Real Estate Law Blog

New Accounting Standards from FASB Create Big Changes for Leases

In February, The Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) addressing financial reporting about transactions involving leases. These new accounting standards have been in gestation for many years, and any company that leases any property, from equipment to real estate, will be affected by them. More >

Regulatory Takings Cases and the Relevant Parcel: Murr v. Wisconsin

This summer, in Murr v. Wisconsin,[1] the United States Supreme Court will make an important decision on property rights and regulatory takings under the Takings Clause of the Fifth Amendment of the U.S. Constitution. At issue in the case is whether two legally distinct parcels of land can be treated as one for regulatory purposes if they share common ownership. In a time when planning and zoning regulations change sporadically, this case has broad implications for owners of commercial property, farmers, developers, mining operations and others that hold legal title to adjoining properties, so these groups should pay particular attention to this case.

[1] Murr v. Wisconsin, 359 Wisc. 2d 675 (Wis. App. 2014), rev. denied, 862 N.W.2d 899 (Wis. 2015) More >

Lexington Approves Local Minimum Wage Ordinance

Per the Bluegrass Hospitality Association: More >

IRS: Bad News for REIT Spin-off Conversions

In late September, the IRS sent up as large of a red flag as possible concerning Real Estate Investment Trust (“REIT”) spinoffs in IRS Notice 2015-59 and Rev. Proc. 2015-43. While these issuances did not change existing law, they did state a new no-rule policy with regard to tax-deferred PropCo/OpCo spin-offs under Section 355 of the Internal Revenue Code (In these types of transactions, a property-holding company (“PropCo”) which is a subsidiary of an operating company (“OpCo”), purchases real estate owned by OpCo, then leases it back to OpCo and claims status as an REIT). Under the latest word from the IRS, unless there are “unique and compelling” circumstances, IRS will not issue private letter rulings on these types of transactions if real property owned by either PropCo or OpCo is the basis for REIT election for either company. Coupled with statements from the agency that these spin-offs and conversions give the agency “significant concerns,” these proclamations create significant market uncertainty as to the validity of such transactions. More >

Halloween Ghouls, Zombie Nativities, Toilets with Antlers, and other Offensive Holiday Displays: Zoning Law, the First Amendment and the Right to be Offensive

It’s that time of year again. Seasonal holiday displays are beginning to dot our subdivisions and public spaces. Although most will conform to mainstream cultural, religious and societal norms, the ones that don’t create discomfort or even outrage, spurring calls for government authorities to order them to be removed.  When governments do not act, it is not unheard of for citizens to take on the task themselves by removing or destroying the offensive display, risking criminal charges or even arrest in doing so. More >

Changes in Environmental Due Diligence in Commercial Real Estate Prevent Toxic Investments

Financial due diligence in a commercial real estate purchase is a necessity, but equally important to purchasers and lenders is environmental due diligence. Many properties may have environmental issues from prior use, and purchasers of those properties may be on the hook for risk of loss should those issues materialize after closing. The purchaser would likely bear the responsibility for cleanup of any contaminated site under Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). This can also pose a problem for the lender as well, as an extensive cleanup operation may impact the purchaser’s ability to repay the loan or impair the value of the property. Further, a lender on the purchase may be jointly and severally liable for cleanup costs. Luckily for both purchaser and lender, an environmental site assessment (“ESA”) on the site prior to purchase – environmental due diligence – creates a safe harbor for innocent landowners and lenders involved in the purchase of real estate after conducting an ESA that showed no concerns for hazardous substances on the site. More >

Non-Conforming Uses

In its most basic form, a nonconforming use is the use of a property which is no longer a permitted use under current zoning regulations but was permitted under prior zoning (or, in some cases, before there was zoning). In effect, a prior permitted use is grandfathered in despite the current zoning status. For instance, imagine the neighborhood where you run a business is rezoned as a residential area. Does this mean you have to shut your doors? No. Non-conforming uses play a key role in real estate development as a creative solution to promote urban infill through reuse of existing properties, as it may allow a use that is not otherwise permissible More >

How to Evict a Tenant

The ideal situation in a landlord-tenant relationship is the timely adherence to the provisions of the lease, producing mutual benefit for both parties to the contract. Unfortunately, sometimes this relationship deteriorates and a landlord must step in to reassert her or his right to receive cash flow from the leasing of real estate. While an eviction may seem like a harsh step, landlords should understand that it is a business decision made in the course of renting property, one that they should not hesitate to take when necessary. Luckily, the process is not overwhelmingly difficult, even if it must be done according to very specific steps. More >

Bankers, Real Estate Loans, and the Unauthorized Practice of Law: A Refresher

Back in 1968, the Kentucky Bar Association (“KBA”) released Unauthorized Practice of Law Opinion KBA U-6 (“U-6”), opining that bank officers and lending institutions could not draft loan documents such as mortgages, security agreements or financing statements without violating the provisions of Kentucky law that prohibit the unauthorized practice of law. It is entirely within the province of attorneys in the Commonwealth of Kentucky to draft legal documents, and this KBA opinion merely reinforced that idea. So far, so good, right? Opinion U-6 was not the last word on where the role of the lender can dovetail with the practice of law, however, and all lenders should take heed of where potential landmines of the unauthorized practice of law in violation of KRS §524.130 still exist. More >

The New TILA-RESPA Integrated Disclosure Requirements

Farewell, HUD-1, we hardly knew ye. As of October 3rd, 2015, lenders will provide two integrated forms at specified intervals surrounding the closing date to comply with the provisions of both the Truth in Lending Act (“TILA”) and the Real Estate Settlement Procedures Act of 1974 (“RESPA”). The new forms are the result of provisions from Sections 1098 and 1100A of the Dodd-Frank Act meant to combine and simplify existing documents to make them easier for mortgagors to understand. More >