Accessing Unclaimed TIF Funds

by Alex Zaretsky April 24 2007, 09:53
Developers looking for a new source of revenue during the housing slump should not overlook municipal redevelopment programs. Developing the right kind of project at the right location may qualify one for millions of dollars in government subsidies. Forty-nine states and the District of Columbia have some variation of Tax Increment Financing. [1] More commonly known as TIF, the program lets local municipalities subsidize projects in designated redevelopment areas. [More]

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Real Estate

The Dark Side of Land Use Restrictions

by Katherine Croswell April 12 2007, 15:19
     Residential land use restrictions are part of life in most areas in the United States.  There may be land-use restrictions regarding “building height, architectural styles, materials, orientation, view preservation” [1] and even the color of your home. [2] These restrictions may have benefits, to essentially assure quality homes are being built as well as maintain property values by preventing doublewides from being built next to mansions.  However, what happens when these restrictions go too far?  For example, the government may reject a landowner’s building plan not because it fails to meet the technical requirements of local building and zoning codes, but because the board simply does not like what the structure will look like. [3]   Along more disturbing lines, land use restrictions can (and have) made it difficult for hundreds of natural disaster victims to construct decent temporary housing. [4] Welcome to this, the dark side of land-use restrictions.      While one could discuss a variety of potential problems regarding land use restrictions, the issue of aesthetic restrictions will be the focus here.  David and Diane Williams decided to build a duplex in a residential area of California. [5] While they were very careful to plan their facility just right, so as to make it past the local review board, the proposal was denied due to how the facility was proposed to look. [6]  The guidelines stated that the structure must not be “monotonous” but must also be “harmonious” with the rest of the neighborhood.  [7]  This guideline is vague and subjective, especially considering that the Williams’ architect wrote these guidelines himself when he was the chairman of the local review board, and yet was not able to meet his own restrictions. [8]  Such a result indicates a real flaw in the system: it is inefficient for landowners to spend their resources and time on a plan that may or may not get past the review board.  Predictability is key, and this feature is obviously lacking in some local review boards.       Beyond this issue of inefficiency, there are possible first amendment rights at stake.  The Williams’ lawyer suggests that “purely aesthetic guidelines may not jibe with constitutional guarantees of due process and free expression.” [9] Courts have long recognized a special interest in the home as opposed to other properties, which may afford them more freedom of expression.  A judge in Williams’ case noted that there is “no reason why a uniquely architectural design, expressing [the homeowner’s] personal views and attitudes, is not as worthy of First Amendment protection as ‘live nude dancing.’” [10]  Since architecture is a distinct and recognized form of art, and art is among those areas protected by the first amendment, perhaps aesthetic guidelines which are certainly vague and subjective should be eliminated.  The individual landowner’s preferences, as well as the private covenants in place, should take priority.      More broadly, property rights are infringed upon when these kinds of land use restrictions go into effect.  When a landowner is told that they can’t create a structure on their land that looks a certain way, a small part of their bundle of rights has been taken away.  However, property rights are not absolute. [11]  As long as the government leaves you with some economically viable use of your land and does not reduce it’s value to virtually zero, the land use restrictions are generally valid and legal.  [12]  While takings will not be discussed in depth here, it should be noted that these restrictions are in some cases extremely limiting, and may be worthy of just compensation though in all likelihood, courts would favor the government’s right to enforce such restrictions.       Land use restrictions are perhaps an important societal and governmental tool which can help to maintain or dramatically increase the value of land. [13]  However, flexibility must be built into that system to assure that exceptions can be made when the situation calls for it.  Perhaps local governments should forgo involvement and leave these kinds of restrictions and limitations up to private covenants which would then be enforced by private neighborhoods and the courts if need be.  At the very least, local review boards should be required to maintain a set of easy to read and, most importantly, easy to follow guidelines.  Architects and landowners should not be made to guess whether the architectural plan they put time and money into will or will not pass muster with local review boards.[1] Steven B. McBride, Site Planning and Design, The Web Book of Regional Science, West Virginia University, http://www.rri.wvu.edu/WebBook/McBride/main.html.[2] Robert Pollock, Architectural Correctness? – Restrictions on Architectural Design, REASON, Oct. 1994, available at http://www.findarticles.com/p/articles/mi_m1568/is_n5_v26/ai_16101031.[3] Id.[4] FEMA: Land Use Restrictions Delay Placement of Temporary Homes for [Katrina Victims], THE DAILY RECORD (Baltimore), Dec. 22, 2005, available athttp://www.findarticles.com/p/articles/mi_qn4183/is_20051222/ai_n15964264.[5] See Pollock, supra note 2.[6]  Id.[7]  Id.[8]  Id.[9]  Id.[10]  Id.[11] National Trust's State and Local Policy Program for the National Trust for Historic Preservation,Understanding Property Rights, Cardi Toolboxhttp://www.cdtoolbox.net/government_policies/000208.html (last visited Apr. 8, 2007).[12]  Id.[13]  Id.

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Real Estate

Subprime Slump: Will the Economy Follow?

by Alicia Filter April 5 2007, 01:33
On February 7, 2007, the Senate Banking Committee heard testimony which indicated that nearly 20 percent of subprime mortgage loans obtained in the period from 2005-2006 will result in foreclosure, affecting over 2.2 million families in the United States over the next few years. [1] On Monday, April 2, 2007, the second largest provider of high-risk, subprime mortgages, New Century Capital Corporation of Irvine, California, filed for Chapter 11 Bankruptcy protection and fired 3200 employees in the wake of its own "financial missteps" and trouble with the SEC and U.S. Department of Justice over financial statements which failed to accurately account for financial losses the corporation was suffering, as well as mismanagement of the corporation. [2] With more than 25 subprime lending companies shutting down over the past few months [3], many are wondering about the implications for the future of both the subprime market and the economy.



Subprime mortgages are those given to consumers with credit scores below 620, indicating that these consumers are generally late in paying their bills and often have significant delinquencies in their credit reports indicating frequent late payments on obligations of 30 to 90 days. [4] Alternatively, subprime mortgages are issued to consumers with high debt-to-income ratios or with limited credit histories. [5] As compared to prime borrowers, "subprime borrowers are disproportionately minority and lower income, older, less well educated, less financially sophisticated, and less likely to search for the best interest rate." [6] This indicates that subprime mortgagees may not fully understand exactly what they are getting themselves into contractually and financially at the time they sign their mortgage documents. [More]

Finding REIT Investors through the EB-5 Visa Program

by Alex Zaretsky March 27 2007, 09:55
Real estate investment trusts looking for new investors should consider participating in an increasingly popular US immigration law program. Each year, the U.S. Citizenship and Immigration Service (USCIS) allocates 10,000 visas through the fifth category of the employment-based paths to permanent residency (EB5) to foreign-nationals who invest in the U.S. [1] Sometimes referred to as the “million dollar green card”, the EB5 has been wrought with frustration due to stringent standards and wary would-be applicants. In an attempt to make the program more attractive, the USCIS made key amendments and set aside 5,000 visas (of the 10,000 total) to foreign nationals investing in designated “Regional Centers”. [2] [More]

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Real Estate

Turning Brownfields into Big Green: Practical Concerns Regarding Contaminated Real Estate

by Katherine Croswell March 8 2007, 15:20
I. Introduction


Greenfields, otherwise known as pristine tracts of land, are becoming scarce as demand for residential property continues to rise, yet environmentalist groups are fighting to preserve these undeveloped areas. [1] How, then, can we provide more residential areas to meet the increasing demand, while refraining from construction on previously unused land? Brownfields very well may be the answer to this fundamental conflict. Brownfields are “real property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.” [2] Some authorities report that there are more than 500,000 abandoned brownfields scattered throughout the United States. [3] While the thought of turning polluted land into a residential area may at first seem unappetizing, brownfield redevelopment is gaining more acceptance as lenders and insurers begin to give financial support for these projects. [4] As more and more builders are taking on these projects, the question remains as to whether the benefits really outweigh the risks. [More]

Investing in Privatized Municipal Infrastructure: Accounting for the Legal Risks

by Alex Zaretsky February 20 2007, 09:58
Fortune Magazine recently declared privatized municipal infrastructure “one of the hottest asset classes in the U.S.” [1] Banks and private-equity firms alike are lining up to bid on toll roads, parking garages, and for the first time ever a major U.S. airport. The city of Chicago has plans to privatize Midway Airport, which could go for as much as $3 billion. [2] [More]

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Real Estate

Re-zoning Ordinances = Regulatory Takings?

by Katherine Croswell February 8 2007, 15:21
Starting a business or opening a new office building can be a trying experience.  This is true even before you factor in the possibility of a re-zoning ordinance that will render your business plans fruitless.  When this unsettling scenario comes to fruition, there are some landowners who have fought back, claiming that this action is a regulatory taking requiring just compensation [1] – but can this argument prevail?  With some cases decided and others pending, the picture of re-zoning as a regulatory taking is beginning to take shape, though the view is far from clear.To illustrate this problem, look at the case of Dianna Reagan who owned a steel services business and decided to build a new office building. [2]  She consequently bought 4.7 aces of land for $134,000 and spent the next two years planning her new facility. [3]  The land that Reagan bought was zoned industrial in 1999 when she purchased it, though much of the surrounding area had changed to residential use over the years and the land itself was sandwiched between two residential subdivisions. [4] Beginning in April 2001 the ball started rolling, and by July 2001 Reagan’s property was re-zoned residential, effectively killing her office plans. [5] Reagan then sold the property for $172,000 and filed a lawsuit, stating that by re-zoning her land, the government had deprived her of her desired use and therefore owed her just compensation. [6] At trial, Reagan argued that she was owed compensation for the decreased property value from the re-zoning. [7] The trial court agreed, awarding her over $60,000, but the Court of Appeals of Missouri reversed the trial court’s judgment. [8]  The case is now on its way to the Missouri Supreme Court [9], and it will be interesting to see the final result.Looking outside of Missouri, the outcomes have been mixed, though plaintiffs have prevailed in limited instances. New York courts have found that if a re-zoning ordinance destroys investment-backed expectations, the owner of that property is entitled to just compensation.[10]  In both Noghrey v. Town of Brookhaven and Magee v. Town of Orangetown, leading New York cases, the plaintiff property owner prevailed and the court declared the re-zoning ordinance a regulatory taking when a proposed business was killed by a zoning change. [11]  It could be argued that New York is a more business-friendly arena than most areas of the country, making a verdict for the business owner more likely in New York than in other areas of the country.Other jurisdictions yield different results from those in New York.   In the Supreme Court case ofVillage of Euclid v. Ambler Realty Company, the Court found no taking after a zoning ordinance effectively reduced the value of the plaintiff’s land by 75%. [12]  The Court reasoned that “the exclusion of buildings devoted to business, trade, etc., from residential districts bears a rational relation to the health and safety of the community” and is therefore valid grounds to re-zone an area. [13] Using similar reasoning to that in Euclid, the court in Haas v. City and County of San Franciscoheld that even though a property owner is deprived of the most profitable use of the land, “land use restrictions reasonably related to the promotion of the health, safety, morals, or general welfare” are not regulatory takings requiring compensation. [14]  The means for predicting the outcomes of these cases appear to rest in weighing traditional takings analysis factors, including whether the property has lost all economically viable uses and whether the ordinance has interfered with investment-backed expectations (among other Penn Central Factors).  [15] By reviewing case law it appears that courts are at least amenable to concluding that a re-zoning ordinance constitutes a regulatory taking.While awarding compensation to the business owner may on its surface seem like the fair and just thing to do, one can not help but think about the public policy implications going forward.  If landowners prevail as a rule in cases such as Reagan, what will the overall effect be?  It has been contended that this kind of direction by courts will have a chilling effect on local governments when deciding to re-zone areas. [16] While on the one hand this may seem like a positive result since governments will think more before they make these important decisions, do we really want the government to tread lightly (or maybe not at all) if the overall effect of a re-zoning ordinance is a greater public good?  Another possible problem with re-zonings deemed as regulatory takings is the probability of abuse. What’s to stop every “victim” of a re-zoning ordinance from bringing suit, claiming that they had grand plans for the property in question, which was effectively quashed by the ordinance? [17] Time will tell if these concerns have merit.What, then, are the practical implications for prospective business owners?  The answer is two-fold.  First, examine the surrounding area.  If a business owner thinks they have found a great deal in the middle of a residential area, and therefore that business will have an edge with the all-important location, location, location, perhaps more research into the locale is needed.  The re-zoning practices surrounding the area are a good indication of what direction the local government is heading, so one should pay special attention to these signals.  [18]  However, the reality is that the land in question may be first on the chopping block, so one may not have such a clear indication of re-zonings to come.  The best option is to submit development proposals and other paperwork as soon as possible.  Though not a guarantee, courts seem more willing to label a re-zoning as a taking when the landowner has officially begun the project. [19]Sources[1] See Scott Lauck, Missouri Zoning Issue goes before Supreme Court, MISSOURI LAWYERS WEEKLY, Jan. 29, 2007.[2] Id.[3] Id.[4] W. Dudley McCarter, Rezoning of Property did not Constitute Unconstitutional Taking, Missouri Municipal League, http://www.mocities.com/default.asp?sectionID=60&pageID=12099&showMenu=3(last visited Feb. 7, 2007).[5] See Lauck, supra note 1.[6] Id.[7] Id.[8] Id.[9] Id.[10] Silverberg Zalantis LLP, Jury Awards 1.6 Million for Rezoning of Property, New York Zoning and Municipal Law Blog, http://blog.szlawfirm.net/2005/12/jury_awards_16_million_for_rez.html (last visited Feb. 7, 2007).[11] Id.[12] Village of Euclid v. Amber Realty Co., 272 U.S. 365, 391 (1926).[13] Id. at 392.[14] Haas v. City and County of San Francisco, 605 F.2d 1117, 1121 (9th Cir. 1979).[15] Reagan v. County of St. Louis, 2006 Mo. App. LEXIS 990, *6 (Mo. Ct. App. 2006); see alsoSilverberg, supra note 10.[16] Andrew Harris, Jury Finds Rezoning Amounted to a Taking under Federal Law, N.Y.L.J., (Nov. 29, 2005), available at  http://www.accessmylibrary.com/coms2/summary_0286-11988686_ITM (last visited Feb. 7, 2007).[17] See Lauck, supra note 1.[18] Id.[19] Id.

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Real Estate

The Luxury Housing Market: Thriving in a Time of General Decline

by Alicia Filter February 2 2007, 15:45
In a time where most real estate markets have declined and many experts argue that the bubble has indeed burst as home prices are increasing much less slowly than they were a year ago [1], the trend in luxury home sales is far from declining. [2] Luxury home sales have been booming, and not just in retirement areas such as Arizona, Florida, and Nevada [3], but in other areas of the country including Manhattan and California. [4] This trend has also been recently recognized internationally in Russia, Great Britain, and Canada. [5] So, why are the luxury markets booming while the housing market in general is tanking? The answer lies in an exploration of the population, economics, and employment rates. [6]



According to the Institute for Luxury Home Marketing, a group comprised of Realtors and members of the National Association of Home Builders, luxury homes are those considered to be in the upper tier of available housing in any given market.[7] Homes are categorized as "luxury" by looking at the specific geographical market and taking the higher amount of the top 10% of sales in that market or $500,000. [8] Thus, a home must be worth upwards of $500,000 to be considered "luxury" regardless of geographic location. [More]

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Real Estate

Leasing to More Than Just Humans? Who's Liable When Bongo Bites?

by Patrick Clyder November 21 2006, 09:02
It has often been said that a dog is a man’s best friend. Dogs are an ever-popular pet, but people can choose from a wide variety of pets today including exotic birds, large snakes, and even scary spiders. Unfortunately, pet lovers looking to lease a home or apartment need to choose a location carefully because not all landlords allow pets. Some landlords may ban pets because the pets may make noise that disturbs other tenants and other landlords fear that the pets may damage the leased premises. For those landlords that brave the threats of property damage and noise complaints and allow pets, can such landlords be held liable when a tenant’s pet attacks someone? This article will address a landlord’s potential liability for an attack caused by a tenant’s pet in Illinois. [More]

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Real Estate

Thinking About Refinancing Your Mortgage? Think Again

by Alicia Filter November 6 2006, 15:50
Recently, more and more homeowners have begun taking advantage of the various mortgage refinancing options available to consumers. The third quarter of 2006 saw the highest number of "cash-out" mortgage refinances of any quarter since 1990. [1] While cash-out refinancing can put money in the homeowner's pocket for things such as home repairs or remodeling, or simply free up money to consolidate and pay off other debts, higher interest rates on a higher amount of money financed as a mortgage may not make good financial sense. Homeowners should also be wary of the recently highly publicized "interest-only" refinancing option which lowers payments in the short-term but increases them dramatically after only a short period of time. [2] [More]

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Real Estate

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