Documentation key for tracing separate property interests

By Andrew Zashin

While uncertainty continues to plague the real estate market, historically, the spring and summer months have been the best times to sell a home. As we approach these warmer months, experts are optimistic that, despite housing inventory remaining at a near all-time low, mortgage rates will continue to decrease in 2024. For individuals looking to buy or sell real estate this year, there are a variety of things that you can do to seek to protect your separate property interests in this real estate in the event of divorce.

When parties divorce in Ohio, the courts must equitably divide the marital estate. This means that the court must first determine what is marital property and what is the separate property of either spouse. Any property acquired from the date of marriage to the date of a final hearing terminating the marriage is presumed to be marital property. Separate property, conversely, includes any assets owned by either party prior to the marriage, inheritances, gifts or assets explicitly designated as separate through legal agreements. The party asserting a separate property interest must prove that they own this interest.

There are a variety of ways that individuals can acquire separate property interests in real estate. One party may own a home prior to the marriage that the parties then live in during the marriage. One party may sell a home owned prior to the marriage and then use the proceeds for the down payment on a residence purchased by the parties during the marriage. One party may use funds received from an inheritance to pay for an addition to a residence. Regardless of how a party acquires a separate property interest in a residence, however, there are a variety of things that they can do to prove this interest more easily in the event of divorce.

First, couples may consider entering into a prenuptial or post-nuptial agreement that identifies the separate property interests that either has as of the date of the agreement and how the parties intend to distribute property owned by either or both of them in the event of divorce. Even without such an agreement, however, individuals can take important steps to demonstrate or “trace” their separate property interests. The easiest way to do so is by maintaining thorough records regarding the purchase of the property, any separate funds contributed to the purchase, and any separate funds used toward improvements to the property.

Because banks and other businesses are only required to keep records for a certain number of years, it is important for individuals with separate property interests to maintain these records themselves. Individuals should begin by gathering all relevant documents that establish their ownership interest in the property, including deeds, purchase agreements and mortgage documents. Next, individuals should gather and maintain records showing their use of separate funds for the purchase of, or improvements to, the property, including bank statements and receipts. If an individual has a premarital interest in a residence that the parties then live in during the marriage, the party should obtain a mortgage statement as of the date of marriage. To further simplify tracing of their separate property interests, individuals should also consider opening new accounts solely for the purpose of housing funds they receive by way of inheritance, gift or separate proceeds received from the sale of real estate or other assets.

Ultimately, I encourage anyone looking to protect their separate property interests in real estate to maintain careful records and to consult with an experienced family law attorney about the best ways to protect their interests in the event of divorce.

This article originally appeared as a column for the Cleveland Jewish News.

2024-02-23T14:48:46-05:00February 23rd, 2024|Divorce, Property Division, Real Estate|

Cleveland’s redesigned residential tax abatement program solution to affordable housing crisis?

By Andrew Zashin*

In 2017, Ordinance 244-2017 established in the city of Cleveland a “one size fits all” residential tax abatement policy: a blanket 15 years 100% abatement of any increase in real estate property tax that results from eligible improvements on qualifying projects (whether a new construction or the remodeling of existing homes). All work had to be completed under a permit issued by the city and needed to meet Green Building Standards.

While the tax abatement program has been a clear success in various parts of the city like downtown, the near west side (Ohio City, Tremont, Detroit-Shoreway, Edgewater, etc.), or University Circle – some neighborhoods have not drawn as much interest and remain lagging behind.

With the 2017 tax abatement program expiring on June 4, and the crippling affordable housing crisis, Cleveland Mayor Justin Bibb and his administration introduced a revamped tax abatement legislation on May 9. After some alterations, Cleveland City Council unanimously adopted the new legislation on May 25 – days ahead of the expiring program.

The redesigned tax abatement program focuses on incentivizing equitable developments uniformly across the city by dividing the city blocks into three tiers: market rate, middle market and opportunity neighborhoods. A map of the neighborhood designations is available on the city of Cleveland website at

The idea behind the three-tiered design is to grant greater tax relief to neighborhoods with the weakest housing market than neighborhoods with more demand.

For example, constructions of new homes in a market-rate neighborhood will be eligible for an 85% abatement on the first $350,000 of a property’s value. In middle markets, the abatement rises to 100% on the first $400,000. And finally, in opportunity neighborhoods, the owners may claim 100% on the first $450,000.

Constructions of multi-family projects of four units or more are also subject to the three-tiered approach with an 85% abatement in market-rate neighborhoods, 90% abatement in middle-markets, and 100% in opportunity. But with multi-family projects comes an additional requirement: that the owner enters into a Community Benefits Agreement with the City.

The Community Benefits Agreement requires that owners of multi-family projects set aside a percentage of units that someone making the metropolitan area’s median income of $56,000 could afford (just above $1,000 for a one bedroom). The set aside is 25% for a multi-family project in avmarket-rate neighborhood, 15% in a middle-market neighborhood, and 5% in an opportunity neighborhood. Developers that do not meet the set-aside requirement can also pay $20,000 per unit into a housing trust fund.

The main alteration that the council undertook from Bibb’s proposed plan is with regards to renovations. Renovations will not be subject to the three-tiered approach. Rather, the blanket 100% abatement for 15 years remains – regardless of geography. For a single-family home, the 100% abatement applies to the first $450,000 of the property’s value or if all units are affordable at 80% of the area’s median income. For a multi-family home, the 100% abatement applies if the remodeling costs are greater than $15,000 per unit or $500,000 per structure and if the owner enters into a Community Benefits Agreement with the city.

The hope is that developers will prefer undertaking renovations rather than new build projects – creating significantly less waste than the latter.

For all projects, the requirement that all developments (whether renovations or new build) adhere to the green building standards remains.

The new abatement program will take effect on Jan. 1, 2024. For more information about the new abatement program, check out the council program.

Whether the new abatement program is or isn’t successful in creating significantly more affordable housing, one thing is certain – Cleveland is building more than ever and changing at a rapid pace.

This article originally appeared as a column for the Cleveland Jewish News.

2023-11-10T13:38:05-05:00August 19th, 2022|Real Estate, Tax Breaks|

Potential tax relief for commercial property owners negatively affected by COVID-19

By Andrew Zashin*

Unbeknownst to many Ohioans, on Aug. 3, Gov. Mike DeWine signed into law Senate Bill 57, which can assist real property taxpayers who believe the value of their property has declined as a result of the COVID-19 pandemic.

The law specifically allows eligible taxpayers to file a special COVID-19 complaint with their county board of revision requesting that a property’s tax valuation for tax year 2020 be determined as of Oct. 1, 2020, instead of the Jan. 1, 2020. Prior to the passage of this recent legislation, a real property taxpayer was only permitted to file one complaint in each three-year valuation period if they disagreed with their assessed tax value. However, the new law allows a real property taxpayer to submit a COVID-19 complaint, even if they have already filed a standard challenge to their property’s value.

In order for a real property taxpayer to qualify for this special COVID-19 relief, the taxpayer must demonstrate that the real property’s value has been reduced due to circumstances related to the COVID-19 pandemic or a COVID-19-related order issued by the governor or a state agency, the special complaint must be filed on or before Sept. 2, 2021 and the special complaint must state with particularity how the COVID-19-related circumstances caused the reduced real property value.

After the complaint is submitted, the taxpayer will be scheduled for Zoom hearing at a later date. If a COVID-19 complaint is successful, and the board of revision shall adjust the tax value of the property which will then alter the taxes payable in 2021. For those taxpayers who bring a successful complaint and have already paid their 2021 taxes, the local county auditor should issue a refund to the taxpayer in the amount the taxpayer overpaid.

While both commercial and residential real property taxpayers are eligible to file a special complaint, because home values have generally remained strong through the pandemic, it may be difficult for a residential property owner to show that their property’s value should be reduced due to the pandemic. As a result, the new complaint program is more likely to benefit owners of commercial properties instead of residential owners since many commercial property owners experienced income losses as a result of the pandemic.

In addition to the tax relief described above, the same law authorized a property tax exemption for housing primarily used by individuals diagnosed with mental illness or substance use disorder and their families. To qualify, property must use the property to provide housing, lease the property to individuals with mental illness or substance use disorder and make supportive services available to such individuals, or lease the property to a charitable institution.

It is important that any taxpayer and/or property owner wishing to file a COVID-19 special com-plaint carefully review the specifications and requirements of the new law prior to filing since a complaint can be summarily dismissed if a complainant fails to provide all the requested documentation and information with their initial complaint. In addition, taxpayers with properties negatively affected by the COVID-19 pandemic or state COVID-19 orders should move quickly to consult with appraisers and legal counsel to determine whether a special tax year 2020 complaint is in their best interests as special 2020 complaints must be filed between July 26, 2021, and Sept. 2, 2021.

This article originally appeared as a column for the Cleveland Jewish News.

2023-11-10T13:38:07-05:00August 20th, 2021|COVID-19, Pandemic, Real Estate, Tax Breaks|

Make real estate part of your retirement planning

By Andrew Zashin*

When you think of preparing for retirement, what comes to mind? A 401(k)? A pension? An IRA? Social Security? Other savings? What about real estate? Maybe surprisingly, some prospective retirees are looking to real estate investments to help fund their golden years.

If you are interested in the prospect, know that you have several options.

One of the simplest ways is to invest in a real estate investment trust, generally known by the acronym, REIT. A REIT is effectively the real estate equivalent of a mutual fund. They own and typically operate real property that produces income, such as apartment buildings, warehouses, hotels, shopping centers and even timberlands. Some even provide financing. They can be private or public. And, perhaps most interesting for investors, they are subject to tax rules that require at least 90 percent of all taxable income be distributed to shareholders each year.

On the other hand, it can be difficult to get into the best-managed REITs. Income can be inconsistent. And, the required payouts can limit growth, as there will simply be less capital available for reinvestment.

Another option is to create an income stream through property rental. Some people may opt to own a second (or third, fourth, or 10th) home or building for purposes of renting it out. Others may opt to live in one part of a multi-family home or apartment building and rent the other units. Or, of course, commercial buildings can garner significant rents. And vacation rentals, whether rented with the assistance of a property management company or even a rental website like Airbnb, are likely to bill weekly, providing net amounts that can be much higher than other residential types of rentals, especially in popular tourist spots.

On the other hand, all types of rental properties require some capital. You may have ongoing expenses like a mortgage, management expenses, standard upkeep and improvements, and property taxes. To come out ahead, it is imperative to do some level of cost-benefit analysis to make sure the investment is likely to be worth it.

It may be enough to simply take equity out of your home. If you’ve paid off – or even just paid down – your home in the years leading up toward retirement, this could be a good option for you. Home equity loans and home equity lines of credit will permit you to borrow against the wealth that you have built up. Loan proceeds would then be available for other investment, payment of expenses, and the like. The downside is that these funds will need to be repaid, and the repayment terms will certainly need to be weighed against available cash flow and the benefit derived.

Finally, if you or your spouse are over the age of 62, a reverse mortgage might be a good option for you. This is an alternate type of mortgage loan that allows a homeowner to access the equity built up in his or her property. The equity funds are received at the inception of the loan and usually require no monthly repayment.

Instead, interest is added to the loan balance, which will be collected at the time the home is sold or the homeowner passes away. Borrowers will still be responsible for paying property taxes and home owner’s insurance, not to mention any repairs. The loan balance can grow beyond the actual equity available in the home, especially in a down economy. However, the borrower –or his or her estate – is not typically on the hook for any overage. But, it is important to understand that no value may be left for heirs.

Unless you are going to become a property tycoon, you will probably not be able to retire on real property alone. But, if you are looking for some supplement cash flow – or a lump sum of cash– these options may help you get there.

This article originally appeared as a column for the Cleveland Jewish News.

2023-11-10T13:38:11-05:00October 18th, 2018|Estate Planning, Real Estate, Retirement Planning|

Reverse mortgages: predatory lending or valuable planning tool?

By Andrew Zashin*

This article originally appeared as a column for the Cleveland Jewish News.

“Are you over the age of 62?”

“Do you have equity trapped in your home?”

“Having trouble making your monthly mortgage payments?”

“Supplement your retirement savings and make that money work for you.”

Targeted advertisements tout the benefits of reverse mortgages.

A reverse mortgage is a special type of loan offered to homeowners over the age of 62, generally with at least 50 percent equity in their home. Under this type of loan, borrowers pay property taxes and homeowner’s insurance, but no mortgage payment, and get immediate access to the home equity that has built up. The borrower keeps the home and will generally never be forced out of it.

It differs from other loan products like home equity loans or home equity lines of credit in that the borrower makes no monthly mortgage payment. Instead, repayment of the loan – including the interest that has compounded each month – is deferred until the home is sold or the borrower dies.

In general, the home is the collateral for the loan, and the borrower, or borrower’s estate, is not responsible for repaying interest that exceeds the home’s value. Given the way these loans are structured, it should come as no surprise that there may or may not be any equity left in the home when it is time to sell it.

This type of loan – known more formally as a home equity conversion mortgage – was first made available under the Reagan administration in 1988. In the subsequent decades, reverse mortgages have been criticized for many reasons, including confusing terms that make predatory lending a concern, high initiation costs, higher interest rates than conventional mortgages or home-equity loans, and compounding interest that can quickly deplete home equity, leaving little wealth to pass on to heirs.

AARP has been rather vocal in its efforts to advocate and educate consumers about this planning tool. While the terms of a reverse mortgage prevent foreclosure on the borrower, before 2014 those protections did not extend to a surviving spouse who was under the age of 62. The law was subsequently changed, making it a less risky option for borrowers with spouses below the age limit.

Reverse mortgages have developed a stigma as being a “last-resort” option for those who desperately need money because they have insufficient retirement savings to meet expenses or unexpected bills. It is certainly true that this type of loan can help with those things. But the recent recession is still fresh in everyone’s mind and has proven that real estate is not the sound, guaranteed return investment that it was historically thought to be. While this loan product can certainly help people with cash flow concerns, even if you have more than enough saved to last and sustain a few retirements, rising home values may make a reverse mortgage a smart financial tool to – just like advertisements say – make your money work for you.

2023-11-10T13:38:12-05:00July 27th, 2017|Real Estate, Retirement Planning, Reverse Mortgage|

In real estate deal, professional help may be wise investment

By Andrew Zashin*

This article originally appeared as a column for the Cleveland Jewish News.

Very often, people wonder if it is necessary to hire a real estate agent or even an attorney to buy or sell real estate. After all, Realtor commissions and/or attorney fees add up, and it is tempting to want to keep that money in your pocket.

The short answer is no, you do not need to hire professionals, but it sure helps.

Buying and selling property is quite different than selling a used car on craigslist. For starters, real estate is generally going to be many times more expensive, meaning it will be a much bigger deal if you overpay for a new purchase or undervalue the property you are selling. Further, there are a multitude of specific laws that must be followed, from fair housing issues to required disclosures for things like the existence of use, lead paint or pipes, and radon.

Then, of course, you want to make sure you have a properly drafted contract to best protect you against future problems. And, perhaps the area where a professional earns most of his or her fee is in the negotiation process. Knowing the fair price of a property requires knowledge of the market, how comparable properties have sold, and how certain features and issues impact upon the value.

Is it possible for a lay person to learn about these things and adequately represent him or herself in a transaction? Sure. But it takes lots of time and effort, and you would be missing out on the expertise and experience of someone who does it for a living. After all, you could study up and do the same work as your plumber or electrician. You could even set your broken leg if you so wished. But, without the training and experience of a professional, the job is much more difficult and less likely to be done well.

For the majority of real estate transactions, such as the purchase of a home, a rental property, or even a smaller commercial property, you generally will not need an attorney; a real estate agent will have all of the expertise necessary.

A real estate agent is not qualified to give legal advice, but he or she typically does not need to. A real estate agent will have the necessary legal documents to cover the important points of the transaction. And, he or she will be familiar with the laws that affect the transaction. In short, for a good Realtor, the commission is money well spent for your protection and piece of mind.

*Andrew Zashin writes about law for the Cleveland Jewish News. He is a co-managing partner with Zashin & Rich, with offices in Cleveland and Columbus.

2023-11-10T13:38:14-05:00July 31st, 2015|Real Estate|
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