Banking and Commercial Transactions, Bankruptcy Law, Blog
Indiana’s Dislike of Cognovit Notes
Indiana doesn’t look kindly upon cognovit notes, even though its neighbor, Ohio, routinely uses them. In fact, Indiana’s dislike of cognovit notes is demonstrated by the existence of an Indiana statute providing it’s a Class B misdemeanor to procure, retain possession of, or attempt to recover upon a promissory note with a cognovit provision in it. (see Indiana Code §34-54-4-1.) So, cognovit provisions aren’t just unenforceable in Indiana, they’re illegal. How can two states with a common border disagree so vastly about the legal attributes of the cognovit note? To answer this, it’s important to understand what a cognovit note is. A cognovit provision is a legal device by which a debtor gives advance consent to a noteholder obtaining a judgment against him or her without prior notice or hearing. A cognovit is essentially a confession of judgment included in a note. Should there be a default, the holder can obtain judgment without giving the debtor notice or a hearing. This allows the noteholder to obtain a judgment without the delays inherent in having to serve notice on the debtor or dealing with any defenses the debtor might throw up. This makes the process much smoother and quicker for the noteholder. But, what about the debtor? Doesn’t this fly in the face of constitutional due process? Indiana thinks so, although several states, not just Ohio, think cognovits are okay. The states who agree with Ohio and consider cognovit notes legal are: Delaware, Virginia, Pennsylvania, and Maryland. Why would any borrower agree to this? Simply because a…
Read More
Blog, Real Estate
Title Commitments A-Z
So you’re buying your first apartment building or commercial property and you receive a copy of title commitment. Now what? A title commitment shows the current state of title as identified by the title examiner. It consists of three parts: Schedule A: This part of the commitment represents the basic facts of the transaction, including the effective date, the proposed insureds (purchaser and lender), the types and liability amounts of the policies to be issued, the estate being insured, how the title to the state is currently vested, and the legal description and address of the subject property. Schedule B-1: This section lists the requirements that must be met before a title policy will be issued, including any or all of the following items: releases of mortgages, releases of tax liens, entity or estate documentation, releases of judgments, correction deeds, and warranty deeds. Schedule B-2: This section lists the title insurance exceptions. The items not being insured by the title company will initially include standard exceptions, taxes not yet due and payable, and further burdens such as covenants, conditions, and restrictions, easements, and/or mineral reservations Obtain complete copies of each exception document identified in Schedule B-2. An experienced real estate attorney will perform a thorough analysis of the Title Commitment. With respect to Schedule A, the attorney will ensure the Owner’s name and Lender’s name are spelled correctly and the policy is the correct amount (which may vary depending on cross-collateralization). With respect to Schedule B-1, the attorney—if representing the owner—will ensure that all documents requested…
Read More
Blog, Business
Out-of-state Sellers will soon be required to remit Indiana sales tax
The collection and remission of sales tax changed dramatically after the South Dakota vs. Wayfair decision by the US Supreme Court in June 2018. Now, states can collect sales tax from out-of-state sellers even if the seller has no physical presence in the state. The law goes into effect on October 1, 2018 and requires remote sellers to remit sales tax to Indiana if the seller has annual gross revenues from Indiana sales exceeding $100,000, or 200 or more separate Indiana transactions. Out-of-state companies are encouraged to use Streamlined Sales Tax Registration system at www.streamlinedsalestax.org to remit sales tax to multiple states (including Indiana). For those companies seeking to remit sales tax to only Indiana, remote sellers can register through the online portal, INBiz, at www.inbiz.in.gov. More information can be obtained from the Indiana Department of Revenue at https://content.govdelivery.com/accounts/INDOR/bulletins/201d096.
Read MoreBlog, News
Announcing Our 2018 Super Lawyers
We are pleased to post that the following attorneys from the firm have been selected to the 2018 Indiana Super Lawyers and the Indiana Super Lawyers Rising Stars list. Each year no more than five percent of the lawyers in the state are selected by the research team at Super Lawyers to receive this honor. William Bock Entertainment & Sports Jay Kennedy Creditor Debtor Rights Madalyn Kinsey Banking James Knauer Business Litigation David Wright Business Litigation Rising Stars Joseph Pettygrove Employment & Labor Justin Leverton Business & Corporate
Read More
Blog, Construction Law
The Residential Renewable Energy Tax Credit is back!
The Residential Renewable Energy Tax Credit is back pursuant to the Congressional budget compromise reached last night. What this means for homeowners is that if you are considering upgrading your heating and cooling system to geothermal, you now could get up to a thirty percent federal income tax credit on the amount you spend. A phase-out of the credit will begin in 2020. Geothermal systems are expensive to install, and we always recommend hiring a lawyer prior to entering into any construction contract. For all your real estate legal needs, please contact Justin Leverton at jwl@kgrlaw.com
Read More
Banking and Commercial Transactions, Blog
Accuracy is key when it comes to selling real estate
Selling real estate is the largest financial transaction most people undertake. In order to maximize their return, some sellers misrepresent the condition of their property—often to their own peril. The importance of being accurate when advertising your property for sale was recently addressed in Cheng Song v. Thomas and Theresa Iatarola, 2017 WL 1908400, _____ N.E.3d _____ (Ind. Ct. App. 2017), reh’g denied (July 06, 2017). In Song, the Iatarolas advertised 10 acres for sale and represented that it was zoned I-2 Industrial suitable for warehousing and other light industrial uses. The Sellers knew the property was zoned Agricultural because Ms. Iatarola refused to sign the Listing Agreement until the zoning error was corrected. Despite Ms. Iatarola’s refusal, the property was listed for sale as I-2 industrial land. Cheng Song approached the Iatarolas about purchasing the property and disclosed that he intended to use the property for an imported tool warehouse. The Iatarolas did not inform Song that the property was zoned agricultural—not industrial—and they subsequently entered into a purchase agreement. At the final inspection, Mr. Iatarola informed Song that the property was actually zoned agricultural. Song subsequently terminated the purchase agreement and requested the return of his earnest money. When the Iatarolas refused, Song sued them for fraud and won. Song was victorious despite the Purchase Agreement not containing an express representation regarding the property’s zoning designation. When Selling real estate, it’s critical that the listing, the offering memorandum (if any), and the Real Estate Sales Disclosure Form are each accurate. In addition, the Seller…
Read MoreBanking and Commercial Transactions, Blog
FEMA Plans to Suspend Flood Insurance Policy Renewals in Indianapolis
With FEMA’s announcement that it plans to suspend flood insurance policy renewals and new applications in Indianapolis, it’s important to discuss why flood zones* matter and how to protect yourself when buying real estate. An ALTA/ACSM Survey should disclose whether the property is located in a flood zone and its zone classification. In addition, FEMA maintains the Flood Map Service Center that can be used to determine if a property is in a flood zone and its zone classification. If an improvement on the property is located in a flood zone, any federally regulated lender will require you to purchase flood insurance before you get a mortgage. Why did Congress enact this requirement? If your home is located in flood zone A or AE (a typical category for Indiana homes located in a flood zone), your property has a 1% chance of flooding every year. Over the course of thirty years (a typical residential mortgage), the chance of a flood event is 30%. Over the long-run, flood insurance in these zones makes economic sense to protect the collateral. Even if the property is located in a flood zone, don’t expect to automatically rely on federally subsidized flood insurance policies. Barring an injunction or a settlement, FEMA will suspend flood insurance policy approvals in Marion County until local government fixes the errors in its revised Flood Protection Ordinance. In addition, other areas of the country have been redlined entirely from obtaining federal flood insurance (e.g. structures built in area that has been previously designated a Coastal Barrier…
Read MoreBanking and Commercial Transactions, Blog
Landlords with blanket criminal bans now violate the Fair Housing Act
On April 4, the Federal Department of Housing and Urban Development issued a guidance detailing the agency’s interpretation of how the fair housing law applies to Landlord policies that exclude people with criminal records, a group that is not explicitly protected by the Act but falls under it in certain circumstances. In this incredible pronouncement, HUD recognizes that “African Americans and Hispanics are arrested, convicted and incarcerated at rates disproportionate to their share of the general population.” Therefore, according to HUD, blanket bans on criminals violate the Fair Housing Act because criminals are more likely to be minorities (known in legal parlance as disparate impact liability). The landlord is liable for violating the Fair Housing Act even if the landlord has no discriminatory intent (i.e. applies the policy evenly to all applicants). So, the solution is not to run background checks, right? No so fast. Compounding the problem is the potential for premises liability for foreseeable criminal acts. See, generally, Ctr. Mgmt. Corp. v. Bowman, 526 N.E.2d 228 (Ind. Ct. App. 1988); Nalls v. Blank, 571 N.E.2d 1321, 1323 (Ind. Ct. App. 1991). Under Indiana law, a landlord can be liable to a tenant if the landlord assumes a duty to protect the tenant and then negligently performs those acts. The dilemma landlords now face is very real. If a landlord has a blanket ban on convicted felons, the landlord is in violation of the Fair Housing Act. If the Landlord rents to a convicted felon and that felon commits a crime against a tenant, the…
Read MoreBlog
Attorney Leverton Appointed to Woodruff Place Economic Improvement Board
Kroger, Gardis & Regas, LLP attorney Justin Leverton was recently appointed to the Woodruff Place Economic Improvement Board. The Board was created in 2015 after creation of the Woodruff Place Economic Improvement District – the first EID in Indianapolis. The EID was created following a door-to-door campaign by civic leaders determined to revitalize the historic district. We congratulate Justin on his appointment and thank him for his civic activities!
Read MoreBlog
Hire a lawyer before you sign a real estate purchase agreement
A Lawyer’s Guide to Buying Residential Real Estate Almost every day I get a phone call from a person that has entered into a real estate contract for a property they wish they’ve never seen. Collapsing foundations, shoddy repair work, knob and tube wiring, asbestos, radon, contaminated well water, and restrictive HOA covenants are all issues I’ve come across. Just when I think I’ve heard it all, a potential client calls and wants to get out of their deal for yet another reason. Invariably, the story goes something like this: We found the perfect home, we entered into a purchase agreement, the inspection/due diligence discovered something we can’t live with, our agent told us that we have to close or we could be sued, and we don’t know what do to. Even though I know the answer, I ask them if a lawyer reviewed the purchase agreement before they signed it. The answer is always no. At this point, if they retain me, I’ll look over their boilerplate real estate purchase agreement and break the bad news. The agreement is not designed to allow a buyer to easily exit from the transaction. Instead, it’s filled with various ambiguous terms that encourage closing the transaction—not terminating it. If the inspection report identifies a defect, is the defect “major”? If the defect is major, was the defect previously disclosed to the buyer? If there was a casualty loss prior to closing, has seller “fully” repaired the property? All of these scenarios can and have arisen out of these…
Read More