Real Estate Buyers Beware of Fraudulent Wire Transfer Instructions

Email Fraud and Real Estate Closings

Email fraud in Pennsylvania real estate transactions poses a cruel risk to innocent buyers. And email fraud connected to real estate closings is alarmingly on the rise. The FBI, national title companies and real estate advisers are warning buyers to confirm emailed wire transfer instructions with the settlement agent who is running their closing.

The Scam

The email scam is sophisticated, often successful and increasingly common.

It works like this. Hackers identify email accounts of real estate agents, brokers or other companies involved in real estate closings. Then they hack directly into the accounts and find emails relating to pending closings. Using the chain of emails already sent to a buyer by the realtor or other participants in the closing, the hackers are able to send a very convincing email to the buyer with false wire transfer instructions. The buyer readily accepts the instructions because he or she has already received emails from the apparent sender—  and the hacker’s email contains specific, correct information about the closing and about the property.

The fraudulent instructions direct the buyer to wire monies to an account controlled by the hacker. After the buyer wires the funds, the account is emptied instantly by the hacker.

Protect Yourself

How can a buyer protect against this fraud?

First, the buyer probably has previously received escrow instructions or other preliminary information that identifies the bank where funds will be deposited before closing. Buyers must review their paperwork before following emailed wire instructions. Often fraudulent wire transfers call for transfers to a bank some distance away from the town where the closing is scheduled.

Second, and far more importantly, buyers must speak directly to the settlement agent, by telephone or even in person, and review emailed wire instructions thoroughly before wiring funds. Given the existence of this hacking scheme, buyers simply cannot rely on emailed wire instructions.

Hacking is Common

Sony, Target and the United States Office of Personnel Management have been thoroughly hacked. It’s not wise to assume that the same can’t happen to real estate agents and title agents. Everyone involved in real estate closings must confirm wire transfer instructions by speaking with a responsible person involved in the closing to confirm the bank and account number in to which the funds should be wired.

Impacted? Act Quickly

And for those who are victimized by this scam, it is imperative immediately to cancel the wire transfer with the victim’s sending bank, in writing, with detail that the transfer was fraudulently induced. Equally quickly a scammed buyer must notify the receiving bank in writing that the transfer was fraudulently induced, and instruct the receiving bank to hold the funds pending further investigation. It may be impossible to reverse a fraudulent wire transfer, but a reversal can only occur if prompt written notice is given to both banks. Finally, prompt notice to the regional FBI Office can help stop the movement of funds.

 

Woman Lost Property at Tax Sale

Woman Lost Property at Tax Sale

Shortly after January 1, county delinquent tax collection authorities will start notifying some Pennsylvania property owners that they are delinquent in their payment of their real estate taxes. Eventually, that real estate will be sold at tax sale if the taxes remain unpaid. If you receive a delinquent tax notice in the upcoming months, don’t delay, resolve the payment promptly and make sure you have paid the taxes in full.

A Pennsylvania widow was shocked to learn that she lost her home at tax sale, and she was successful in her appeal to challenge the sale. The widow was not familiar with her real estate taxes because her husband had customarily taken care of the payments. When he died, she used the life insurance proceeds to pay off the home mortgage. But she failed to pay part of the delinquent taxes and then received a delinquent tax bill with penalties and interest. She promptly paid the delinquent tax bill of $897.19 in full. But because interest of $6.90 was accruing each month, and because another interest charge was imposed after she mailed her check, she was left with a balance due of $6.90. Several months later, the tax collection bureau billed her $28.25, a sum consisting of the interest balance of $6.90, plus postage and costs. The widow didn’t pay the $28.25.

The following year, the widow again paid her taxes late, and the total due, with penalties and interest was $3,990.03. The bill did not include the previous year’s balance of $28.25 and the tax collection bureau apparently did not send any further requests for the $28.25 from the previous year.

Because the $28.25 was over a year overdue, and because it caused the widow’s home to be on the delinquent tax list, her home went up for tax sale and was purchased by a bidder. When she discovered what had happened, she immediately requested a hearing to set aside the sale. The county court simply reviewed the record, found the sale legal and denied her any relief.

On appeal, the appellate court reversed the county court, finding that fundamental state and federal principles of constitutional law demand “the most rigorous due process standards” when government deprives an owner of property. The widow was entitled to a hearing, in which the collection bureau was responsible to prove that she had actual notice of the scheduled sale. The appeals court returned the case to the county for further hearing and proof.

Notices from tax collection authorities must be taken very seriously by property owners. In order to hold all property owners accountable to pay their real estate taxes, Pennsylvania law provides an orderly process for the forced sale of real estate burdened by delinquent taxes. Be sure your real estate taxes are current, and if they are not, pay careful attention to all notices regarding your delinquent taxes. If you have actual notice of a tax sale, even if you think the sale is a mistake, don’t ignore the notice. You could lose your property.

Cite

Battisti v. TCB of Beaver County, 76 A.3d 11 (Pa. Cmmwlth. 2013).

A Shed is Not Real Estate

A Shed is Not Real Estate

Many Pennsylvania municipal governments use zoning laws to regulate the use of storage sheds. In many municipalities, land owners who buy commercially available prefabricated storage sheds must apply for zoning permits and also must observe local municipal regulations that limit how close to property lines sheds may be placed. Some Pennsylvania municipalities also tax the sheds, by including the sheds as a part of the owners’ real estate, raising the assessed value of the property after the purchase of shed. Typically, county assessment authorities discover the sheds by monitoring zoning permits.

A Pennsylvania shed-owning homeowner protested the increase of his taxes, and by appealing his case to the Pennsylvania Commonwealth Court, he secured a judicial decision that benefits other Pennsylvania shed owners. The homeowner purchased a 10 foot by 20 foot shed, with a garage-style rolling door and wooden floor. Delivered to his property by a roll back truck, the shed was placed on support beams sitting on a bed of stone. The shed did not have any plumbing, electricity or heat. The shed was not fixed or attached to the beams on which it simply rested. The county assessment authorities followed up after receiving notice of the zoning permit, and raised the homeowner’s property assessment by more than $2,000.00. The increase in the assessment triggered an increase in the homeowner’s school taxes, county taxes and township taxes.

While he lost his local challenge, the homeowner prevailed in his state court appeal. The Pennsylvania Commonwealth Court reversed the county tax assessment increase, and noted that the only buildings which may be assessed for real estate taxes are those “permanently attached to the land or connected with water, gas, electric or sewage facilities.” The county court had focused on the homeowner’s intention to use the shed permanently; the Pennsylvania Commonwealth Court emphasized that a physical, permanent attachment to the land is a crucial element if a building is to be included in the owner’s assessment. The Court noted that a building or shed is not “attached” to the land if it is “held in place by its weight alone.” Some “substantial connection” affixing the building to the land is required before a building or shed can be assessed for real estate tax purposes

Homeowners who buy storage sheds must first consider safety, manufacturer’s installation specifications and sound construction principles in deciding how to situate a storage shed. But if simply placing the shed on the ground is equally acceptable to affixing it to a foundation or to another structure, homeowners can avoid increased real estate taxes by refraining from affixing the shed. Likewise, because a connection to electric services will result in increased taxes, the decision whether to run an electric line to a shed must be made with taxes in mind. It is not yet clear whether a poured foundation, as opposed to support beams, could affect the potential for an increased assessment. But given the Commonwealth Court’s clear focus on “attachment,” it would appear that the existence of a poured pad will include a focus on whether the shed is “attached.”. Homeowners whose sheds have already been assessed as taxable now have the right to request a re-assessment in light of this decision.

Cite

Pederson v. Monroe County Bd. of Assessment Appeals, 84 A.3d 402 (Pa.Cmwlth. 2014).

 

Riverbank Law

Riverbank Law in Pennsylvania

A Pennsylvania business recently lost its claim to 4 acres of land along the Delaware River in Philadelphia, due to laws that date back to 1810.

The dispute has its beginning in a dredge and fill project that was run by several state, local and federal agencies in 1960. In order to shore up several piers supporting the Betsy Ross bridge in Philadelphia, the government agencies dredged and filled the riverbank. When the project was finished, 4 acres of additional land were exposed in a location where previously the soil had been completely submerged below the low water line. The business owned 10 acres which became directly connected to the additional 4 acres.

The business sued in 2010 to confirm that it now owed the entire area on the riverbank, now consisting of 14 acres. The trial court dismissed the business’s claims, noting that Pennsylvania law long has provided that all land under navigable rivers is owned by the Commonwealth “in trust” for the people. Natural build up and natural erosion both change a landowner’s riverside land rights, but “man-made” improvements belong to the Commonwealth.

The business appealed, acknowledging that Pennsylvania law does give the Commonwealth control of river beds, but claiming that the law should be changed. Arguing that modern methods of river engineering now put riverside landowners at more risk, the business asked the appeals court to modernize Pennsylvania river laws. The business noted first that many states have modernized their river laws, now giving title to newly exposed banks to the riverbank owners, as long as the owners did not cause the change in the river’s condition. The business also noted that riverbank owners are always at risk of losing large portions of their land to natural river changes and they are most deserving of a chance to reap the benefits of any enlargement of their land. Another concern raised by the business was that when the Commonwealth acquires newly created riverbanks, that acquisition can limit existing owners’ access to the river. Finally, the business noted that the Commonwealth is an absentee owner of many small pieces of river land under the current law and the newly exposed river banks are better manage if owned by existing, adjacent land owners.

The Pennsylvania appeals court rejected the well reasoned arguments of the business, noting simply that Pennsylvania laws going back to 1810 are clear and that the Commonwealth owns man-made additions to the river banks “in trust” for all the residents. The court did acknowledge that if a previous owners rights of access to the river are imperiled by newly created riverbanks, those rights will be protected by the courts.

Cite

Delaware Avenue LLC v. Dept. of Conservation, 997 A.2d 1231 (Pa. Cmwlth. 2010).

What is an Easement?

Easements in Pennsylvania

An easement is a limited right to use the property of another. Common easements include driveways, private roads, and utility rights-of-way for electric, water or communication lines. Most easements are contained in deeds; some can arise simply due to the passage of time. A “prescriptive” easement arises when, for twenty-one consecutive years, one land-owner uses the land of another in an “open, notorious and uninterrupted” manner. If your neighbors run their cable line across your property, after twenty-one uninterrupted years, they have established the right to do so. If you live on a private road and let it become a short-cut for a neighbor who isn’t entitled to use the road, after twenty-one years, she will be entitled.

A Pennsylvania Case

In a significant Pennsylvania easement case, a Pennsylvania homeowner tried to stop his neighbor from developing property. The homeowner claimed that because the roots and branches of his trees would be disturbed by the neighbor’s development plans, the development must be halted by the court. Arguing that twenty-one years of uninterrupted growth of roots and branches had created a prescriptive easement for the continued growth of the trees, the homeowner expected that his neighbor’s rights to develop his property should be limited. Any development that undermined the trees, damaged their roots or required the removal of branches was unfair, the homeowner insisted, since the roots and branches of his trees had encroached on the neighbor’s land for more than twenty-one years. Now, the homeowner claimed, he had an absolute right to have the health, location and condition of his trees remain unchanged since a twenty-one year encroachment on his neighbor’s land had given him the right to permit his trees to continue the encroachment.

Noting that Pennsylvania’s streets, yards, sidewalks and neighborhoods are full of unruly trees whose branches and roots cross property lines heedlessly, the Pennsylvania Superior Court declined to extend the law of prescriptive easements to tree growth. The Court wisely concluded: “The philosophy of the law is simply that whenever neighbors cannot agree, the law will protect each owners rights insofar as that is possible. Any other result would cause landowners to seek self-help or to litigate each time a piece of vegetation starts to overhang their property for fear of losing the use or partial use of their property as the vegetation grows.” The encroachment of trees or vegetation from one person’s land to another’s land doesn’t create any permanent right to continue the encroachment in the future.

Tree Branches & Neighboring Properties

If tree branches from neighboring properties overhang your property, you are entitled to “compel” their removal. Overhanging tree branches from adjacent property are legally considered a trespass. It is wisest to speak to the tree owner first and resolve the problem. But if overhanging tree branches pose a danger to you or your property you are entitled to remove them as long as you can do so without trespassing on your neighbor’s property. If the problem can’t be resolved by agreement or your safe removal of the objectionable growth, the courts will compel a landowner to trim or remove trees which encroach on your land.

Losing Real Estate at a Tax Sale

Can You Lose Real Estate at a Tax Sale?

Pennsylvania real estate owners can lose their real estate if they don’t pay their real estate taxes. With the exception of the cities of Philadelphia and Pittsburgh, all Pennsylvania counties have a central county Tax Claim Bureau that is responsible for collecting delinquent taxes. The cities of Philadelphia and Pittsburgh also hold tax sales, but they follow different procedures from the statewide Tax Claim Bureaus.

“Upset” Sales

Tax Claim Bureaus sell real estate confiscated from delinquent taxpayers in the fall of each year, at “upset” sales. An upset sale is one where the buyer takes title to the property subject to all existing mortgages and liens. Because most buyers at tax sales don’t want properties that are subject to mortgages and liens, many properties don’t actually sell at the fall upset sales. The Tax Claim Bureaus then have the authority to petition the court for a “judicial” sale. The judicial sales are often held in the early months of the following year. At judicial sales, the buyer takes clear title to the property, subject only to certain limited federal and Commonwealth liens.

Recent Cases

In a recent case where a homeowner lost a property at a judicial sale, he was able to have the sale reversed, or “set aside,” because the Tax Claim Bureau did not precisely comply with the notice requirements of the Real Estate Tax Sale Law (RETSL). The sale was published twice in local newspapers. In addition, the Tax Claim Bureau hired a constable to serve notice on the homeowner at a restaurant that he owned. The constable gave the sale notice paperwork to the homeowner’s adult stepson at the restaurant and explained the details about the scheduled sale; the stepson agreed to give the documents to his stepfather. However, the stepson put the documents on a shelf in the restaurant kitchen, never gave them to his stepfather, and simply told his stepfather that someone had come by the restaurant with a back‑rent collection claim.

The RETSL requires that the Tax Claim Bureau use the county sheriff’s office to serve all notices of judicial sales personally on homeowners. The sale was set aside because the homeowner was not personally served and because the Tax Claim Bureau used an elected constable, rather than the county sheriff’s office, to serve the notice.

Notice Requirements

The stated purpose of the RETSL is “to ensure the collection of taxes, and not to deprive citizens of their property.” For this reason, the courts read the notice requirements of the RETSL very strictly. Because many properties don’t sell at the annual fall upset sales, some homeowners become careless or casual about the subsequent judicial sale notices. The judicial sales should be taken very seriously; Pennsylvania property owners can lose valuable real estate at judicial sales. If your real estate taxes are delinquent, visit your county Tax Claim Bureau and learn what you can do to save your title to your real estate.