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FUNDS RETAINED FROM THE SELLER – THE USE OF ESCROW ACCOUNTS AFTER A CLOSING

August 9, 2016 Leave a comment

There are a few categories of real estate transactions in which certain potential liabilities could occur or “appear” after the closing.  In this regards, I want to shed some light on how to handle these situations through the use of an escrow accounts are, communicate why sometimes funds need to be withheld from the seller, and when and how are the funds subsequently disbursed. 

In this regards, any deposit into an escrow account requires an “escrow agreement” to be executed by the parties and the entity holding the funds.  I want to further note, that the closing notary is not a party to this agreement.

The purpose use of the escrow account I am referring to in this post is quite specific and different to the use of escrow accounts for a closing across the United States.  The issue I want to cover, is the need to withhold funds from the seller to protect the buyers from a potential condition that may require funds from the seller in the future.

Once a property is sold, the seller may elect to “travel the World” or go and find new adventures elsewhere.  If the buyer of a property is confronted with a situation after the closing which the seller is responsible for, the buyer may have some difficulties in achieving compensation from the seller.  While this is not a common occurrence and not all possibilities can be predicted, there are some circumstances which warrant the use of an escrow account.

An example of the potential need for an escrow account after the closing are property taxes. 

A seller of a property has to transfer the rights to the buyer with zero balance owed and with the records properly updated.  Sometimes, a property is not appraised for property tax purposes and the taxes have not been paid up to the date of the closing.  Under such circumstance, a buyer may elect to proceed with the closing anyhow. 

The amount of the tax exposure would be estimated by the title insurance company and the funds equivalent to this estimate would be withheld from the proceed of the sale and deposited into an escrow account until the tax situation is cleared.  The amount finally owed would be paid from the escrow funds and any leftover balance (if any) would be returned to the seller.

Another situation is a loan which has been paid-off but the mortgage was not timely canceled by the seller.  The buyer or his/her title insurance company would demand that a given amount of money be placed into an escrow account while the mortgage is being cancelled.  Once the mortgage is successfully removed from the Property Registry, the funds held in the escrow account would be disbursed to the seller.

Regardless of the situation which warranted the use of an escrow account, once key element is noteworthy.  The agreement to deposit the funds into an escrow account is by the parties in conjunction with the title insurance company who manages the escrow account.  This agreement will manifest the requirements needed for the funds to be released in the future.  Until those requirements are met, the funds will not be released.

The parties must understand that the eventual disbursement of the funds depends on: (1) full compliance with the requirements of the escrow agreement to the satisfaction of the entity managing the escrow funds; and (2) a consent by both parties to this entity . 

A Father’s Day Message

June 21, 2015 2 comments

I do not know exactly why, but this time Father’s Day has been quite different for me. 

For whatever reason, as I started thinking about my long departed father I also started finding many similarities between him and many of my friends today, particularly those I see as bein exemplary beings.

It then hit me that “eternity” is a word or concept I did not fully understand– until today. 

My father has always been present in my life even after his death.  Somehow, the fact that he is not here though his body is of no consequence to me.  As far as I am concerned, he is always present and this Father’s Day I believe I have finally understood why; Eternity in this material world manifests itself through production.

It is that which we are actually able to produce which keeps on manifesting itself well beyond the so called death, specifically in the area of help.

My father had plenty of production and many of my friends today are also–like my father during his time–highly effective producers. The fact that I am associated with these individuals, keeps my father’s point if view alive.

Indeed, my father loved to help and understood the importance helping others has in the continuity of our culture, our wellbeing as a society, and the prosperity if anyone’s business and family life.

I just realized that my desire to help comes from my father’s exemplary conduct, and my continued desire to help is keto alive by those like minded individuals I surround myself with.

My father knew as I very well know now, that our desire and ability to effectively help others results in a great legacy for anyone anywhere.

Understand something :  I am not referring to history, since history by definition is something of the past.  I am referring to those actions and that production which creates something here and now which will perdure. This creation involves creating improved conditions of individuals groups, communities and society as a whole.

Hence, to those individuals who on a daily basis produce effective help to others, particularly their children and their families, families and communities as a whole, please keep up the good work and emjoy a happy Father’s Day. You have earned it!!

Sincerely,

Santiago F. Lampón, the proud son of Luis Enrique Lampón from Bayamón, Puerto Rico.

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Why (and When to) Speak to a Real Estate Lawyer When Purchasing a Property in Puerto Rico

May 20, 2015 Leave a comment

I am frequently asked when is the oportune time for a buyer to speak to a real estate lawyer when performing a real estate transaction in Puerto Rico. Through this video I clarify when and why.

Yes, the answer may seem obvious to most readers.  My recent (surprising) experiences on this subject have motivated me to publish this video which I hope you will enjoy.

Yours,

Santiago F. Lampón

Finding a Title at the Puerto Rico Property Registry – Part 2

June 20, 2013 Leave a comment

This post is a sequel to Part 1 published by lawyer and notary Santiago F. Lampón. On this post, Mr. Lampón covers the search for a registered title when the parties lack the basic information which identifies the property.

Exequatur in Puerto Rico

August 15, 2012 Leave a comment

Dear Subscriber:

Here is a link to my newest article on the subject of “exequaturs” in Puerto Rico.  Click on the link and you will see a definition on what the process is and its uses.

http://www.puertoricolegalblog.com/exequatur-in-puerto-rico/

I have had to work with many of these in Vieques.

Yours,

Santiago F. Lampón

Forced Heirs Law in Puerto Rico – An Introduction

August 13, 2012 2 comments

Dear Subscriber:

I present my latest video, this one on the subject of Puerto Rico Foced Heirs Law, a subject I commonly confront in my practice.  Please remember that I welcome any questions or comments on the subject, and perhaps your question can become the subject of my next video or post.

Very truly yours,

Santiago F. Lampón

Wills Not Executed in Puerto Rico

July 27, 2012 Leave a comment

Dear Subscriber:

Here is a link to my video on wills not executed in Puerto Rico.

Very truly yours,

Santiago F. Lampón

Forms of Deeds in Puerto Rico – Some further comments

July 21, 2012 Leave a comment

Dear Subscriber:

A reader posted a question on my video post about Forms of deeds in Puerto Rico.  The question was very interesting and got me to write a detailed comment in response.  Follow this link to gain access to  this additional information which I hope you will find useful.

Very truly yours,

Santiago F. Lampón

Powers of Attorney and Real Estate Transactions in Puerto Rico

July 11, 2012 Leave a comment

Dear Vieques Law Subscriber:

I have posted an article on this subject which you may read here.

Please follow the link above for the article.

Very truly yours,

Santiago F. Lampón

New Economic Laws to Benefit Small and Medium Size Businesses

October 1, 2008 Leave a comment

New economic measures have been approved into law with the purpose of benefiting small and medium size businesses, with the purpose of assisting in the development and strengthening of the local industry.

Among the excellent measures is Law Núm. 147 of August 1, 2008, known as the Law of Incentives for the Development of Small and Medium Size Companies.  This law includes a series of amendments made to a series of laws, among which are the Puerto Rico Internal Revenue Code, Workmen’s Compensation Law, Municipal Patent Law and others, in order to create a model of incentives that stimulate the development and growth of medium and small companies of local capital.  These companies are generally seen as the creators of economic activity which in turn support the economic development of the Island.

As an example, a corporation or partnership with annual income not in excess of $5.000.000, will be able to choose a 25% tax rate if it maintains an average of 7 employees per year or 30% rate otherwise. The cost of equipment of computer systems and other equipments could be adjusted towards the gross income with two years depreciation, including transportation and environmental conservation equipment among others.

Puerto Rico is aggressively pushing for the strengthening of small and medium size business.  Hence, it is important to keep abreast of the changes affecting this sector of the economy.

 

Lampón & Associates

 

Medidas económicas a beneficio de las Pequeñas y Medianas Empresas

 

Nuevas medidas económicas se han convertid en ley con el objetivo de beneficiar a las empresas locales y al consumidor, fomentando el desarrollo y el fortalecimiento de la industria local.  

 

Entre las medidas más relevantes se encuentra la Ley Núm. 147 del 1 de agosto de 2008, conocida como la Ley de Incentivos para el desarrollo de Pequeñas y Medianas Empresas. El cuerpo de dicha ley consiste en una serie de enmiendas realizadas a un grupo de leyes (Código de Rentas Internas, Ley de Compensación por Accidentes del Trabajo, Ley de Contribución Municipal sobre la Propiedad y Ley de Patentes Municipales) con el propósito de crear un modelo de incentivos contributivos y no contributivos que estimulen el desarrollo y crecimiento de empresas medianas y pequeñas de capital local como creadoras de empleos y de actividad económica para fomentar así el desarrollo económico del país.

 

A modo de ejemplo, gracias a ésta ley una corporación o sociedad cuyos ingresos anuales no excedan de $5,000,000.00 podrá optar por una contribución de un 25% si mantiene un promedio de 7 empleos anuales, o como alternativa una contribución de 30% sin estar éstas sujetas a imposición de contribución adicional. Se podrá deducir del ingreso bruto el costo de equipos de sistemas de computadoras y su instalación, y se podrá determinar dicha deducción utilizando una vida útil de dos años para el equipo de transportación terrestre y equipo de conservación ambiental.

Es importante conocer y entender todas las medidas que se están adoptando día a día en el país con miras a lograr una estabilidad económica dentro de un sistema que sea estable y seguro. Estos incentivos están dirigidos no solo al desarrollo y fortalecimiento de la industria local, si no también a la protección y el beneficio del consumidor como parte del colectivo social.  

Para más información sobre este tema o algún tema asociado, puede comunicarse con nosotros al 787-273-6767.

Lampón & Associates

 

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