The Abstract of Title in Real Estate: What Is It?

Image of a stack of legal documents for real estate. Captioned: The Abstract of Title in Real Estate

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An abstract of title is a written chronology of all recorded documents and proceedings related to a specific piece of real estate. It shows the names of all the owners, how long each held title, and what each paid for the property.

The abstract is used for verifying a property’s marketability. The abstract offers assurance that the property is just as the seller represents it, both in the accuracy of its physical description and the integrity of its title.

The classic title abstract goes back in history to the earliest available records—sometimes as far back as the original land grant or patent deed from the U.S. government.

The abstractor of title is the person who researches this history, summarizes the relevant documents, and certifies the binder as true and complete.

Who Is the Abstractor?

The first abstractors were attorneys. Today’s abstractor studies under an experienced abstractor and may be licensed by the state. For example, an Oklahoma abstractor is licensed by the state board.

In other states, an attorney who earns a commission on the title insurance product is the same person who prepares the abstract.

Today’s abstractors typically research a property by searching county records and by using records already stored in their abstract plants—sites managed by title-insurance companies to hold copies of documents. Counties typically store their records by year. A property’s complete title history may be contained by numerous record books, and is time-consuming to find. (That said, expect the process to evolve as real estate market data generally becomes more accessible and high-tech.)

The abstractor must have sharp analysis skills. Abstractors must recognize which documents could be erroneous or void. For example, an abstractor in Ohio might find a recent transfer on death deed. The provision of the Ohio Revised Code that governs the deed requires the grantor to file an affidavit with the county prior to death. If the deceased did not record the legally required affidavit before death, the abstractor must determine that the deed is void and that the real estate remained vested in the grantor’s estate. 

What Else Does the Abstraction Process Uncover?

A seller could be asked to produce an abstract to uncover any interests others might have in the property, or whether some unknown party could have reason to challenge a buyer’s ownership. Thus, the abstractor is responsible for finding all major transactions and legal issues, and for including:

  • Mortgages and liens. Liens for property taxes, mortgage loans, homeowners’ association dues, or any other lenders’ interests must be resolved or good title could be destroyed.
  • Subdivision and homeowners’ association restrictions. The buyer needs to know what can and cannot be done with a property.
  • Lot and block diagrams; plat maps.
  • Surveys. Any encroachments, such as fences over the boundary, should appear in the surveyor’s notes.
  • Easements. Right of ways or utility access can create areas the buyer is restricted from fencing off or developing.
  • Pertinent wills, deeds, lawsuits, or tax sales.

Once the abstractor finishes, a title company has a comprehensive summary of the condition of the title, and can insure it accordingly.

How Does an Abstract Differ From a Title Report?

A recorded property deed specifies on its face whether it is recorded with the county recorder or the office of the registrar. If it is the registrar, and the deed is kept through a torrens system, there is no abstract. In this case the court issues a Certificate of Title.

No state requires an abstract to effect a legal property conveyance. Yet lenders nationwide do make loans contingent on a title insurance report. In some states, a title insurer prepares (and is responsible for the accuracy of) the report, which is treated as tantamount to an abstract. The abstract, though, is designed to rule out any clouds on title. In contrast, the title report simply enables the purchase of title insurance. This runs the risk over simply “insuring over” the title defects.

On the other hand, it is possible that defects in title may escape the abstractor’s attention. Title insurance protects the buyer, and is normally available based on a cost-effective title report through which the title insurer inspects the title’s condition. The insurance covers resolution costs for unknown defects covered by the policy.

Another process that applies in some states is the 40-year search. Information gleaned from this process can serve as the basis for title insurance. For example, Ohio’s marketable title provision states that “any person claiming an interest in land may preserve and keep effective the interest” by filing a notice for the record “during the forty-year period immediately following the effective date of the root of title of the person whose record title would otherwise be marketable.” ​In some states the marketable title act could require checking back over a different term of years.

Who May Obtain an Abstract of Title?

Abstracts, or updated abstracts, are expensive, bound documents. The real estate attorney who certifies a title orders and obtains them.

Yet, assuming an abstract exists, anyone may read most documentation it contains at the county courthouse.

Many people do this when researching history of genealogical or architectural significance. For example, a researcher may wish to nominate a property to the National Register of Historic Buildings. The abstract may reveal connections with significant historical figures, and the early names of a property as well as the construction and renovation dates.

For ordinary properties, the county recorder of deeds can tell the seller if an abstract is available, based on the property’s legal description.

Abstract States?

Regardless of whether a state has a reputation as an “abstract state,” every state requires an expert review of a title’s history. Therefore, a title report and an abstract of title will include much similar information.

Which is needed? Check the state’s marketable title provision, local custom, and the underwriter’s insurance requirements.

In any case, a title’s quality must be rigorously assessed.

And the chronology of a place continues.

These Eye-Catching Bricks Are Made from Textile Waste

Fab BRICK upcycles clothes into bricks that are great thermal, acoustic insulators.

By Katherine MartinkoPublished March 5, 2021 01:44PM ESTFact checked by Haley Mast

FabBRICK brick

Clarisse Merlet was a French architecture student in 2017 when she became alarmed about the amount of textile waste created each year. In France, it’s estimated to be around 4 million tons, and that’s just a fraction of what gets tossed globally; it was 17 million tons in the United States three years ago.1 Very little of that discarded clothing is collected for reuse or recycling – less than a third in France, and half of that (15%) in the U.S.

At the same time, Merlet was aware of diminishing natural resources and the tremendous waste inherent in the construction industry. Surely there was a better way to build that reduced demand for virgin material and make use of resources that have already been extracted? That’s how she came up with the idea for FabBRICK, her award-winning company that makes decorative and insulative bricks out of old clothes.https://a02ae06bd5941fc6f73695415cca7f6d.safeframe.googlesyndication.com/safeframe/1-0-37/html/container.html

FabBRICK in a retail store
FabBRICK bricks used to make a display shelf. FabBRICK

The basic component of the bricks is shredded clothing, which Merlet purchases pre-ground from a supplier in Normandy. Each brick uses the equivalent of two to three T-shirts’ worth of material and, as a FabBRICK representative told Treehugger, any kind can be used – “not just cotton, [but also] polyester, elastane, PVC, etc.” The scraps are mixed with an ecological glue that Merlet developed herself, then pressed into a brick mold. This mold uses mechanical compression to form the bricks, so it requires no energy beyond what a human worker needs to press it down. The wet bricks are removed from the mold and set out to dry for two weeks before using.

When it comes to construction, the bricks cannot be used for structural work, but Merlet said she’s working on that and hopes they can be at some point. For now, they are fire- and moisture-resistant, and make an excellent thermal and acoustic insulator. They’re suitable for room partitions and decorative walls in retail stores (particularly fitting where clothes are sold). The bricks, which can be ordered in four different sizes, are used to make furniture such as lamps, tables, stools, and more. 

From the company’s website: “Since our creation at the end of 2018, we have already designed more than 40,000 bricks which represent 12 tons of recycled textiles.” FabBRICK does commissions for retailers and companies that want specialized bricks, such as the famous Parisian shopping center Galeries Lafayette that has ordered a handmade series, and Vinci Construction that’s turning its own worksite wear into stools and lamps. The process appeals to many companies because, as explained to Treehugger, FabBRICK “can personalize the color of your wall with the clothes you decide to recycle.” https://www.treehugger.com/embed?www.instagram.com.googlesyndication.com/html

In an interview with Novethic, Merlet shows a prototype of a brick made from shredded surgical masks – an interesting potential use for some of the pandemic-related waste we now see worldwide. She says, “We don’t yet know how we’re going to sell it, because it still has to pass a number of laboratory tests, notably fire tests,” but the idea is to build some small furniture pieces and see how they work.

The company is still small and fairly new, but the idea is exciting. With such a surplus of clothing in the world, it makes perfect sense to use all that cotton, wool, polyester, and more in ways that prolong their life and replace other materials that would have to be extracted from the Earth. Merlet is on to something great here, and hopefully continues to get enthusiastic support for her work from companies around the world.

Homebuilder confidence drops as interest rates and lumber prices rise

A contractor works on a house under construction at the Norton Commons subdivision in Louisville, Kentucky, U.S., on Monday, March 8, 2021.

A contractor works on a house under construction at the Norton Commons subdivision in Louisville, Kentucky, U.S., on Monday, March 8, 2021.Luke Sharrett | Bloomberg | Getty Images

A monthly index measuring homebuilder confidence in the single-family housing market fell, as builders face rising interest rates and rising costs for materials, especially lumber.

The National Association of Home Builders/Wells Fargo Housing Market Index fell 2 points to 82 in March. Anything above 50 is considered positive sentiment. The index stood at 72 in March 2020 and hit a high of 90 in November.

The latest results indicate that the housing industry might be in for a rough patch even as the economy roars back.

“Though builders continue to see strong buyer traffic, recent increases for material costs and delivery times, particularly for softwood lumber, have depressed builder sentiment this month,” said NAHB Chairman Chuck Fowke, a builder from Tampa, Florida. “Supply shortages and high demand have caused lumber prices to jump about 200% since last April.”

Of the index’s three components, current sales conditions fell 3 points to 87. Sales expectations in the next six months increased 3 points to 83, and buyer traffic was unchanged at 72.

A record low supply of homes for sale has caused prices for existing and newly built homes to rise quickly. Higher costs for builders are only exacerbating the situation, as these costs are being passed on to buyers. The median price of a newly built home was up more than 5% year over year in January.

“While single-family homebuilding should grow this year, the elevated price of lumber is adding approximately $24,000 to the price of a new home,” said Robert Dietz, chief economist for the NAHB. “And mortgage interest rates, while historically low, have increased about 30 basis points over the last month.”

Rising costs are particularly hard on first-time homebuyers, as the supply on the lower end of the market is leanest. Any increase in mortgage rates also knocks some buyers out of the market, not just because monthly payments are higher but because in today’s tight lending market, they will no longer qualify for the loan.  

Regionally, on a three-month moving average, builder sentiment in the Northeast rose 2 points to 80. In the Midwest it fell 1 point to 80 and in the South dropped 2 points to 82. In the West, sentiment fell 3 points to 90.

www.cnbc.com/2021/03/16/

How Rooftop Solar Benefits Your Neighbors

Homeowners who install solar on their roofs lower electricity costs for those around them, new study finds.

By Sami GroverPublished February 12, 2021 11:09AM ESTFact checked by Haley Mast

Cute house

Ever since rooftop solar became cheap enough to start proliferating, there has been debate about fairness and equity. Specifically, some have argued that policies like net metering – where utility companies are required to pay for excess electricity that homeowners produce – are simply foisting costs on the rest of society.https://161d38c52457a9faeb8c831c09902a77.safeframe.googlesyndication.com/safeframe/1-0-37/html/container.html

But now, new research led by Joshua Pearce, a professor of materials science and engineering at Michigan Technological University, has not only discredited this assertion, but he’s actually shown that the opposite is true.1 On average, homeowners who install solar on their roofs are helping to stabilize the grid, and as such, they are actually lowering electricity costs for their neighbors.

Here’s how Pearce described the value that solar brings:

“Anyone who puts up solar is being a great citizen for their neighbors and for their local utility. Customers with solar distributed generation are making it so utility companies don’t have to make as many infrastructure investments, while at the same time solar shaves down peak demands when electricity is the most expensive.”

distributed generation

Distributed generation refers to technologies that generate electricity at or near where it will be used. Distributed solar energy in the residential sector commonly includes rooftop and ground-mounted solar photovoltaic panels, which are typically connected to the local utility distribution grid. 

Specifically, the study highlighted several ways that distributed solar contributes to the broader energy grid, including:https://161d38c52457a9faeb8c831c09902a77.safeframe.googlesyndication.com/safeframe/1-0-37/html/container.html

  • Avoided operation and maintenance costs.
  • Reduced demand for fuel.
  • Reduced need for new capacity.
  • Fewer plants on standby.
  • Less need for power lines.
  • Fewer health impacts from pollution.

And that’s apparently before even taking into account the massive inequities that the climate crisis will bring. According to Pearce and his co-author, rather than worrying about folks with solar being unfairly subsidized by those without, we should be talking about making sure that solar owners are being adequately compensated for the service they are providing to society.

The authors hope that their research can serve as a starting point for getting a more accurate picture of the societal-level economics of distributed solar, therefore allowing utility companies to better understand the value that investing in distributed solar could bring. Of course, even fully decarbonizing the electric grid is not going to get society to where it needs to go, but the study also looked at ways that solar could be combined with heat pumps to start decarbonizing home heating too. Perhaps surprisingly for those who think green tech is expensive, Pearce’s research suggested that solar-plus-heat-pumps offers a viable path to decarbonize and, ultimately, a profitable return on household investment too:https://161d38c52457a9faeb8c831c09902a77.safeframe.googlesyndication.com/safeframe/1-0-37/html/container.html

“Our results suggest northern homeowners have a clear and simple method to reduce their greenhouse gas emissions by making an investment that offers a higher internal rate of return than savings accounts, CDs and global investment certificates in both the U.S. and Canada. Residential PV and solar-powered heat pumps can be considered 25-year investments in financial security and environmental sustainability.”

Such research is critically important if renewables are going to thrive. Not only does it help dispel some of the myths or oversimplifications about equity, but it also serves as a counterpoint to overtly political narratives that have been pushed by certain parties that benefit from polarization.

In her book, “Short Circuiting Policy,” clean energy expert Leah Stokes laid out how such concerns have been weaponized by fossil fuel interests and utility lobbyists. Not only have they been used to force rollbacks of specific net metering policies, but Stokes argued that they have also been used to drive political partisanship and division – essentially helping paint the picture of clean energy in general, and solar in particular, as being the purview of “coastal elites” and well-to-do environmentalists:

 “At the same time that these interest groups lobbied for retrenchment and repeal, public opinion and legislators’ positions on clean energy policy became increasingly polarized. Through lobbying politicians and regulators, and driving polarization in the parties, the public, and the courts, these opponents often succeeded in weakening clean energy laws.”2

While one study on one aspect of the ongoing clean energy revolution is unlikely to reverse these forces, it does offer the hope that as costs come down – and societal benefits become clearer and harder to refute – it will become politically more feasible to enact genuinely pro-renewables policy. In the same way that solar megaprojects can help demonstrate the jobs that clean energy will bring, distributed solar may help to provide a tangible demonstration of how doing the right thing for the climate crisis can also mean doing the right thing by your neighbors.

A homebuyer’s guide to a competitive housing market

African couple standing on terrace hold keys of new house

Millions of people are locking in their dream to own a home. So, what’s stopping you from the exciting homeownership journey? Despite the fact that low housing inventory is making it a competitive market, people are still buying and listing homes. It’s simply up to you to take ownership of your home-buying dream, and we’re here to help with this homebuyer’s guide.  

If you’re wondering where to begin, a good place to start is learning how to position yourself as the most attractive buyer in a handful of offers. We asked two housing experts who have a history of helping their clients buy homes amid strong competition for advice, so you can distinguish yourself as a serious buyer in today’s fast-paced market.

Lean on trusted advisors. Think of your real estate agent and loan officer as the foundation of your home-buying journey. They support you through the whole process and are the people you will continuously rely on. This is why Donnell Williams, president of the National Association of Real Estate Brokers, highly recommends using a trusted advisor, because you need someone working on your behalf. Williams adds that choosing an area expert in your market will prove crucial to your ultimate success.

Part of this trust is also on you. “Honesty is the best policy,” says Williams. “So, when you’re working with your trusted advisor, lay all your cards on the table.” If you’re getting financial help from your parents for the down payment, let them know. If you have a really strict timeline for when you need to be out of your current residence, let them know. These details are crucial in their being able to properly support you.

Get pre-approved. There’s power in getting pre-approved in a competitive housing market. Sam Bhandal, a Home Lending Officer at Citi, says that getting pre-approved helps homebuyers figure out what their home purchase price point is, so they know what range they should be shopping in.

What does getting pre-approved entail? Bhandal explains that you should have financial documents such as bank statements, pay stubs and tax returns ready for your loan officer. This way, they can give you a pre-approval letter that comes with a firm commitment to lend, giving you and your offer a potential edge over other buyers. Bhandal compares it to doing all of your homework up front and getting everything out of the way that pertains to your finances, so you are solid when you go to make an offer.

For their part, home sellers want a smooth transaction with a qualified buyer and a contract with a strong likelihood of closing on time, and without hiccups. Having all your ducks in a row as a buyer will keep you feeling confident and positive throughout the process, says Bhandal. 

Be ready to move fast. Once your pre-approval is in hand, you’re ready to look at homes with added peace of mind. Here’s where timing can be everything. It’s not only you who needs to be ready to move fast; your real estate agent and loan officer need to be ready, too. On one side, you and your real estate agent must be ready to look at prospective homes as soon as possible. Wait too long and it’s likely a sale is already pending.

Maintain an open line of communication with your lender, so they can tailor your pre-approval letter to the specific home you intend to put an offer on and help you calculate what your monthly expenses for that specific home price would be.

Solid preparation at the onset is the ultimate key to success, especially in a competitive market, according to Citi’s Bhandal. After you laid the groundwork, the second stage is creating an offer that will stand out.

Figure out where you can be flexible. Two of the most effective tactics home shoppers can leverage to win a bidding war, according to Williams, are price and terms. “Determine what your highest competitive bid could be, and then come up with your terms,” he says.  Escalation clauses—which Williams highlights as one option that can be included in your offer to make it more competitive—tell the seller that if they get another offer that’s higher than your offer, you are willing to up your offer by an amount you prescribe.

On the flipside, being flexible also means not including some terms in your offer, such as requiring the seller to include the washer and dryer in the sale if those weren’t listed among the appliances that are staying. On the buyer’s side, “a contingency clause is a negative,” Williams says. “The other competitive offers are not going to have contingencies in their offer, so that’s going to be an impediment to your offer.”

Open communication with the seller’s agent can also be key. Consider reaching out routinely to them to determine the seller’s number one priority. Is it to close quickly? If so, the seller may be more willing to negotiate on price. Or, is their top priority being able to rent back their old home from the new owners for a few weeks until they close on their next home? If so, your offer would stand out if you create flexibility on your own move-out time.

The final touches. Cover letters, or love letters as they are sometimes called, are one way to communicate directly with the seller and stand out in a field of bidders. This is your chance to let the seller know why this specific house is perfect for you. Is this your dream home because it’s close to your parents? Is it your dream home because it shortens your drive to work and lets you spend more time at home with family? Let the seller know these things.

You can also use a cover letter to affirm your employment stability, your proactive stance in providing documents, and anything else that strengthens your position.

Lastly, Williams suggests asking for a group call to present your offer if it’s an option. This allows you to present your offer in your words with no preconceived notions from the seller getting in the way.

And while you might go through this process a handful of times in a competitive market, Bhandal explains it well when he says, “This is an exciting and positive process. We may have some obstacles, but everybody involved in the transaction is an expert in­­­­­­ their own way, and they’re going to help you come across that finish line.”

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MORRILL ACT OF 1890

1890 IS OUR HISTORY, TOO! 
MORRILL LEGISLATION

photo of Senator Justin Smith MorrillSenator Justin Smith Morrill was an abolitionist who had a vision that education would be for all social classes and offered a shift from predominantly classical studies to applied studies. This academic shift prepared students for the real world and advanced the nation by providing an opportunity to educate all classes of citizenry.

As a young boy of 15, Justin was personally impacted when he was unable to continue his own education due to his family’s lack of financial means. But in spite of this lack, he remained intellectually curious and pursued “education” on his own through business, architecture, horticulture, and politics. He later entered the political arena at the age of 44, and served another 44 years in the United States Congress as a representative and senator from Vermont. Congress is where the First and Second Morrill Acts were birthed.

The First Morrill Act of 1862 provided federal funds from the sale of public land to establish an endowment fund for land-grant colleges of agriculture and mechanical arts. It established at least one college in every state “accessible to all, but especially to the sons of toil.” This statement bears witness that Morrill had a vision of true democracy in higher education.

Three years later in 1865, approximately four million hard-working, but primarily illiterate Blacks were set free from slavery.  Out of his tremendous sense of duty to them and the welfare of this country, he stated, “They are members of the American family, and their advancement concerns us all.”

In spite of his sentiments, segregation was still widely practiced, especially in the Southern and Border States that would not admit Blacks to their educational institutions. This American response stirred the need for more legislation.

Passed in Congress and signed on August 30, 1890, the Second Morrill Act included the stipulation that African Americans were to be included in the United States Land-Grant University Higher Education System without discrimination. It further made provision that required states with separate colleges for Black and White citizens, to designate or establish a college to train Black students in agriculture, mechanical arts, and architecture as well. These Southern and Border States became known as the Negro Land-Grant Institutions and today as the 1890 Land-Grant Universities and Tuskegee University.

AAMU & THE MORRILL ACT

historic photo of State Normal School buildingThe Alabama Agricultural and Mechanical University (AAMU) came into being as the result of an 1873 bill passed in the Alabama State legislature that established a State Normal School and University for the Education of the Colored Teachers and Students, provided that the president and trustees of the school placed it at the disposal of the state. However, prior to the 1873 bill, William Hooper Councill founded the Lincoln Normal School in 1869; therefore, AAMU was a ‘continuation’ of that work. The institution opened its doors to 61 students on May 1, 1875, as the Huntsville Normal School with a state appropriation of $1,000 per year.

Historic Photo of William H. CouncillIn 1878, Councill introduced industrial education to the curriculum so students could learn practical skills that would earn them employment.  This effort gained wide attention and funding support by the Slater Fund and Peabody Education Fund, as well as private individual contributors. Because of the success of the  industrial education, the state legislation authorized a name change to the State Normal and Industrial School at Huntsville with an increased appropriation of $4,000 per year.  As time moved on, in 1891, the school received additional funds under the Morrill Act of 1890, which provided monies for instruction in practical and mechanical subjects such as engineering, agriculture, and architecture. In 1896, the then State Normal Industrial Institute for Negroes, among other name variations, became the Alabama Agricultural and Mechanical College for Negroes at Normal, giving us and other educational institutions for “Negroes,” a better opportunity for educational pursuits. On June 26, 1969, the Alabama Board of Education adopted a resolution changing the College to its current name.

So today, the 1890 land-grant universities, like Alabama A&M University, are all eligible to receive federal funds for instructional and educational programs.  Each state that has an 1890 university, also has an 1862 university; except Alabama, which has one 1862 and two 1890s – Alabama A&M University and Tuskegee University.  Nationally, these 19 universities comprise the 1890 Land-Grant University System. 

Cornell University

Texas A&M University

Clemson University

University of Maryland

University of Illinois at Urbana‑C…

Virginia Polytechnic Institute an…

How To Make An Insurance Claim For Business Interruption

Joshua SteinContributorReal EstateI write about commercial real estate negotiations, deals and legal issues.

A picture of a generic closed business.
If a closed business wants to claim under its business interruption insurance, it needs to jump … [+] RANJAN SAMARAKONE

Businesses large and small, including particularly retail tenants, hotels, and theaters (as well as their support services) have seen their revenue dramatically interrupted because of Covid shutdowns. But they still have to pay many of their operating costs, such as rent and utilities. So the owners of those businesses have sometimes tried to file claims under the business interruption element of their property insurance policies. Insurance companies have generally rejected those claims. The courts have usually agreed, but not always.

A successful business interruption insurance claim will depend, first, on the words of the particular policy and the scope of coverage. Sometimes a business owner will get lucky.

For example, if a policy provides coverage against loss of access, and a governmental order required the property owner to close off access, then the business might have a claim. Likewise if the policy had unusually broad coverage for hazards to human health. Policyholders have sometimes won by arguing that the coronavirus constituted some form of physical invasion, causing physical damage to the space. In recent test case litigation in the U.K., policyholders occasionally prevailed, again based on the specific wording of policies.

The history to date makes it clear that a successful business interruption insurance claim won’t necessarily be easy to assert or assured of success. But enough cases have turned out favorably to the insured that perhaps it’s worth a shot.

If a business owner wants to try to make a business interruption claim, they need to approach the process with the same care, diligence, and planning that they would for any other insurance claim, particularly one that might fall in a gray area. My friend Lennie Morgan, an independent insurance adviser at www.cpgstrategy.com, gave me a few suggestions for any business owner contemplating a business interruption claim.

First, read the policy. What language in the policy might support the claim? How can the insured sculpt a business interruption claim to make the strongest possible argument that it qualifies for coverage? The successful business interruption claims described earlier in this article begin to offer a roadmap. The policy may also cover actions of “civil authority” in a way that could support a claim. Does the policy have any language that might cover a loss that cannot be physically seen? It’s worth having counsel or an insurance adviser take a look at successful claims to date to see how best to frame this particular claim.MORE FOR YOUExperts Predict What The Housing Market Will Be Like In 2021Florida Panhandle’s Most Expensive New-Construction Home Is On The MarketThese Are The Lowest Mortgage Rates Being Offered Right Now

Second, pay close attention to deadlines and filing requirements. Policies often require claims to be filed within a relatively short time after a loss. And the claim needs to be submitted on a particular form, often with specific accompanying information and documents. It’s not enough to have a nice chat with the insurance broker. Again, read the policy. Do exactly what it requires. If the broker will get involved in submission of the claim, make sure the carrier acknowledges receipt of the claim.

Third, plan ahead to proving the amount of business lost as a result of the business interruption. This will require collecting and organizing records and other information. Ideally, it will happen during the period while the business suffers its losses, while memories and documentation are fresh, as opposed to being reconstructed many months after the fact. A successful insurance claim requires solid evidence of how much the insured actually lost.

Fourth, work with someone who knows how the insurance system works and how carriers deal with claims. That can be a lawyer, a consultant, an independent insurance advisor, or an adjuster. Insurance brokers often have the necessary knowledge, but they may have less zeal for the insured than if they were an advocate and strategist looking out solely for the insured.

The four measures just suggested will certainly help increase the chances of succeeding with a business interruption claim, by denying the carrier some easy grounds on which to reject a claim. Ultimately the likelihood of success remains pretty bleak, though. So a business owner will want to avoid spending too much time and money on an effort that is very likely doomed.

SHOULD YOUR PROPERTY RIGHTS?

Article    |    Institute for Justice

What If Your Neighbor…

Imagine a law giving bureaucrats unbridled discretion over your property rights. It would provide no standards. City officials could stop you from using your property—such as putting up a fence or planting a tree—for arbitrary reasons, or, indeed, for no reason at all. And you’d have no one to appeal their decisions to.

Now imagine a law vesting this unbridled discretion in a neighbor’s hands instead of a government agent’s. In other words, you’d need to get your neighbor’s permission to use your property the way you wanted. And your neighbor could withhold that permission for any reason whatsoever, even a petty, years-old grudge. If you objected to your neighbor’s decision on your property rights, you’d be out of luck—the neighbor’s decision would be final, and no one could overturn it.

The Neighbor’s Veto Is Dead, Long Live the Neighbor’s Veto

In a 1912 decision, Eubank v. City of Richmond, the U.S. Supreme Court struck down a neighbor’s veto as unconstitutional. But five years later, in Thomas Cusack Co. v. City of Chicago, the Court upheld a different neighbor’s veto. The difference between these cases has been where courts ground their analysis ever since.

Let’s start with Eubank. That case involved a setback ordinance that let private parties establish binding building lines. Once two thirds of property owners abutting a street decided to set a building line between 5 and 30 feet, the government had no discretion to alter this boundary.

According to the U.S. Supreme Court, this delegation to private parties violated due process. As the Court emphasized, the government had “conferr[ed] the power on some property holders to virtually control and dispose of the property rights of others and “create[d] no standard by which the power [was] to be exercised.” 226 U.S. 137, 143–44. Hence, property owners who wanted a building line could “do so solely for their own interest, or even capriciously.” Id. at 144. Just as a law would violate due process if it put this unbridled discretion in a government agent’s hands, it violated due process to put this power in private parties’ hands.

But in the 1917 Cusack case, the U.S. Supreme Court distinguished Eubank. The ordinance at issue in Cusack prohibited people from building billboards in residential areas unless they got written consent from a majority of neighboring property owners. The Supreme Court held that this neighbor’s-veto provision did not violate due process.

So why was a neighbor’s veto unconstitutional in Eubank but constitutional in Cusack? According to the Supreme Court, the difference was that the ordinance in Eubank let property owners veto land uses that were otherwise legal whereas the ordinance in Cusack let property owners waive restrictions on land uses that were otherwise prohibited:

Legislatures and Courts Must Determine Which Land Uses Are Nuisances

While lots of cases from the 1910s and 1920s were overruled in the decades ahead, Eubank, Cusack, and Roberge were not. As Professor Sasha Volokh chronicles in this informative law-review article, several modern courts have approvingly cited these three cases.

That said, courts haven’t always applied these precedents consistently or faithfully. Consider the case of Silverman v. Barry, which concerned a District of Columbia law that prohibited converting apartments to condominiums without tenants’ consent. After a trial judge granted a motion to dismiss a challenge to this law, a three-judge D.C. Circuit panel reversed the judge because “the Supreme Court ha[d] held this sort of delegation unconstitutional” in Eubank and Roberge. 727 F.2d 1121, 1126 (D.C. Cir. 1984). When the trial court dismissed the case again on remand, a different three-judge D.C. Circuit panel found that this delegation was constitutional under Cusack. According to the court, a “statute survives due process challenge on this ground if it enacts a general prohibition and then delegates to private citizens the authority to waive that prohibition.” 845 F.2d 1072, 1087 (D.C. Cir. 1988).

But this latter decision completely ignored Roberge. As Roberge shows, a delegation isn’t constitutional merely because it lets private parties waive a general prohibition. Rather, the question is whether the land use that’s prohibited is a nuisance or not. And there was no discussion—let alone indication—in Silverman as to whether converting apartments to condominiums would constitute a nuisance.

Going forward, it’s incumbent on legislatures and courts to keep the relevance of nuisances in mind when considering a neighbor’s veto. As for legislatures, municipalities like Brookline shouldn’t give private parties power to veto benign uses of property, like short-term rentals. And as for courts, it’s their job to carefully probe neighbor’s-veto laws to see if they correctly limit private power to controlling nuisances.

This task requires grappling with evidence. Cusack and Roberge are instructive. In the former case, there was “much evidence” introduced at trial showing that billboards neighboring property owners could veto were responsible for “fires[,] . . . offensive and insanitary accumulations[,] . . . and [a] shield for immoral practices, and for loiterers and criminals.” 242 U.S. at 529 (emphasis added). In the latter case, there was “nothing in the record’ showing that the philanthropic home that neighbor property owners could veto was “a nuisance.” 278 U.S. at 123 (emphasis added).

This distinction between nuisances and benign land uses should still carry the day—if your use of your property isn’t hurting anyone, then your neighbors shouldn’t have a veto to stop it.

Milad Emam is an attorney at the Institute for Justice.

What is the Difference Between a Trust and a Foundation?

by Jiah Kim | Estate Planning 

©2018michaelgouldgroup.com

If your estate planning goals include establishing a lasting legacy through charitable donations, aside from making outright gifts (which will make sense for certain people under certain circumstances), your two primary options are: (i) to establish a trust, or (ii) to establish a foundation.

But, how do you choose? And, once you choose, how do you ensure that your charitable motivations will continue to be served after you are gone? These are important questions, and finding the answers starts with gaining a better understanding of the options that you have available.

What Is a Trust?

A trust is a legal arrangement pursuant to which one person (the “grantor” or “settlor”) entrusts assets to another person or organization (the “trustee”) to manage for the benefit of others (the “beneficiaries”). Now, this is an oversimplified definition, and with certain types of trusts (such as the revocable living trust), a single person can serve as grantor, trustee, and beneficiary; but, this provides a good foundation for our discussion of charitable trusts.

Under the right circumstances, establishing a charitable trust can have numerous benefits. Some of these benefits include:

  • Tax Savings. By transferring assets to a charitable trust, you can often avoid income, capital gains, and estate taxes that would otherwise need to be paid by you or your estate.
  • Asset Protection. Since assets that you transfer to a trust are no longer considered your property, establishing a trust can help shield your charitable gift from the risk of loss, should you face a lawsuit or incur another substantial liability.
  • Enhanced Certainty. Most forms of trusts are recognized by state and federal courts around the country, and you can use your trust documents to establish clear rules around your charitable donation. As a result, when you use a trust for your charitable giving, you can feel confident that your final wishes will be carried through.

Of course, the trust structure has certain limitations as well. Among them, when establishing a trust for charitable purposes, the trust will often need to be irrevocable. This means that you will not be able to pull assets back out of the trust should you need to do so in the future. There are costs involved with establishing a trust as well, though these costs will often be offset by the tax benefits involved.

What Is a Foundation?

A private foundation is a tax-exempt organization generally established as either a trust or corporation under state law. Management responsibility rests with directors or trustees, and one of the main distinguishing factors from stand-alone charitable trusts is that private foundations can accept contributions from multiple donors. As a result, private foundations are often used by families seeking to establish a lasting charitable legacy, allowing for family members’ gifts to be pooled and then distributed to outside organizations (or used in-house) at the direction of the foundation.

However, the founders also have the ability to establish permissible donees and assert additional controls over the foundation’s operations as well, making foundations particularly attractive to those who have altruistic goals that they wish for their loved ones to continue to pursue after their death. As a result, whether your hope is to help finance a major international charity, to establish an enduring support fund for a local cause or organization, or even to establish your own operating charitable entity, you can use a private foundation to achieve your goals.

Like charitable trusts, private foundations can offer significant tax benefits for donors and their estates. Donors also have the option (also similar to trusts) to make contributions during their lifetimes, at death, or both.

Types of Charitable Trusts

The two most common forms of charitable trusts are: (i) the “charitable remainder trust,” and (ii) the “charitable lead trust.”

1. Charitable Remainder Trust

With a charitable remainder trust, the grantor establishes the trust and names a specific charitable organization as the trustee. This organization must receive IRS approval, which generally (though not universally) requires a 501(c)(3) designation. The grantor then funds the trust (usually with appreciated assets for tax purposes), and then the charity takes over responsibility for managing the assets as trustee. The grantor has the option to receive either a fixed annuity or a percentage of the trust’s value on an annual basis for his or her lifetime or a period of years; and, upon the grantor’s death, the charity takes possession of the trust’s assets.

2. Charitable Lead Trust

A charitable lead trust operates much the opposite of a charitable remainder trust. With a charitable lead trust, the charity receives income payments for a period of years or the grantor’s lifetime, and then upon the grantor’s death the trust assets transfer to named non-charitable beneficiaries. There is also the option for the trust assets to be redistributed to the grantor prior to death.

Depending upon the grantor’s goals, a charitable lead trust can be structured as any of the following:

  • Qualified reversionary grantor trust
  • Qualified nonreversionary grantor trust
  • Qualified nonreversionary nongrantor trust
  • Nonqualified reversionary nongrantor trust

Please check with your Estate Planner no matter how small your assets may be, especially if you own property: I.E. Bank accounts or Land.

Wills, Slavery and Probate: The Legacy of Lucy Sutton

Estate planning can significantly impact future generations. In honor of Black History Month ACTEC Fellow Terrence M. Franklin shares his journey of discovery: how his fourth great grandmother Lucy Sutton and her eight children and six grandchildren were freed from slavery through a Last Will and Testament. There is no greater time than now to effectively communicate your intentions and protect your legacy through a will and estate planning documents.

ACTEC Fellow Cynthia G. Lamar-Hart: In honor of Black History Month, The American College of Trust and Estate Counsel, ACTEC, presents a mini-documentary that offers searing insight into the enduring legacy of slavery in the personal histories of many African American families in this country.  We invite you to join us in hearing from ACTEC Fellow Terry Franklin, as he shares the powerful story of how a Last Will and Testament from 1846 played a critical role in freeing his fourth great-grandmother, Lucy Sutton, and her family from slavery.

Hi. I’m Terrence Franklin. I’m a Fellow in the American College of Trust and Estate Counsel. And I wanted to talk to you, a little bit, about why it is important for everyone to have Estate Planning and particularly why it might be important for people of color, and especially African Americans.

I bring a particularly unique experience to this. I’ve been a trust and estates litigator for nearly 30 years, which means I do will contests, family disputes, and so forth. But I’d been doing it for about a quarter of a century when I discovered in my own family a quite interesting will contest that I did not know was part of my own family’s history. I was trying to do something to celebrate my great aunt’s hundredth birthday and thinking about how I could possibly celebrate her life because she’s been so significant to our family members as a matriarch. I went looking for a piece of information that I had seen at a family reunion, some almost 20 years before; and what I’d seen in that set of reunion materials was a typed-up portion of a will that indicated that a man named John Sutton, who was of sound mind, but infirm in body, was setting about to create his own new will. And he indicated that he had owned the following property, to wit, a “mulatto slave Lucy,” aged about 45, her daughter Easter, aged about 26 and so forth and so on, listing all eight of Lucy’s children as well as six children of Easter — all of whom John owned. All of whom he was identifying in his will and all of whom he was setting free by the will.

 I knew that there had been the fire in 1901, so it was unlikely that I was going to be able to find the original will, but the paralegal said, “There was the fire but let me see what I can do.”  Well, by the end of that day I had an email back from her that indicated that she had found a John Sutton file and she wasn’t sure if it was the right one but she would have it by Friday of that week; and this was the week I was going to be flying back to the Midwest for my great aunt’s birthday. That morning, when I got up and went to the office, I had an email from the paralegal and she said, “we found it; we found the right will!” And she asked me what I wanted to do. And I had her take photos. And she sent me, across time, a hundred and seventy years, across the ages and across the Internet, I got this image of this document; and it was red wax sealed before the days of lick’em stick’em envelopes.  And it was in handwritten fine script by an attorney named Gregory Yale, who drafted the document. I suddenly had this image that was in my hands, that I could see and visualize and imagine this story about this white man named John who owned this mulatto slave Lucy and her eight children and her six grandchildren. And to me, it had suggested that perhaps this was a family.

As I did research over the next few months and tried to understand what the meaning was with his relationship and wrote an article and got some inspiration from other people, I came to understand that, in fact, John and Lucy probably did have a family.

 I knew that there had been the fire in 1901, so it was unlikely that I was going to be able to find the original will, but the paralegal said, “There was the fire but let me see what I can do.”  Well, by the end of that day I had an email back from her that indicated that she had found a John Sutton file and she wasn’t sure if it was the right one but she would have it by Friday of that week; and this was the week I was going to be flying back to the Midwest for my great aunt’s birthday. That morning, when I got up and went to the office, I had an email from the paralegal and she said, “we found it; we found the right will!” And she asked me what I wanted to do. And I had her take photos. And she sent me, across time, a hundred and seventy years, across the ages and across the Internet, I got this image of this document; and it was red wax sealed before the days of lick’em stick’em envelopes.  And it was in handwritten fine script by an attorney named Gregory Yale, who drafted the document. I suddenly had this image that was in my hands, that I could see and visualize and imagine this story about this white man named John who owned this mulatto slave Lucy and her eight children and her six grandchildren. And to me, it had suggested that perhaps this was a family.

As I did research over the next few months and tried to understand what the meaning was with his relationship and wrote an article and got some inspiration from other people, I came to understand that, in fact, John and Lucy probably did have a family.

We had done some research and found out that the Equal Justice Initiative, headed by Bryan Stevenson, a social justice activist and lawyer, had documented some 4,000 lynching’s that had taken place in the South between the end of the Civil War and the civil rights era. And we decided that if we used our Internet, we could follow each one of those lynching’s and understand the stories of those families that had been affected — those individuals who had died in the families that had been destroyed and whole communities that had been shattered by these acts of terrorism. And at the end of our drive, a hundred and twenty-five lynching’s later, we made a donation to the Equal Justice Initiative, as a way of pushing back against the racism that is such a part of so much of American law.

I realize that it wasn’t just the will that my great, great, great, great grandfather had made and made his mark on. There was a whole will contest file. And so, the will contest that I had imagined had happened, really had happened; and that the uncle that I called Eustace, as a good old-timey name, was really named Shadrack. Shadrack Sutton had fought to keep my family enslaved. As it turns out, there was also the transcript from the trial, which included the judge’s handwritten notes. And so, Judge Crabtree, William F. Crabtree, who was the judge, indicated in his notes that Gregory Yale had gone out to the house – he’d been summoned by the family. He referred to them as the family, not as his slaves. And that he’d spent time talking to John and to his sons and daughters and that they explained to him that the reason why they had moved to Florida was because they had left Georgia believing that they could be emancipated in the state of Florida. But it wasn’t until they got to Florida that they found out otherwise. That’s why they had to do the will.

It also turns out that at one point, Lucy came into the room; and Lucy said she would have been just as happy to stay with Shadrack or move away, except Shadrack had always threatened that he would beat them if he ever came to own them. So, this underscored the urgency for the need for the family to be free.

As it turns out, on March 10th, 1847 Judge Crabtree banged his gavel and ruled that the will contest was invalid. That the will itself was valid and was upheld, and he ordered Shadrack to pay $28.08 in court costs.

So this story of my ancestors who did something — who pushed in a way to try to counteract racist policies that prohibited the emancipation of slaves in the state of Georgia and in the state of Florida — they found a way to push back against that by taking on an anti-racist act. By creating these documents. And I happen to believe that my great, great, great, great grandmother Lucy had some influence on it too. Maybe not under undue influence, but she made sure that John saw to it that their family was going to be set free. And they were able to make their way to Illinois, Polk County, where they claimed their freedom in December of 1846.

Thinking about and taking action to do estate planning as a way to be anti-racist, to not let a network of policies of property ownership and transfer that have negative impacts on Black people control how we live our lives. Just as my ancestors used a will — an estate planning tool — to take the anti-racist and anti-slavery step of setting Lucy free, as well as her eight children and her six grandchildren, we can be anti-racist by taking care of our business and making sure that we are making the choices instead of leaving them up to someone else.

And I promise, this week I’m going to update my own estate plan. 

ACTEC Fellow Cynthia G. Lamar-Hart: Every day in this country, people of all ages, races and socio-economic backgrounds die without an estate plan in place, leaving their loved ones without any formal instructions as to their wishes.  Rather than leaving a plan that has been thoughtfully designed with their beneficiaries’ particular needs in mind, these decedents have entrusted their estate plans to the default provisions provided by state law. Please consider making it a priority this month to give your intended beneficiaries the gift of clarity by documenting your intentions through a formal estate plan.

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