New Bill Makes it Easier for Surviving Spouse to Fight Foreclosure

California Attorney General Kamala Harris is supporting a bill that expands the state’s Homeowners’ Bill of Rights. Under the expansion, the Homeowners’ Bill will include a provision designed to help surviving spouses and children stay in their homes after the primary mortgage holder passes away.

All too often, a couple buys a property but only one spouse signs the original loan documents and thus becomes the primary borrower. After the primary borrower passes away, the remaining spouse (typically the widow) is unable to pay the mortgage. As a result, the house is foreclosed.

The bill is known as the Homeowner Survivor Bill of Rights, Senate Bill 1150. If enacted, it would expand the current California Homeowners’ Bill of Rights to provide protections for homeowners against foreclosure. In that regard, the Survivor Bill is meant to protect surviving spouses and children from losing their home after losing their loved one.

Homeowner’s Bill of Rights

The California Homeowner Bill of Rights was enacted in 2012 to ensure fair lending and borrowing practices, and to guarantee basic fairness and transparency for homeowners in the foreclosure process. For example, mortgage servicers were restricted from taking steps to advance the foreclosure process if the homeowner was working on securing a loan modification. Another provision required purchasers of foreclosed homes to give tenants at least 90 days before starting eviction proceedings. California Homeowner Bill of Rights

In its current form, the survivor spouse is at risk of losing his or her home due to foreclosure. Recent hearings on the Homeowner Survivors’ Bill revealed banks insist on speaking with the primary mortgage borrower. Even if the primary borrower has passed, the bank would not modify the loan to include the surviving spouse because the deceased spouse could not sign the loan modification.

Other supporters of the Survivors Bill reveal they had to send their deceased spouse’s death certificate twenty-five times to the bank before the bank would consider modifying the loan. This difficult process has caused many grieving spouses additional pain, annoyance, and heartache.

How Does the Survivor Bill Fight Foreclosure?

The Homeowner Survivor Bill of Rights addresses what its sponsors have defined as a “loophole in California law that fails to provide surviving spouses and children important protections against foreclosure that are available to other homeowners.”

Under the Survivors Bill, the surviving spouse would be able to apply for both a loan assumption and loan modification and become the single point of contact with the lender. In other words, the spouse would be able to assume the loan and modify it without the deceased spouse having to sign paperwork after death or having to send the bank numerous copies of a death certificate to prove the deceased passed.

The proposed legislation also requires mortgage servicers to communicate with the heirs and spouse directly instead of allowing mortgage servicers to foreclose without attempting to speak with the deceased’s family. The new legislation notifies the surviving spouse that they can step in, assume the loan and keep their home instead of inundating them with paperwork and conflicting, confusing information.

Judges Judging Judges: Will a Court Rule Magic the Gathering Judges are Employees?

Those who judge duels of spells and monsters have convened in joint purpose—to sue Wizards of the Coast for failing to pay them. Wizards of the Coast (Wizards) is a Hasbro subsidiary who owns the most popular collectible card game in the world—Magic the Gathering.  Magic the Gathering (Magic) has attracted a substantial competitive community and tournaments are held with some regularity.  These Magic tournaments are moderated by judges certified by Wizards, resolving rule disputes and performing other functions.

Recently, several of these judges filed a complaint against Wizards on behalf of themselves and all other judges.  The class action lawsuit alleges that the judges are employees of Wizards and that Wizards has—among other things—failed to pay them for their services.  The lawsuit seeks damages of over $5M.

Judges in Magic the Gathering

In order to become a Magic judge, a person needs to register with Wizards and pass a multiple choice test provided by Wizards. Restore Balance

The requirements of being a judge and maintaining judge status are set by Wizards and vary based on a judge’s level—1 to 5. These duties and requirements include documenting Magic gameplay at events and tournaments, working at least 25hr/month per judge level, and regular testing.  The advancement from level 2 judge to level 3 and beyond requires substantial testing and interviews.  The testing is all handled by Wizards.  Wizards can also unilaterally revoke judge status whenever they feel like it.

Up until recently, judges have been reimbursed for their work—often over 12 hours in a day—with specialized promotional Magic cards available only to judges. These cards can be worth anything from $200-$800.  However, Wizards has discontinued this practice, perhaps out of fear that it makes judges seem more like employees.  Currently, judges do not receive anything for their service and are not provided meal breaks, rest breaks, or expenses for working events.

Volunteer Judges?

Wizards has historically treated judges like volunteers—enthusiastic members of the magic community whose donated time is much appreciated. While this is not explicitly argued in Wizard’s press response to the judge’s lawsuit, it is heavily implied.  The release states that “fans choose to become judges out of a sincere love of the game and as a way to enjoy their favorite hobby. They ensure events are fair and fun, and we appreciate everything they do.”

It’s not surprising that Wizards is only implying that the judges are volunteers, as the assertion doesn’t have a legal leg to stand on. Federal law clearly establishes that for-profit, private sector companies cannot take advantage of volunteer labor.  Wizards, a for-profit subsidiary of one of the largest for-profit toy makers in the world, certainly cannot accept volunteer labor.

Joint Employment

So if the judges can’t be volunteers, the question becomes what are they? The judge’s complaint alleges, that they are employees.  However, Wizards will certainly argue that they either have no relationship or are independent contractors.

In their press response, Wizards argues that the judges’ class action lawsuit is meritless because most judges do not work at tournaments run by Wizards.  In fact, only a very small number of the highest tier Magic tournaments are organized and handled by Wizards itself.  The majority of tournaments are set up by local stores and event organizers.  Unfortunately for Wizards, this doesn’t matter.

Less than a year ago, the National Labor Relations Board issued a ruling that changed the way employment functioned—preventing an employer from avoiding employer obligations by hiring through a labor supply contract or temp agency. This case, Browning Ferris Industries, found that multiple employers can act as joint employers (with all the responsibilities that come with that relationship) where (1) the entities are employers within the meaning of the common law; and (2) the entitles share or codetermine those matters governing the essential terms and conditions of employment.

Wizards controls a great deal about the conditions of a judge’s employment at any tournament—even tournaments run by local stores. They set the rules, they set the tests to determine whether or not you can be a judge in the first place, Wizards often schedules and regulates events.  Much of the time, Wizards even determines the “format” of an event—what kind of tournament will be held.  Wizards has a substantial hand even in tournaments it doesn’t directly run—meeting the second requirement of the Browning test.  All that remains is to determine whether Wizards has an employer-employee relationship with the judges or if these judges are independent contractors.

Independent Contractor v. Employee

Independent contractors make contracts with a business to perform a specific type of work, usually for a limited period of time. Employees work under the direct control of an employer, with the employer controlling the terms, conditions, and tasks of the employee.  Independent contractors are not protected by most employment laws—including minimum wage and overtime laws.  If Wizards could establish that the judges are independent contractors, they’d be off the hook.

The tests to determine whether somebody is an employee or independent contractor vary substantially throughout the country and sometimes have as many as 21 different factors to consider. However, the tests all boil down to the same thing—the level of control the potential employer has over the would-be employee.  The tests look to who decides how, when and where a person does their work.

Taken as a whole, Wizards certainly has a substantial amount of control over the judges. The testing to become a judge, combined with Wizards’ retaining the ability to unilaterally revoke any judge status, represent substantial involvement in judge training and close supervision of individual judges.  Wizards sets all the rules that the judges enforce.  Alongside private vendors, Wizards schedules many—but not all—of the tournaments the judges work at and even assign judges to tournaments sometimes.  All of this supports the judges’ argument that they are unpaid employees and Wizards is their joint employer with the local tournament organizers they work with.

What Will Wizards Do?

Unsurprisingly, the judges seem to have the rules right. Even if there is a colorable case on the part of Wizards that the judges are independent contractors—it certainly isn’t looking good for them.  A jury determination that all the judges are employees would be a costly loss for Wizards and would leave them with a sticky situation in dealing with their judges going forward.  While Wizards has publically stated that they believe the judges’ class action suit to be meritless, it seems likely that a settlement may be forthcoming in order to avoid a court ruling the judges are employees. This would be quickly followed by a serious restructuring of their judge program.

Removing Permanent Alimony for Divorcing Floridians a No Go

A previous blog discussed Florida’s child custody bill that would have started divorcing parents on equal ground in a custody battle with a presumption of 50/50 custody. Governor Rick Scott, who expressed creating a promise of equal custody would put the needs of the parents before the child, vetoed the bill.  The equal custody provision of the bill got more media attention. However, an even bigger portion of the bill was aimed at removing Florida’s current law regarding alimony.

Currently, Florida allows permanent lifetime alimony. Supporters of the alimony reform want to replace permanent alimony with formulas to calculate an award that would result in a fixed end date based off the length of the marriage and the spouses’ respective incomes.

Florida Judges Have Broad Discretion to Determine Who is Entitled to Alimony, the Amount, and For How Long the Alimony Can Last.

When determining whether to award alimony, the court will consider:

  • the standard of living during the marriage,
  • the duration of the marriage,
  • the age and the physical and emotional state of each party,
  • the financial resources of each party, including the nonmarital and marital assets and liabilities distributed to each,
  • the earning capacities, educational levels, vocational skills, and employability of the parties,
  • the contribution of each party to the marriage, including services rendered in homemaking child care education and career building of the other party,
  • the responsibilities each party will have with regard to any minor children they have in common,
  • the tax treatment and consequences to both parties of any alimony award, and
  • all sources of income available to the party.

Sounds fair, right? Well, the presumption for long-term marriages, 17 years or more, is that any determined award of alimony is permanent. It’s a rebuttable presumption, so the court can disregard the presumption. Nonetheless, that’s not a burden the breadwinning spouse should have to endure. Alimony

Under the vetoed alimony reform, alimony would have had an end date, rather than an indefinite time frame. Although the current law already requires judges to take the above factors into consideration when considering an award of alimony, the reform would have taken away the discretional decision-making component and required the number to be calculated based off the formula, and thus, resulting with a fixed end date.

Current Law Allowing Lifetime Alimony Is Unfairly Applied

It’s geared at stay-at-home parents, usually the mother, who could not easily re-enter the workforce. Florida’s rationale behind alimony is that they, as a state, don’t want to support the impecunious spouse. Instead of forking up the money via welfare and food stamps, legislative intent is to look to the breadwinning spouse to provide for the non-breadwinning spouse.

Spouses are expected to maintain the same standard of living that was held during the marriage, but, in reality, that’s an insane standard. That assumes divorcing spouses will not remarry and will not inevitably have to support another spouse or 2 separate households. Had a stay-at-home spouse never gotten married and had kids, that spouse would have had to learn to support themselves. Marriage ending in divorce should not be an equivalent to a lifetime financial contract.

Additionally, many spouses are forced to work longer than they normally would have, not being able to retire, because they can’t afford to make alimony payments otherwise. How is that fair?  Current law allows spouses to ask for reductions in their alimony payment for retirement purposes, but it’s often overlooked.

Is There a Better System?

A parent that sacrifices their ability to have a career to stay at home and take care of their kids is great and, don’t get me wrong, should be given an award of alimony, but requiring an indefinite award seems excessive.

Using a formula to calculate an amount with a fixed end date seems like a more reasonable system than a permanent award, as it allows the spouse time to get back on their feet without forcing a breadwinning spouse to work beyond retirement age just to afford alimony payments. While I agree with the intent of the alimony reform bill, how the formula plays out in actual divorces may be a different story and I think there’s room for improvement.

Other than lengthy marriages that involve a stay-at-home spouse taking care of children, I don’t see a useful purpose for including length of marriage as a hard factor into the formula. While it should be considered, especially if the couple had only been married for a short amount of time, 17 years of marriage shouldn’t automatically equate to an alimony award—the length of the marriage shouldn’t be weighed as heavily in calculating a figure.

Need should be the #1 factor in the formula, as using a basic pre-determined formula may unfairly hurt the paying spouse. Earning potential, education, children, cohabitation or re-marriage, among other factors, should all definitely be considered. An exacting formula may not be the best answer and that’s why allowing judicial discretion is important, but there definitely needs to be some hardline rules or ways to incorporate formulas that won’t unfairly punish the paying spouse by requiring lifetime alimony.

Florida’s current guidelines aren’t bad; it’s more the execution of allowing lifetime alimony awards that’s hurting breadwinning spouses. With the veto of the bill, it’s unclear whether any kind of alimony reform will happen in the foreseeable future.

Utah Creates First Ever White Collar Criminal Registry

Utah has created the first ever registry for white-collar criminals. Similar to a sex-offender registry, the Utah White Collar Crime Offender Registry primarily targets any offender convicted of fraud. With a whopping $1 billion of fraud-victim loss in 2010, apparently the citizens of Utah are particularly more vulnerable to affinity fraud due to Utah’s high volume of religious and ethnic communities.

What’s affinity fraud, you ask? Perpetrators of affinity fraud pose as members of religious or ethnic communities, build a trusting relationship, and then exploit that relationship to essentially run a Ponzi scheme against the unsuspecting members.  Think Bernie Madoff.

Despite the fact that conviction records are public, the database, according to Utah Attorney General Sean Reyes, will provide consumer protection in a user-friendly fashion.

Sex Offender Registries Create Stigma

Sex-offender registries are modernized scarlet letters that put the same stigma on every registrant, regardless of what they did. It’s one of the biggest arguments against the use of sex-offender registries.  While some states have taken steps to remedy the problem by creating different levels of sex-offense White Collar Crimecrimes, it still produces a stigma on the offender—usually as a pedophile even if they’ve never touched a child.  Did you know in some states you can be forced to register as a sex offender for being caught peeing in public?  Or how about a teenager exposing himself in public as a prank?

Many even argue that sex-offender registries do little to actually deter sex crimes. Whether you agree with public shaming or not, it can prove difficult for registrants to find a place to live and find sustainable jobs, all the while isolating offenders from the rest of the world.

White-Collar Registries Are Not the Same

One of the biggest differences between the two is that sex-offenders are required to list their address while the white-collar offenders are not. This definitely helps protect the offenders from any harassment issues that sex-offenders sometimes face.

Additionally, Utah’s white-collar crime registry only requires registration for the following 2nd degree felony convictions:

  • Securities fraud,
  • Theft by deception,
  • Unlawful dealing of property by fiduciary,
  • Fraudulent insurance,
  • Mortgage fraud,
  • Communications fraud, and
  • Money laundering.

Offenders are required to maintain on the registry for a period of 10 years for their 1st offense and increases with each offense thereafter.  The catch here, different than a sex-offender registry, is that an offender is not required to register if they’ve complied with all court orders at the time of sentencing, paid all court-ordered restitution to victims in full, and have not been convicted of any other registerable offense.  That’s definitely a component sex-offender registrants don’t have.

Here’s the thing, though. An offender that gets convicted of defrauding his insurance company for dismantling his motorcycle, hiding the parts, and claiming they had been stolen in order to claim insurance money gets put on the registry just the same as an insurance agent who cheated 700 members of the Church of Jesus Christ of Latter-day Saints out of $72 million.  An offender with 1 victim gets the same treatment as an offender with 700.  Sounds like it’s creating the same problems, right?

Absent not having the registry all together, there doesn’t seem to be an alternative to get around negative impacts the registry may have. Creating different “levels” of offenses won’t really change the issue because, at the end of the day, it doesn’t really matter when it comes to crime involving the integrity of a person’s character.  Dishonesty is at the core of the crime of fraud—the stigma is already there and anyone on it would likely be scrutinized regardless of any class level.

Despite the Drawbacks, White-Collar Registries Can Be Beneficial

Arguably, sex-offender registries don’t do much for the public other than making them aware of the offender. Don’t get me wrong, knowing who is a sex offender is a good thing to know, but I don’t really see it preventing future sex crimes. On the other hand, white-collar crime registry could actually help prevent fraudulent behavior.

Both types of registries list what the offender was convicted of, but you will see a detailed, albeit brief, description of what the white-collar offender did that got them convicted. That could come in handy, especially for future employers looking to hire.

While a sex offender registry might state:

Lascivious acts with a minor.

The white-collar crime registry would state:

As part of job duties, prepared deposit slip for Brinks delivery on last day of work. Actual deposit on arrival at bank was short $43,900 in cash.

See the difference? It’s subtle, and arguable not significant, but what does the first one even mean?  How old was the offender compared to the victim at the time?  Was it an 18-year old boy with a 16-year old girlfriend or was the offender 30 and the victim 16?  Now, not all descriptions are so eluding, but, even so, the white-collar crime registry gives a bit insight into how the offender actually defrauded their victim. This allows an individual, or business, to make an informed decision about whether or not to do business with the offender.

Protecting Your Real Estate Sale From Eviction Lawsuits

A couple from Idaho is faced with the difficult task of evicting a squatter that rented their home from someone posing as the landlord.

Brian and Renae Prindle moved out of their Canyon County home at the end of 2015 in order to expedite its renovation and sale. Little did they know that a woman named Debbra Smith signed a lease and paid a man who had keys to their home. Smith pays $1,550 to rent the home, although it is unclear whether she is current on her rent. The Prindles contacted local authorities who consider the case a civil matter. They have now filed a civil lawsuit to evict her. The Prindles are concerned the eviction will derail their chances of selling their home.

Is the Tenant’s Lease Valid?

Smith claims she signed a valid lease with a man who claimed to be the landlord of the Prindles’ home. It’s unclear whether she can provide a copy of the lease. Regardless, whether she can prove she signed a lease with the fake landlord is immaterial. A residential lease is a legally binding contract between a landlord and a tenant which affords the tenant the right to exclusive use and enjoyment of the residential property in exchange for money paid to the landlord. If a lease is signed between a tenant and a man posing as a landlord that has no legal right to the property itself, he does not have the right to rent the residential property. In that regard, the lease between Smith and the purported landlord is completely invalid.

What If the Tenant Pays Rent?

If Smith pays rent to the Prindles directly, does that change the relationship between Smith and the Prindles? Prindle House

In most states, the answer is yes, but only if the Prindles accept payment. By accepting rent from a tenant, even one who is not in the lease, the transaction creates a landlord-tenant relationship. The tenant has the right to exclusive use and enjoyment of the residential property, and the landlord is entitled to monthly rent. The transaction creates a month-to-month lease. It also becomes more difficult to evict the tenant.

Does the Tenant Have a Legal Right to Remain in the House?

A bona fide purchaser, or BFP for short, is a legal term used primarily when referencing real and personal property. It refers to the innocent party who purchases property for fair value without notice of any other party’s claim to the property. Because the bona fide purchaser is innocent and had no notice of another party’s superior rights, he has the right to retain the property or enforce obligations against the person who may have superior rights.

For example, let’s say Derek steals your bike then sells it to Joe. You later find out Joe is in possession of your stolen bike. If Joe paid fair value for the bike and can demonstrate he thought Derek was the owner of the bike prior to purchase, Joe would be considered a bona fide purchaser and have the legal right to the bike. Your only legal recourse would be against Derek, but you would have no legal right to your bike.

In this case, the tenant could not claim she was a bona fide purchaser. The tenant did not purchase the home, only rented it. Even if she did buy the home for fair value, she still could not claim she was a bona fide purchaser because a title report would show that the true owners of the property were the Prindles. Therefore, she would be “on notice” that someone else was the legal owner of the property.

While Smith continues to reside in the home, she’s considered a squatter. A squatter is a term for a person who occupies a place that legally belongs to someone else when the owner hasn’t given permission for the occupation.

Will A Sales Contract Prevail?

Various disclosures are required in any home purchase contract. Most states require sellers to disclose whether any pending litigation exists on the property.

While the sellers understandably wouldn’t have known of the squatter until visiting the house, they would have to disclose to any potential buyer that there is litigation pending which could stall any potential sales contract. A savvy buyer’s agent would put a clause in a sales contract which states that the home purchase contract is subject to a successful eviction of the squatter, and would also include a definitive timeline.