Michael Swanenburg

As we begin the new Bar year, I would like to thank our Past Chair, Tracey Skinner, as well as the members of the Section Council, for all of their hard work and efforts in making this past year a success. As a result of the contributions of this group, as well as the involvement of many of our members, we have been able to broaden the focus of our Section by providing additional programs and resources for the use and benefit of our members. I would like to express my gratitude and recognize the commitment of these individuals, and acknowledge their role in creating and maintaining meaningful and successful components of our organization. It is my hope and desire to continue the efforts of this distinguished group.

For the upcoming year it is our goal to continue the many successful programs of the Section, as well as to expand many of our new initiatives. For example, we will continue our involvement with MICPEL by presenting the Advanced Real Property Institute scheduled for October 17, 2007, in Baltimore. We have planned what we believe will be a very informative program, and hope that many of you will be able to attend what promises to be an excellent event. Additionally, as part of our on-going presentation of the Commercial Real Estate Discussion Group Lunches, it is our intention to improve upon the production of our web-casts of these meeting. By upgrading our technology, and providing improved access to the materials presented on-site, in addition to making other revisions in response to feedback received from many members, we hope to establish a user-friendly and time-saving resource, especially for those whose proximity to these sessions makes attendance problematic. Additionally, in response to the request of many of our members, we have created a new Construction Law Committee that we expect to be of interest and benefit to many of our members, and we look forward to supporting its growth.

We will keep you posted with respect to the above matters, as well as other on-going matters of the Section in the upcoming months. For now, I look forward to a rewarding year and the continued growth of our Section. Thank you for your support.

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William J. Thomas, MBA
Senior Underwriter
Pinnacle Title & Escrow Inc.
Rockville Maryland

Improvement liens and assessments can create many title issues and complications. Practitioners must be vigilant in reviewing all matters appearing of record and in carefully reading the title documents. Additionally, proper exceptions must be included in title insurance binders and policies, so that the title company does not end up paying assessment costs for the unaware buyer.

Most think that utility liens and assessments are easily found in title searches by obtaining a lien certificate. This assumption might be true if the subject property is served by public water and sewer where the assessment is made by the County or local jurisdiction. However, if the property is subject to a private utility assessment, the charge and obligation to pay the assessment may not be so easily identified. [view article in it's entirety]

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Ronald S. Deutsch
Cohn, Goldberg & Deutsch, LLC
Towson, Maryland

Claude Pepper once said, “Life is like a bicycle. You don’t fall off until you stop peddling”. In a few reported decisions, borrowers attempting to save their homes by purchasing them at a foreclosure sale or by re-purchasing them from a lender who completed its foreclosure – directly or indirectly, through a family member being used as a straw purchaser – may have unwittingly fallen off their bicycles.

Under theories of equitable re-attachment, liens thought to have been extinguished can be potentially revived when a foreclosed borrower repurchases his property. Although there are only a few reported cases dealing with this issue, the theory may be applicable in many states.

In one New Jersey case, Old Republic Insurance Co. v. Currie, 665 A.2d 1153; 284 NJ Super. 571 (Ch. Div. 1995), a husband and wife owned a property subject to a first mortgage. Sometime later, they executed a second mortgage, which was recorded among the land records. As the years progressed, the borrowers faced increasing financial difficulty. The borrowers tried various plans to turn their situation around and retain their home, none of which worked. Finally, after attempting to save their home by filing a bankruptcy petition, and after relief from the automatic stay was granted to the lender, their first mortgage company foreclosed. For whatever reason, presumably because of the property’s value, the second mortgage company elected not to bid at the foreclosure sale held by the first mortgage company. However, three years after the foreclosure, the second mortgage company discovered that one of the mortgagors reacquired the property. It was then that the second mortgage company attempted to assert its equitable rights based on reviving the lien, by re-recording its mortgage that was presumably extinguished at the earlier foreclosure sale. [view article in it's entirety]

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Robert J. Strupp, Esq.
Director of Research and Policy

In the 2007 General Assembly, both the House and Senate considered proposals to impose recordation and transfer tax obligations on the transfer of controlling interests in certain entities owning real property (corporations, partnerships, limited liability companies, limited liability partnerships and certain other unincorporated businesses). The only practical difference between HB 475 and SB 616 was the threshold value of real property held by the transferor entity to be subject to the taxes. The House version was to apply to property valued in excess of $1,000,000.00 and the Senate version to property exceeding $500,000.00 in value. Similar bills have been introduced in recent years with a variety of proposal to use the newly generated funds for educational purposes and land preservation.

As a practical matter, under current law, real property can be transferred without payment of transfer and recordation taxes, or documented recordation in the land records, by transferring the ownership (controlling) interest in the title owner of the property. Studies by the Maryland Department of Legislative Services (2005 Session HB1) suggests that, at the threshold of 1 million dollars, the State would collect in excess of 13 million dollars a year and the counties and municipalities would collect in excess of 45 million dollars in additional transfer and recordation taxes. In the current climate of budget deficits and proposed tax increases, to paraphrase the late US Senator Everett Dirksen, this is “real money”.

The so-called “llc loophole” does more than enable the sale of high rise office towers of Baltimore City, the shopping centers of suburbia and apartment complexes around the State to escape transfer and recordation taxes, it enables investors who buy and sell single family residential property through limited liability entities to not only escape the transfer and recordation taxes, but to escape the detection of land records. Consider the following:

1. A owns 123 Maple Street
2. A creates a limited liability company wholly owned by A – known as 123 Maple, LLC and records a deed from A to 123 Maple, LLC. This transaction, under current law may be exempt from transfer and recordation taxes.
3. A sells his membership interest in 123 Maple, LLC to B for $20,000.00 cash. B now effectively owns 123 Maple Street. Because this was a transfer of the LLC and not the property, there are no transfer or recordation taxes and no deed reflecting the sale.
4. B, a “wholesaler” real estate investor sells the membership interest in 123 LLC to C, a rehabber for $40,000.00. Once again there is no change in the title (123 Maple LLC retains ownership) and no transfer or recordation taxes are collected.
5. C fixes the property, and thereafter 123 Maple, LLC deeds the property to D for $100,000.00. Only in this last transaction is a deed filed and transfer and recordation taxes collected.

What does the chain to title look like. A to 123 Maple, LLC to D. What was lost in revenues in state and local transfer and recordation taxes? Assuming the combined transfer tax to be 2 percent, $1,200.00 was not collected. Assuming a $5.00 per $500.00 recordation tax, another $600.00 was lost, for a total of $1,800.00. Suppose B and C have 10 transactions like this per year, $18,000.00 in revenue, failed to be captured. If there were merely 100 such transactions made statewide in a year, $1,800,000.00 was lost by tax collectors.

As you can sense, the existing law results in the loss of millions of dollars in possible tax collections when real property is transferred by conveying it under the guise of a membership interest or other entity interest. The critical question is whether conveyance taxes are beneficial to State and local governments and their citizens?

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The Elements of Influence, Alan Kelly, Penguin Group, 2006. 304 pp. Illustrations, appendix, glossary, index. ISBN 0-525-94984-4.

Reviewed for Ground Rules Newsletter by:
Nancy P. Regelin, Esquire
Shulman, Rogers, Gandal, Pordy & Ecker, P.A.

Land use attorneys need a wide ranging set of skills and tools to help them effectively influence the outcome of a development application. In the face of sophisticated opposition, lack of political support, or unpopularity of a specific project, the land use practitioner needs a play book of moves and countermoves to manage opposition, reputation, and buzz. Alan Kelly has written such a playbook.

Kelly has created a system or “periodic chart” that clearly defines 25 moves for outmaneuvering the opposition, protecting a reputation, advancing ideas, controlling public discussions, and moving a proposition forward. The book is targeted to business leaders, marketers, politicians, and public relations experts, but is also an applicable guide for land use practitioners. In a clear, illustrated format, Kelly outlines precisely how to recognize, implement, counter, and master the ploys, plays and plans of all the players in the game.

As an example, have you ever used a “Label” to reshape the public’s perception? A Label can be a suggestive nickname or a well crafted sound bite that simplifies a complicated issue. Think “Slick Willy” vs. “The Comeback Kid” (Clinton) or “Intel Inside” (Intel chips).

How do you counter when a Label is used against your project? Alan Kelly provides a bevy of options to choose from.

When the opposition calls for historic designation to prevent redevelopment and labels a building that had previously been voted the ugliest building in town as “The Pink Bank,” try countering with: 1) a new Label – “The Future Site of Our New Town Center”; 2) expose the hypocrisy by running a “Mirror” – “Why are they calling it Pink? There is nothing pink about that building.”; 3) run a “Bait” – ridicule the made up Label –“It’s an act of desperation to call it The Pink Bank because they otherwise have no valid justifications for historic designation” ; 4) recast the Label as a bridge back to your position – “We may have fond memories of the Pink Bank but we knew then and we know now that it has no significant historical or architectural value”; or 5) run a “Bear Hug” – embrace the opposition’s point and use the opportunity and platform to good naturedly reinforce your position – “We support historic preservation but it undermines the value of other historic resources to designate marginal or inappropriate properties”.

The book provides invaluable ideas for times of strategic planning and for periods of crisis management.

The Elements of Influence decodes the plays that land use practitioners use, and opposition to projects use against everyday. The book outlines how to use the plays, how to recognize a play being used against you, and also importantly, which are the most effective moves to counter opposing plays. The information in this book will serve as a resource in your land use practice for years to come.

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It is a great honor to become a member of the American College of Real Estate Lawyers. The Section would like to recognize the achievement of the following Maryland members:

Thomas C. Barbuti
Douglas M. Bregman
Priscilla K. Carroll
Timothy D. A. Chriss
Ronald P. Fish
Morton P. Fisher, Jr.
David H. Fishman
Jan K. Guben
Nancy Haas
William M. Harvey
John P. Healy
James A. Kenney, III
David M. Kochanski
Arnold J. Kohn
Harry W. Kerch
Edward J. Levin
James C. Oliver
Mark Pollak
Gregory Reed
Russell R. Reno, Jr.
J. Paul Rieger, Jr.
Linda D. Schwartz
Kevin L. Shepherd
Lawrence A. Shulman
John W. Steele, III
Raymond G. Truitt
Roger D. Winston
Fred Wolf, III
James D. Wright

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