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Perspectives on Florida Law
When You Need Help - January, 2013

Vehicle owner liability (Dangerous Instrumentality Doctrine)
By:Paul R. Cavonis, Esq.

What is it?
Every vehicle owner in Florida should be aware of what is known as the Dangerous Instrumentality Doctrine. This doctrine holds the owner of a vehicle liable for the negligent operation of the vehicle by a permissive operator. The reasoning behind this doctrine is that a vehicle is dangerous if operated improperly and the owner of that vehicle is the person in the best position to make sure it is being operated safely. For example, if you let your neighbor borrow your car and your neighbor causes an accident, you are equally at fault under the law simply because it was your car and you allowed your neighbor to use it.

How does it apply?
The doctrine applies to many vehicles, not just cars and trucks. Of particular interest in Florida, boats are considered dangerous instrumentalities. Other examples include farm tractors, golf carts (!), trailers, buses, motorcycles and airplanes. The doctrine applies only when the owner allows the driver to operate the vehicle ("permissive use"). Therefore, if your vehicle is being operated without your permission, the doctrine does not apply. For example, if your vehicle is stolen and subsequently involved in an accident, you are not liable under the doctrine. The permission can be expressed or implied. Express permission means you specifically allow someone to use your vehicle on a particular occasion. Implied permission means you generally give someone access to your vehicle. For example, if you leave your car keys out when you know your roommate typically borrows your car, implied consent will be established.

Exceptions
There are exceptions to the doctrine, such as the shop rule and bare naked title exceptions. The shop rule exception shields a vehicle owner from liability when a vehicle is entrusted to a repair shop and, while in the care of the shop, is involved in an accident. The bare naked title exception shields a vehicle owner from liability when another really owns the vehicle, but for some reason legal title has not been transferred. For example, if a vehicle owner sells the vehicle but the new owner fails to complete transfer of the title and is involved in an accident, the original owner is not liable.

Protect yourself
Be careful when you allow others to use your vehicle. If you doubt the ability of someone to safely operate your vehicle, don't let them use it. If you have a teenage child who likes to "borrow" your car against your instructions, don't make your keys accessible. Lastly, if someone uses your vehicle with regularity, consider adding them as an additional operator under your insurance policy.


End of Paper Checks from the Government

The U.S. Department of Treasury began phasing out paper Social Security checks and other federal benefit checks on May 1, 2011. It required anyone applying for Social Security checks and other federal benefits on and after that date to receive their payments electronically. If you currently get your Social Security check or other federal benefit payment on paper, you must switch to electronic payments before March 1, 2013.

Those who began receiving Social Security checks before May of 2011 have until March 1, 2013, to sign up for electronic payments, the Treasury Department announced. Those who don't sign up to have their Social Security checks direct-deposited by that date would receive their benefits through the Direct Express card program.

The payment options apply to Social Security, Supplemental Security Income, Veterans Affairs benefits, and anyone who receives benefits from the Railroad Retirement Board, Office of Personnel Management and Department of Labor (Black Lung).

Savings from End of Paper Checks

Phasing out paper Social Security checks entirely is expected to save taxpayers about $120 million every year, or more than $1 billion over 10 years. Government officials also pointed out that eliminating paper Social Security checks will "provide positive benefits to the environment, saving 12 million pounds of paper in the first five years alone."

"It costs 92 cents more to issue a payment by paper check than by direct deposit. We are retiring the Social Security paper check option in favor of electronic payments because it is the right thing to do for benefit recipients and American taxpayers alike."

"Getting your Social Security or Supplemental Security Income payment by direct deposit or Direct Express is safer and more reliable," Michael J. Astrue, the commissioner of Social Security, said in announcing the change. In 2010, more than 540,000 Social Security and Supplemental Security Income paper checks were reported lost or stolen and had to be replaced, the Treasury Department said. "You don't have to worry about your check being lost or stolen and your money is available immediately on your payment date," Astrue said. "There is no need to wait for the mail to arrive."

What You Need to Do Now

If you are applying for new benefits, you are now required to choose an electronic payment method, whether it's direct deposit of your Social Security check or other federal benefit into a bank or credit union account.

When you apply for your Social Security check or other federal benefit, you will need:

  • Your financial institution's routing transit number, often found on a personal check;
  • The account type, checking or savings;
  • The account number, often found on a personal check.

You can also choose to receive your Social Security check on a prepaid debit card or Direct Express Debit MasterCard card.

You can switch from paper checks to direct deposit at www.GoDirect.org, by calling the U.S. Treasury Electronic Payment Solution Center's toll-free helpline at (800) 333-1795, or by speaking with a bank or credit union representative.


American Taxpayer Relief Act
Real Estate Issues
By: Peter T. Hofstra, Esq.

As most of you are aware, the Congress and President recently enacted the American Taxpayer Relief Act, more commonly known as the "Fiscal Cliff Compromise." Included within said legislation were several real estate issues.

Short Sales. The fiscal cliff legislation extended the Mortgage Forgiveness Debt Relief Act that was scheduled to terminate on December 31, 2012. The Mortgage Forgiveness Debt Relief Act was passed during the Bush administration and allows the owner of a home participating in a short sale to avoid, in certain situations, being taxed on the amount of the debt being forgiven by the owner's mortgage lender(s). The extension of the Mortgage Forgiveness Debt Relief Act is welcome news to the local real estate market.

Mortgage Insurance Premiums. The fiscal cliff legislation allows taxpayers to write off mortgage insurance premiums or guarantee fees on FHA, VA, Fannie Mae, and Freddie Mac loans. However, there are income limitations relative to said write offs. The new legislation retroactively permits the write offs for all of 2012 and 2013 for qualified taxpayers.

Energy Tax Credit. The fiscal cliff legislation allows taxpayers up to a $500 credit for making energy-saving improvements and/or installing energy-saving equipment. Please note that this is a credit, not a deduction.


Foreign Investment in Florida Real Estate
Part II
By: Dennis R. DeLoach, Jr.

Methods to Hold Title:
As stated in the earlier article of this series, a recent study by Florida Realtors indicated that 19 percent of the total residential sales volume was by foreign investors over the past year. As such, it becomes prudent to evaluate the methods by which foreign investors may own such real estate in Florida and the advantages and disadvantages of each ownership alternative. Through this series of articles we will continue evaluating the alternative forms of ownership for foreign investors including direct ownership by a foreign individual (Discussed in Part I), investment in real estate through a limited liability company (Discussed in this article), investment in real estate through a foreign corporation and investment in real estate through a living trust (To be discussed in the future).
 

Benefits of Ownership by Foreign Individual(s) through an LLC:
Many foreign investors choose to form an LLC to manage their investment property as opposed to other forms of ownership. Ownership through an LLC can include liability limitations and possible tax advantages. For example, if investment property is owned by an LLC and used as a rental property and a tenant injures himself or herself on site, in most circumstances the judgment would be limited to assets of the LLC and not personal assets of any of the LLC owners. Also, if the LLC were to incur debt, this would generally not attach to the individual owners. Recent legislation, referred to as the Olmstead patch amendment, is intended to eliminate any question about the scope of the remedies available to creditors in the context of a Florida LLC.
 

Consequences of Ownership by Foreign Individual(s) through an LLC:
Owning investment property in an LLC, as opposed to direct ownership, may cause the loss of certain individual rights. While Florida law does not require an LLC to have an operating agreement, operating an LLC without one can have its drawbacks if the default provisions of Florida LLC law do not meet the needs and expectations of the owners. To avoid this situation, owners of an LLC often adopt an operating agreement tailored to their business needs. But, such agreements can also have drawbacks. Limitations on owners specified in an LLC operating agreement are legally enforceable restrictions that can just as easily work against them should a disagreement develop. Such enforceable restrictions within an operating agreement may include how an owner may devise, sell, or manage his share of the property.

In many instances, banks are not readily willing to offer loans to LLCs without personal guarantees. Moreover, a limited liability company is classified as a corporation for Florida and federal income tax purposes and, as such, is subject to the Florida Income Tax Code and must file annually.
 

Tax consequences of any type of ownership:
Regardless of the type of entity by which a foreign investor elects to hold title, said individual should seek independent counsel and advice pertaining to income tax and estate ramifications in both the United States and the individual's country of residence.

Future articles:
In future articles we will discuss how title to real estate can be held by foreign individuals using a foreign corporation or through a living trust.

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