Interstate Rail ?

Recently, I came across an article written in 2001 by J.H.Crawford entitled Interstate Rail: Adapting the Interstate Highway System to Rail Use. Mr. Crawford advocates that the Interstate highway system has the benefit of an already dedicated right of way which is engineered to a standard that would require little retrofitting for conversion to rail use. He envisions the use of the center strips and center most lanes being converted to rail use, or where necessary elevated rail track constructed. Given that the most significant cost of all transit and highway projects is the cost of the land acquisition by eminent domain, Mr. Crawford's idea is worth a second look by our leaders since the rights of way are in place. Sure, some engineering and land acquisition would be required for certain aspects of an Interstate Rail system, but the idea of it is intriguing. As real estate professionals the development and financing of stations, junctions and stops could make for some wonderful urban commercial and residential developments. Can you picture high speed passenger trains running along I-71 from Louisville to Cleveland; and along I-75 from Lexington to Detroit ?.

Breaking Real Estate News In Cincinnati

Thursday evening I had the opportunity to attend the First Annual Cincinnati Blogger's Convention held at the Mercantile Library downtown. Our hosts, the Mercantile Library, made all of the attendees feel welcome. The library was a nice venue for the local blogging community to meet each other and trade "war stories." My estimate is that approximately 50-60 people attended the event.

I had the opportunity to meet and speak with Kevin Lemaster, whose blog is Building Cincinnati. If you have not yet visted Building Cincinnati, I highly suggest you do so, as it is current with project news and real estate developments in and around Cincinnati.

Small Homes ?

Friday, July 19, 2008 the Wall Street Journal published an article entitled The Newest Cottage Industry. The article discusses how less can be more in home development. The focus is on two developers in the Northwest (Washington State), Ross Chapin and Jim Soules, who have designed and built several small home (cottage) communities. Each home is under 2,000 square feet in size, garage and vehicle access is only located in the rear of the homes, the homes are close together and each home faces a community public space (play area, gardens or the like). Do you see where this is going ? The developments are constructed to build a feeling of community.

The designs are smart and well thought out. Wall space we usually leave unfinished is utilized for storage, book shelves, display areas. Much attention is given to details. Obviously, a smaller home will use less energy to heat and air condition and be less expensive to live in and maintain. However, given the attention to detail in the construction the prices per square foot range from $175-$250 per square foot (Northwest US). This means that the upfront savings in downsizing may not be apparent at first. This could be a hard sell in the land abundant Mid West.

As we see inner core communities develop their town centers and incorporate retail, office and service uses and interest in public transportation, these type of developments actually seem appealing and can integrate well into the "New Urbanism" we are seeing take hold.

Sample floor plans can be viewed at http://www.rosschapin.com

The WSJ has a nice video about cottage community living and design here

Title Insurance: A Closing Checklist Must

I continue to be amazed at the reaction I get when I recommend to clients that they purchase title insurance as part of a real estate transaction. Granted I could be considered biased as I am a licensed title insurance agent, clerked in law school by searching titles in Franklin and the surrounding counties and spent the first 2 years of my legal career as an underwriting attorney for Chicago Title at their headquarters in Chicago. Generally, lending clients have accepted title insurance as a must; but not all developers and residential purchaser's have seen the light; notwithstanding the Erpenbeck situations which arise from time to time.

So, if you are not yet convinced that title insurance should be a necessary component of your due diligence and closing requirements, below is a list of 73 reasons why you should change your mind which has been assembled by Stewart Title and LandAmerica (Lawyer's and Commonwealth) Title Insurance Company at their website KnowYourClosing.com. Most of these items can be located by a search of the public records, but not all.

Forged deeds, mortgages, satisfactions or releases. Deed by person who is insane or mentally incompetent. Deed by minor (may be disavowed). Deed from corporation, unauthorized under corporate bylaws or given under falsified corporate resolution. Deed from partnership, unauthorized under partnership agreement. Deed from purported trustee, unauthorized under trust agreement. Deed to or from a "corporation" before incorporation, or after loss of corporate charter. Deed from a legal non-entity (styled, for example, as a church, charity or club). Deed by person in a foreign country, vulnerable to challenge as incompetent, unauthorized or defective under foreign laws. Claims resulting from use of "alias" or fictitious namestyle by a predecessor in title.

Deed challenged as being given under fraud, undue influence or duress. Deed following non-judicial foreclosure, where required procedure was not followed. Deed affecting land in judicial proceedings (bankruptcy, receivership, probate, conservatorship, dissolution of marriage), unauthorized by court. Deed following judicial proceedings, subject to appeal or further court order. Deed following judicial proceedings, where all necessary parties were not joined. Lack of jurisdiction over persons or property in judicial proceedings. Deed signed by mistake (grantor did not know what was signed). Deed executed under falsified power of attorney. Deed executed under expired power or attorney (death, disability or insanity of principal). Deed apparently valid, but actually delivered after death of grantor or grantee, or without consent of grantor. Deed affecting property purported to be separate property of grantor, which is in fact community or jointly-owned property. Undisclosed divorce of one who conveys as sole heir of a deceased former spouse. Deed affecting property of deceased person, not joining all heirs. Deed following administration of estate of missing person, who later re-appears. Conveyance by heir or survivor of a joint estate, who murdered the decedent. Conveyances and proceedings affecting rights of service-member protected by the Soldiers and Sailors Civil Relief Act. Conveyance void as in violation of public policy (payment of gambling debt, payment for contract to commit crime, or conveyance made in restraint of trade).

Deed to land including "wetlands" subject to public trust (vesting title in government to protect public interest in navigation, commerce, fishing and recreation). Deed from government entity, vulnerable to challenge as unauthorized or unlawful. Ineffective release of prior satisfied mortgage due to acquisition of note by bona fide purchaser (without notice of satisfaction). Ineffective release of prior satisfied mortgage due to bankruptcy of creditor prior to recording of release (avoiding powers in bankruptcy). Ineffective release of prior mortgage of lien, as fraudulently obtained by predecessor in title. Disputed release of prior mortgage or lien, as given under mistake or misunderstanding. Ineffective subordination agreement, causing junior interest to be reinstated to priority. Deed recorded, but not properly indexed so as to be locatable in the land records. Undisclosed but recorded federal or state tax lien. Undisclosed but recorded judgment or spousal/child support lien. Undisclosed but recorded prior mortgage. Undisclosed but recorded notice of pending lawsuit affecting land. Undisclosed but recorded environmental lien. Undisclosed but recorded option, or right of first refusal, to purchase property. Undisclosed but recorded covenants or restrictions, with (or without) rights of reverter. Undisclosed but recorded easements (for access, utilities, drainage, airspace, views) benefiting neighboring land. Undisclosed but recorded boundary, party wall or setback agreements.

Errors in tax records (mailing tax bill to wrong party resulting in tax sale, or crediting payment to wrong property). Erroneous release of tax or assessment liens, which are later reinstated to the tax rolls. Erroneous reports furnished by tax officials (not binding local government). Special assessments which become liens upon passage of a law or ordinance, but before recorded notice or commencement of improvements for which assessment is made. Adverse claim of vendor's lien. Adverse claim of equitable lien. Ambiguous covenants or restrictions in ancient documents. Misinterpretation of wills, deeds and other instruments. Discovery of will of supposed intestate individual, after probate. Discovery of later will after probate of first will. Erroneous or inadequate legal descriptions. Deed to land without a right of access to a public street or road. Deed to land with legal access subject to undisclosed but recorded conditions or restrictions. Right of access wiped out by foreclosure on neighboring land. Patent defects in recorded instruments (for example, failure to attach notarial acknowledgment or a legal description). Defective acknowledgment due to lack of authority of notary (acknowledgment taken before commission or after expiration of commission). Forged notarization or witness acknowledgment. Deed not properly recorded (wrong county, missing pages or other contents, or without required payment). Deed from grantor who is claimed to have acquired title through fraud upon creditors of a prior owner.

An extended coverage policy may be requested to protect against such additional defects as: Deed to a purchaser from one who has previously sold or leased the same land to a third party under an unrecorded contract, where the third party is in possession of the premises. Claimed prescriptive rights, not of record and not disclosed by survey. Physical location of easement (underground pipe or sewer line) which does not conform with easement of record. Deed to land with improvements encroaching upon land of another. Incorrect survey (misstating location, dimensions, area, easements or improvements upon land). "Mechanics' lien" claims (securing payment of contractors and material suppliers for improvements) which may attach without recorded notice. Federal estate or state inheritance tax liens (may attach without recorded notice). Pre-existing violation of subdivision mapping laws. Pre-existing violation of zoning ordinances. Pre-existing violation of conditions, covenants and restrictions affecting the land.

Is Your Development Complying with the Interstate Land Sales Full Disclosure Act ?

As the development market slows contract purchasers will look for creative ways to get out of purchase contracts. Did you consider the Interstate Land Sales Full Disclosure Act (”ILSA”) 15 U.S.C. 1702 (a) when programming your development project ?

The ILSA is a federal consumer protection statute which the U. S. Department of Housing and Urban Development administers which requires disclosures and contract provisions relating to the sale of land, including commercial, industrial and residential subdivisions, townhome developments and condominium projects.

Compliance is time consuming and costly. So developers will want determine if their projects qualify for one of the several full or partial exemptions to compliance with the ILSA provisions. There are two (2) popular exemptions: (i) “Improved Lot exemption” which is a promise of the developer to complete the project within 2 years of the date of the contract to sell a unit to a consumer; and (ii)"fewer than 100 units" exemption.

Failure to comply can be costly. The ILSA provides statutory remedies to contract purchasers of return of earnest money deposits, monetary damages and specific performance. Much of the reported case law emanates from Florida. However, there is a line of cases from the 6th Circuit. Avoid the headaches and plan accordingly. Discuss the ILSA and its application to your project with your real estate counsel.

Ohio H.B 554 Signed into Law

On June 12, 2008 Governor Ted Strickland signed into law Ohio H.B. 554 making changes to the Ohio Historic Rehabilitation Tax Credit ("OHRTC"). The OHRTC is a credit against the Ohio income tax, corporate franchise tax and some intangibles taxes. One of the changes that H.B. 554 is responsible for will enable each party awarded with the OHRTC up to $5 million per year in tax credits against qualified expenditures. The prior limitations of $60 million per year in OHRTC awards and the cap on the number of applications which can be submitted have been eliminated. H.B. 554 requires the Director of Development to "consider the potential economic impact and regional distributive balance of the credits throughout the state" when reviewing applications. It is hoped that this will allow for more even distribution of the tax credits throughout Ohio. For more information on the OHRTC program and its availability you should speak with your tax professional or an attorney who has tax credit development experience.

The Perfect Storm

As real estate professionals it is no secret to us that the metropolitan areas in which we practice our trade have been designed around an automobile/cheap gas model. Today, as we face the consequences of global warming, record high oil prices, increasing corn prices and the resulting and cumulative affects from each of these issues we need to rethink where and how we live, work and play.

In a recent Brooking's Institute study the Cincinnati metropolitan area is cited as one of the highest carbon emitting areas in the United States. The report also cites that transportation related carbon emissions accounts for 39% of carbon pollution, the balance of which is caused primarily by residential and commercial building operation and use.

The cumulative affect of unbridled growth, road congestion, limited public transportation options and buildings and homes which are far from green has created "The Perfect Storm" when you add rising oil prices into the equation. How can the real estate community create value and make the Cincinnati area a highly desired location in which to live and work ?

1. Drive less, look for public transportation options;
2. Design new buildings or rehabbed buildings as environmentally friendly green buildings;
3. Encourage our city planners to design roadways incorporating bicycle lanes and mass transit lanes;
4. Encourage our public leaders to increase the taxes collected for parking and fuel consumption; rather than build new roads, invest in alternative transportation;
5. Educate our clients on the long term benefits of operating their businesses within I-275 and closer to the urban core where there is ample supply of labor and transportation options for the same; and
6. Encourage our public leaders to draft legislation to encourage all of the above.

We must strengthen our cities by halting urban sprawl. We must grow our cities up not out. We must give our citizens the means to commute to their jobs in a reliable and cost efficient manner. As all of these suggestions develop and come together the value of real estate within I-275 will naturally increase. Make no mistake about it, we all pay the indirect subsidies to maintain the cities and roads which we have built to service them. We need to reallocate our collective resources and look inward again.