inspection. The attorney also utilizes his/her legal expertise when reviewing the title history of the property, any easements or restrictions which may limit a buyer's use of the property and any other liens against the property which would constitute a defect in the title. The attorney then identifies any issues which would adversely affect the Buyer and seeks to resolve them. The attorney will assist with satisfying the conditions of Buyer's mortgage commitment, review the loan documents, complete them and attend to their execution at closing. The attorney summarizes the financial aspects of the transaction on a HUD-1 form, calculating adjustments for real estate taxes, water, homeowners association dues and the like. The attorney also represents the Buyer's interests in resolving any last minute issues which arise at closing. The attorney then takes responsibility for recording the deed, and if applicable, the mortgage, in the County Clerk's Office.

Home Inspectors - Home inspectors are critical in helping the home Buyer determine the condition of the property they are buying. Some inspectors perform most, if not all aspects of a home inspection. This would include structural, mechanical, electrical, roof and basement conditions. However, for certain transactions, specialized inspectors for wood destroying insects, mold, septic systems, well water, underground storage tanks and radon may be needed.

Home buyers should take advantage of the expertise of the various professionals available to assist them in this important transaction.

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Under certain circumstances, a single taxpayer can exclude up to $250,000.00 of gain on both federal and state income tax returns and married taxpayers can exclude up to $500,000.00. For married couples, the $500,000.00 exemption, requires that they file a joint return in the year their residence is sold.

The determination of whether gain on the sale of a residence can be excluded from a homeowner's income for tax purposes depends on whether the property has been owned and used by the taxpayer for a period of two or more years during the five year period prior to the sale. The five year period ends on the date title is transferred. The two year time period, for both ownership and use, does not need to be a consecutive. The time can be aggregated over the five year period.

There is, however, a limitation on how often this exclusion of gain can be used. The exclusion can only be applied to one sale every two years.

For married couples to qualify for the up to $500,000.00 exemption, in addition to filing a joint return, either the husband or wife must meet the ownership requirement and both spouses must meet the use requirement. In addition, neither spouse shall be ineligible for the exclusion because he or she sold a property within the past two years. If the married couple do not share a principal residence, an exclusion of up to $250,000.00 is available on a sale that qualifies as the principal residence of one of the spouses.

If a single homeowner who is eligible for the exclusion marries someone who elected to use the exclusion benefit within the two years prior to the marriage, the now married taxpayer is only allowed a maximum exclusion of $250,000.00.

If a taxpayer has more than one home, only the sale of the principal home qualifies for the exclusion of gain benefit.

There can be an exception to the minimum two year ownership and use requirement when a sale results from a change in the taxpayer's place of employment, health, or certain unforeseen circumstances. In such situations, a taxpayer is provided a reduced exclusion based on the portion of the two year period for which the ownership and use requirement is met.

The Taxpayer Relief Act of 1997 modified Section 121 of the Internal Revenue Code to provide this exclusion of gain benefit. It replaced the prior law which provided rollover and one-time exclusion provisions for the sale of taxpayers' residences and replaced it with a simpler law which no longer requires a taxpayer to continually "trade up" to benefit from substantial tax savings. The exclusion of gain benefits are also available on an exchange of a principal residence.

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Why, you may ask, is there such an attorney review period? Because without it, such a contract of sale would be legally binding on both parties when signed. A party signing such a sales agreement prepared by a real estate agent might not fully realize that they are signing a binding legal document. The contract of sale is of primary importance to the real estate transaction. It is the document which lays out each party's responsibilities from the time it is signed until closing of title. It is important that the parties understand what their obligations and rights are before agreeing to be bound by them.

The right to attorney review, which applies to real estate broker prepared contracts involving residential real estate in New Jersey, was created by the New Jersey Supreme Court. The right to attorney review applies to contracts prepared by licensed real estate brokers and sales people for residential real estate containing one to four dwelling units and for the sale of vacant one-family lots in sales which provide the realtor with a commission or other fee interest. The attorney review provisions also apply to documents prepared by a real estate broker or sales person which materially modify the original contract.

If neither the buyer nor the seller exercises their right to have an attorney review the contract within the three day review period, the contract will be binding on both parties. If the parties do retain the services of an attorney to review the contract, and neither party's attorney disapproves the contract, the contract will be binding as well. The parties can agree to extend the attorney review period if desired. If the contract is disapproved and thus terminated, it will remain terminated until such time as the parties and their attorneys can negotiate changes which will make the contract acceptable. This negotiation process may exceed the initial three (3) day review period.

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Frequently encountered easements include:

Public utility easements - these are probably the most common types of easements; they provide public utilities (e.g., gas, electric, telephone, etc.) or any corporation operating pipeline facilities (e.g., gas, oil pipelines) with the right to run lines or pipes over, across or under your property and generally provide the right to enter upon your property to install, maintain, inspect, operate or repair the utility lines or pipelines.

Municipal easements- these are becoming increasingly common, and include grants for sewer, water, drainage, conservation purposes (protection of woodlands, greenways, wetlands, etc.) which are given to the local municipality or other governmental entity to provide benefits for the public good.

Easements for encroachments - these are less frequent, but may, for example, permit a neighboring structure or fence to encroach, or overlap, onto an adjoining property.

Driveway easements - often encountered when two adjoining properties share a common driveway located on the land of each adjoining property. Each owner grants the other an easement for ingress and egress over their part of the common driveway.

It is important to understand the ways in which use of your property may be restricted due to an easement. For example, if a sewer easement runs through your property, there may be restrictions against placing any structures over it. If repairs are ever required, the holder of the easement will have the right to access the line (usually by digging up your property!). If part of your property is subject to a conservation easement, you may not have the right to cut down trees or build structures in the easement area. And if you do build a structure without first obtaining any necessary approvals, you may have to later tear down the structure.

Easements are usually created by an express grant of the right to others, often in the form of a formal agreement between the parties to the easement, which is set forth in a recorded deed. An express grant of an easement can also be made by reserving an easement in a deed, or providing for it on a filed map or survey.

Easements can also be created by implication or necessity. If, for example, access to a piece of property is only obtainable over certain private roads, an easement may arise to provide access.

Finally, easements can be created by prescription, which is similar to adverse possession simply by extended use over a prolonged period of time. If one can prove exclusive, continuous, uninterrupted, visible and notorious use for a 20-year period, (for example, a farmer's use of a dirt roadway to access a landlocked field) one may acquire an easement.

It is important to know what easements, if any, your property is subject to and to be aware of the effect they may have on your enjoyment of your property.

Technorati Tags: New Jersey : Real Estate

What is mold? Mold is a living fungus which is present everywhere. It especially thrives in dark, damp areas such as basements and heating ducts, but can exist anywhere the conditions are right. Mold can be benign or toxic. While there are more than 100,000 known types of mold, only two types are toxic - stachybotrys (the most common) and memnoniella. Toxic mold is frequently referred to as "black mold" - although not all black colored mold is toxic. Toxic mold can affect people with weak immune systems and infants and can lead to serious health conditions in certain individuals. Once discovered, mold can usually be remediated by providing for the safe removal of the mold contaminated material from the structure and a treatment plan to avoid future problems.

There are a number of ways buyers of homes can protect themselves against buying a home with a serious "mold problem." Buyers can make sure they have the home inspected specifically for mold, by either a general home inspector (if qualified) or a certified inspector who specializes in testing for mold. These inspections are usually performed pursuant to a home inspection contingency or a specific mold inspection contingency contained in the contract for the purchase of the home. Check to be sure that the home inspection contingency in the sales contract provides that the presence of mold will be deemed a defect sufficient to terminate the contract, unless it is remediated by the seller.

In addition, a buyer should insist on complete disclosure by the seller regarding any pre-existing mold problems as well as any water problems such as flooding, damp basements, leaking roofs and leaking pipes. If such issues are disclosed, the buyer may want to follow up with specific mold inspections of the suspect areas.

If an inspection reveals the presence of toxic mold, or mold of a sufficient amount to cause potential health problems for the home buyer, then removal of the offending mold should be negotiated before the sale is consummated. An alternative remedy is for the seller to provide a credit to the buyer at closing for any mold remediation.

Finally, the potential home buyer needs to determine when and if the existence of mold poses a sufficiently serious health hazard to warrant the termination of the contract - and if so, the Buyer must then be willing to walk away from the transaction by validly terminating the contract under the home inspection contingency.

Helping the home buyer through this process are various professionals: the buyer's attorney; the buyer's realtor; and the inspectors. Each one should be informed about the extent to which the buyer has a concern about the potential presence of mold and whether the buyer seeks to order specific testing to determine the possible presence of mold.

Technorati Tags: New Jersey : Real Estate

Here are a few tips:

1. Check on Permits for Home Improvements: If you ever made home improvements to your residence, check to make sure building permits from your municipality were issued, when necessary, for repairs or improvements. If permits were issued, confirm that the work was subsequently inspected and approved. Often, homeowners believe that if they do the work themselves no permit is needed. This is not always the case. Buyers frequently require sellers to show that all necessary permits were obtained for repairs or improvements to the home and that the permits were "closed out". If the homeowner didn't obtain a permit and one was required, or if the work performed was not approved by the municipality, a new inspection by the appropriate municipal building code official may be necessary - and penalties may be imposed. Be aware, however, that sometimes completion of an improvement may cause an increase in the homeowner's real estate tax assessment.

2. Obtain Certificate of Occupancy: Some municipalities, but not all, require a Certificate of Occupancy as a prerequisite to transfer title to a homebuyer. A municipal inspector will inspect the home and then issue a report. If the report indicates building code violations, the selling homeowner must correct them prior to transferring title. In certain situations, the buyer may be permitted to assume responsibility for correcting violations

3. Obtain Certificates for Smoke Detectors, Carbon Monoxide Detectors and Fire Extinguishers: Homeowners are required to have smoke detectors, carbon monoxide detectors and a portable fire extinguisher properly placed within the home prior to sale. Certificates from the municipality for each of these are required at closing. Proper installation of these devices and an early inspection will avoid any surprises right before closing. If a Certificate of Occupancy is required by the municipality in which the home is located, approvals for the smoke detectors, carbon monoxide detectors, and fire extinguisher will be contained in that certificate.

4. Terminate Draws on Homequity Loans/ Lines of Credit: Homeowners frequently forget that their homequity loan or line of credit is usually secured by a mortgage on their home. In order to properly transfer title of the home to a buyer, the homequity loan/line of credit must be terminated and the mortgage cancelled of record at closing. This means the homeowner should not draw on the line of credit immediately prior to closing because this may make it difficult for the lender to determine the outstanding balance .

5. Provide a Clean House for Buyer's Final Walkthrough: Often overlooked, but significant, is the physical condition the seller leaves the premises when the seller vacates. If the seller runs short of time to clean, the seller may want to consider utilizing a cleaning service. Buyers viewing a clean home during their final walkthrough may be less inclined to find fault with the condition of the home and more likely to overlook one, if found. This type of last minute issue can sometimes be the cause of extended negotiations at the closing table.

These are just a few tips to help the homeowner prepare for a smooth closing. Frequently the homeowner's real estate agent and/or attorney will assist the homeowner in addressing these issues.

Technorati Tags: New Jersey : Real Estate