TABLE OF CONTENTS Chapter 1 CHAPTER 1 LAND USE CONTROLS AND ZONING 1.1 I. THE PLANNING PROCESS... 1-1 1.1.1 A. The Concept of Planning... 1-1 1.1.2 B. The Planning Commission... 1-1 1.1.3 C. The Regional Planning Commission... 1-2 1.1.4 D. The Professional Planner... 1-2 1.2 II. THE COMPREHENSIVE PLAN... 1-2 1.2.1 A. Overview... 1-2 1.2.2 B. Elements of the Comprehensive Plan... 1-3 1.2.3 C. Manner of Adoption of a Comprehensive Plan... 1-3 1.2.4 D. Effect of Adoption of the Comprehensive Plan... 1-4 1.2.5 E. The Comprehensive Plan and Public Facilities... 1-5 1.2.6 F. The Comprehensive Plan and Building or Setback Requirements for Proposed Streets and Highways... 1-5 1.2.7 G. Practice Suggestions... 1-5 1.3 III. THE SUBSTANCE OF LAND USE CONTROLS... 1-6 1.3.1 A. Methods of Controlling Land Use... 1-6 1.3.2 B. Zoning Regulations... 1-6 1.3.2(a) 1. Relationship of Zoning Regulations to the Comprehensive Plan... 1-6 1.3.2(b) 2. Constitutionality of Zoning Regulations: Rubric of General Welfare... 1-6 1.3.2(c) 3. Kansas Statutory Scheme... 1-7 1.3.2(c)(1) a. Districting... 1-8 1.3.2(c)(2) b. Cumulative Zoning Districts... 1-9 1.3.2(c)(3) c. Noncumulative Zoning Districts... 1-9 1.3.2(d) 4. Specialized Zones... 1-10 1.3.2(d)(1) a. Flood Plain Zoning... 1-10 1.3.2(d)(2) b. Agricultural Zoning... 1-10 1.3.2(d)(3) c. Airport Zoning... 1-10 1.3.2(d)(4) d. Historic Preservation Zoning... 1-11 1.3.3 C. Flexible Zoning Techniques... 1-12 1.3.3(a) 1. Planned Unit Developments... 1-12 1.3.3(a)(1) a. Overview... 1-12 1.3.3(a)(2) b. Enforcement and Modification of the PUD Plan... 1-13 1.3.3(a)(3) c. Opportunities Under Planned Unit Development Legislation... 1-13 1.3.3(a)(4) d. Planned Unit Development Problem Areas... 1-13 1.3.3(a)(4)(i) i. Size of Planned Unit Development... 1-13 1.3.3(a)(4)(ii) ii. Lack of Mutuality Between Municipality and Developer... 1-14 1.3.3(a)(4)(iii) iii. Premature Commitment by Developer... 1-14 1.3.3(a)(4)(iv) iv. Phasing of PUD and Non-Uniform Allocation of Open Space... 1-14 1.3.3(a)(4)(v) v. Dedication of Open Space... 1-15 1.3.3(b) 2. Special Use Permits... 1-15 1.3.3(b)(1) a. Definition... 1-15 1.3.3(b)(2) b. Permissible Use in Kansas... 1-15 1.3.3(c) 3. Floating Zones... 1-16 1.3.3(c)(1) a. Definition... 1-16 1.3.3(c)(2) b. Permissible Use in Kansas... 1-16 xi
xii Table of Contents 1.3.3(d) 4. Clustering... 1-16 1.3.3(d)(1) a. Definition... 1-16 1.3.3(d)(2) b. Permissible Use in Kansas... 1-16 1.3.3(e) 5. Density Zoning... 1-16 1.3.3(e)(1) a. Definition... 1-16 1.3.3(e)(2) b. Permissible Use in Kansas... 1-17 1.3.3(f) 6. Contract and Conditional Zoning... 1-17 1.3.3(f)(1) a. Definition... 1-17 1.3.3(f)(2) b. Permissible Use in Kansas... 1-17 1.3.3(g) 7. Transferable Development Rights... 1-18 1.3.3(g)(1) a. Definition... 1-18 1.3.3(g)(2) b. Permissible Use in Kansas... 1-18 1.3.3(h) 8. Overlay Zones... 1-18 1.3.3(h)(1) a. Definition... 1-18 1.3.3(h)(2) b. Permissible Use in Kansas... 1-18 1.3.3(i) 9. Design Control and Aesthetics... 1-19 1.3.3(i)(1) a. Definition... 1-19 1.3.3(i)(2) b. Permissible Use in Kansas... 1-19 1.3.3(j) 10. Growth Management... 1-19 1.3.3(j)(1) a. Definition... 1-19 1.3.3(j)(2) b. Permissible Use in Kansas... 1-19 1.3.4 D. Regulation of Mobile and Manufactured Homes... 1-20 1.3.4(a) 1. Mobile Homes... 1-20 1.3.4(b) 2. Manufactured Homes... 1-20 1.4 IV. SUBDIVISION CONTROLS... 1-20 1.4.1 A. Enabling Legislation... 1-21 1.4.2 B. Contents of Subdivision Regulations... 1-21 1.4.2(a) 1. Platting... 1-21 1.4.2(b) 2. Lot Splitting... 1-23 1.4.2(c) 3. Design Standards... 1-23 1.4.2(d) 4. Public Improvements... 1-23 1.4.2(e) 5. Public Improvement Construction Standards... 1-23 1.4.2(f) 6. Mandatory Dedication of Open Space... 1-24 1.5 V. SITE PLAN CONTROLS... 1-24 1.6 VI. THE REZONING PROCESS... 1-24 1.6.1 A. Amending the Zoning Regulation... 1-24 1.6.2 B. The Lawyer s Role in the Rezoning Process... 1-26 1.6.2(a) 1. Representing the Client in Rezoning... 1-26 1.6.2(a)(1) a. Determining the Client s Needs... 1-26 1.6.2(a)(2) b. Application for Rezoning... 1-26 1.6.2(a)(3) c. Conferences with Planning Staff and City Officials... 1-26 1.6.2(a)(4) d. Determining Burden of Proof... 1-27 1.6.2(a)(5) e. Review of Zoning Regulation and Comprehensive Plan... 1-27 1.6.2(a)(6) f. Reducing Neighborhood Opposition... 1-28 1.6.2(a)(7) g. Exhibits... 1-28 1.6.2(a)(8) h. Checklist of Additional Steps for Preparing Planning Commission Presentation... 1-29 1.6.2(b) 2. The Commission Meetings... 1-33 1.6.2(b)(1) a. Unique Character of the Planning Commission Meeting... 1-33 1.6.2(b)(2) b. The Lawyer s Role in the Planning Commission Meeting... 1-33 1.6.2(b)(3) c. The City or County Commission Meeting... 1-34
Table of Contents xiii 1.6.2(c) 3. Representing Opponents of Rezoning... 1-34 1.6.2(c)(1) a. Determining the Facts... 1-34 1.6.2(c)(2) b. Developing Neighborhood Opposition... 1-34 1.6.2(c)(3) c. Publicizing the Opposition... 1-34 1.6.2(c)(4) d. The Commission Meeting... 1-35 1.6.2(c)(5) e. Kinds of Opposition... 1-35 1.6.2(c)(5)(i) i. Opposition Based on Procedural Defects... 1-35 1.6.2(c)(5)(ii) ii. Opposition Based on Merits of the Application... 1-35 1.6.2(c)(6) f. The Protest Petition... 1-36 1.6.2(c)(6)(i) i. The Persuasive Petition... 1-36 1.6.2(c)(6)(ii) ii. Legal Petition... 1-36 1.7 VII. ADMINISTRATIVE RELIEF FROM LAND USE CONTROLS... 1-36 1.7.1 A. Staff Relief... 1-36 1.7.2 B. Statutory Relief... 1-37 1.7.2(a) 1. Board of Zoning Appeals... 1-37 1.7.2(b) 2. Powers and Duties of Board of Zoning Appeals... 1-37 1.7.2(b)(1) a. Variances Definition... 1-37 1.7.2(b)(2) b. Criteria for Issuance of a Variance... 1-38 1.7.2(b)(3) c. Exceptions Definition... 1-39 1.7.2(b)(4) d. Use of the Exception... 1-39 1.8 VIII. JUDICIAL CONTROL OF ZONING AND LAND USE DECISIONS... 1-39 1.8.1 A. Timeliness of a Challenge to a Zoning Regulation or a Board of Zoning Appeals Decision... 1-39 1.8.1(a) 1. Zoning Regulation... 1-39 1.8.1(b) 2. Board of Zoning Appeals Order or Determination... 1-40 1.8.2 B. Standing to Challenge a Zoning Regulation... 1-40 1.8.3 C. Remedies in Zoning Cases... 1-40 1.8.4 D. Scope of Judicial Review... 1-40 1.8.4(a) 1. Zoning... 1-40 1.8.4(b) 2. Platting... 1-43 1.8.4(c) 3. Special Use Permits... 1-43 1.8.4(d) 4. Nonconforming Uses... 1-44 1.8.4(e) 5. Burden of Proof... 1-44 1.8.4(f) 6. Evidence... 1-44 1.8.4(g) 7. Presumptions... 1-44 1.8.4(h) 8. Construction of Zoning Regulations... 1-45 1.9 IX. LIMITATIONS ON LAND USE CONTROLS... 1-45 1.9.1 A. Police Power or Eminent Domain... 1-45 1.9.2 B. Unlawful Delegation of Power and Discretion... 1-47 1.9.3 C. Procedural Due Process... 1-47 1.9.4 D. Substantive Due Process... 1-48 1.9.5 E. Equal Protection of the Law... 1-48 1.9.6 F. Federal Antitrust Laws... 1-50 1.9.7 G. Exclusionary Zoning... 1-50 1.9.8 H. Aesthetic Zoning... 1-51 1.9.9 I. Federal Acts... 1-52 1.9.9(a) 1. The Fair Housing Act... 1-52 1.9.9(b) 2. The Religious Land Use and Institutionalized Persons Act of 2000... 1-52 1.9.9(c) 3. Telecommunications Act of 1996... 1-53 1.9.10 J. Zoning to Limit or Retard Community Growth... 1-55
xiv Table of Contents 1.9.11 K. Nonconforming Uses... 1-55 1.9.11(a) 1. Definition... 1-55 1.9.11(b) 2. Kansas Nonconforming Use Statutes... 1-55 1.9.11(c) 3. Extension, Enlargement, or Alteration of Nonconforming Uses... 1-56 1.9.11(d) 4. Abandonment of Nonconforming Uses... 1-56 1.9.12 L. Municipal Land Use Controls Over State Property... 1-57 1.9.12(a) 1. Zoning Controls... 1-57 1.9.12(b) 2. Building Codes... 1-57 CHAPTER 2 TITLE EXAMINATIONS 2.1 I. INTRODUCTION AND SCOPE OF CHAPTER... 2-1 2.2 II. TITLE EXAMINATION OPTIONS... 2-1 2.2.1 A. Title Insurance... 2-1 2.2.2 B. Abstracts and Title Opinions... 2-1 2.2.2(a) 1. Abstracts: Purpose, Form and Content... 2-1 2.2.2(a)(1) a. Caption Sheet; Property Description... 2-1 2.2.2(a)(2) b. Body... 2-2 2.2.2(a)(3) c. The Certificate... 2-2 2.2.2(a)(4) d. Period of Time Covered... 2-2 2.2.2(b) 2. Title Matters That May Not Be Disclosed in the Abstract... 2-3 2.2.2(b)(1) a. Unrecorded Rights... 2-3 2.2.2(b)(2) b. Zoning and Other Ordinances... 2-3 2.2.2(b)(3) c. Mechanic s, Materialmen s, and Similar Liens... 2-3 2.2.2(b)(4) d. Survey Matters... 2-3 2.2.2(b)(5) e. Certain Fixtures... 2-4 2.2.2(b)(6) f. Certain Conveying Party Information... 2-4 2.2.2(b)(6)(i) i. Competency... 2-4 2.2.2(b)(6)(ii) ii. Fraud; Duress... 2-4 2.2.2(b)(6)(iii) iii. Other Conveying Party Issues... 2-4 2.2.2(c) 3. Liability of the Abstracter... 2-4 2.2.2(d) 4. The Title Opinion... 2-5 2.2.3 C. Stand-Up Title Reviews and Opinions... 2-5 2.2.4 D. Comparing Title Examination Options... 2-6 2.2.4(a) 1. Selection Factors... 2-6 2.2.4(b) 2. Type of Transaction Financing... 2-6 2.2.4(c) 3. Title Information Provided... 2-6 2.2.4(d) 4. Cost... 2-6 2.2.4(e) 5. Availability of Abstracts and Stand-up Reviews; Turnaround Time... 2-7 2.2.4(f) 6. Liability... 2-7 2.3 III. IDENTIFYING, ANALYZING AND CURING TITLE DEFECTS AND TITLE REQUIREMENTS... 2-7 2.3.1 A. Standards for Title Examination... 2-7 2.3.2 B. Title Matters Not Requiring Objection or Requirement Because of Curative Law... 2-8 2.3.2(a) 1. Curative Statutes... 2-8 2.3.2(b) 2. The Marketable Record Title Act... 2-8 2.3.2(c) 3. Exceptions to the Marketable Record Title Act Property Interests and Conditions Not Affected... 2-9
Table of Contents xv 2.3.2(c)(1) a. The Right to Possession of a Lessor or any Lessor s Successor as a Reversioner on the Expiration of Any Lease... 2-9 2.3.2(c)(2) b. The Rights In and To Any Lease of Any Lessee or Any Lessee s Successor... 2-9 2.3.2(c)(3) c. Term Mortgages... 2-9 2.3.2(c)(4) d. Any Mineral Interest That Has Been Severed from the Fee Simple Title of the Land... 2-10 2.3.2(c)(5) e. Easements... 2-10 2.3.2(c)(6) f. Use Restrictions or Area Agreements... 2-10 2.3.2(c)(7) g. Rights of Any Reversioner or Remainderman Upon the Expiration of Any Life Estate or Trust... 2-10 2.3.2(c)(8) h. Rights of Reverter or Rights of Entry for Condition Broken... 2-10 2.3.2(c)(9) i. Rights or Interest of the United States or State of Kansas... 2-10 2.3.3 C. Preparation of Title Opinions and Title Objection Letters... 2-11 2.3.4 D. Common Title Defects, Objections and Requirements... 2-12 2.3.4(a) 1. Divorces... 2-13 2.3.4(b) 2. Joint Tenancy... 2-13 2.3.4(c) 3. Bankruptcies... 2-14 2.3.4(d) 4. Trust Deeds... 2-15 2.3.4(e) 5. Transfer on Death (TOD) Deeds... 2-16 2.3.4(f) 6. Pending Actions Lis Pendens Statute... 2-17 2.3.4(g) 7. Pending Actions The Relation Back Doctrine of K.S.A. 60-2202... 2-17 2.3.4(h) 8. Title Issues Common to Commercial Real Property Transactions... 2-18 APPENDIX 2A: Sample Title Opinion Based Upon Abstract Review... 2-19 CHAPTER 3 FORMS OF REAL ESTATE OWNERSHIP IN KANSAS 3.1 I. SCOPE OF CHAPTER... 3-1 3.2 II. RELEVANT FACTORS... 3-1 3.2.1 A. Type and Use of Real Estate... 3-1 3.2.1(a) 1. Personal Use... 3-1 3.2.1(b) 2. Business Use... 3-2 3.2.1(c) 3. Rental Use... 3-2 3.2.1(d) 4. Investment... 3-2 3.2.1(e) 5. Property held for Sale to Customers... 3-2 3.2.2 B. Limited Liability... 3-3 3.2.3 C. Number and Type of Owners... 3-3 3.2.4 D. Type of Management... 3-3 3.2.5 E. Avoidance of Double Taxation... 3-3 3.2.6 F. Contributions and Distributions of Property... 3-3 3.2.7 G. Deductions of Losses... 3-4 3.2.8 H. Inclusion of Debt in Basis... 3-4 3.2.9 I. Allocation of Income... 3-4 3.2.10 J. Ability to Grant Service Providers a Profits Interest... 3-4 3.2.11 K. Phantom Income and Accumulation of Earnings... 3-4 3.2.12 L. Classification of Entities for Tax Purposes... 3-4 3.2.13 M. Effect of Governmental Grants or Other Public Contributions... 3-5 3.3 III. COMPARISON OF OWNERSHIP TYPES... 3-5 3.3.1 A. Individual Ownership... 3-5
xvi Table of Contents 3.3.1(a) 1. Advantages... 3-5 3.3.1(b) 2. Disadvantages... 3-6 3.3.2 B. Tenancy in Common... 3-6 3.3.2(a) 1. In General... 3-6 3.3.2(b) 2. Advantages... 3-6 3.3.2(c) 3. Disadvantages... 3-7 3.3.3 C. Joint Tenancy... 3-8 3.3.3(a) 1. In General... 3-8 3.3.3(b) 2. Advantages... 3-8 3.3.3(c) 3. Disadvantages... 3-9 3.3.4 D. Corporations... 3-9 3.3.4(a) 1. Advantages... 3-9 3.3.4(b) 2. Disadvantages... 3-10 3.3.5 E. S Corporations... 3-11 3.3.5(a) 1. In General... 3-11 3.3.5(b) 2. Advantages... 3-12 3.3.5(c) 3. Disadvantages... 3-12 3.3.6 F. General Partnership... 3-13 3.3.6(a) 1. In General... 3-13 3.3.6(b) 2. Advantages... 3-13 3.3.6(c) 3. Disadvantages... 3-17 3.3.7 G. Joint Venture... 3-17 3.3.8 H. Limited Partnerships... 3-18 3.3.8(a) 1. In General... 3-18 3.3.8(b) 2. Advantages... 3-18 3.3.8(c) 3. Disadvantages... 3-20 3.3.9 I. Limited Liability Companies... 3-20 3.3.9(a) 1. In General... 3-20 3.3.9(b) 2. Advantages... 3-21 3.3.9(c) 3. Disadvantages... 3-22 3.3.10 J. Limited Liability Partnerships... 3-22 3.3.11 K. Trusts... 3-22 3.3.11(a) 1. In General... 3-22 3.3.11(b) 2. Business Trust... 3-23 3.3.11(c) 3. Land Trust... 3-23 3.3.11(d) 4. Practicality of Trust Ownership of Real Estate... 3-24 3.3.11(e) 5. Real Estate Investment Trusts... 3-24 3.4 IV. OTHER ISSUES... 3-25 3.4.1 A. Applicability of Securities Law... 3-25 3.4.2 B. Effect of Governmental Assistance... 3-27 CHAPTER 4 THE CONDOMINIUM AND THE TOWNHOUSE 4.1 I. SCOPE OF CHAPTER... 4-1 4.2 II. DISTINCTION BETWEEN A CONDOMINIUM AND A TOWNHOUSE PROJECT... 4-1 4.3 III. PROBLEMS OF STRUCTURING A PHASED CONDOMINIUM PROJECT... 4-3 4.4 IV. REVISIONS TO THE APARTMENT OWNERSHIP ACT... 4-4 4.5 V. THE HUD REGS... 4-6
Table of Contents xvii 4.6 VI. RESTATEMENT (THIRD) OF PROPERTY: SERVITUDES... 4-7 4.7 VII. BENEFITS AND BURDENS OF CONDOMINIUMS... 4-7 4.7.1 A. Legal Status as Real Property... 4-7 4.7.2 B. Exclusive Ownership and Possession... 4-7 4.7.3 C. Separate Taxation... 4-7 4.7.4 D. Appurtenant Rights... 4-8 4.7.4(a) 1. Undivided Interest in Common Areas and Facilities... 4-8 4.7.4(b) 2. Permanent Character of Undivided Interest... 4-8 4.7.5 E. Partition Actions Prohibited... 4-8 4.7.6 F. Insurance Protection... 4-9 4.7.7 G. Interdependent Community... 4-9 4.7.7(a) 1. Owners Association... 4-9 4.7.7(b) 2. Compliance with Bylaws and Rules and Regulations... 4-9 4.7.7(c) 3. Safety and Soundness Duties... 4-9 4.7.7(d) 4. Personal Obligation to Comply with the Act, the Declaration and Bylaws... 4-9 4.7.8 H. Economic Viability... 4-9 4.7.8(a) 1. Division of Common Profits and Expenses... 4-9 4.7.8(b) 2. Personal Liability for Common Expenses... 4-9 4.7.8(c) 3. Right of Assessments... 4-10 4.7.8(d) 4. Waiver and Abandonment are no Excuse from Contribution to Common Expenses... 4-10 4.7.8(e) 5. No Blanket Mortgages... 4-10 4.7.8(f) 6. Limitations on Mechanic s Liens... 4-10 4.7.8(g) 7. The Tipping Point... 4-10 4.8 VIII. CONDOMINIUM DECLARATION... 4-11 4.8.1 A. Description of the Land... 4-11 4.8.2 B. Description of Units... 4-11 4.8.3 C. Specific Description of Units as Constructed... 4-11 4.8.4 D. Description of Common Areas and Facilities and Common Expenses... 4-12 4.8.5 E. Description of Limited Common Areas and Facilities... 4-13 4.8.6 F. Undivided Interests in Common Areas and Facilities for All Purposes... 4-13 4.8.7 G. Use Restrictions... 4-14 4.8.8 H. Service of Process... 4-14 4.8.9 I. Procedure for Rebuilding or Restoration in the Event of Damage... 4-14 4.8.10 J. Convertible Condominium... 4-14 4.8.11 K. Expandable Condominium... 4-14 4.8.12 L. Additional Declaration Provisions Not Required by Statute... 4-15 4.8.12(a) 1. Right of First Refusal to Homeowners Association to Purchase... 4-15 4.8.12(b) 2. Management... 4-15 4.8.12(c) 3. Condominium Fees... 4-15 4.8.12(d) 4. Insurance... 4-15 4.8.12(e) 5. Developer Control... 4-16 4.8.12(f) 6. Recreational Condominium Special Provisions... 4-17 4.8.12(g) 7. Easements... 4-17 4.8.12(h) 8. Contractual Rate of Interest... 4-18 4.9 IX. CERTIFIED FLOOR PLANS OF CONDOMINIUM UNITS... 4-18 4.10 X. LAND SURVEY... 4-18 4.11 XI. THE CONDOMINIUM DEED... 4-18 4.12 XII. ASSOCIATION OF APARTMENT OWNERS... 4-20
xviii Table of Contents 4.12.1 A. Structure... 4-20 4.12.2 B. Bylaws of the Owners Association... 4-20 4.12.3 C. Income Tax Exemption: I.R.C. 501(c)(4), 501(c)7, and 528... 4-21 4.13 XIII. CONDOMINIUM MORTGAGE PROVISIONS... 4-21 4.14 XIV. THE TOWNHOUSE OWNERSHIP ACT... 4-23 4.15 XV. THE TOWNHOUSE DECLARATION... 4-23 4.15.1 A. Description of the Real Estate... 4-24 4.15.2 B. Description of the Townhouse Units... 4-24 4.15.3 C. Common Areas and Facilities... 4-24 4.15.4 D. Common Expenses and Method of Apportionment... 4-24 4.15.5 E. Rights of the Association for Unpaid Expenses... 4-26 4.15.6 F. Insurance... 4-26 4.15.7 G. Easements Created for the Benefit of the Association and Owner... 4-26 4.15.8 H. Amendment of Declaration... 4-26 4.15.9 I. Additional Provisions Not Required by Statute... 4-26 4.15.9(a) 1. Management... 4-27 4.15.9(b) 2. Developer Control... 4-27 4.16 XVI. ASSOCIATION OF TOWNHOUSE OWNERS... 4-27 APPENDIX 4A: Form for Expandable Declaration of Condominium Under Kansas Apartment Ownership Act... 4-29 APPENDIX 4B: Form of Engineer Certificate to be Attached to Floor Plans of Each Building... 4-47 APPENDIX 4C: Index of Floor Plans and Survey for each Building... 4-49 APPENDIX 4D: Reasearch and General Drafting Aids... 4-51 CHAPTER 5 RESIDENTIAL LANDLORD AND TENANT LAW IN KANSAS 5.1 I. INTRODUCTION... 5-1 5.2 II. PRIOR TO RENTING... 5-1 5.3 III. REQUIREMENTS AND LIMITATIONS OF THE RENTAL AGREEMENT... 5-2 5.3.1 A. Limitations on Leases Prescribed by the Act... 5-2 5.3.2 B. Providing for Terms Omitted From the Lease... 5-4 5.3.3 C. Rules of Law Which Have Not Been Altered or Superseded by the Act... 5-4 5.3.4 D. The Fair Housing Act... 5-5 5.4 IV. PERIOD IMMEDIATELY AFTER THE TENANCY BEGINS... 5-5 5.5 V. PROBLEMS ARISING DURING THE TERM OF THE TENANCY... 5-5 5.5.1 A. Duties Imposed on the Landlord and Remedies Available to the Tenant Under the Act... 5-6 5.5.2 B. Other Limitations Imposed on the Landlord by the Act... 5-8 5.5.3 C. Rules of Law Concerning Obligations of the Landlord Not Affected by the Act... 5-9 5.5.4 D. Tenants Obligations Under the Act... 5-10 5.5.5 E. Destruction of the Premises... 5-12 5.5.6 F. Transfer of Interest by the Landlord or Tenant... 5-12
Table of Contents xix 5.6 VI. EVICTION... 5-14 5.6.1 A. Notice Requirements... 5-14 5.6.1(a) 1. Notice Terminating the Tenancy... 5-14 5.6.1(b) 2. Notice to Quit the Premises... 5-14 5.6.1(c) 3. Combined Notices... 5-15 5.6.2 B. Other Considerations with Regard to Eviction... 5-15 5.7 VII. PROBLEMS AS THE TENANCY ENDS... 5-16 5.7.1 A. Notice Requirements for the Termination of Periodic Tenancies... 5-16 5.7.2 B. Holding Over... 5-17 5.7.3 C. Abandonment... 5-17 5.7.4 D. Return of the Security Deposit... 5-18 5.8 VIII. COMMENTS AND CONCLUSIONS... 5-19 5.9 IX. FORMS... 5-19 APPENDIX 5A: Rental Agreement... 5-21 APPENDIX 5B: Rules and Regulations... 5-25 APPENDIX 5C: Premises Inventory... 5-27 APPENDIX 5D: Furniture Inventory... 5-29 APPENDIX 5E: Notice to Quite Premises... 5-31 APPENDIX 5F: Notice to Quit for Nonpayment of Rent... 5-33 APPENDIX 5G: Notice to Quit for Violation of the Rental Agreement and of the Residential Landlord and Tenant Act... 5-35 APPENDIX 5H: Writ of Restitution and Execution... 5-37 APPENDIX 5I: Notice of Appeal... 5-39 CHAPTER 6 MORTGAGES AND CONVENTIONAL REAL ESTATE LENDING 6.1 I. SCOPE AND INTRODUCTION... 6-1 6.1.1 A. History of Mortgages... 6-1 6.1.2 B. Statutory Definition... 6-1 6.1.3 C. Deeds of Trust... 6-2 6.1.4 D. Installment Sale Contract... 6-2 6.2 II. TYPES OF MORTGAGES... 6-4 6.2.1 A. Standard Mortgages... 6-4 6.2.1(a) 1. Single Family... 6-4 6.2.1(b) 2. Commercial... 6-4 6.2.2 B. Construction Mortgages... 6-4 6.2.2(a) 1. Characteristics... 6-4 6.2.2(b) 2. Loan Commitment Letter... 6-4 6.2.2(c) 3. Permanent Financing Commitment... 6-4 6.2.2(d) 4. Other Security... 6-5 6.2.2(e) 5. Construction Loan Agreement... 6-5 6.2.2(f) 6. Basic Construction Loan Documents... 6-5 6.2.3 C. Wraparound Mortgages... 6-6
xx Table of Contents 6.2.3(a) 1. Description... 6-6 6.2.3(b) 2. Consent of First Lender... 6-6 6.2.3(c) 3. Mortgage Registration Fee... 6-6 6.2.3(d) 4. Key Provisions... 6-6 6.2.4 D. Second Mortgages... 6-7 6.2.5 E. Leasehold Mortgages... 6-7 6.2.6 F. Loan Commitment Letters, Loan Agreements and Credit Agreements... 6-8 6.2.6(a) 1. Form... 6-9 6.3 III. CONTRACTUAL ISSUES... 6-9 6.3.1 A. Interest and Repayment... 6-9 6.3.1(a) 1. Usury... 6-9 6.3.1(b) 2. Points and Prepaid Finance Charges... 6-11 6.3.1(c) 3. Default Interest... 6-11 6.3.1(d) 4. Prepayment Penalties... 6-11 6.3.2 B. Insurance and Taxes... 6-12 6.3.3 C. Future Advances... 6-12 6.3.3(a) 1. In General... 6-12 6.3.3(b) 2. In Practice... 6-12 6.3.3(c) 3. Statutory Authority... 6-13 6.3.3(d) 4. Court Rulings... 6-13 6.3.4 D. Assignment of Rents... 6-13 6.3.5 E. Appointment of Receiver... 6-14 6.3.6 F. Waiver of Redemption... 6-14 6.3.6(a) 1. Right of Redemption and Waiver... 6-14 6.3.6(b) 2. Example of Waiver of Redemption Clause... 6-14 6.3.7 G. Mortgage as Security Agreement and Financing Statement... 6-14 6.3.8 H. Subordination... 6-15 6.3.8(a) 1. Subordination of the Owner s Fee... 6-15 6.3.8(b) 2. Subordination of the Tenant s Leasehold Interest... 6-15 6.3.8(c) 3. Other Mortgagees... 6-15 6.3.9 I. Attorney Fees... 6-15 6.3.10 J. Environmental Liability... 6-16 6.3.11 K. Clogging the Equity... 6-16 6.3.12 L. Guaranty... 6-16 6.3.12(a) 1. Definition... 6-16 6.3.12(b) 2. Construction... 6-17 6.3.12(c) 3. Defenses... 6-17 6.3.12(d) 4. Some Defenses That Did Not Work... 6-18 6.3.12(e) 5. Endorsers and Accommodation Parties Under the Uniform Commercial Code... 6-18 6.3.13 M. Nonrecourse Loans... 6-18 6.3.14 N. Loan Assumption... 6-19 6.3.14(a) 1. Generally... 6-19 6.3.14(b) 2. Due on Sale Clause... 6-19 6.3.14(c) 3. Assuming vs. Subject To... 6-20 6.4 IV. DEFAULT PROBLEMS... 6-20 6.4.1 A. Foreclosure... 6-20 6.4.1(a) 1. Default... 6-20 6.4.1(b) 2. Right to Cure Reinstatement... 6-21 6.4.1(c) 3. Title Search... 6-21 6.4.1(d) 4. Parties... 6-21
Table of Contents xxi 6.4.1(e) 5. Petition... 6-22 6.4.1(f) 6. Pretrial Relief... 6-22 6.4.1(g) 7. United States as a Party... 6-23 6.4.1(h) 8. Service Personal, Mail, or Publication... 6-24 6.4.1(i) 9. Defendants in Military Service... 6-25 6.4.1(j) 10. Guardian Ad Litem... 6-25 6.4.1(k) 11. Title Search Update... 6-25 6.4.1(l) 12. Judgment... 6-25 6.4.1(m) 13. Sheriff s Sale... 6-26 6.4.1(n) 14. Bidding... 6-26 6.4.1(o) 15. Confirmation of Sale... 6-27 6.4.1(p) 16. Redemption... 6-28 6.4.1(q) 17. Waiver... 6-29 6.4.1(r) 18. Owner Redemption... 6-29 6.4.1(s) 19. Creditor Redemption... 6-29 6.4.1(t) 20. Federal Government Liens... 6-30 6.4.1(u) 21. Bankruptcy Effect on Validity of Sheriff s Sale (Fraudulent Transfer)... 6-30 6.4.2 B. Deed in Lieu of Foreclosure... 6-31 6.4.3 C. Defenses to Foreclosures... 6-32 6.4.3(a) 1. Borrower s Breach of Loan Documents... 6-32 6.4.3(b) 2. Lender s Breach of Loan Documents... 6-32 6.4.3(c) 3. Servicer s Breach of Notice Requirements... 6-32 6.4.3(d) 4. Notice Requirements for Lender s Attorney... 6-32 6.4.3(e) 5. Lender s Breach of Industry Regulations... 6-33 6.4.3(f) 6. Real Estate Settlement Procedures Act... 6-33 6.4.3(g) 7. Truth in Lending Act... 6-33 6.4.3(h) 8. Uniform Consumer Credit Code... 6-34 6.4.3(i) 9. Usury... 6-35 6.4.3(j) 10. Kansas Consumer Protection Act... 6-35 6.4.3(k) 11. Credit Agreements... 6-35 6.4.3(l) 12. Equity... 6-35 6.4.3(m) 13. Breach of Fiduciary Duty or Negligence... 6-36 6.4.3(n) 14. Scrutiny of Judgment/Redemption Amounts... 6-36 6.4.3(o) 15. Extension of Redemption Period... 6-36 6.5 V. MISCELLANEOUS... 6-36 6.5.1 A. Assignment of Mortgage... 6-36 6.5.2 B. Removal of Buildings... 6-37 6.5.3 C. Purchase Money Mortgage Priority... 6-37 6.5.4 D. Satisfaction or Release... 6-38 6.5.5 E. Mortgage Registration Fee... 6-38 6.5.6 F. Foreign Lenders Doing Business In Kansas... 6-40 6.5.6(a) 1. Foreign Corporations, Limited Liability Companies and Limited Liability Partnerships... 6-40 6.5.6(b) 2. Business Trusts... 6-40 6.5.7 G. Mortgage Businesses... 6-41 6.5.8 H. Loan Brokers... 6-41 6.5.9 I. Basic Recording Rules... 6-42
xxii Table of Contents CHAPTER 7 CONTRACTS FOR SALE OF REAL ESTATE AND CLOSING PART A: CONTRACTS FOR SALE OF REAL ESTATE 7.1 I. FUNDAMENTAL REQUIREMENTS... 7-1 7.2 II. THE PARTIES... 7-1 7.3 III. DESCRIPTION OF THE PROPERTY... 7-2 7.4 IV. CONVEYANCE... 7-3 7.5 V. PURCHASE PRICE... 7-3 7.6 VI. METHOD OF PAYMENT... 7-3 7.7 VII. PROOF OF TITLE... 7-5 7.8 VIII. TAXES... 7-6 7.9 IX. POSSESSION... 7-7 7.10 X. CLOSING... 7-7 7.11 XI. INSURANCE... 7-7 7.12 XII. FEES... 7-8 7.13 XIII. REMEDIES... 7-8 7.14 XIV. DISCLOSURES... 7-9 7.14.1 A. Agency Disclosure... 7-9 7.14.2 B. Lead Paint Disclosure... 7-9 7.14.3 C. Property Condition Disclosure... 7-9 7.14.4 D. Notice Concerning Sex Offenders... 7-10 7.14.5 E. Radon Disclosure... 7-10 7.14.6 F. Foreclosure Addendum... 7-10 7.14.7 G. Waiver... 7-11 7.14.8 H. Required Additional Language... 7-11 7.15 XV. MISCELLANEOUS... 7-11 7.16 XVI. INSTALLMENT CONTRACTS FOR DEED... 7-12 7.17 XVII. OPTION TO PURCHASE REAL ESTATE... 7-14 PART B: CLOSING THE TRANSACTION 7.18 XVIII. GENERAL... 7-15 7.19 XIX. THE CLOSING STATEMENT... 7-15 7.20 XX. DELIVERY OF DOCUMENTS... 7-17 7.21 XXI. REAL ESTATE SETTLEMENT PROCEDURES ACT... 7-17 PART C: FORMS 7.22 XXII. REAL ESTATE CONTRACT GENERAL FORM... 7-17 7.23 XXIII. CONVENTIONAL FINANCING CONTINGENCY... 7-20 7.24 XXIV. USE OF A CLOSING ESCROW... 7-20 7.25 XXV. CONTINGENCY OF ASSUMPTION OF EXISTING MORTGAGE... 7-21 7.26 XXVI. CONTINGENCY OF FHA FINANCING... 7-21
Table of Contents xxiii 7.27 XXVII. CONTINGENCY OF VA FINANCING... 7-22 7.28 XXVIII. CONTINGENCY OF CONVENTIONAL INSURED LOANS... 7-22 7.29 XXIX. ADDITIONAL PROOF OF TITLE... 7-22 7.30 XXX. CONTINGENCY OF TERMITE INSPECTION... 7-22 7.31 XXXI. INSTALLMENT CONTRACT FOR DEED... 7-23 7.32 XXXII. AGENCY DISCLOSURE LANGUAGE REQUIRED WHERE REAL ESTATE LICENSEES ARE INVOLVED K.S.A. 58-30,110... 7-26 7.33 XXXIII. LEAD WARNING STATEMENT LANGUAGE REQUIRED FOR ALL RESIDENTIAL HOUSING BUILT PRIOR TO 1978 24 C.F.R. SUBTITLE A 35.92... 7-26 7.34 XXXIV. SPECIAL ASSESSMENT DISCLOSURES (REQUIRED WHERE SPECIAL ASSESSMENTS ARE PRESENT. K.S.A. 12-6,123 AND 12-6A20)... 7-27 7.35 XXXV. SHORT SALE ADDENDUM (REQUIRED WHERE APPLICABLE IF REAL ESTATE LICENSEE INVOLVED)... 7-27 7.36 XXXVI. HOME EQUITY PROTECTION FORM - REQUIRED ANYTIME PROPERTY IS IN FORECLOSURE, POST FILING OF PETITION... 7-28 CHAPTER 8 TAX CONSIDERATIONS 8.1 I. INTRODUCTION... 8-1 8.2 II. TAX CLASSIFICATION OF REAL ESTATE... 8-1 8.3 III. CAPITAL GAINS AND LOSSES... 8-2 8.3.1 A. Definition of Capital Asset... 8-2 8.3.2 B. Dealer or Investor... 8-3 8.3.3 C. Mechanics of Capital Gains and Losses... 8-4 8.3.3(a) 1. Capital Gains of Individuals... 8-5 8.3.3(b) 2. Capital Losses of Individuals... 8-5 8.3.3(c) 3. Capital Gains of Corporations... 8-5 8.3.3(d) 4. Capital Losses of Corporations... 8-6 8.3.4 D. Tax Treatment of 1231 Assets... 8-6 8.4 IV. COMPUTATION OF AMOUNT OF GAIN OR LOSS... 8-6 8.4.1 A. The Amount Realized... 8-6 8.4.2 B. Basis... 8-8 8.4.2(a) 1. Cost... 8-8 8.4.2(b) 2. Substituted Basis... 8-8 8.4.2(c) 3. Property Acquired by Inheritance... 8-8 8.4.2(d) 4. Property Acquired by Gift... 8-9 8.4.2(e) 5. Adjustments to Basis... 8-10 8.4.3 C. Holding Period... 8-10 8.5 V. SALES TO RELATED PERSONS... 8-11 8.6 VI. SUBDIVIDING REAL ESTATE... 8-12 8.7 VII. CAPITAL COST RECOVERY... 8-13
xxiv Table of Contents 8.7.2 A. Depreciation... 8-14 8.7.3 B. The Taxpayer Entitled to Depreciation Deductions... 8-14 8.7.4 C. Improvements to Real Estate... 8-15 8.7.5 D. Methods of Depreciation... 8-16 8.7.6 E. Accelerated Cost Recovery System... 8-17 8.7.7 F. Modified Accelerated Cost Recovery System... 8-19 8.7.8 G. Depreciation Recapture... 8-20 8.8 VIII. BUSINESS PROPERTY DEDUCTIONS... 8-20 8.8.1 A. Interest and Taxes... 8-20 8.8.2 B. Expenses for Maintenance and Repairs... 8-22 8.8.3 C. Demolition Loss... 8-23 8.8.4 D. Losses to Business Property... 8-24 8.8.5 E. Operating Expenses... 8-24 8.9 IX. LIMITATIONS ON LOSSES FROM REAL ESTATE... 8-25 8.9.1 A. Passive Activity Limitations... 8-25 8.9.2 B. At-Risk Limitation... 8-27 8.10 X. INSTALLMENT SALES... 8-28 8.10.1 A. General Rules... 8-28 8.10.2 B. Disposition of Installment Obligations... 8-31 8.10.3 C. Advantages of Installment Reporting... 8-32 8.11 XI. PERSONAL RESIDENCES OWNERSHIP AND SALE... 8-33 8.11.1 A. Deductions by Homeowners... 8-33 8.11.2 B. Cooperative Homeowners... 8-35 8.11.3 C. Condominium Homeowners... 8-36 8.11.4 D. Improvements by Homeowners... 8-36 8.11.5 E. Sale of Personal Residence... 8-37 8.11.5(a) 1. Sale of Principal Residence Prior to May 7, 1997... 8-37 8.11.5(b) 2. Exemption on Sale by Taxpayer Age 55 or Older for Sales of Principal Residence Prior to May 7, 1997... 8-39 8.11.5(c) 3. Sale of Principal Residence On or After May 7, 1997... 8-40 8.11.6 F. Vacation Home Deductions... 8-42 8.12 XII. TAX PROBLEMS OF MORTGAGES... 8-43 8.12.1 A. The Effect of Placing a Mortgage on Property or Acquiring Property Subject to a Mortgage... 8-43 8.12.1(a) 1. Basis... 8-43 8.12.1(b) 2. Costs of Obtaining the Mortgage... 8-43 8.12.1(c) 3. Mortgage in Excess of Basis... 8-45 8.12.2 B. Exchanges of Mortgaged Property... 8-46 8.12.3 C. Foreclosure and Repossession of Mortgaged Property... 8-46 8.12.4 D. Loss on Foreclosures... 8-49 8.12.5 E. The Bankruptcy Tax Act Provisions Applicable to Mortgagors... 8-50 8.13 XIII. TAX PROBLEMS IN LEASING... 8-50 8.13.1 A. Tax Consequences to Lessor... 8-50 8.13.2 B. Tax Consequences to Lessee... 8-51 8.13.3 C. Treatment of Increasing, Decreasing, or Deferred Rents... 8-53 8.13.4 D. Existence of a Lease... 8-53 8.14 XIV. REAL ESTATE PROPERTY TAXATION... 8-54
Table of Contents xxv 8.14.1 A. Property Taxation in General... 8-54 8.14.2 B. Property Subject to Taxation... 8-55 8.14.3 C. Taxing Officials and Agencies... 8-55 8.14.4 D. Reappraisal and Classification... 8-57 8.14.5 E. The Property Tax System Generally... 8-59 8.14.6 F. The Taxing Process and Timetable... 8-59 8.14.7 G. The Valuation of Real and Personal Property for Purposes of Taxation... 8-62 8.14.8 H. Grounds for Property Tax Disputes... 8-64 CHAPTER 9 MECHANIC'S LIEN LAWS 9.1 I. INTRODUCTION... 9-1 9.2 II. A FUNCTIONAL APPROACH TO MECHANIC S LIENS... 9-1 9.2.1 A. What is a Mechanic s Lien and Why Allow It?... 9-1 9.2.2 B. When is a Mechanic s Lien Available?... 9-2 9.2.2(a) 1. The Owner Must Have Asked For the Increased Value... 9-2 9.2.2(a)(1) a. Equitable Ownership... 9-2 9.2.2(a)(2) b. Contracts with Lessees and Holders of Partial Interest in Real Estate... 9-3 9.2.2(b) 2. To Whom is a Mechanic s Lien Available?... 9-3 9.2.3 C. Lien for What?... 9-3 9.2.3(a) 1. What are Lienable Items?... 9-3 9.2.3(b) 2. Used or Consumed... 9-5 9.3 III. HOW A LIEN IS CREATED... 9-6 9.3.1 A. Content of a Lien Statement... 9-6 9.3.1(a) 1. Name of Owner... 9-6 9.3.1(b) 2. Name of Claimant... 9-7 9.3.1(c) 3. Description of Real Property... 9-7 9.3.1(c)(1) a. Lien on Entire Tract... 9-7 9.3.1(c)(2) b. Multiple Contracts and Tracts... 9-8 9.3.1(d) 4. Reasonably Itemized Statement... 9-8 9.3.1(d)(1) a. General Rule... 9-8 9.3.1(d)(2) b. Suggested Practice Exhibits... 9-8 9.4 IV. FORMALITY OF A LIEN STATEMENT... 9-8 9.4.1 A. Verified Statement/Agency... 9-8 9.4.2 B. Agency of Person Signing Lien... 9-9 9.5 V. FILING AND SERVING NOTICE OF LIEN... 9-9 9.6 VI. TIMING OF A LIEN STATEMENT... 9-10 9.6.1 A. Time to File Lien... 9-10 9.6.2 B. Extensions of Time to File... 9-10 9.6.3 C. Date of Last Work/Work Done to Extend Lien Time... 9-11 9.6.4 D. Counting Months... 9-11 9.7 VII. SPECIAL CONSIDERATIONS FOR SUBCONTRACTORS LIENS... 9-12 9.7.1 A. Subcontractors Lien Statements... 9-12 9.7.2 B. Liens of Subcontractors on Residential Property... 9-12 9.7.2(a) 1. Improvement of Residential Property... 9-12 9.7.2(b) 2. New Residential Property... 9-13 9.7.2(c) 3. Special Considerations in Owner Contractor Circumstances... 9-13
xxvi Table of Contents 9.8 VIII. OPERATION OF MECHANIC S LIENS AND RIGHTS CREATED BY MECHANIC S LIENS... 9-13 9.8.1 A. Lien Priority... 9-13 9.8.1(a) 1. Date of First Work... 9-13 9.8.1(b) 2. Multiple Mechanics Liens... 9-13 9.8.1(c) 3. Rights and Liability of Owner... 9-14 9.8.1(d) 4. Competing IRS Lien... 9-14 9.8.2 B. Assignment of Mechanic s Liens... 9-14 9.8.3 C. Foreclosure of Lien... 9-14 9.8.3(a) 1. Limitation of Actions... 9-14 9.8.3(b) 2. Election of Remedies... 9-15 9.8.3(c) 3. Foreclosure by First Mortgagee... 9-15 9.8.3(d) 4. Collection of Interest... 9-15 9.8.3(e) 5. Distribution of Proceeds... 9-15 9.8.3(f) 6. Suggestion In Event of Foreclosure... 9-15 9.8.4 D. Action by Landowner... 9-15 9.8.5 E. Bond to Secure Payment of Claim... 9-16 9.8.6 F. Amending Lien Statement... 9-16 9.8.7 G. Bankruptcy... 9-16 9.8.7(a) 1. The Automatic Stay... 9-16 9.8.7(b) 2. Trustee Avoidance Powers... 9-17 9.8.7(c) 3. Effect of Discharge... 9-17 9.9 IX. COMMERCIAL REAL ESTATE BROKER LIENS... 9-17 9.9.1 A. Necessity of a Written Agreement... 9-17 9.9.2 B. Liens are Available Only for Commercial Real Estate... 9-17 9.9.3 C. The Amount of the Lien... 9-17 9.9.4 D. Filing a Broker Lien... 9-18 9.9.5 E. Providing the Owner with a Copy of the Notice of Lien... 9-18 9.9.6 F. Time Limits for Filing a Broker Lien... 9-18 9.9.7 G. Priority of a Broker Lien... 9-19 9.9.8 H. Foreclosure of a Broker Lien... 9-19 9.9.9 I. Filing of a Lien Release or Satisfaction... 9-19 9.9.10 J. Attorney Fees and Costs... 9-20 9.10 X. FORMS... 9-20 APPENDIX 9A: Lien Statement Contractor's Claim... 9-21 APPENDIX 9B: Lien Statement Subcontractor's Cliam... 9-23 APPENDIX 9C: Notice of Intent to Perform... 9-25 APPENDIX 9D: Warning Statement... 9-27 APPENDIX 9E: Notice of Extension to File Contractor Lien... 9-29 APPENDIX 9F: Notice of Extension to File Subcontractor's Lien... 9-31 CHAPTER 10 DEEDS 10.1 I. GENERAL INTRODUCTION AND SCOPE OF CHAPTER... 10-1 10.2 II. REQUIREMENTS FOR CREATING A VALID DEED DOCUMENT... 10-1 10.2.1 A. A Deed Must be in Writing... 10-1
Table of Contents xxvii 10.2.2 B. A Deed Must Designate and Describe the Parties... 10-1 10.2.2(a) 1. Individuals... 10-2 10.2.2(b) 2. Corporations, Limited Liability Companies, Other Business Entities... 10-2 10.2.2(c) 3. Trusts and Other Fiduciary Relationships... 10-3 10.2.2(d) 4. Political Subdivisions, Agencies, Utilities, and the Like... 10-3 10.2.2(e) 5. Multiple Grantors and Multiple Grantees... 10-3 10.2.3 C. A Deed Must Describe the Property... 10-4 10.2.3(a) 1. In General... 10-4 10.2.3(b) 2. Metes and Bounds Legal Descriptions... 10-4 10.2.3(c) 3. Reference to Plats... 10-5 10.2.3(d) 4. Other Identifying Characteristics... 10-5 10.2.3(e) 5. Exceptions from the Legal Description... 10-6 10.2.4 D. A Deed Must Contain Operative Words of Conveyance or Granting Language... 10-6 10.2.5 E. A Deed Must Be Signed By the Grantors... 10-7 10.2.5(a) 1. In General... 10-7 10.2.5(b) 2. Corporations and Limited Liability Companies... 10-7 10.2.5(c) 3. Partnerships... 10-8 10.2.5(d) 4. Witnesses, Attestations, Proof of Authority... 10-9 10.2.5(e) 5. Signature by Grantees... 10-10 10.3 III. OTHER CUSTOMARY (AND OFTENTIMES NECESSARY) ELEMENTS OF THE DEED DOCUMENT... 10-10 10.3.1 A. Date... 10-10 10.3.2 B. Recitals... 10-11 10.3.3 C. Consideration... 10-11 10.3.4 D. Description of the Interest Conveyed... 10-12 10.3.4(a) 1. Full and Lesser Interests Generally... 10-12 10.3.4(b) 2. Mineral Rights and other Surface and Subsurface Interests... 10-13 10.3.5 E. Reservations; Liens and Other Encumbrances... 10-14 10.3.5(a) 1. Reservations... 10-14 10.3.5(b) 2. Liens and Other Encumbrances... 10-15 10.3.6 F. Covenants and Warranties; Types of Deeds... 10-16 10.3.6(a) 1. General Warranty Deeds... 10-16 10.3.6(b) 2. Special or Limited Warranty Deeds... 10-17 10.3.6(c) 3. Quitclaim Deeds... 10-18 10.3.7 G. Conditions and Restrictions... 10-18 10.3.8 H. Release of a Spouse s Interest... 10-20 10.3.9 I. Acknowledgments/Notarizations... 10-20 10.4 IV. SPECIAL SITUATIONS AND TYPES OF DEEDS... 10-21 10.4.1 A. Deeds of Fiduciaries, Including Trustees... 10-21 10.4.2 B. Sheriff s Deeds, Marshal s Deeds, and Deeds of Other Public Officials... 10-22 10.4.3 C. Transfer On Death Deeds and Beneficiary Deeds... 10-23 10.4.4 D. Correcting Errors in Deeds and Correction Deeds... 10-23 10.4.5 E. Railroad Right of Way Deeds... 10-25 10.4.6 F. Deeds in Lieu of Foreclosure... 10-25 10.5 V. THE NEED FOR DELIVERY AND ACCEPTANCE OF DEEDS... 10-26 10.5.1 A. A Deed Must Be Delivered By the Grantor... 10-26 10.5.2 B. A Deed Must Be Accepted By the Grantee... 10-27 10.6 VI. ENFORCEABILITY OF AGREEMENTS AFTER DELIVERY OF THE DEED THE MERGER DOCTRINE... 10-27
xxviii Table of Contents 10.7 VII. CAPACITY AND ASSENT OF THE PARTIES... 10-28 10.7.1 A. Mental Capacity in General... 10-28 10.7.1(a) 1. Mental Impairment and Insane Delusions... 10-28 10.7.1(b) 2. Age... 10-28 10.7.1(c) 3. Intoxication... 10-29 10.7.2 B. Mistake of Fact... 10-29 10.7.3 C. Fraud and Misrepresentation... 10-29 10.7.3(a) 1. Reliance on Representations and Age and Mental Weakness... 10-29 10.7.3(b) 2. Equal Means of Knowledge and Suppression of the Truth... 10-30 10.7.4 D. Duress... 10-30 10.7.5 E. Undue Influence... 10-31 10.8 VIII. RECORDING OF A DEED... 10-31 10.8.1 A. Requirements... 10-31 10.8.2 B. Effect of Recording... 10-32 10.8.3 C. Other Documentary Requirements... 10-33 10.8.4 D. Sales Validation Questionnaire... 10-33 10.9 IX. APPENDIX OF FORMS... 10-34 APPENDIX 10A: Kansas Warranty Deed... 10-35 APPENDIX 10B: Kansas Limited Warranty Deed... 10-37 APPENDIX 10C: Kansas Quitclaim Deed... 10-39 APPENDIX 10D: Kansas Joint Tenancy Warranty Deed... 10-41 APPENDIX 10E: Kansas Joint Tenancy Quitclaim Deed... 10-43 APPENDIX 10F: Kansas Business Organization Warranty Deed... 10-45 APPENDIX 10G: Kansas Business Organization Limited Warranty Deed... 10-47 APPENDIX 10H: Kansas Business Organzation Quitclaim Deed... 10-49 APPENDIX 10I: Kansas Business Organization Joint Tenancy Warrant Deed... 10-51 APPENDIX 10J: Kansas Business Organization Joint Tenancy Quitclaim Deed... 10-53 APPENDIX 10K: Trustee's Deed... 10-55 APPENDIX 10L: Administrato's Deed... 10-57 APPENDIX 10M: Executor's Deed... 10-59 APPENDIX 10N: Conservator's Deed (Under Court Order)... 10-61 APPENDIX 10O: Executor's Deed (Power of Will in Sale)... 10-63 APPENDIX 10P: Kansas Real Estate Sales Validation Questionairre... 10-65 CHAPTER 11 COMMERCIAL REAL ESTATE LEASES IN KANSAS 11.1 I. INTRODUCTION... 11-1 11.2 II. DESCRIPTION OF PROPERTY LEASED... 11-1 11.3 III. TERM OF THE LEASE... 11-1 11.4 IV. CONDITION, INSPECTION, AND ACCEPTANCE OF PROPERTY... 11-2
Table of Contents xxix 11.5 V. DELIVERY OF POSSESSION... 11-3 11.6 VI. RENTAL AGREEMENTS... 11-3 11.6.1 A. Fixed Rent and Net Provisions... 11-3 11.6.2 B. Percentage Rent... 11-3 11.6.3 C. Rent Adjustment... 11-6 11.6.4 D. Abatement of Rent... 11-6 11.7 VII. TAX PAYMENTS UNDER COMMERCIAL LEASES... 11-7 11.8 VIII. TAXES PAID BY THE TENANT... 11-7 11.9 IX. PAYMENT OF EXPENSES... 11-8 11.10 X. SECURITY DEPOSITS AND ADVANCE RENTALS... 11-8 11.11 XI. REPAIR AND MAINTENANCE... 11-8 11.12 XII. TENANT S RIGHTS... 11-11 11.13 XIII. TENANT S OPTION TO PURCHASE OWNER S INTEREST... 11-11 11.14 XIV. TENANT S RIGHT TO ALTER AND IMPROVE... 11-12 11.15 XV. TENANT S DAMAGES IF OWNER FAILS TO DELIVER POSSESSION... 11-12 11.16 XVI. DEFAULT... 11-13 11.16.1 A. Owner s Rights Upon Tenant s Default... 11-15 11.16.2 B. Duty to Mitigate... 11-16 11.16.3 C. Owner s Right to Perform Tenant s Obligations... 11-16 11.17 XVII. ASSIGNMENT AND SUBLETTING... 11-17 11.17.1 A. Owner s Consent Required... 11-17 11.17.2 B. Restrictions on Right to Assign or Sublease... 11-18 11.17.3 C. Protective Provisions in Subleasing... 11-18 11.18 XVIII. AGREEMENTS ON USE OF COMMERCIAL PROPERTY... 11-19 11.18.1 A. Noncompetition Clauses... 11-19 11.18.2 B. Exclusive Use and Radius Restrictions... 11-20 11.19 XIX. OPTIONS... 11-21 11.19.1 A. Options to Extend or Renew... 11-21 11.19.2 B. Option to Terminate... 11-21 11.19.3 C. Option to Purchase... 11-21 11.19.4 D. Options Based on Events... 11-22 11.20 XX. SURRENDER OF THE PREMISES... 11-22 11.21 XXI. WAIVER OF SUBROGATION... 11-23 11.22 XXII. EXCULPATORY CLAUSES... 11-23 11.23 XXIII. INDEMNIFICATION OF THE LANDLORD... 11-23 11.24 XXIV. INSURANCE... 11-24 11.25 XXV. FIRE AND OTHER CASUALTY INSURANCE... 11-24 11.26 XXVI. CONDEMNATION... 11-25 11.27 XXVII. MORTGAGING THE LEASEHOLD INTEREST... 11-26
xxx Table of Contents 11.28 XXVIII. ESTOPPEL CERTIFICATE... 11-27 11.29 XXIX. SUBORDINATION AND NONDISTURBANCE... 11-27 11.30 XXX. NEW CONSTRUCTION... 11-28 11.31 XXXI. REAL ESTATE BROKER COMMISSIONS... 11-29 11.32 XXXII. ATTORNEY FEES... 11-29 11.33 XXXIII. PROVISIONS FOR INTERPRETATION AND ENFORCEMENT OF THE LEASE... 11-29 11.34 XXXIV. ENVIRONMENTAL CONCERNS... 11-30 11.35 XXXV. TENANT REPRESENTATIONS... 11-30 11.36 XXXVI. LANDLORD REPRESENTATIONS... 11-31 11.37 XXXVII. INDEMNIFICATION... 11-31 11.38 XXXVIII. AMERICANS WITH DISABILITIES ACT (ADA)... 11-31 APPENDIX 11A: Lease Forms... 11-33 CHAPTER 12 TITLE INSURANCE 12.1 I. SCOPE AND INTRODUCTION... 12-1 12.1.1 A. Title Insurance v. Abstract and Attorney s Opinion... 12-1 12.1.2 B. General Definition of Title Insurance... 12-1 12.1.3 C. ALTA Form A Insures Against Loss Only... 12-1 12.1.4 D. ALTA Form B Insures Title as Merchantable... 12-2 12.2 II. TITLE COMMITMENT AS TO ALL INTERESTS... 12-7 12.2.1 A. General Definition of Title Commitment or Binder... 12-7 12.2.1(a) 1. Useful Purposes of Commitment or Binder... 12-7 12.2.1(b) 2. Report as to Outstanding Interest in Land... 12-7 12.2.1(c) 3. Checklist for Prospective Purchasers... 12-7 12.2.1(d) 4. Necessary Parties to Foreclosure... 12-7 12.2.1(e) 5. List of Requirements to Obtain Title... 12-7 12.2.2 B. Conditions Unique to the Title Commitment... 12-7 12.2.2(a) 1. Mortgage Defined... 12-8 12.2.2(b) 2. Unresolved Claims Known to Insured Not Covered... 12-8 12.2.2(c) 3. Company s Liability Limited to Insured... 12-8 12.2.2(d) 4. Title Company May Not Make Unreasonable Requirements... 12-8 12.2.2(e) 5. Insured Action Against Company Must Be Based on Terms of Commitment... 12-8 12.2.2(f) 6. Conditions Nonnegotiable... 12-8 12.2.3 C. Requirements of Companies to Be Met Prior to Issuance of Policy... 12-9 12.2.3(a) 1. Procure and Record Deed... 12-9 12.2.3(b) 2. Procure and Record Satisfactory Release of Mortgage or Lien... 12-9 12.2.3(c) 3. Procure and Record Release or Waiver of Lien or Judgment... 12-9 12.2.3(d) 4. Complete Satisfactory Court Action to Cure Title Defect... 12-9 12.2.3(e) 5. Procure and Record Affidavit... 12-9 12.2.3(f) 6. Obtain Access to Property Insured... 12-9 12.2.3(g) 7. Miscellaneous Requirements Unique to the Property Insured... 12-9 12.2.3(h) 8. Requirements Not Satisfied Shown as Policy Exception... 12-10 12.2.4 D. Duration of Company Liability on Commitment... 12-10
Table of Contents xxxi 12.3 III. LEASEHOLD TITLE POLICY... 12-10 12.3.1 A. Form and Requirements... 12-10 12.3.2 B. Amount of Insurance... 12-10 12.4 IV. LENDER TITLE POLICY... 12-10 12.4.1 A. Form and Requirements of Loan Commitment... 12-10 12.4.2 B. Form and Requirements of Lender of Leasehold Commitment... 12-11 12.4.3 C. Amount of Insurance for a Lender Policy... 12-11 12.5 V. ENDORSEMENT FOR SPECIAL COVERAGES... 12-11 12.5.1 A. Endorsement for Special Coverages... 12-11 12.5.1(a) 1. Survey... 12-11 12.5.1(b) 2. Mortgages... 12-12 12.5.1(c) 3. Comprehensive Minerals... 12-12 12.5.1(d) 4. Variable Rate, Negative Amortization... 12-12 12.5.1(e) 5. Street or Special Assessments... 12-12 12.5.1(f) 6. Condominiums... 12-13 12.5.1(g) 7. Variable Rate... 12-13 12.5.1(h) 8. Truth in Lending Regulation Z... 12-13 12.5.1(i) 9. Multiple Tracts Partial Release Mortgage... 12-13 12.5.1(j) 10. Construction Draws Total Mortgage Known Draw Downs... 12-13 12.5.1(k) 11. Construction Draw Specifically to Mechanics Lien Coverage... 12-13 12.5.1(l) 12. Exceptions to Insure Special Taxes and Assessments Prior to Policy Date... 12-14 12.5.1(m) 13. Recognizing Assignee as Party Insured... 12-14 12.5.1(n) 14. Assignment of Mortgage Extension of Assignment Date... 12-14 12.5.1(o) 15. Leasehold... 12-14 12.5.1(p) 16. Variable Changes... 12-14 12.5.1(q) 17. Special Restrictions... 12-14 12.5.1(r) 18. Zoning Ordinance... 12-15 12.5.1(s) 19. Zoning Completed Structure... 12-15 12.5.1(t) 20. Planned Unit Development (Community Unit Plans)... 12-15 12.5.1(u) 21. Manufactured Housing Unit... 12-15 12.6 VI. POLICY OF TITLE INSURANCE... 12-16 12.6.1 A. Conditions and Stipulations that Survive the Issuance of the Policy... 12-16 12.6.1(a) 1. Definition of Terms... 12-16 12.6.1(b) 2. Continuation of Insurance After Acquisition of Title... 12-16 12.6.1(c) 3. Defense and Prosecution of Actions... 12-16 12.6.1(d) 4. Insured s Obligation to Notify Company of Claim... 12-16 12.6.1(e) 5. Company s Right to Settle Claims... 12-17 12.6.1(f) 6. Determination and Extent of Liability... 12-17 12.6.1(g) 7. Limitation of Company s Liability... 12-17 12.6.1(h) 8. Reduction of Company s Liability on Partial Payment... 12-17 12.6.1(i) 9. Liability of Company Is Noncumulative... 12-17 12.6.1(j) 10. Rights of Recovery Upon Payment or Settlement... 12-17 12.6.1(k) 11. Liability Limited to Policy... 12-18 12.6.1(l) 12. Required Notice to Company... 12-18 12.6.2 B. Exceptions Contained in the Policy to Be Issued... 12-18 12.6.3 C. Standard Exceptions... 12-18 12.6.3(a) 1. Defects First Appearing After the Date of the Policy... 12-18 12.6.3(b) 2. The Rights or Claims of Parties in Possession Not Shown by the Public Record... 12-19 12.6.3(c) 3. Easements or Claims of Easements Not Shown by Public Record... 12-19
xxxii Table of Contents 12.6.3(d) 4. Encroachments, Overlaps, and Boundary Line Disputes... 12-19 12.6.3(e) 5. Mechanics Lien Not Shown by Public Record... 12-19 12.6.3(f) 6. Taxes and Special Assessments Not Yet Due... 12-20 12.6.3(g) 7. Special Exceptions... 12-20 12.6.3(g)(1) a. General Ad Valorem Taxes or Special Assessments Which May Be Due for This Year or Subsequent Years... 12-20 12.6.3(g)(2) b. Mortgages... 12-20 12.6.3(g)(3) c. Easements, Leases, and Miscellaneous Other Items That Are Shown on the Public Record... 12-20 12.6.3(g)(4) d. Restrictive Covenants... 12-20 12.6.3(g)(5) e. Homeowners Declarations and Rights of Assessments by Homeowners Association... 12-20 12.6.3(g)(6) f. Planned Unit Development Plans... 12-20 12.6.3(h) 8. Requirements in the Commitment That Have Not Yet Been Satisfied... 12-21 12.6.4 D. Exclusions From Coverage... 12-21 12.6.4(a) 1. Laws, Ordinances, Government Regulations, and Government Police Powers... 12-21 12.6.4(b) 2. Right of Eminent Domain... 12-21 12.6.4(c) 3. Defects Created by the Insured... 12-21 12.6.5 E. Exclusions from a Loan Policy... 12-21 12.6.5(a) 1. Failure to Comply With Applicable Doing Business Laws... 12-21 12.6.5(b) 2. Usury and Other Transgressions... 12-22 12.6.5(c) 3. Mechanics Liens Arising From Work Performed Subsequent to the Date of the Policy and Not Financed from the Mortgage Proceeds... 12-22 12.7 VII. CLAIMS... 12-22 12.7.1 A. What Is a Claim?... 12-22 12.7.2 B. Insured s Claim Notice to Company... 12-23 12.7.3 C. Insurer s Response to Claims... 12-24 12.7.3(a) 1. Duty to Defend... 12-24 12.7.3(b) 2. Duty to Defend Seller Mortgage Under a Mortgage Policy... 12-24 12.7.3(c) 3. Selection of Counsel... 12-24 12.7.3(d) 4. Conflict of Interest... 12-24 12.7.3(e) 5. Reservation of Rights... 12-25 12.7.3(f) 6. Litigation... 12-25 12.7.3(g) 7. Settlement... 12-25 12.8 VIII. REGULATION OF TITLE INSURANCE... 12-26 12.8.1 A. Controlled Business (K.S.A. 40-2404)... 12-26 12.8.2 B. Rebate Prohibition (K.S.A. 40-2404(14))... 12-26 12.8.3 C. Federal Rebate Prohibition (Real Estate Settlement Procedure Act)... 12-26 CHAPTER 13 ENVIRONMENTAL CONSIDERATIONS 13.1 I. SCOPE... 13-1 13.2 II. INTRODUCTION... 13-1 13.3 III. SOURCES OF ENVIRONMENTAL REGULATION AND LIABILITY... 13-2 13.3.1 A. Federal Law... 13-2 13.3.1(a) 1. CERCLA or Superfund... 13-2 13.3.1(b) 2. Resource Conservation and Recovery Act (RCRA)... 13-3
Table of Contents xxxiii 13.3.1(c) 3. Clean Air Act... 13-4 13.3.1(d) 4. EPCRA... 13-5 13.3.1(e) 5. Federal Water Pollution Control Act... 13-5 13.3.1(f) 6. Toxic Substances Control Act... 13-6 13.3.2 B. Kansas Laws and Regulations... 13-6 13.3.2(a) 1. Kansas Superfund Law... 13-6 13.3.2(b) 2. Kansas Storage Tank Act... 13-7 13.3.2(c) 3. Kansas Hazardous Waste Management Act... 13-7 13.3.2(d) 4. Kansas Wastewater Discharge Control Law... 13-7 13.3.2(e) 5. Kansas Air Quality Control Act... 13-7 13.3.3 C. The Regulatory Agencies... 13-8 13.3.3(a) 1. U.S. Environmental Protection Agency (EPA)... 13-8 13.3.3(b) 2. Kansas Department of Health and Environment (KDHE)... 13-8 13.4 IV. ENVIRONMENTAL LIABILITIES... 13-9 13.4.1 A. Seller s Considerations... 13-10 13.4.1(a) 1. General... 13-10 13.4.1(b) 2. Liability From Prior Activity... 13-13 13.4.1(c) 3. Liability From Future Activity... 13-13 13.4.2 B. Buyer s Considerations... 13-14 13.4.2(a) 1. General... 13-14 13.4.2(b) 2. Preserve the Innocent Landowner Defense... 13-14 13.4.2(c) 3. Know What You Are Buying; Bona Fide Prospective Purchaser... 13-15 13.4.3 C. Lender s Considerations... 13-16 13.4.3(a) 1. General... 13-16 13.4.3(b) 2. The Secured Creditor Exemption... 13-17 13.4.3(c) 3. Lender Strategy... 13-19 13.4.4 D. Trustee s Considerations... 13-19 13.5 V. MEASURING THE RISK... 13-20 13.5.1 A. All Appropriate Inquiry... 13-20 13.5.1(a) 1. The Problem... 13-20 13.5.1(b) 2. The Standard... 13-21 13.5.1(c) 3. The Elements... 13-21 13.5.2 B. Environmental Audits and Assessments... 13-22 13.5.2(a) 1. General Considerations... 13-22 13.5.2(b) 2. Environmental Audit... 13-23 13.5.2(c) 3. Record Review or Phase I Environmental Site Assessment... 13-23 13.5.2(d) 4. Additional Investigation... 13-24 13.5.2(e) 5. What the Assessment Should Do... 13-24 13.5.2(f) 6. What the Assessment Should Not Do... 13-25 13.6 VI. LIMITING ENVIRONMENTAL LIABILITY... 13-26 13.6.1 A. Advising the Client... 13-26 13.6.1(a) 1. Sensitization to Environmental Issues... 13-26 13.6.1(b) 2. Strategy... 13-26 13.6.1(c) 3. Limits of Traditional Protections... 13-27 13.6.2 B. Drafting Documents... 13-27 13.6.2(a) 1. General Drafting Recommendations... 13-27 13.7 VII. REAL ESTATE DEVELOPMENT ISSUES... 13-28 13.7.1 A. Wetlands... 13-28 13.7.2 B. The Endangered Species Act... 13-29