Tag Archives: Real Estate

New Year Brings New Licensing Law for Real Estate Agents

The Delaware legislature passed a bill on June 30, 2011 creating an entirely new Real Estate License Act (the “Act”) governing Delaware real estate agents that becomes effective January 1, 2012.  The new Act made extensive revisions to the Real Estate Commission’s licensing law.  There are many new terms and definitions designed to modernize Delaware’s licensing statute.  The following are some of the significant changes:

  • The Act creates three licenses:  Broker, Associate Broker and Licensee (salesperson).
  • The Act now defines a Comparative Market Analysis and that it can be provided by the agent for a potential listing price or a potential offering price.
  • The Act now allows the Real Estate Commission to issue Cease and Desist Orders and provide fines against those practicing real estate sales without a license.
  • The new Act creates several methods whereby an out-of-state real estate agent may obtain a Delaware license (reciprocal licensure).  This section ensures that the Real Estate Commission has the authority to consider the out-of-state agent’s disciplinary history in other jurisdictions.
  • The Act now permits real estate agents to become affiliated with more than one Broker of Record as long as each broker gives written approval of consent to affiliation.
  • The new Act provides that Statutory Agency will be presumed and not predicated on the signing of the Consumer Information Statement.  Additionally, the Act provides Statutory Agency begins on the first contact between the real estate agent and the member of the public.

For more information, please contact the Delaware real estate attorneys at Elzufon Austin & Mondell, P.A.

Non-Resident Sellers Must Pay or Estimate Real Estate Tax on Gains at Time of Settlement

Happy New Year. 

Effective January 1, 2011, all non-resident sellers of Delaware real estate (individuals, corporations and pass-thru entities) are required to file a Real Estate Tax Return and pay the Real Estate Tax or estimate thereof of 6.95% of the value of the gain on the sale of the real estate at the time of settlement.  The new statute, passed into law in June 2010, prohibits the recording of the Deed without the filing of the tax return and payment of the tax. 

The Delaware Division of Revenue has created Form 5403, 2011 Real Estate Tax Return Declaration of Estimated Income Tax Return which is to be completed and presented at the time of recording the deed.  The tax return contains certain “check box” options, e.g., no capital gain recognition or the seller does not have sufficient information to determine if tax is due.  Nonetheless the tax return must be completed and filed along with the deed.  Therefore, in order to ensure a smooth settlement, it is incumbent upon the real estate agents representing sellers to make sure the seller receives and completes the tax return prior to settlement.

For more information, please contact the real estate attorneys at Elzufon Austin & Mondell, P.A.

Private Transfer Fees – A No Go in Delaware

Private Transfer Fees are typically created by recording deed restrictions that compel a buyer to pay a fixed amount or a percentage of the sales price to a former owner of the property at the time of transfer of the property.  Thus, a former owner of a property can collect a transfer fee from successive buyers for years after the former owner relinquished ownership. 

However, pursuant to Title 25, Section 319 of the Delaware Code, such a fee for any transfer fee recorded on or after July 27, 2010 is prohibited.  The law provides that any transfer fee recorded after July 27, 2010 shall not run with the title to the property and is not binding or enforceable against any owner or subsequent owner, purchaser, or mortgagee.  The law further provides that any lien to secure the payment of a private transfer fee under a transfer fee covenant recorded on or after July 27, 2010 is void and unenforceable. 

The law also specifically states that §319 does not mean that a transfer fee recorded before July 27, 2010 is presumed valid and enforceable.  There are various legal theories against transfer fee covenants (Rule Against Perpetuities, unconscionability, failure of consideration, etc.).  Moreover, there are federal lending rules that disqualify mortgages on properties with private transfer fees from being sold to Fannie Mae or Freddie Mac, or used as collateral for Federal Home Loan Bank advances.  The law provides a list of fees that are not considered private transfer fees. 

Some of the fees that are not considered private transfer fees are as follows:  payment of purchase price; purchase money mortgage; installment sales contracts; real estate commissions; loan payments and associated lender fees; rental payments; payments under options to purchase and/or right of first refusal; governmental charges; condominium fees; and payment for re-sale certificates.

For more information, please contact the real estate attorneys at Elzufon Austin & Mondell, P.A.

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