Question: My backyard contains a big, beautiful shade tree. It is about 10 feet from the boundary with my neighbor's lot. About nine months ago, he cut my tree roots, which extended into his yard under the fence. He wanted to plant a garden and said the tree roots interfered with his garden.
Now my tree is showing signs of dying. An arborist tells me there is no disease, so he can only surmise this unhealthy condition is because of my neighbor's cutting my tree roots. If the tree dies and my backyard is barren of shade, will my neighbor be liable to me for money damages?
Answer: Your neighbor had a legal right to cut the tree roots that intruded on his lot; however, if he negligently cut those roots so severely that your tree dies, he might be liable to you for monetary damages for the lost value of your tree.
The leading decision on this issue is from California. Booska vs. Patel (30 Cal.Rptr.2d 241) involved a neighbor who cut intruding tree roots and killed the tree. The court ruled the neighbor violated a "rule of reasonableness" and was liable for the lost value of the tree.
That sounds similar to your situation. Please consult a local real estate attorney for more details.
IRS May Require Proof of Property's Rental Intent
Q: I acquired a rental house in an Internal Revenue Code 1031 tax-deferred exchange. I plan to convert it for my personal use as a second home. How long must I rent it to satisfy the IRS? I have discussed this with several accountants and am getting different answers.
A: Nobody knows the answer to your frequently asked question. I have even asked several IRS officials in Washington, D.C. None will give me an exact answer.
The reason is IRC 1031 doesn't specify how long either the exchanged property, or the acquired property, must be "like kind" property held for investment or use in a trade or business. As you know, your personal residence cannot qualify for a tax-deferred exchange.
If you were to be audited, you must be able to prove rental intent for the acquired property. You would obviously flunk the test if you only rented the acquired house for a month. Most CPAs feel a six-month to one-year rental period, at minimum, shows rental intent, before converting the acquired property to your residence.
Contact Lender Regarding Optimum Payment Day
Q: I make an extra principal payment each month, along with my regular mortgage payment. My lender mails me a monthly payment statement showing how my extra payment was applied to principal. I recently wrote my lender, asking if it matters on what day I make my payment. I have not received any reply. I have a fixed-term, fixed-rate mortgage. Does it matter if I make my extra payment on the first or 15th day of each month?
A: Most homeowners have 15-or 30-year amortized mortgages with a 10-or 15-day grace period. That means the monthly payment is due on the first day of each month, but the borrower has up to 10 or 15 days for the payment to be received by the lender without a late charge.
However, some borrowers have "simple interest" or "daily interest" mortgages. Those loans accrue interest for each day until the monthly loan payment is received. To minimize interest cost, these borrowers should assure their payments are received within a day or two of the due date.
As for your extra principal payments, many lenders stop accruing interest on these additional amounts as of the date of receipt. However, most loan documents do not specify how extra principal payments will be handled, so it is up to your lender.
You are wise to ask, but there is nothing you can do if you don't like the answer.
Comparison Shop Before Agreeing to Refinance Fee
Q: On a home mortgage refinance, do you advise homeowners to pay a one-point fee to lock in the interest rate?
A: No, not in today's relatively stable home loan interest rate market. A one-point loan fee to lock in the current interest rate is expensive.
For example, if you're obtaining a $200,000 mortgage refinance, that's a $2,000 lock-in fee. Most reputable lenders I've encountered will quote an interest rate upon loan approval that is valid for 15 or 30 days without any extra fee. Shop around. Maybe you're not talking with the best mortgage lender.
Probate Depends on Title Holdings Within Wills
Q: My wife and I each have wills that give our assets to each other after death, then to our daughter. Let's say I die first. Do all my assets go directly to my wife without probate court costs and delays? You often talk about living trusts. Would that avoid probate?
A: Probate court avoidance depends on how you and your wife hold title to your assets.
