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January 31, 2009

Fraud Not Part of Claim For Damages Under Real Estate Disclosure Act

 

Fraud Not Part of Claim For Damages Under Real Estate Disclosure Act  

- by Roger McEowen

December 29, 2008

Iowa law requires real estate sellers to provide a written disclosure statement to prospective buyers that details the condition and characteristics of the property.  The law is known as the Iowa Real Estate Disclosure Act (Act), and it authorizes an aggrieved buyer to recover actual damages resulting from a violation of the Act.  But, must the buyer establish that the seller defrauded the buyer as a condition of recovering under the Act?  That was the question presented in this case.

The plaintiffs bought a home from the defendants who had lived in the home for several years.  They had experienced water problems in their basement and performed drainage work around the house to help correct the problem.  They also replaced basement cabinets and carpet, and painted the basement walls.  During the process of selling the home, the defendants executed a disclosure statement on which they claimed that there was no known water or other problems with the basement or foundation, no known settling, flooding, drainage or grading problems and no known structural damage.  However, after the plaintiffs purchased the residence, they experienced basement flooding during rainstorms which damaged the carpet, drywall and cabinets.   The plaintiffs sued under the Act to recover their damages.

The trial court ruled for the defendants even though the court determined that the defendants knowingly made false statements on the disclosure document.  The court believed that the Act required an aggrieved buyer to establish that they were damaged because they reasonably relied on the seller’s false representations.  Here, the trial court determined that the plaintiff had failed to meet that requirement.  But, does the act require the buyer to prove reliance on the seller’s false statements?  That was the issue on appeal.

The appellate court reversed the trial court, holding that the Act does not require an aggrieved buyer to prove fraudulent misrepresentation as an element of “reliance” under the Act.  There is no need to prove fraud or reliance on that fraud.  The Act only requires that the buyer show that the seller had actual knowledge of a problem concerning the property that was not disclosed.  Here, the buyers justifiably relied on the disclosure document in deciding to buy the property and there were no outward signs of water damage that would have put the plaintiffs on notice of problems.  The court also determined that the water damage was proximately caused by the problems that were not disclosed on the disclosure document.  On the damage issue, the court noted that Iowa law allows for some degree of speculation, but that the damages needed to be adjusted on remand to account for deconstruction and remodeling costs.  Hammes v. JCLB Properties, LLC, No. 8-570/07-1815 (Iowa Ct. App. Dec. 17, 2008).  

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- by Roger McEowen

December 29, 2008

Iowa law requires real estate sellers to provide a written disclosure statement to prospective buyers that details the condition and characteristics of the property.  The law is known as the Iowa Real Estate Disclosure Act (Act), and it authorizes an aggrieved buyer to recover actual damages resulting from a violation of the Act.  But, must the buyer establish that the seller defrauded the buyer as a condition of recovering under the Act?  That was the question presented in this case.

The plaintiffs bought a home from the defendants who had lived in the home for several years.  They had experienced water problems in their basement and performed drainage work around the house to help correct the problem.  They also replaced basement cabinets and carpet, and painted the basement walls.  During the process of selling the home, the defendants executed a disclosure statement on which they claimed that there was no known water or other problems with the basement or foundation, no known settling, flooding, drainage or grading problems and no known structural damage.  However, after the plaintiffs purchased the residence, they experienced basement flooding during rainstorms which damaged the carpet, drywall and cabinets.   The plaintiffs sued under the Act to recover their damages.

The trial court ruled for the defendants even though the court determined that the defendants knowingly made false statements on the disclosure document.  The court believed that the Act required an aggrieved buyer to establish that they were damaged because they reasonably relied on the seller’s false representations.  Here, the trial court determined that the plaintiff had failed to meet that requirement.  But, does the act require the buyer to prove reliance on the seller’s false statements?  That was the issue on appeal.

The appellate court reversed the trial court, holding that the Act does not require an aggrieved buyer to prove fraudulent misrepresentation as an element of “reliance” under the Act.  There is no need to prove fraud or reliance on that fraud.  The Act only requires that the buyer show that the seller had actual knowledge of a problem concerning the property that was not disclosed.  Here, the buyers justifiably relied on the disclosure document in deciding to buy the property and there were no outward signs of water damage that would have put the plaintiffs on notice of problems.  The court also determined that the water damage was proximately caused by the problems that were not disclosed on the disclosure document.  On the damage issue, the court noted that Iowa law allows for some degree of speculation, but that the damages needed to be adjusted on remand to account for deconstruction and remodeling costs.  Hammes v. JCLB Properties, LLC, No. 8-570/07-1815 (Iowa Ct. App. Dec. 17, 2008).  

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San Diego Unified Sch. Dist. v. County of San Diego, No. D052082

California Appellate Districts, January 20, 2009
San Diego Unified Sch. Dist. v. County of San Diego, No. D052082
In an action brought by plaintiff-school district against defendant-county for environmental problems and remediation costs incurred at plaintiff's property due to ongoing effects of an inactive landfill operated by defendant in the 1960's, summary judgment in favor of defendant-county is reversed where: 1) the trial court erred as a matter of law in deciding that the latent construction defect limitations period was dispositive of all of plaintiff's contractual and indemnification theories; 2) triable issues of fact remained on alternative grounds on which the County sought summary judgment, the different limitations bars of section 337, subdivision (1) and Government Code section 911.2; and 3) the other noncontractual causes of action by the District, such as nuisance and trespass, were not subject to the bar of section 337.15. Read more...
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A Subsequent Owner Is Liable for Prior Owner's Violations of Rent Control Ordinance

 

 

A Subsequent Owner Is Liable for Prior Owner's Violations of Rent Control Ordinance  

By Danielle Gensch and Brendan Macaulay
January 21, 2009  

Prospective owners and, in the current foreclosure climate, financial institutions should be aware of Baychester Shopping Center, Inc. v. San Francisco Residential Rent Stabilization and Arbitration Board , 165 Cal.App.4th 1000 (2008).  In a case arising out of the San Francisco rent control ordinance, a court held a current owner of an apartment building liable for rent overpayments relating back to the ownership period of a prior owner.  Although certain details of the case are unique to the San Francisco rent control ordinance, purchasers should perform due diligence on rent control and inclusionary housing ordinances and negotiate for adequate representations and, if necessary, post-closing security on such representations.  

The Case  

In late 2005, Baychester Shopping Center (Baychester) contracted to buy a 9 unit residential apartment building.  In October 2005, a tenant, who had lived there since 1991, filed a claim with the San Francisco Residential Rent Stabilization and Arbitration Board (Board).  The tenant claimed that his rent had increased more than was allowed under San Francisco's rent control ordinance, which is administered by the Board.  In December 2005, Baychester closed on its purchase of the building.  In February 2006, an administrative judge determined that the tenant had been overcharged and ordered Baychester to repay the tenant.  Baychester appealed, first to the Board, then to the San Francisco Superior Court and finally to the California Court of Appeals.  CLICK HERE TO CONTINUE

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Oceans 21" - A New Way to Regulate Air Emissions and Land Use?

Land Use
 

"Oceans 21" - A New Way to Regulate Air Emissions and Land Use?

By George J. Mannina, Jr.
January 21, 2009

On January 6, 2009, Congressman Farr (D. Cal.) introduced H.R. 21.  Dubbed "Oceans 21" by its supporters, this bill directs federal agencies to (1) implement the National Ocean Policy established in H.R. 21 "to the fullest extent possible" and (2) within two years issue regulations to "ensure" that actions authorized, funded, carried out, permitted, or licensed by such agencies are consistent with H.R. 21's National Ocean Policy. 

H.R. 21 states that the National Ocean Policy "shall" be implemented to "protect, maintain, and restore marine ecosystem health."  The bill defines "marine ecosystem health" as the ability of an ecosystem to sustain a "complete diversity" of species and the "physical, chemical, geological, and microbial" environment necessary to maintain that complete diversity.  H.R. 21 also provides that the National Ocean Policy "shall" be implemented such that "the lack of scientific certainty should not be used as justification for postponing action to prevent negative environmental impacts."  Finally, H.R. 21 directs that the National Ocean Policy "shall' be implemented such that federal agencies recognize (1) the "interconnectedness of the land, atmosphere including climate, and oceans," and (2) "that actions affecting one of these, such as climate, are likely to affect another, such as ocean resources." 

Companies discharging directly to the oceans, or engaged in activities that result in runoff or other discharges to rivers and streams that empty into oceans, will be regulated under H.R. 21's strict prohibitions.  So too will companies contributing to air emissions that are alleged to affect ocean temperatures or ocean acidification.  While legislators and lobbyists are focused on global warming legislation, H.R. 21 provides federal agencies with a backdoor way to regulate air emissions and to force revisions to EPA regulations, using what amounts to an "ensure no harm to the oceans" standard.  H.R. 21 may also be a way to establish a federal zoning program to regulate any land use in a watershed that empties into an ocean.  Given that 40% of the land mass in the lower 48 states drains into the Mississippi River alone, the potential regulatory reach of H.R. 21 cannot be overstated.

H.R. 21 was introduced with 26 co-sponsors.  The environmental community has made this bill a top legislative priority and the bill sponsors are pushing for quick Congressional action.

George Mannina is a Partner in Nossaman's Washington, DC office who has more than three decades experience with environmental litigation and government relations.  He has demonstrated expertise with oceans and fisheries law, the Endangered Species Act (ESA), the Superfund Natural Resource Damages and the Clean Water Act (CWA).  He can be reached at 202.887.1491 or gmannina@nossaman.com.

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2008 Eminent Domain Year in Review

2008 Eminent Domain Year in Review

By Rick E. Rayl and Michael G. Thornton
January 29, 2009

When we look back on what happened in eminent domain in 2008, the most striking thing may be how little happened.  After three years of living with the aftermath of the Kelo decision, in 2008 things returned more to "normal."  On the legislative front, not a single important piece of eminent domain legislation was enacted.  At the ballot, the dramatic changes proposed by Proposition 98 were rejected by voters, while the moderate reforms promised by Proposition 99 curried the voters' favor.  In the courts, the list of published eminent domain decisions was relatively small - and those opinions that were published tended to shape or clarify some of the broader cases from the past couple of years, rather than create sweeping changes in the law. 

All of that said, a few notable things did occur, and what follows is the Nossaman Eminent Domain and Valuation Practice Group's 2008 Year in Review. 

The Ballot

Following the Supreme Court's 2005 decision in Kelo v. City of New London, 545 U.S. 469 (2005), California saw perhaps the largest wave of proposed eminent domain reforms in history.  By mid-2008, however, the post-Kelo momentum behind eminent domain reform had stalled.  This likely resulted from the June 2008 passage of Proposition 99.  Proposition 99 was placed on the ballot to compete with the more ambitious reforms proposed in Proposition 98 (in large part, a successor to 2006's failed Proposition 90).  Proposition 99 passed, and while it may not in fact effect any significant reform, it may be that the mere passage of "eminent domain reform" was enough to divert the public's attention. 

Proposition 99 was crafted as a counterproposal to Proposition 98.  It was promoted as eliminating the government's ability to condemn residential property for the purpose of turning the property over to a private developer.  Its goals were far more modest than those of Proposition 98; its substantive provisions focused solely on protecting owner-occupied homes. The measure contained a provision which stated that if both Propositions 98 and 99 passed, Proposition 99 would trump Proposition 98 as long as it received more votes.  This "kill" provision provides some insight into the purpose behind Proposition 99.  Indeed, some have opined that if it accomplished nothing more than helping to defeat Proposition 98, its proponents would view it as a success. 

Since Proposition 99 was approved by California's voters, it appears the push for the more radical "Proposition 90/98"-type reforms have stalled.  We are not aware of any further Propositions being circulated for signatures in California regarding eminent domain.  CLICK HERE TO CONTINUE

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California Appellate Districts, January 28, 2009
California Native Plant Soc'y v. County of El Dorado , No. C057083
In plaintiff-environmental society's challenge to defendant-county's approval of a congregate care construction project under California Environmental Quality Act (CEQA) and county's General Plan claiming the project would harm two rare plants, judgment in favor of defendant-county is reversed where: 1) the impact fee allowed approval of projects within the relevant environmentally fragile area, but did not eliminate the need to evaluate and address the impacts on plants of a particular project in the area; 2) there was substantial evidence in the record to raise a fair argument that the project may have significant environmental impacts on one or more endangered plant species; and 3) the mitigated negative declaration (MND) should not have been certified and an environmental impact report (EIR) was required for this project. Read more...

California Appellate Districts, January 28, 2009
Great Oaks Water Co. v. Santa Clara Water Valley Dist., No. H032067
In plaintiff-water company's challenge to defendant-district's use of a statutory rate-setting exemption from the California Environmental Quality Act (CEQA), trial court judgment denying petition for writ of mandate is affirmed over claims of error that: 1) defendant-district abused its discretion by failing to proceed in a manner required by law because it did not set forth with specificity the factual or evidentiary basis for its finding that its adoption of groundwater-rate increases fell within the statutory rate exemption; and 2) defendant's district's finding of the exemption's applicability was not supported by substantial evidence in the administrative record. Read more...

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January 23, 2009

COMMERCIAL ISSUES

COMMERCIAL ISSUES
NAR President Charles McMillian Advocates for Commercial Real Estate
Link to the attached podcast to hear Charles McMillian describe how he is leading NAR's effort to ensure that the interests of commercial members are being included in any economic stimulus proposals that are being considered by Congress. For more information¸ visit...
http://www.realtor.org/wps/wcm/connect/b5a41! 5004cbc1 8ce8bb8ffa604fae89e/NAR+Presidents+Podcast_012009.mp3?MOD=AJPERES&CACHEID=b5a415004cbc18ce8bb8ffa604fae89e&WT.mc_id=LS012109&CAT=Comm

Cutting Edge Commercial Ed in February
Join the RCA online for two commercial Webinars in February: "Industrial Properties: 15 Things You Must Know to Lead the Field" on Feb. 19 and "299 People You Have to Get to Know... and the Strategies to Make Them Your Friends" on Feb. 20. Each 60 to 75 minute engaging and interactive online presentation is followed by an extensive Q&A session and includes written materials plus the opportunity to review the session recording for a limited time after the event. Cost: $49 for NAR/RCA members with either of these coupon codes hsemeffusf or kefidduguv To register¸ go to...
http://www.realtor.org/narlservredirect.nsf/pages/NT0000119A?OpenDocument&WT.mc_id=LS012109&CAT=Comm
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January 22, 2009

Helping Us Help Ourselves

Helping Us Help Ourselves
NCR's global real estate activity follows the lead of a 'deep and wide' corporate strategy.

 

 Site Selection: Walk us through the site selection process for this Atlanta project.
      JM: There are a few things we look at when we make the real estate decision. First and foremost, the customer, which leads into our Strategic Long-Range Planning [SLR] process – strategies to enhance and improve the customer experience for existing customers, as well as to acquire new customers. Our real estate organization, as a support organization, provides some of the pillars to the top-level strategies that the global sales and marketing team pulls together.
      Some key criteria are: What capabilities are required in terms of human capital and physical capital? And how do we ensure alignment between the two, and, most importantly, the customer. When looking at the opportunities, a big driver for us is "Where can you source talent?" We will look and see if it's engineering talent, training, customer engineering, product management, marketing talent or procurement talent. That varies by region within the U.S. even. There are universities that have strong electrical engineering programs, and some have strong procurement programs. We look at where we can hire the best and most talented resources. Where do they want to be? Georgia was attractive to us. We looked at demographics, universities, programs the universities have at the R&D level.
      Ways we can improve the customer experience – that's probably the single greatest driver for us.
      We have to be located close to a major airport, cutting down on transportation time, and ensuring we have the capability and flexibility to deliver on customer requirements. We need the ability for an employee to get on an airplane and travel to a customer site. Also, we look at what type of incentives the local and state governments are willing to provide, to demonstrate their ongoing commitment to attracting top talent to their communities.
http://www.siteselection.com/issues/2009/jan/NCR-QI/

 

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Commercial Real Estate Exposure Catches Banks in Economic Downdraft

Commercial Real Estate Exposure Catches Banks in Economic Downdraft

Banks Report Deterioration in Nonresidential Loan Portfolios, Tighten Purse Strings

The other shoe has dropped. Banks began issuing their fourth quarter reports this week and a potential major trend appears to be the negative effect deteriorating business conditions are beginning to have on the credit quality of their commercial real estate loan portfolios. In addition, banks are reporting they expect the credit quality of their portfolios will only continue to worsen.

Not surprisingly, bankers also noted that the overall demand for loans has declined and so has the credit quality of prospective borrowers. Their response has been to tighten lending criteria and/or focus primarily on the most creditworthy clients.

http://www.costar.com/News/Article.aspx?id=3DACFB68FD19173FE6469086235DC5AC&ref=100&iid=115&cid=2F87810CEAB2B5ABAEEA4D28C926076F

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January 20, 2009

Forward Focus: How to Future Proof Your Property

Forward Focus: How to Future Proof Your Property

Joe Bousquin discusses how you can future proof your property so that you can attract residents today and down the road. Watch this free, on-demand webinar to learn about the evolving technology for multifamily dwellings and how to integrate it effectively.


https://event.on24.com/eventRegistration/EventLobbyServlet?target=registration.jsp&eventid=120418&sessionid=1&key=98E3507207597EDFF7FD55005BB84A2B&partnerref=webpromo&sourcepage=register
Speaker:

Joe Bousquin, Contributing Editor, Multifamily Executive

Joe Bousquin highlights the apartment industry’s latest technology trends each month in Multifamily Executive’s award-winning Tech Specs column. Querying the industry’s top professionals, Bousquin examines and writes about the technological, organizational and business implications posed by the ever-evolving state of technology in multifamily ownership and management. As broadband Internet access and applications mature from exotic perks to must-have utilities for apartment dwellers, Bousquin looks for the next-generation developments that will ultimately affect the third of the U.S. population living in rental housing. A former staff writer for the Wall Street Journal and TheStreet.com, Bousquin seeks to balance tech’s gee-whiz factor with the real-world ROI needed to justify each new implementation. He lives in Sacramento, California.
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Developer News

— With the increasing national focus on all things environmental, it's little wonder the EPA is cracking down on Clean Water Act violators. In 2006, the agency identified home building and big-box construction as two areas in need of improved stormwater management. And last year, three big builders—Pulte, Centex, and KB—each paid more than $1 million in fines for stormwater infractions.

http://www.developeronline.com/topics/news/

Developer News

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January 19, 2009

From: HUD USER News


From: HUD USER News
 
Annual rent adjustments are required for housing units
receiving assistance under Section 8 of the U.S. Housing
Act of 1937. To help meet this requirement, HUD has
developed rent adjustment factors, known as the Annual
Adjustment Factors (AAFs). AAFs are calculated based on
changes in residential rent and utility costs for
specified geographic areas, according to Bureau of Labor
Statistics Consumer Price Index survey data. The AAFs for
2009 were published in the Federal Register on January
12, 2009 and are available electronically from HUD USER
at www.huduser.org/datasets/aaf.html.
 
Separate rent adjustment procedures are used for each of
three program categories:
 
o Section 8 New Construction, Substantial
  Rehabilitation, and Moderate Rehabilitation programs;
 
o Loan Management and Property Disposition programs; and
 
o Section 8 Certificate Project-Based Certificate
  program.
 
The adjustments are shown in two schedules: one for
adjusting the rent of units where the highest-cost
utility is included in the contract rent, and the other
for units where the tenant pays for the highest-cost
utility. Separate AAF schedules are also shown for
specified geographic areas. 
 
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January 18, 2009

Birke v. Oakwood Worldwide, No. b203093

Birke v. Oakwood Worldwide, No. b203093
In a nuisance case over an apartment complex's obligation to eliminate second hand smoke, grant of demurrer is affirmed in part, reversed in part and remanded where plaintiff properly pleaded a public nuisance complaint by alleging that: 1) defendant, by failing to act, created a condition that was harmful to health or obstructed the free use of the common areas of the apartment complex so as to interfere with the comfortable enjoyment of life or property; 2) the condition affected a substantial number of people at the same time; 3) an ordinary person would be reasonably annoyed or disturbed by the condition; 4) the seriousness of the harm outweighed the social utility of defendant's conduct; 5) neither plaintiff (a minor) nor her parents consented to the conduct; 6) plaintiff suffered harm that was different from the type of harm suffered by the general public because she was a resident of the complex unable to enjoy its outdoor facilities; and 7) defendant's conduct was a ! substantial factor in causing plaintiff's harm. Read more...

California Appellate Districts, January 12, 2009

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January 13, 2009

REQUIRED READING: Avoid Common Liabilities Linked To Brownfield Lending

REQUIRED READING: Avoid Common Liabilities Linked To Brownfield Lending
on 09 Jan 2009 by Craig Carbrey email the content item print the content item
As turmoil continues to sweep across the capital markets, both transactional volume and real estate development have come to a grinding halt. With virtually no liquidity available in the market, developers across all product types have entered a tenuous wait-and-see period. While financing will continue to pose a significant roadblock to the majority of development in the immediate future, there [read more]
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January 12, 2009


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January 09, 2009

January Realtors

Correction Regarding January REALTORS® Commercial Alliance Webinars
In the last edition, an error was written about the REALTORS® Commercial Alliance Webinars scheduled for this month. They were promoted as "free" -- but the cost of each is $49 for NAR/RCA members (regularly $89) Discount Code: fohurolddd The first seminar is online on Jan. 22 and features Top Dogs founders, Bob McComb and Peter Droubay presenting tools to fast-track your knowledge about office space and office building brokerage including leases, sales, specific vocabulary insight and property types.  For more information¸ visit...
http://www.realtor.org/narlservredirect.nsf/pages/NT0000117E?OpenDocument&WT.mc_id=LS010709&CAT=Comm

Commercial Real Estate Outlook Dampened
With the exception of cash transactions, investment activity in commercial real estate sectors is nearly at a standstill because commercial lending has essentially halted, while job losses are curtailing the demand for space, according to the latest Commercial Real Estate Outlook. Lawrence Yun, NAR chief economist, said there are serious structural problems in commercial lending. The NAR forecast covers the office, industrial, retail and multifamily markets. Read more...
http://www.realtor.org/press_room/news_releases/2008/commercial_real_estate_outlook_dampened?&WT.mc_id=LS010709&CAT=Comm

In-Your-Favor Tax Strategies
REALTORS® Land Institute is launching its unique web seminar series on Tuesday, January 27, 2009, at noon CT with "Tax & Financial Planning Strategies for Today's Economy." Given the huge impact of today's economic trends on the land business, don't miss this just-in-time information for reducing your taxes and for increasing commissions. Read more...
http://www.realtor.org/narlservredirect.nsf/pages/NT00001172?OpenDocument&WT.mc_id=LS010709&CAT=Comm
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January 08, 2009

This Year, Pain To Replace Gain

This Year, Pain To Replace Gain

Nary a Bright Spot in CoStar Group’s First-Ever State of the Market/Industry Outlook

The pain felt throughout the U.S. housing market over the past two years is going to catch up with commercial real estate in 2009 when the country will begin to see spikes in office vacancy rates climbing as much as 300 to 400 basis points with many markets expected to experience severe negative net absorption.

That was the assessment of Andrew Florance, founder and CEO of CoStar Group Inc., as presented in the company’s first-ever 2009 State of the Office Market review and outlook delivered this afternoon from its Bethesda, MD, headquarters and webcast to CoStar clients across the country.

Florance’s presentation laid out the economics and fundamentals detailing the impact of the financial meltdown on commercial real estate, finding little upside to report with all indicators projecting continued:
  • Constraint in the credit markets,
  • Dearth of investment and construction activity,
  • Corporate space contraction, and
  • Falling property values.



The outlook is now for the current recession to take a higher toll, for a longer time, on commercial real estate than did the dot.com bubble burst of 2001-2002.

Rather than try to reproduce the entire presentation or beat the dead horse that is the economy, here is recap of just some of the highlights

http://www.costar.com/News/Article.aspx?id=82F65EB97E014D8671AC245889156995&ref=100

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January 07, 2009

New Commercial Listings Web Site

New Commercial Listings Web Site

Visit CommercialSource.com, the Commercial Real Estate Marketplace, and check out the new commercial property listings platform that gives listings national exposure to members at no charge. Get your Association on board today!

Read more >
Visit the site >

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January 06, 2009

Settlement Clears Way for Continued Funding of New Jersey Superfund Cleanup

Settlement Clears Way for Continued Funding of New Jersey Superfund Cleanup

WASHINGTON—A multi-party settlement involving the federal government, the state of New Jersey and approximately 300 parties will ensure that clean-up efforts continue to be funded at the Combe Fill South Superfund Site Landfill (CFS) in Morris County, N.J., the Justice Department and the U.S. Environmental Protection Agency announced today.

Among the many parties potentially responsible for contamination at the site are Honeywell International Inc., Warner-Lambert Company doing business as Pfizer, the Colgate-Palmolive Company as a successor to The Mennen Company, Mars Inc., and Waste Management.

Under terms of a consent decree lodged in the U.S. District Court in Newark, N.J., the defendants will pay at least $61 million in past costs with interest running from Dec. 8, 2007 with up to an additional $8 million as other municipal defendants join; pay more than $3.2 million for natural resource damage claims to be used for restoration projects; and purchase a $27 million annuity paying $900,000 a year for 30 years for the continued performance of the remedy.

The CFS site is contaminated with both chemical wastes and refuse as a result of its use as a sanitary landfill from the early 1950s until it was closed down in 1981. A 1986 EPA Record of Decision called for the containment of the waste through a landfill cap and continuous operation of a pump and treat facility. The cap and pump and treat facility have been in place for more than 10 years. The state is currently conducting a study of the deep aquifer to determine what additional work may be required.

"Today’s agreement is an excellent result that recovers money spent by federal and state agencies to clean up contamination at the site and provides funding for the remaining work for years to come," said Michael Guzman, Principal Deputy Assistant Attorney General for the Justice Department’s Environment and Natural Resources Division. "This legal action, which has spanned more than 10 years, is an example of the Justice Department’s dedication to protecting the environment and taxpayer dollars while holding those responsible for the costs of cleanup."

"With this important settlement, we are recovering most of the money that EPA and the state spent to clean up this site," said Alan J. Steinberg, EPA Region 2 Administrator. "This is an example of Superfund working just as it should. We went forward with the cleanup while still pursuing those responsible for the contamination, with today’s successful result."

The CFS site is located in Chester and Washington Townships in Chester, N.J. Contaminants found in the ground and surface waters include benzene, ethylbenzene, toluene and chlorethane.

The consent decree, lodged in the U.S. District Court in Newark, New Jersey, is subject to a 30-day federal comment period and a statutory state comment period, as well as final court approval. The consent decree is available on the Justice Department Web site at www.usdoj.gov/enrd/Consent_Decrees.html.

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President’s Corporate Fraud Task Force Adds Six New Member Agencies

President’s Corporate Fraud Task Force Adds Six New Member Agencies

WASHINGTON – The President’s Corporate Fraud Task Force has been expanded to include six new agencies to help in the focus on mortgage and securitization fraud cases, Deputy Attorney General Mark R. Filip, the Task Force Chairman, announced today.

 The Task Force’s expanded roster includes the Federal Housing Finance Agency, the Office of the Comptroller of the Currency, the Office of Thrift Supervision, the Federal Reserve, the Department of Housing and Urban Development, and the Special Inspector General for the Troubled Asset Relief Program (TARP). The new member agencies represent a continuing focus by the Task Force to crack down on mortgage fraud, particularly with regard to ongoing investigations into securitization fraud. The additions mark the largest expansion of the Task Force since it was formed in July 2002.

 “The Task Force is uniquely suited to providing the kind of thoughtfulness and collaboration that can be invaluable in tackling mortgage fraud at the corporate level, and in trying to analyze whether and when law enforcement action is appropriate,” said Deputy Attorney General Filip. “These new members reflect the breadth and depth of the mortgage crisis that we are now confronting, and the urgency of the task before us.”

In addition to remarks by the Deputy Attorney General, the Task Force was briefed today by representatives from several of the regulatory agencies on their efforts to tackle mortgage fraud and heard from the Special Inspector General of the newly formed TARP.

The Task Force’s current members include the Assistant Attorneys General for the Justice Department’s Civil and Tax Divisions, the Director of the FBI, seven U.S. Attorneys Offices, the Secretaries of the Departments of Treasury and Labor, and the heads of the Securities and Exchange Commission, Commodity Futures Trading Commission, Federal Energy Regulatory Commission, Federal Communications Commission, United States Postal Inspection Service, and the Department of Housing and Urban Development's Office of Federal Housing Enterprise Oversight.

Since July 2002, the task force has yielded remarkable results with nearly 1,300 corporate fraud convictions to date, including more than 200 chief executive officers and presidents, more than 120 corporate vice presidents, and more than 50 chief financial officers.

President Bush created the President’s Corporate Fraud Task Force on July 9, 2002 to restore public and investor confidence in America’s corporations following a wave of major corporate scandals. Since its inception, the Task Force has compiled a strong record of combating corporate fraud and punishing those who violate the trust of employees and investors. Prosecutors and agency attorneys who are part of the Task Force have brought charges for accounting fraud, securities fraud, insider trading, market manipulation, wire fraud, obstruction of justice, false statements, money laundering, Foreign Corrupt Practices Act violations, stock option backdating and conspiracy, among others. More information on the task force can be found at http://www.usdoj.gov/dag/cftf/ .

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Columbus, Ohio, Accountant Sentenced to 120 Months for Fraud

Columbus, Ohio, Accountant Sentenced to 120 Months for Fraud

WASHINGTON – Dennis G. Sartain of Hilliard, Ohio, was sentenced to 120 months in prison by U.S. District Judge Michael H. Watson, the Justice Department and Internal Revenue Service (IRS) announced today. The judge found the tax loss to be more than $1million and the fraud loss to be nearly $3.7 million.

 

In November 2007, a federal grand jury returned a superseding indictment against Sartain, charging him with conspiracy to defraud the United States, four counts of aiding in the filing of false tax returns, one count of aiding and abetting credit and loan application fraud and one count of aiding and abetting money laundering. In February 2008, Sartain pleaded guilty to all charges. According to court documents, Sartain was the accountant for two Columbus, Ohio, businesses involved in home building and real estate brokerage services.

 

According to the indictment, Sartain conspired with others to pay the Realtors and others who worked for these two companies "under the table." Court documents asserted that Sartain either prepared false Forms 1099 that underreported the amount of compensation paid to the individuals working for the companies, or he did not prepare and file any Forms 1099 with the IRS reporting any compensation paid. In addition, the superseding indictment alleged that Sartain prepared or helped prepare false individual income tax returns that underreported the income earned and taxes owed by the individuals who had received payments from these companies. Finally, the indictment claimed that Sartain and others shredded and discarded documents and business records and concealed electronic records maintained on computers and memory sticks that were relevant to the investigation.

Sartain also pleaded guilty to filing false individual income tax returns on behalf of himself and his wife. He did not report all of the income he was paid by one of these companies in the years 2001 through 2004. According to the superseding indictment, in two of those four years, Sartain listed his occupation as "unemployed."

Additionally, Sartain admitted aiding in the submission of a false loan application by helping submit false payroll check stubs to a mortgage company. The false payroll stubs misrepresented the loan applicant’s position and salary for the purpose of fraudulently obtaining a mortgage.

Finally, Sartain aided and abetted money laundering by engaging in conduct that contributed to a $54,295 payment to the buyer of a home sold by a local real estate business, according to court documents. That payment represented excess fraudulently obtained loan proceeds derived from the credit and loan application fraud.

"Today’s sentence shows that taxpayers who fail to comply with their federal tax obligations or assist others in doing so will pay a heavy price," said Nathan J. Hochman, Assistant Attorney General of the Justice Department’s Tax Division. "Mr. Sartain has been branded a convicted felon for the rest of his life, will spend ten years in prison, and still has to pay back all of the taxes plus interest and steep penalties."

"Paying individuals ‘under the table’ in an effort to circumvent the tax laws is criminal activity," said Eileen Mayer, IRS Chief, Criminal Investigation. "Unfortunately, there are individuals who are relentless in their efforts to thwart our nation's tax laws; however, we are equally relentless in our efforts to investigative these individuals and hold them accountable."

In addition to the charges for which he was sentenced today, Sartain faces additional charges stemming from a September 2008 indictment for conspiracy, obstruction of justice and witness tampering. This matter is currently scheduled for a December 2008 trial.

Assistant Attorney General Hochman commended the IRS special agents who investigated the case, as well as Tax Division trial attorneys Richard M. Rolwing, Jill M. Cassara and Sean B. O’ Connell, who prosecuted the case.

More information about the Justice Department’s Tax Division and its enforcement efforts is available at http://www.usdoj.gov/tax/

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Former Chief Operating Officer Pleads Guilty in $132 Million Scheme to Defraud Clients of Funds Allegedly Held in Trust

Former Chief Operating Officer Pleads Guilty in $132 Million Scheme to Defraud Clients of Funds Allegedly Held in Trust

WASHINGTON - A former chief operating officer of Investment Properties of America, based in Richmond, Va., pleaded guilty today to conspiring to commit mail and wire fraud and to making a material false statement to federal investigators, Acting Assistant Attorney General Matthew Friedrich of the Criminal Division and Acting U.S. Attorney Dana Boente for the Eastern District of Virginia announced.

On July 10, 2008, a federal grand jury returned a superseding indictment against Lara Coleman, 40, for her role in a scheme to defraud and obtain millions of dollars in client funds held by the 1031 Tax Group (1031TG), a qualified intermediary company owned by the same person who owned Investment Properties of America.

Coleman, a resident of Houston, entered the guilty plea in U.S. District Court in Richmond before U.S. District Judge Robert E. Payne. Coleman pleaded guilty to one count of the superseding indictment that charged her with conspiracy to commit mail and wire fraud and to a one-count information charging her with making a material false statement to federal investigators.

According to the plea agreement and statement of facts, Coleman and others used 1031TG and its subsidiaries in a scheme to obtain millions of dollars of client funds by false pretenses. Section 1031 of the Internal Revenue Code allows investment property owners to defer the capital gains tax that would otherwise be due on properties sold, if the proceeds are used to purchase new property in a specified time frame. To facilitate such exchanges, investment property owners deposit the proceeds from the sale of their property with qualified intermediaries and sign exchange agreements, which include various promises by the qualified intermediaries to clients regarding the safekeeping of exchange funds in trust.

In the plea agreement and statement of facts, Coleman admitted that 1031TG falsely represented that it would hold client funds solely to complete the clients’ 1031 exchanges. Coleman admitted that after obtaining clients’ exchange proceeds with that false promise, she and others misappropriated approximately $132 million in client funds to support the lavish lifestyle of the owner of 1031TG, pay operating expenses for the owner’s various companies, invest in commercial real estate and purchase additional qualified intermediary companies to obtain access to additional client funds. In addition, Coleman admitted that she lied to federal investigators about statements that she had made in 2006 to internal attorneys for Investment Properties of America about the amount of money that she and others had misappropriated.

Coleman has agreed, under the terms of the plea, to a sentence of 10 years in prison. At sentencing, scheduled for May 1, 2009, she also faces a $500,000 fine. In addition, the indictment seeks forfeiture of all funds and assets owned by Coleman that were derived from or connected to the misappropriation of the approximately $132 million in 1031TG funds.

In related cases, Robert D. Field II and Richard E. Simring have pleaded guilty to participating in the conspiracy to defraud 1031TG customers. Field was the chief financial officer and Simring was the chief legal officer of a holding company that was set up, in part, to oversee both Investment Properties of America and 1031TG, however neither company was ever officially made a subsidiary of the holding company. Both men are also scheduled to be sentenced on May 1, 2009.

This case is being prosecuted by Assistant U.S. Attorney Michael S. Dry for the Eastern District of Virginia and Trial Attorney Brigham Cannon of the Criminal Division’s Fraud Section. This continuing investigation is being conducted by the U.S. Postal Inspection Service, Internal Revenue Service and the FBI.  (1031 Appraiser, Appraisal)

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January 02, 2009

CIVIL PROCEDURE, CLASS ACTIONS, GOVERNMENT LAW, PROPERTY LAW & REAL ESTATE
Anderson v. US Dep't of Hous. & Urban Dev., No. 07-31008
Class certification was incorrectly granted to a group of displaced residents of four storm-damaged public housing developments in New Orleans. District court's authority to certify a class under Rule 23 does not permit it to structure a class around claims that the displaced residents never pled. Read more...

 

BANKING LAW, CONSTRUCTION, CONSUMER PROTECTION LAW, CONTRACTS, INJURY AND TORT LAW, PROPERTY LAW & REAL ESTATE
Alpine Bank v. Hubbell, No. 07-1190
In a lawsuit arising after plaintiffs failed to repay a construction loan made by plaintiff-bank, summary judgment against defendants-homeowners on all claims and on their counterclaims is affirmed where: 1) a contract counterclaim, based on an alleged breach of the contractually implied duty of good faith and fair dealing arising from bank's failure to oversee the construction, was barred by a provision in the parties' agreement; 2) for purposes of negligent-misrepresentation counterclaims, one alleged misrepresentation regarding the contractor was nonactionable puffery and the others lacked the requisite state of mind; 3) bank did not have a duty to disclose negative information regarding the construction or the contractor; and 4) bank's advertising slogan did not violate the Colorado Consumer Protection Act. Read more...


commercial appraiser

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COMMERCIAL ISSUES

COMMERCIAL ISSUES
Free Commercial Webinars in January
Start off the year with new knowledge and make 2009 successful with two free educational webinars from the REALTORS® Commercial Alliance. Join us online Jan. 22 to develop your expertise in office properties and on Jan. 23, to learn how to create 400 loyal commercial accounts?fast. Register today for these 60 to 75 minute engaging and interactive online presentations followed by an extensive Q&A session. Cost $49 each with discount code: fohurolddd. For more info and to register... visit...
http://www.realtor.org/narlservredirect.nsf/pages/NT0000116E?OpenDocument&WT.mc_id=LS123108&CAT=Comm
commercial appraiser, commercial appraisal
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