A standard issue flood insurance policy is a ‘one peril policy’ that pays for physical damage to the insured property up to the replacement cost or actual cash value of the damages or the policy limit, whichever is less. There are two types of coverage: Building Coverage and Contents Coverage. Contents Coverage must be purchased separately. The amount of coverage varies by type of property.  Here is a breakdown.

Building Coverage:
Single-Family Dwelling $250,000
Two to four-family Dwelling $250,000
Other Residential $250,000
Non Residential $500,000

Contents Coverage:
Residential $100,000
Non Residential $500,000

What Does Flood Insurance Cover?

Building Coverage protects the structure of the residential or business property. Included are items of property that are considered to be part of the building such as:
• Above-ground appliances such as built-in dishwashers, built-in microwaves, ranges, cooking stoves and ovens
• Central air conditioners, refrigerators, walk-in freezers
• Hot water heaters, furnaces and radiators, garbage disposal units
• Awnings, blinds and canopies
• Carpet permanently installed over unfinished flooring
• Permanently installed cupboards, bookcases, cabinets, paneling and wallpaper
• Elevator equipment, fire sprinkler systems, light fixtures, plumbing fixtures
• Outdoor antennas and aerials fastened to buildings

Contents Coverage insures personal belongings such as portable air conditioners, washers and dryers, food freezers and the food in them. This is only a partial list of the personal property covered by flood insurance.

What Flood Insurance Doesn’t Cover!

One major factor is coverage limitations for areas below the lowest elevated floor. This includes basements, crawl spaces and enclosed areas beneath elevated buildings. Coverage is limited depending on the flood zone and date of construction. According to Allstate Insurance, for example, coverage of a basement, which is defined as any room where the floor is below ground on all sides, coverage is limited to the following:

• Furnaces, hot water heaters, water softeners, central air conditioners, heat pumps
• Utility connections, sump pumps, fuel and water tanks
• Supports and anchors required to hold up building, fiberglass insulation, dry wall or sheet rock walls, unfinished, unfloated and not taped
• Electrical wiring and circuit breaker boxes
• Clean-up after a flood

However, clothes washers, dryers and food freezers located below ground, in a basement, are not covered under Building Coverage. Contents Coverage can be purchased separately for these items.

Most people have no idea what their flood insurance covers and how it works. Don’t take my word for it. It is best to speak with your insurance advisor to get all the particulars, especially if you are told that you are in a flood zone and that your lender requires you to have a policy.

Many people were confused and upset after the storm when they realized that they were counting on flood insurance to soften the financial blow only to find out that there were limits and coverage exclusions in the policy. This should be a lesson. Do your homework before disaster strikes and make sure that you know exactly what your flood insurance policy covers.

New Jersey (starting Oct.26): Atlantic, Bergen, Cape May, Essex, Hudson, Middlesex, Monmouth, Ocean, Somerset and Union
Additional NJ Counties now include: Burlington, Camden, , Cumberland, , Gloucester, Hunterdon, Mercer, Morris, , Passaic, Salem, Sussex, and Warren

New York (Starting Oct. 27): Bronx, Kings Nassau, New York, Queens, Richmond, Rockland, Suffolk and Westchester
Additional NY Counties now include: Orange, Putnam, Sullivan, and Ulster.

Connecticut (starting Oct. 27): Fairfield, Middlesex, New Haven and New London Counties, and the Mashantucket Pequot Tribal Nation and Mohegan Tribal Nation located within New London County;

Added to the list of states:
Rhode Island (starting Oct. 27): Newport and Washington counties.

As before, pursuant to Revenue Procedure 2007-56 § 17, in order to qualify for an extension of the 45-day identification period or 180-day exchange period, ALL these criteria must be met:

(1) The taxpayer resides in the Covered Disaster Area, or the taxpayer has difficulty meeting the exchange deadlines due to reasons given or similar to examples stated in Revenue Procedure 2007-56, section 17 (such as location of an affected property or offices of a necessary party to the transaction, etc); AND

(2) The relinquished property was transferred (or the parked property was acquired by the EAT in a reverse exchange under Revenue Procedure 2000-37) on or before the disaster date listed in the Notice; AND

(3) The 45-day or 180-day deadline falls on or after the date of the presidentially declared disaster.
If the taxpayer meets these criteria, then the 45-day or 180-day deadline that falls on or after the disaster date is extended to 120 days from that deadline. (For many other tax purposes, as specified in the IRS notice, filing deadlines falling on or after the disaster date have been extended generally until February 1, 2013.

The 45-day and 180-day deadlines may not be extended beyond the earlier of one year from the original deadline date or the due date (including extensions) for the tax return for the year in which the like kind exchange was started. Typically, if a timely automatic tax return filing extension request was made, the extended filing deadline is September 15 for calendar year filing corporations and October 15 for calendar year filing non-corporate taxpayers.

To determine your 45-day and 180-day deadline, click here to use our Date Calculator:
(http://www.madison1031.com/1031madisonExchange_calc_calendar.asp)

Refer directly to Revenue Procedure 2007-56, and the IRS website for further details. (http://www.irs.gov/uac/Newsroom/IRS-Provides-Tax-Relief-to-Victims-of-Hurricane-Sandy;-Return-Filing-and-Tax-Payment-Deadline-Extended-to-Feb.-1,-2013). Please confirm with your tax advisor if you are entitled to an extension and what your extended deadline dates may be.

Tax-Related Disclaimer: Any federal tax advice contained in this communication was not intended or written to be used, and it cannot be used, by any taxpayer for the purpose of (i) avoiding penalties that may be imposed under the Internal Revenue Code or (ii) promoting, marketing or recommending to another party any transaction or tax-related matter addressed herein. The foregoing disclaimer has been provided in accordance with U.S. Treasury regulations governing tax practice.‏‏

New Jersey (starting Oct.26): Atlantic, Bergen, Cape May, Essex, Hudson, Middlesex, Monmouth, Ocean, Somerset and Union;

New York (Starting Oct. 27): Bronx, Kings Nassau, New York, Queens, Richmond, Rockland, Suffolk and Westchester;

Connecticut (starting Oct. 27): Fairfield, Middlesex, New Haven and New London Counties, and the Mashantucket Pequot Tribal Nation and Mohegan Tribal Nation located within New London County;

Pursuant to Revenue Procedure 2007-56 § 17, in order to qualify for an extension of the 45-day identification period or 180-day exchange period, ALL these criteria must be met:

(1) The taxpayer resides in the Covered Disaster Area, or the taxpayer has difficulty meeting the exchange deadlines due to reasons given or similar to examples stated in Revenue Procedure 2007-56, section 17 (such as location of an affected property or offices of a necessary party to the transaction, etc); AND

(2) The relinquished property was transferred (or the parked property was acquired by the EAT in a reverse exchange under Revenue Procedure 2000-37) on or before the disaster date listed in the Notice; AND

(3) The 45-day or 180-day deadline falls on or after the date of the presidentially declared disaster.

If the taxpayer meets these criteria, then the 45-day or 180-day deadline that falls on or after the disaster date is extended to 120 days from that deadline. (For many other tax purposes, as specified in the IRS notice, filing deadlines falling on or after the disaster date have been extended generally until February 1, 2013.

The 45-day and 180-day deadlines may not be extended beyond the earlier of one year from the original deadline date or the due date (including extensions) for the tax return for the year in which the like kind exchange was started. Typically, if a timely automatic tax return filing extension request was made, the extended filing deadline is September 15 for calendar year filing corporations and October 15 for calendar year filing non-corporate taxpayers.

To determine your 45-day and 180-day deadline, click here to use our Date Calculator.

Refer directly to Revenue Procedure 2007-56, and the IRS website for further details.

This happened recently in, of all places, New York. Imagine the level of surprise and disbelief by everyone when Madison Title issued a title commitment indicating that no one had previously owned the property! Actually, we reported that there were no documents of record indicating ownership of any kind – no deeds, no tax records, no easements, no letters patent. We chose to report that the owner was the “People of the State of New York.”

What’s interesting is that this particular property was not in some remote, unattended part of New York State, visited by an occasional lost cow or a wayward Canadian tourist. Nor was it on the border of Canada or one of the five states that surround New York and mistakenly part of another set of property records. The property was in Westchester County!

Savvy real estate sleuths might theorize that the property was under a river or body of water. Close… but almost a century too late. It turns out the property is and has been occupied by businesses for industrial uses for generations. It was once under the Hudson River along the shores of Westchester County. It was filled at the beginning of the twentieth century, a time when real estate regulations were lax if they existed at all. The occupiers of the property began using the newly dry land for open air functions such as parking but did not construct any improvements on the parcel other than paving and a bulkhead. Nor did they file any documents with the state, county or local municipality indicating ownership or the desire of ownership of the property.

Fortunately, the buyer – a Madison Title client — took the time to understand the issues and took the proper steps to obtain a letters patent from the State of New York. Patience was needed for the process. Obtaining a letters patent granting ownership took our client the better part of a year. There is now an owner of record for that land.

Land records hold many secrets. Every so often, we are fortunate enough to have the opportunity to be a part of the process of uncovering one!

That begs the question, what makes a good presenter? A good presenter must be able to connect with the audience on a variety of levels. Indeed, a skilled presenter will consider the three basic learning styles of any audience: visual, auditory and kinesthetic. Incorporating words that engage all types of learners’ attention, a good speaker will capture and hold the audience’s attention.

For example, auditory learners listen to change in tone and rate of speech to ascertain the true meaning of the speaker’s words. When trying to relate to a visual learner, a presenter needs to verbally describe a sharp, clear picture of an experience. Last but not least, kinesthetic learners need a strong feeling towards an experience to be created. For the presenter, doing all of these things at the same time is not so easy!

Also consider that most people would rather do anything else than speak in front of a group of people. Given these considerations, it’s easy to see that brushing up on presentation and speaking skills is probably a good idea. Yet the typical professional or business person probably thinks, “Why do I need to do that? I don’t speak publicly.” Is that really true? Any time a person shares a message with someone else — whether it is over the phone, in a one-to-one meeting, or even to a group – that involves some presentation skills. Most everyone in the world of real estate (and business in general for that matter) from Realtors, attorneys, and CPAs to real estate investors, mortgage lenders, and title closers use presentation skills in their day-to-day work.

Presentation Tips

There are some basic items to remember when giving a presentation.
• Be prepared.
• Be credible.
• Know your audience. Use language that is appropriate to the audience.
• Have your thoughts in order. Know what you want to say and know it thoroughly.
• Balance your information with personal anecdotes.
• Infuse your verbal message with visual cues such as body language and intonation. It’s been said that communication is 7% verbal, 38% vocal, and 55% visual. Nonverbal cues are very important in conveying the speaker’s attitude towards what is being said. People believe more in what they see than in the words being relayed. Incorporate some pauses, facial expressions and gestures to improve your effectiveness.

Presentation Butterflies

Now what about those butterflies? Nervousness before a talk is completely normal. There are many strategies to help overcome a fear of giving a presentation or public speaking.
• When speaking, take the time to gather your thoughts and relax.
• Start with the best material to help build confidence (yours and your audience’s).
• Be excited about the topic and reflect that your tone of voice and body language.
• Practice beforehand to a group of people or even to your reflection in the mirror.
• Take a class in public speaking. Join Toastmasters.

Politics aside, Bill Clinton is arguably one of the best public speakers in many generations. Whether he is in a room with 10 people or 50,000 people, he is having a conversation with the audience. He never speaks “down” to an audience – he elevates them. He makes difficult concepts easy to understand. He knows his facts cold. He uses body language and facial expressions to enhance his words. You may want to use some of Bill Clinton’s techniques to improve your speaking skills.

As you prepare for your next presentation, incorporate some of these tips and feel free to borrow best practices from the presidential debates… from men who are – if nothing else – masterful presenters.

How does equitable subrogation work? It is a judicially applied doctrine invoked typically when a mortgage winds up in a different priority position than was intended. Assume a new mortgage (a refi) in the amount of $400,000 is funded and recorded in 2012. Let’s call this Mortgage C. $300,000 of the proceeds of this new mortgage was used to satisfy an old mortgage on the property that was recorded in 2009. We’ll call that Mortgage A. Assume there was also another mortgage recorded in 2010, after Mortgage A, with a principal balance of $600,000. We’ll call this Mortgage B. Without application of equitable subrogation, the new Mortgage C would be junior (in position) to Mortgage B. However if equitable subrogation is recognized, the new Mortgage C will have priority over mortgage B to the extent of the amount of the pay-off of Mortgage A, $300,000.

One rationale for this remedy is to avoid unjust enrichment to the intervening lien holder. In the above example, before the new mortgage funded, Mortgage B was junior to Mortgage A. The holder of Mortgage B would have a windfall if it wound up in first priority position in front of Mortgage C, which was meant to step into the shoes of Mortgage A.

When does Equitable Subrogation Apply?

Typically, five criteria need to be met to invoke equitable subrogation. These criteria were set forth in the case of Mort v. United States, 86 F.3d 890 (1991). Briefly, the criteria are:
1. The payment made was to protect the interests of the new lender;
2. The new lender (that issued Mortgage C) did not volunteer to be put in a junior position;
3. The entire original mortgage (Mortgage A) was paid off;
4. The new lender was not primarily liable for the debt paid; and
5. Subrogation would not work an injustice to the rights of the junior lien holder.

Assuming the above criteria are met, there are still other limitations on the application of equitable subrogation imposed by state law. Generally, if a lender has actual notice of a prior mortgage, it will not able to invoke equitable subrogation. Some states bar use of equitable subrogation even if the new lender only has constructive notice of the loan it is seeking to move ahead of. Since a party is deemed to have constructive notice of recorded mortgages, application of this rule would, in many instances, make equitable subrogation unavailable. Until recently, that had been the case in New York where a line of Second Department cases followed this rule.

Court Decisions in New York and New Jersey Impact Equitable Subrogation

However, a recent decision, Arbor Commercial Mortgage, LLC v. Associates at the Palm, LLC, et al., 2012 WL 1860734, the Appellate Division-, Second Judicial Department, changed this position. The Court reviewed existing law and concluded that in the majority of states actual notice, but not constructive notice, is a bar to application of equitable subrogation. The Court then held that, in the instant case, the bank’s constructive knowledge of the intervening mortgage was not a bar to equitable subrogation.

It’s worth noting that some states permit use of equitable subrogation in limited circumstances, even if the lender has actual notice of the intervening lien. In those cases, the focus is on whether or nor not the intervening lienor will be prejudiced by application of equitable subrogation. In a recent case in bankruptcy court in New Jersey, In re Ricchi, 470 B.R, 715 (2012), the Court concluded that the lender was entitled to equitable subrogation, notwithstanding actual knowledge of the intervening loan by lender’s predecessor. This case also contains a comprehensive discussion of New Jersey law on this topic.

Background on the IRS Definition of a Property Improvement – Part vs. Whole

Before we get to their findings, first some background. In 2008, the IRS redefined an improvement as a cost involving: a betterment of the unit of the property, a restoration of the unit of property, or an adaptation of the unit of property to a new or different use.
The new regulations keep this definition of an improvement as well as the overall ‘Unit of Property” concept. However, the definition of UOP in regards to a building and its structural component changed.

According to Temp. Regs. Sec. 1.263(a)-3T(e)(2)(ii), the building as a unit of property (UOP) consists of the building structure and its enumerated building systems including: (1) heating, ventilation, and air conditioning (HVAC) systems; (2) plumbing systems; (3) electrical systems; (4) all escalators; (5) all elevators; (6) fire protection and alarm systems; (7) security systems; (8) gas distribution systems; and (9) other structural components identified in published guidance.

Under this new system, the effects of a repair on a specific building system, rather than the building as a whole, must be evaluated.

For example –significant repairs to an elevator – under the old rules, these significant repairs may have “bettered” the elevator but were not considered to extend the useful life of the entire building (which under the old rules was one UOP). Hence, they were expansible immediately. Under the new rules, the SAME repairs evaluated relative to the elevator (which is now its own UOP) are significant to the elevator and must now be capitalized.

AICPA Finds New Opportunities in the New IRS Guidelines

Now let’s get back to the findings of the AICPA in their paper. The first cost segregation opportunity the temporary regulations create is where a cost seg study is able to quantify when an improvement is considered repair and maintenance. This then allows the costs to be expensed immediately, as opposed to an improvement to the entire building or any building system, which would have required capitalization of the costs.

The second additional opportunity arises from the expansion of the definition of dispositions to include building structural components. Under the old rules, property owners were required to continue depreciating the cost of the old components no longer in use until the actual building was disposed of. Under the new regulations, property owners are allowed to recognize a loss on the old structural components once removed. This is only possible once the values of the removed assets are quantified. This valuation is one of the natural outcomes of a properly performed, engineer-based cost segregation study.

As with any tax related matter, property owners should discuss these issues with his/her accountant and tax advisor. For anyone who recently performed, or is planning to perform, significant renovations or improvements to a property, however, it is wise to make sure these ‘new’ developments are part of the discussion.

Ideally, landlords, tenants and their respective real estate agents or brokers should work together proactively to keep lease obligations—including costs—in line with economic reality. Of course, that isn’t always the case.

National and global

economic conditions can change very quickly, unexpectedly affecting local commercial tenants. Because every element of a lease is open during renegotiation, the renewal process can be as complex and time-consuming as negotiating the original lease. Besides studying the economics of the proposed lease terms, the landlord should consider both the tenant’s economic strengths and prospects and the supply/demand factors of the market in which the property is located.

Specifically, during lease negotiations, landlords and

brokers should consider some key issues which, if addressed correctly, can provide the bases for success for everyone involved.

1. It is important to know and understand each tenant’s business, beginning with the original lease and pay attention to tenant’s industry sectors in a macro sense —understanding business cycles of industry sectors can provide an “early warning” of trouble ahead.

2. It is also key to understand the real estate submarket of the property inside and out. For example, if large blocks of space are becoming available or new space is being added, some tenants – those willing to move when their lease is up – can exert some leverage on the

current landlord. When, on the other hand, the market is tight and space availability is low, the landlord retains the upper hand in negotiations.

3. It helps to be aware of a tenant’s space requirements as a prelude to lease negotiation or renegotiation.

Ultimately, knowledge is king and, when combined with flexibility, provides the basis for successfully renegotiating a lease during any economic cycle.

Once the form is completed, take the form — including the amended Condominium Declaration — to:

     Manhattan City Register’s Office

     Tax Map Unit

     66 John Street

     13th floor

     New York, NY 10038

Once your amendment form is received, they will assign a new amended condo number and new lots, if applicable.

For more information, including requirements and instructions on how to complete the Application for Filing an Amendment to Condominium Declaration, go to www.nyc.gov.

What’s behind this alliance, and what are the pros—and cons? Is it a game changer?

First, the background: These companies are underwriters that issue title insurance policies. Title insurance agents provide title insurance policies to clients –such as purchasers of real estate and lenders financing real estate deals — through such underwriters. When real estate was booming, prior to the recession, the number of underwriters grew substantially. However, when the real estate market crashed, some underwriters went out of business. Big underwriters also took the opportunity to buy out smaller underwriters, consolidating the market further. Smaller, regional underwriters were left to compete against a handful of giants.

ATRA Alliance Positions Regional Underwriters To Better Compete

Consolidation in a market resulted in less competition. Additionally, big underwriters increased exclusions demonstrated a reluctance to insure certain kinds of transactions. With fewer underwriters and more exclusions, these five regional underwriters formed an alliance to form a powerful group, better able to compete with the largest underwriters.

Is it a game changer? That remains to be seen. Certainly, title agencies benefit from having a variety of willing title insurance underwriters to ensure they are able to insure even the largest and most complex transactions. Greater choice and a competitive landscape is also typically good for clients.

Possible cons? Questions include how well the corporate cultures of ATRA’s members will blend. How will the five firms, which have been functioning in regional markets, operate cooperatively in states with varying regulations and statutes? These and other questions abound. This alliance will provide a very interesting scenario to watch as it unfolds.