New Jersey Estates/Weichert Realtors/ NJ Luxury Real Estate/ New Homes: December 2007

A Tenant's Emotional Damages may be Actual Damages

Suppose a tenant finds him or herself living in a "slumlord" unit. Everything is deteriorated. Unsanitary conditions prevail. What is the tenant's recourse? Is he or she entitled to damages?

More specifically, is he or she entitled to damages for emotional distress? The answer is "yes" if you live in California's Second Appellate District, where the case of Un Sil McNairy et al. v. C.K. Realty et al. was heard.

In California, as in most, if not all, states, landlords have a legal duty to maintain units in a condition of habitability. Appliances and utility delivery systems are supposed to work; doors and windows should open and shut properly; buildings should be free of rodents and vermin; and on and on. Different jurisdictions may define these conditions differently and there always may be grey areas. Nonetheless, the basic principles remain.

In the case of McNairy v. C.K. Realty, it was abundantly clear that the premises were not maintained in a legal condition of habitability. The case was heard in Los Angeles Superior Court. Testimony showed that the Victoria Apartments, owned by Hee Cho, were in a deplorable condition. The tenants' expert witness testified that he had found thirty to thirty-five cockroaches in every unit that he had inspected. There was rust in the water, pigeon droppings on the units, inoperable electrical outlets, non-functioning heaters and air-conditioning units, a lack of hot and cold water, and on and on.

Thus, the Los Angeles Superior Court found damages in the amount of $5,000 in actual damages, $1,000 in special damages, and $4,000 in punitive damages. The landlord appealed. He argued that the actual damages could not, and should not, include any of the so-called emotional damages suffered by the tenants.

The appellate court rejected the arguments of the landlord. The court said that, in cases such as this, damages for emotional distress are included in actual damages.

In doing so, the court relied both upon earlier California cases as well as cases from other jurisdictions. They looked to a case against an insurance company, where a previous court had ruled, "emotional distress is a form of actual damage ... ." Quoting from Black's Law Dictionary, the court wrote, "Generally, the residential tenant who has suffered a breach of the warranty [of habitability] does not lose money ... discomfort and annoyance are the common injuries caused by the breach and hence the true nature of the general damages the tenant is claiming." It referred to a case involving an unauthorized recording of confidential information, and noted that, "... anxiety, embarrassment, humiliation, shame, depression, feelings of powerlessness, anguish, etc. these are actual damages."

Similar rulings were gleaned from court decisions in Arizona, Oregon, West Virginia and Vermont.

In all, the result was pretty clear. Landlords who do not maintain their premises according to commonly accepted standards of habitability will be liable for damages. And those damages will include emotional distress.

During the proceedings, the property was sold by Hee Cho. His gain from the sale was reported at $3.39 million. What a country.


Written by Bob Hunt
December 28, 2007 

Talent Vacuum Sweeping Real Estate

If you think there are too many Realtors, a new report by Deloitte suggests otherwise. High turnover rates and an aging workforce will soon result in a huge global talent shortage for residential and commercial real estate companies.

The real estate industry employs nearly 4 million people in the U.S., 2.3 million of which were born before 1962. That means that nearly 58 percent of the real estate work force will be of retirement age by 2010, says the report.

But wait -- isn't Generation X, those aged 25 to 37, waiting in the wings. No. Gen X isn't large enough to replace the bulge of boomers, no pun intended, and besides, the industry already blew it with them. We didn't make it academically or financially compelling enough, and we haven't done anything to show the Gen Xers that things have changed. In fact, they're worse. Now Gen Xers have seen two housing meltdowns in their lifetimes in the early 90s and now and when you see more people lose money than make money, it's hard to recruit.

Let's take property management, for example. Today, property managers have to be increasingly sophisticated. They have to manage the physical aspects of the job, and oversee their asset management duties which includes budgeting, financial forecasting and market analysis. The problem is the two-year training cycle clashes with the 31-percent annual turnover rate, which suggests that salaries aren't complementing the demands of the job.

So if you're wondering why the sprinkler never gets fixed at your condo, that's why.

At the other end of the working age spectrum, you have Generation Y, the 46.7 million people born between 1982 and 1993. And they may not want to get into real estate, at least not without the proper motivation.

Gen Y's young workers are about 12 percent of the real estate workforce. They see themselves as the customers of their companies -- so they look for technologically advanced workplaces. They have a different value set than the workaholic baby boomers. They want flexibility and insist on a better work-life balance.

Don't ask them to put in overtime, or you'll be reported to the department of labor. On the other hand, this generation is socially responsible and just might save your Social Security butt down the road.

So what can be done to recruit members of Generation Y to your company? Make it clear that your company meets their core needs and values -- flexibility, balance, respect, and accessibility.

Deloitte also suggests:

1. Long-term career development and multiple experiences within a single organization

    

2. Sense of purpose and meaning in the work

    

3. Availability and access to mentors and other company champions

    

4. Social networks that embrace open/honest communication.

You could also try paying them more money, too.


Written by Blanche Evans
December 28, 2007 

Washington Report: Capital Gains Takes on Change

Hardly anybody noticed it, but Congress tucked away a valuable bit of holiday cheer for real estate when it passed its final tax bill of the year.

It was the first substantive change in years to the generous capital gains rules governing sales of principal homes.

Most homeowners and real estate professionals can recite these rules in their sleep: Married, joint-filing sellers of houses can exclude up to $500,000 of gain, and single-filing sellers can take up to $250,000 ... provided they've used the property as a principal residence for a cumulative two of the previous five years.

But what happens when a married home owner dies? Does the surviving spouse still qualify for the full $500,000 -- or does she or he only get to exclude $250,000?

The answer from the IRS has been this: you only get the full $500,000 if you sell during the tax year in which you were married and filing a joint return. Otherwise, the tax code sees you as single, and then you're limited to $250,000.

In other words, if your wife or husband died in June of 2007, you can only claim the full $500,000 benefit if you sell before December 31, 2007.

After that, as long as you remain unmarried, you're capped at the $250,000 limit for single taxpayers.

As a practical matter, most surviving spouses inherit their husband's or wife's share of the property at what's known as a "stepped up" tax basis, with no capital gains tax liability at the current market value.

But here's the problem: Some surviving spouses complain that they feel rushed into sales by the current tax rules. This is especially true for people who've lost their loved ones during the final few months of the year.

With everything else going on, they don't want the additional pressure of having to make the decision to sell the family home quickly. They want more time. Fair enough.

Well, now they've got it. Legislation signed into law before the holiday recess gives surviving spouses two full years to qualify for the $500,000 exclusion -- even though technically they're single.

And who says Congress doesn't have a heart?

Since your tax professional may not be familiar with this yet, here's the official citation: The bill is H.R.3648. The capital gains change is in Section 7.


Written by Kenneth R. Harney
December 28, 2007 

How Will Realtors Advertise In The Future?

After two years of depressed housing sales, Realtors have cut their print budgets and put more money on the Web. The result has been a slingshot effect for online advertising, says a new report by online consulting firm Borrell Associates.

Total ad spending on real estate is down three percent this year, while spending online has grown 25.8 percent, hitting $2.6 billion. At this rate, online real estate advertising will grow 12.4 percent next year, while other avenues will lose advertisers. In three years, predicts Borrell, agents and brokers will spend more money online than with the newspaper.

Economic uncertainty makes it probable that the number of listings will decline and advertising budgets will also decline.

After average annual increases of about nine percent in total real estate advertising during the housing boom of 2001 and 2005, the market flat-lined in 2006 and is likely to fall by over three percent by the end of 2007, mirroring housing sales. This trend will likely continue into 2009.

This is bad news for newspapers, which hit a high of $5.2 billion in print advertising, now expecting a nearly 7 percent decline. Borrell's research suggests that 2008 will be the same and that ad sales will fall 16 percent in 2009 and 13 percent in 2010.

Going forward, online aggregators such as Yahoo! and Zillow will be closely watched by the real estate industry. Yahoo! is the second-most trafficked real estate site behind Realtor.com, and Zillow holds the No. 5 spot.

Since Borrell's report was completed, Zillow has announced partnerships with several franchises and brokers including ERA, and has launched a listings feed for brokers and aggregators. In addition, real estate agents can market themselves and their listings for free.

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