Affordable Housing; EHB 3142

February 26, 2008

The state house passed HB 3142 last week (94-1) and sent to the senate HB 3142, which amends RCW Chapter 185A., involving the affordable housing land acquisition revolving loan fund. The bill notes that the time taken to process these loans made prospective fund borrowers less competitive than their for-profit developer counterparts. The Act provides for a 30 day turnaround on loans from zero to three percent for the purpose of providing affordable housing. This fund is a great resource, creating a practical means of providing affordable housing. I’m surprised that greater use is not made of it. Perhaps if this bill passes the senate (the session ends March 13) and is signed by the governor, the fund will receive greater use. The bill’s sponsors in the house are representatives Liias, Chase, Walsh, Ericks, Loomis, Miloscia, Rolfes, Linville, Dickerson, Green, Morrell, Kelley, Wood, Nelson, Santos, Ormsby

Incapacity; Undoing the Transactions of the Elderly

February 25, 2008

Endicott v. Saul, just decided by Div. I of the Court of Appeals, involves a concern of many children with elderly parents: When do you intervene to insist on a guardian and what can you do to unwind ill-advised transactions? The facts in this case arose just a couple of years after the death of an 80 year old woman’s husband and involved property in aptly named community called Mutiny Bay on Whidbey Island. This case in some respects represents the worst case scenario for those considering intervening. The parent and two couples who were close friends were on one side in the lawsuit and two children were on the other side, asking for a guardian and seeking to have the court set aside a real estate sale. The elderly parent did not want a guardian and joined with her friends in saying that the questioned transaction was legitimate and should not be set aside.

The transaction at issue was the sale of property worth $324,000 to a friend for $150,000, plus expenses of short plat. The purchase and sale agreement acknowledged that the price was below market and stated that the transaction was subject to the approval of the seller’s attorney, which was obtained after a very short meeting with the parent. The court’s recitation of the surrounding facts reads like a daytime television serial.

The court first looked at the matter of a guardianship. In order for the court to appoint a guardian of a person it must determine that “the individual has a significant risk of personal harm based upon a demonstrated inability to adequately provide for nutrition, health, housing, or physical safety.” A guardian of financial affairs is called a “guardian of the estate” and that requires proof of the person’s inability “to adequately manage property or financial affairs.” The court held that there was sufficient evidence to warrant guardianship despite expert evidence to the contrary, saying that incapacity was a legal question, not a medical one.

Looking at the elderly person’s reliance on others for financial assistance and instances of erratic or confused behavior, the court also sustained a protective order under the Abuse of Vulnerable Adults Act.

The court labored over the question of the real estate transaction. It ruled that the elderly person had a confidential relationship with the people involved with the transaction and because of that they had a fiduciary duty to her. This shifted the burden of proof to the buyer to prove that there was no undue influence, a standard they did not meet.

This case illustrates a few things of which people should be aware in dealing with elderly or easily influenced people. First, in dealing with them you purchase something at a price below market value at your peril, particularly if you or anyone acting on your behalf is close to the person. The transaction is not immunized form attack by provisions in the contract or by a brief visit to a lawyer. There must be substantive assurance that the transaction is not corrupted by incapacity or undue influence. If you are watching out for such a person, act quickly if you discern exploitation of their condition. It is best to do something before there is a problem but possible to unravel things that were done inappropriately.

Conveyance of Real Estate

February 22, 2008

The statute of frauds is an example of the path of good intentions often leading into the thicket of dispair. Washington’s statute of frauds for real estate conveyances (RCW 64.04.10) requires that any agreement to convey land be in writing and that there be a sufficient legal description of it. This was intended to prevent people from falsely claiming that they had an agreement to purchase land or that land had been given to them by oral agreement. Rigid adherence to this rule though has often achieved the opposite result. An insufficient description of the property on an earnest money agreement has allowed people, both buyers and sellers, to escape their written agreements.

In 1949 the Washington Supremem Court decided to take a hard line on this matter and follow the monority of states by declairing that any agreement to conveyland must contain a full legal description, thereby allowing people who used a street address or shorthand description to escape from their contracts.

Because legal descriptions are usually not available when contracts are signed this meant that many, if not most, contracts to buy land were avoidable by either party. Trying to avoid the obvious unfairness of this result courts with increasing frequency started applying exceptions to the statute of frauds, trying to prevent it from becoming an instrument of fraud.

The result has been confusion about whether any given contract of sale is enforceable. Real estate agents started using tax lot numbers, as these were usually more accessible than legal descriptions (which more often than not were meaningless to the parties anyway), thinking that this satisfied the statute of frauds. Recent case law however makes this practice unreliable.

Rodney Tom, a representative from Bellevue, sponsored a bill intended to alleviate the plight of real estate agents and their clients. Senate bill 6514, as amended, recently passed the senate and was sent to the state house. This bill provides that henceeforth the use of tax lot numbers, instead of the full legal description, satisfies the statute offrauds with respect to contracts to convey land.

This is an easy solution, or partial solution, to an ill-advised 59 year old decision.

A New Professional Basketball Lease

February 12, 2008

Yesterday the Seattle City Council voted to start negotiations for a new long term lease for the Seattle Storm when the sale to local ownership is approved by the league owners later this month.  This was done unanimously and without discord of any kind.  The Council voted to work collaboratively with the women’s professional team, to be owned by four women with a history of civic and community involvement.  Together they will try to make Key Arena a successful venue for their games.

Isn’t it nice to see this sort of thing, instead of the loud strong-arm tactics employed by the Sonics to try to wrench concessions (so to speak) from the City.

Contract Drafting/Review Tip

January 31, 2008

When writing or reviewing a contract, there is often a section called “Background,” sometimes labeled with an obsolete latin term. This section is mostly overlooked but it can be critical to the deal. It should be used to identify the material facts upon which the parties are relying. These facts are usually too numerous to list, but care should be taken to see that — to the extent possible — critical facts are identified. This makes it easier to avoid the contract if the underlying assumptions are wrong.

A well-written contract will also state which party bears the risk of mistake. Normally this should allocate some risks to one party other risks to the other party.