If you are the owner of rental property there is a pretty significant tax law change going into effect for 2012. As of this year anyone who owns rental property must now report all vendors doing work that exceeds $600. For the landlord that holds multiple rental properties this really is nothing new as they have been required to report this to the IRS.

Last year however, the Federal Government enacted the Small Business Jobs Act of 2010 (H.R. 3297) that expanded the reporting requirement to include ANYONE who owns rental property. To put it bluntly the little guy is now required to send a 1099 to contractors working on their homes.

Rental Owner Tax Obligations

If you are the owner of rental property it means you now have a legal obligation to collect information from contractors doing work at your property including their name, address, tax identification number or social security identification. You must also keep a detailed record of what you pay them through out the year. Again at the end of the year you are obligated to send them a 1099 form.

Rental Property Exemptions

There are a few exemptions that would allow a home owner not to report to the IRS including:

• The property is only a temporary rental of your primary residence.
• The income generated from the rental does not meet minimum threshold requirements.
• Putting together the forms necessary to complete the reporting to the IRS would create a hardship for you.

As of this writing the IRS has not determined what would be considered the minimum income and what constitutes a hardship on your part. Expect the IRS to update these requirements soon. In the meantime do not let this deter you from keeping detailed records.

Recording Keeping For All Contractors

The requirement for keeping diligent records applies to all contractors doing work including but not limited to painters, electricians, plumbers, carpenters, landscapers, cleaners and even your accountant. Anything associated with running the business of having a rental property is included in these calculations.

When calculating the work that was generated on the property recoding keeping becomes vital because if you have a landscaper doing work in the beginning of the year that amounts to $350 dollars and later on in the year does another $300 dollars worth of work the burden of providing this information becomes necessary under the new rules.

Rental Tax Penalties For Filing Late

The IRS has not set the important tax dates as of yet for the 2011 tax year. These dates will become important to have on your calender as the penalty for reporting late will be $250 dollars.

You will be able to file a 30 day extension for getting the tax forms to the IRS, however, this will not apply to making sure you get the appropriate forms to the contractors who have done work on your property. The contractors are going to need to have these forms in order to complete their own taxes and the burden is on the rental owner to provide them in a timely fashion.

If you are the owner of rental property you are probably aware of all the tax deductions available to you. If you are considering purchasing a rental property for the 1st time you may want to brush up on the rental property tax deductions. Of course this becomes an important piece of the puzzle come tax time!

North Reading, MA – February 4, 2011 – (RealEstateRama) — Yesterday Congressman John Tierney met with North Reading Housing Authority staff and residents for an update on the more than $160,000 in federal Recovery Act funds currently supporting an ongoing project to replace the heating system at its Peabody Court complex. According to the Massachusetts Department of Housing and Community Development, energy efficiency improvements such as the one taking place at Peabody Court are estimated to reduce heating costs by anywhere between 15 and 25 percent.

Following a tour of the facility and the project, Congressman Tierney sat down with staff to discuss the federally funded recovery project award and learn more about how it is benefiting the community. This is the first in a series of Recovery-related events and meetings that the Congressman will hold in the coming weeks to mark the two year anniversary of the American Recovery & Reinvestment Act (ARRA).

“These federal funds are serving as critical support for our communities, helping to jumpstart construction projects and create jobs, and saving our local governments through more energy efficient equipment,” Congressman Tierney said. “I thank the North Reading Housing Authority for their work on behalf of our community. Our economy, both locally and nationally, is benefitted when projects like this one support local residents, create jobs, and save taxpayer dollars.”

The ARRA Weatherization Award of more than $160,000 is being used by the North Reading Housing Authority to replace a total of nine boilers in their Peabody Court development (10 buildings, 4 units each). Four of the new boilers have already been installed. Work on replacing the next two boilers with more energy efficient equipment is expected to be completed within the next two weeks, at which point the project is expected to be concluded in the ensuing brief period.

The American Recovery and Reinvestment Act, which Congressman Tierney supported and was signed into law in February 2009, is widely credited with having saved or created an estimated 3.5 million American jobs. The bill continues to help sustain the ongoing recovery in the short-term while also investing in long-term growth through unprecedented investments in education, clean energy and science and technology.

1. What does your inspection cover?
The inspector should ensure that their
inspection and inspection report will meet all
applicable requirements in your state if
applicable and will comply with a well-recognized standard of practice and code of
ethics. You should be able to request and see a copy of these items ahead of time
and ask any questions you may have. If there are any areas you want to make
sure are inspected, be sure to identify them upfront.

2. How long have you been practicing in the home inspection profession
and how many inspections have you completed?
The inspector should be able to provide his or her history in the profession and
perhaps even a few names as referrals. Newer inspectors can be very qualified,
and many work with a partner or have access to more experienced inspectors to
assist them in the inspection.

3. Are you specifically experienced in residential inspection?
Related experience in construction or engineering is helpful, but is no substitute
for training and experience in the unique discipline of home inspection. If the
inspection is for a commercial property, then this should be asked about as well.

4. Do you offer to do repairs or improvements based on the inspection?
Some inspector associations and state regulations allow the inspector to perform
repair work on problems uncovered in the inspection. Other associations and
regulations strictly forbid this as a conflict of interest.

5. How long will the inspection take?
The average on-site inspection time for a single inspector is two to three hours for
a typical single-family house; anything significantly less may not be enough time
to perform a thorough inspection. Additional inspectors may be brought in for very
large properties and buildings.

6. How much will it cost?
Costs vary dramatically, depending on the region, size and age of the house,
scope of services and other factors. A typical range might be $300-$500, but
consider the value of the home inspection in terms of the investment being made.
Cost does not necessarily reflect quality. HUD Does not regulate home inspection
fees.

7. What type of inspection report do you provide and how long will it take
to receive the report?
Ask to see samples and determine whether or not you can understand the
inspector’s reporting style and if the time parameters fulfill your needs. Most
inspectors provide their full report within 24 hours of the inspection.
Information by State

8. Will I be able to attend the inspection?
This is a valuable educational opportunity, and an inspector’s refusal to allow this
should raise a red flag. Never pass up this opportunity to see your prospective
home through the eyes of an expert.

9. Do you maintain membership in a professional home inspector
association?
There are many state and national associations for home inspectors. Request to
see their membership ID, and perform whatever due diligence you deem
appropriate.

10. Do you participate in continuing education programs to keep your
expertise up to date?
One can never know it all, and the inspector’s commitment to continuing education
is a good measure of his or her professionalism and service to the consumer. This
is especially important in cases where the home is much older or includes unique
elements requiring additional or updated training.

“What is surprising about these cases is … the utter carelessness with which the plaintiff banks documented the titles to their assets.” -Justice Robert Cordy, Massachusetts Supreme Judicial Court

Today, the Massachusetts Supreme Judicial Court (SJC) ruled against foreclosing lenders and those who purchased foreclosed properties in Massachusetts in the controversial U.S. Bank v. Ibanez case. Here is the link for the decision. I’ve posted the decision below.

Background

For those new to the case, the problem the Court dealt with in this case is the validity of foreclosures when the mortgages are part of securitized mortgage lending pools. When mortgages were bundled and packaged to Wall Street investors, the ownership of mortgage loans were divided and freely transferred numerous times on the lenders’ books. But the mortgage loan documentation actually on file at the Registry of Deeds often lagged far behind.

In the Ibanez case, the mortgage assignment, which was executed in blank, was not recorded until over a year after the foreclosure process had started. This was a fairly common practice in Massachusetts, and I suspect across the U.S. Mr. Ibanez, the distressed homeowner, challenged the validity of the foreclosure, arguing that U.S. Bank had no standing to foreclose because it lacked any evidence of ownership of the mortgage and the loan at the time it started the foreclosure.

Mr. Ibanez won his case in the lower court in 2009, and due to the importance of the issue, the Massachusetts Supreme Judicial Court took the case on direct appeal.

The SJC Ruling: Lenders Must Prove Ownership When They Foreclose

The SJC’s ruling can be summed up by Justice Cordy’s concurring opinion:

“The type of sophisticated transactions leading up to the accumulation of the notes and mortgages in question in these cases and their securitization, and, ultimately the sale of mortgaged-backed securities, are not barred nor even burdened by the requirements of Massachusetts law. The plaintiff banks, who brought these cases to clear the titles that they acquired at their own foreclosure sales, have simply failed to prove that the underlying assignments of the mortgages that they allege (and would have) entitled them to foreclose ever existed in any legally cognizable form before they exercised the power of sale that accompanies those assignments. The court’s opinion clearly states that such assignments do not need to be in recordable form or recorded before the foreclosure, but they do have to have been effectuated.”

The Court’s ruling appears rather elementary: you need to own the mortgage before you can foreclose. But it’s become much more complicated with the proliferation of mortgage backed securities (MBS’s) –which constitute 60% or more of the entire U.S. mortgage market. The Court has held unequivocally that the common industry practice of assigning a mortgage “in blank” — meaning without specifying to whom the mortgage would be assigned until after the fact — does not constitute a proper assignment, at least in Massachusetts.