William and Melissa bought their home in 1986, purchasing an owner’s title insurance policy from First American Title Insurance Co. The following year, they decided to sell their home and buy another.
They contracted to sell their home for $136,000. The title insurer for the buyers discovered an old town ordinance that provided for a right to graze cattle on the land.
First American began legal proceedings to remove this title cloud, but by 1993 William and Melissa grew weary of the company’s failure to clear their title. They demanded $136,000 for the diminished value of their home plus $20,000 interest paid on the mortgage on their new home. First American denied any liability.
After six years, the local court established marketable title for William and Melissa, who finally sold the house, for $22,000 less than their earlier sale. The insureds then sued First American, which continued to deny any liability.
The company pointed to the provision in its insurance policy that says no claim can be maintained if the title insurer removes the title defect within “a reasonable time after receiving notice.”
Should First American Title Insurance Co. be relieved of liability for its title insurance error, which it corrected within seven years after William and Melissa filed their claim?
The judge said no. The goal of construing an insurance policy is to ascertain the expectations of the parties, he explained. Because First American Title Insurance Co. wrote the policy, the judge emphasized, ambiguities are to be construed against the insurer.
William and Melissa notified First American of the title error in 1988, but the title defect was not cured until six years later. Because this is a long time to correct an insured title defect, First American Title Insurance Co. was not relieved of its liability to William and Melissa, the judge ruled.
Based on the 1995 U.S. District Court decision in Hatch vs. First American Title Insurance Co., 895 Fed.Supp. 10.
Extension for bankruptcy?
In 1988, Henry filed Chapter 13 bankruptcy reorganization. On Aug. 1, 1989, Henry sold his home at a large profit for $125,000. To defer his profit tax, Henry tried to buy several other homes of equal or greater cost, but he couldn’t qualify for a mortgage due to his recent bankruptcy.
In mid-1991, Henry completed his bankruptcy plan payments and was able to qualify for a mortgage to buy a replacement home. He obtained the keys to his new home in July 1991, but the deed was not signed until Aug. 2 and recorded on Aug. 7.
Upon audit, the IRS rejected Henry’s use of the “rollover residence replacement rule” of Internal Revenue Code 1034. The IRS auditor said Henry bought his replacement home 24 months and six days after selling his old home. But Henry argued his bankruptcy made it impossible to buy a replacement home during the 24-month replacement period required by IRC 1034.
Should Henry be allowed to defer his profit tax after missing the 24-month home replacement deadline by only six days?
The Tax Court judge said no. The IRS auditor is correct, the judge explained. Internal Revenue Code 1034 allows home sellers to defer their profit taxes if they buy a replacement home of equal or greater cost within 24 months before or after their home sale, the judge emphasized.
Unfortunately, he noted, there is no provision in the law for any time extension, even if the taxpayer filed bankruptcy. Because Henry did not meet the rigid 24-month deadline, he owes $38,405 home sale taxes plus $7,681 in penalties and interest, the judge ruled.
Based on the 1995 U.S. Tax Court decision in Waters, T.C. Memo1995-535.
Not tennis anyone
In 1984 Kenneth, an avid tennis player, bought a condominium which he leased to his daughter. Kenneth never lived in the condo but he used the complex’s tennis courts.
After his daughter moved out, Kenneth leased his condo to the Sullivans. In the lease he wrote, “Both parties confirm that for all purposes, the tenant and landlord share the premises as co-tenants.”
In 1992, several condo owners complained to the homeowner’s association directors that non-resident owners were using the tennis courts. The board sent a form letter reminding all non-resident condo owners of the association rule, “The recreational facilities shall be used only by the residents and their guests. … Non-resident owners, whose units are rented or available for rent, do not have the use of the recreational facilities.”
All non-resident owners except Kenneth complied. After he continued using the tennis courts, the association fined Kenneth $150 for past violations. He sued the association, seeking an injunction barring enforcement of the non-resident rule.
Can a homeowner’s association can bar non-resident owners from using the recreation facilities?
The judge said yes.
Recorded covenants, conditions and restrictions (CC&Rs) are presumed to be reasonable when uniformly enforced against all affected property owners, the judge explained. Unless the limitation is arbitrary, imposes burdens outweighing the benefits, or violates a fundamental public policy, it is presumed to be enforceable, he noted.
Since the non-resident use prohibition for the recreation facilities was reasonable and fairly enforced against all the condo owners, Kenneth can be barred from using the tennis courts, the judge ruled. The association is entitled to levy fines to enforce its CC&Rs, the judge concluded.
Based on the 1995 California Court of Appeal decision in Liebler vs. Point Loma Tennis Club, 47 Cal.Rptr.2d 783.
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Please note: Real estate laws differ from place to place, and laws of your area should be checked before making decisions on real estate problems.
