What happens if you are renting your house or apartment and your landlord loses the property through a foreclosure sale? A federal law passed in 2009 provides some protection to you.
In the foreclosure of residential property after May 20, 2009, the purchaser at the foreclosure sale takes title subject to the right of the tenant to keep renting the property until the end of the term of the lease or ninety days after written notice, whichever period is longer. However, if the property is sold to a buyer who will occupy the property as a the buyer's primary residence, the lease may be terminated on ninety days written notice even if the length of time left on the lease is longer.
In order for a tenant to benefit from this law, there must be a bona fide lease. A bona fide lease is one in which the tenant is not closely related to the defaulting landlord, the lease was the result of an arms-length negotiation and the rent is at fair market value or is not substantially less than fair market value.
If you are starting a new business either alone or with other investors, one of the first issues to be decided is which type of legal entity should be selected to operate the business. The basic choices these days are:
- Corporation
- Limited Liability Company
- General Partnership
- Sole Proprietorship
The two main considerations in selecting the type of business organization are liability protection and income tax consequences.
Prior to 1994, limited liability companies did not exist in South Carolina and the choice was more difficult. With the advent of the LLC, general partnerships and sole proprietorships have all but disappeared as the choice of entity for a prudent business person because they afford no limited liability protection to the owner in the event of a lawsuit against the business.
Through an LLC, the business can obtain the same income tax advantages of a sole proprietorship or a general partnership and receive the added advantage of giving the owners limited liability protection. We say "limited liability protection" because no business entity gives an owner unlimited liability protection. However, the likelihood of having personal liability for claims against the LLC are much reduced as compared to a sole proprietorship or general partnership.
Corporations have been around for 100 years. They offer practically the same limited liability protection to the owners as an LLC does, but they may not afford the same income tax advantages. Obviously corporations have a much larger body of case law construing corporate statutes so they are more predictable than LLC's but generally corporations do not offer the same flexibility in drafting structural and operational rules that is available to an LLC.
We always encourage our business clients to consult with their tax advisors to determine which entity has the most income tax advantages and we suggest using that form of entity unless there are other overriding business reasons to the contrary.
If your new business will own real estate, we almost always recommend that a separate entity, probably an LLC, be formed to acquire title to the real estate and then the LLC will rent the real estate to the start-up business. This helps insulate the real estate investment from the more risky start-up business.
On April 9, 2010, the South Carolina Supreme Court reversed its 1979 decision and held that the family court could not order a divorced parent to pay for a child's post-secondary education. This is a major change in family law in South Carolina. Although the legal duty to pay child support usually ends when the child turns 18 years of age, in 1979 the South Carolina Supreme Court ruled in a landmark case that the family court had the power to order a divorced parent to pay support for a child's post-secondary education. This included tuition, room and board, books and other living expenses. The case had the effect of allowing a court to order a divorced parent to pay for a child's college education yet no court in South Carolina could order married parents to pay for their child's college education. The new ruling held that this unequal treatment of parents was unconstitutional.
A general power of attorney is a legal document in which a person (the Principal) gives another person (the Agent) the power to handle all financial, business, and, if included, medical affairs of the Principal. The power terminates upon the death of the Principal. A very important estate planning document is the durable power of attorney. Prior to its statutory enactment in the 1970's, South Carolina powers of attorney were voided by law in the event that the Principal became mentally incompetent or physically disabled. The statute allows the Principal to give a power of attorney which remains valid notwithstanding any subsequent mental incompetence or physical disability which may affect the Principal. Very specific language is required to create a durable power of attorney and the document must be recorded at the public records office in the county in which you reside. With such a document in place, should you become mentally incapacitated, either temporarily or permanently, the Agent can handle all of your affairs with no further action needed. If you do not have such a document in place, a family member (usually a spouse, child or parent) or some other interested person will have to file a lawsuit in Probate Court to ask the judge to find that you are legally incompetent and to appoint someone as your conservator (manager of your business affairs) and guardian (physical custodian for you). Such a proceeding usually involves hiring an attorney to bring the lawsuit, at your expense. The court appoints an attorney for you (the alleged incompetent person), at your expense, and a doctor and social worker are hired by the court to examine you, at your expense. After the family member or other interested person is appointed as conservator, an annual accounting must be filed with the court detailing all financial activity for the year. All of this hassle, delay and expense can be avoided by the stroke of a pen in signing a durable power of attorney.
Title insurance is an insurance policy that affords protection to the insured against financial loss from any defects in the title to real estate, up to the Dollar amount of insurance provided by the policy. Title insurance is principally a product developed and sold in the United States as a result of the comparative deficiency of the U.S. land record laws. The policy also provides the insured with an attorney to defend against any lawsuits attacking the validity of the title as it is insured
Typically the real property interests insured are fee simple ownership (owner's coverage) or a mortgage lien (lender's coverage). However, title insurance can be purchased to insure any interest in real property, including an easement, a tenant's lease or a life estate.
Just as lenders require owners to secure hazard insurance, flood insurance and other types of insurance coverage to protect their investment, nearly all institutional lenders require borrowers to purchase title insurance coverage to protect the lender's interest in the real estate securing the loan. The purchase of owner's title insurance is at the discretion of the owner. However, in our opinion a prudent investor should usually purchase owner's coverage.
In South Carolina, the owner and lender receive separate title insurance policies. Once a mortgage is paid in full, the lender's policy expires. An owner's policy, however, remains valid even after the property is sold. Thus, if a title flaw is discovered after you have sold the property, you still have the title insurance coverage to protect you against claims by any subsequent purchasers.
