In this issue...

Purchasing Property at Foreclosure
Auctions; What to Look for
Tenancy
From the Desk of Harold Chu...
Meet Russell H. Ando
Telephone Scam Alert
Update
Did You Know?

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PURCHASING PROPERTY AT FORECLOSURE AUCTIONS: WHAT TO LOOK FOR
By Russell H. Ando

Foreclosures have become very common in Hawaii in recent years. For the mortgagees and lienholders, they involve the institution of legal action and all of the accompanying expense and time commitment. For the property owners, they result in a public auction of property that they once had title to. For the general public, however, they present an opportunity to purchase property under very atypical circumstances. Based on the number of people who frequent foreclosure auctions, there appears to be a segment of the population that is interested in making these purchases.

These purchases are not for the lazy. Careful research and preparation is important in determining the features of the property and whether and how to bid at the auction. The following are some suggestions:

¨ Check the Sunday newspaper for foreclosure notices. They usually include a summary description of the property; the open house dates and times; the auction location, date and time; the auction procedure in general; and the name, address, phone number, and fax number of the commissioner. Foreclosure notices are usually published for three consecutive weeks. Each Sunday newspaper usually contains two or more full pages of foreclosure notices, so a lot of property is available. Foreclosure notices sometimes appear in the newspaper on other days, but the Sunday newspaper is by far the most commonly used.

¨ If a certain piece of property is of interest to you, call the commissioner and ask for a Fact Sheet. The Fact Sheet will include additional information about the property, such as the assessed value, age of building, property manager if applicable, and the like.

¨ If the mortgagee is instituting the foreclosure, be aware that the mortgagee will usually bid on the property to some extent.

¨ Find out the assessed value of the property.

¨ Find out if the sale is "subject to" an existing mortgage or anything else.

¨ Remember, the sale is "as is". Go to the open houses. Inspect everything. Ask questions. Do your own research, as the commissioner will have only basic information. Check zoning restrictions, neighbors, community association fees, community association covenants, schools, and any other matter that is important to you.

¨ If the property is attractive to you, attend the auction. The highest bidder at the auction needs to submit a ten percent downpayment in cash or by cashier's check at the close of the auction. Have a maximum bid in mind. Be ready with your ten percent downpayment.

¨ Be aware that post-auction bids may be allowed by the Court at the confirmation hearing. If, at the confirmation hearing, another party wants to bid five percent higher than the highest bid at the auction, the judge usually will allow that party to bid. In that situation, the commissioner will be instructed to hold another auction in the hallway. The sale is then confirmed to the highest bidder at that auction. Therefore, being the highest bidder at the advertised public auction is no assurance that you will get the property. You may need to bid further.

¨ Find out the date and time of the confirmation hearing. Call the commissioner about a week or two after the auction for that information. If you are the highest bidder, you will need to appear at the confirmation hearing. If appropriate, be ready with additional cashier's checks in the event a third party wants to outbid you.

¨ Bidding strategy comes in all shapes and sizes. Everyone has his or her own approach. Develop your strategy carefully and well before the auction.
¨ If you are not familiar with the auction process, go to the lanai area of the state courthouse on Punchbowl Street and watch a few. There usually is at least one auction at noon on every weekday.

Good Luck!

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TENANCY

One of the most frequently asked question pertaining to real estate is to explain the different tenancies and the effect of each tenancy. We have discussed tenancies in past issues, but since the topic seems to be of general and continuing interest, we thought it might be worth while to revisit this area of the law.

Tenancy are types of ownership of property. There are four basic tenancies:

1. Tenant in Severalty. Tenant in Severalty is ownership of property by one
individual or one entity. Typically, the owner is an individual or a corporation. There is no joint ownership in Tenant in Severalty. When the individual dies, the property passes to the individual's heirs. If the owner is a corporation, the property continues in the name of the corporation as long as the corporation owns it.

2. Tenants in Common. Tenants in common is ownership by one or more
persons. Each owner has a fractional ownership interest in the property. An owner of a tenants in common interest can sell his or her interest in a property without the consent of the other co-tenant, but he or she cannot sell the entire property without the consent of all the co-tenants. When the co-tenant dies, the interest of the deceased co-tenant, goes to the heirs or beneficiaries of the decedent. The surviving co-tenant does not necessarily acquire the decedent's share of the real property. It depends upon the decedent's will. Tenants in common is often used by couples who were previously divorced and each wishes to leave something to their children but not necessarily to the spouse's children. It is also used by unmarried co-owners when they wish to leave their share to their heirs.

3. Joint Tenants. Joint tenancy is another form of co-ownership. In a joint tenancy, there is a right of survivorship. A right of survivorship means that upon the death of a joint tenant, the remaining joint tenant(s) acquire the interest of the deceased owner.

A common misconception is that one can protect the property from creditors' claim by taking title to property as joint tenants. The creditor can attach a debtor's joint tenants interest in the property. If, however, the joint tenant who owes the debt dies before the creditors seizes the joint tenant's interest, the creditor loses his or her claims against the property and the surviving joint tenant takes the property free from the claims of the decedent's creditors. If the surviving joint tenant is the one with the debts, the creditors have substantially more assets to pursue.

One of the principal advantage of joint tenancy is avoidance of probate proceedings, since the surviving joint tenants immediately become the remaining owners of the property. In a joint tenancy, each joint tenant, except for the last remaining owner, gives up his or her right to transferring their interests by will.

4. Tenants by the Entirety. This is a variation of joint tenancy except that it is
available only for legally married couple. This is a joint tenancy between a lawfully-married husband and wife. It places title of the real property in the marital unit with both spouse having an equal undivided interest in the whole property. Upon the death of one's spouse, the surviving spouse owns the entire property. The interests of heirs and creditors of the deceased spouse are excluded. There is no need for probate. This type of tenancy is frequently used in the ownership of a residence and is a guaranty that the surviving spouse will continue to have a home regardless of whether a will is drawn or the property is fraudulently sold.

In Hawaii, under a tenancy by the entirety, the creditors of one's spouse cannot force the sale of the property to satisfy a judgment. A creditor of both spouses, however, could take such action. The tenancy by the entirety is terminated by mutual agreement, divorce or death.

Determining what is the appropriate tenancy involves consideration of the people on title, their particular circumstances, the exposure of a title holder to creditors' claims, and the parties' desires as to the ultimate disposition of the property.

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FROM THE DESK OF HAROLD CHU

Clients often want to know, but are sometimes shy about asking about an attorney's background and work experience. Mr. Ando and I are both experienced attorneys. In this issue, we share some background information about Mr. Ando. There will be a similar article about me in the next issue of this newsletter.

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MEET RUSSELL H. ANDO

From time to time, it's good for me to reintroduce myself. I may have not spoken to many of you for a while.

I was born and raised in Hawaii. I received a Bachelor of Arts degree from the University of Hawaii and a Doctor of Jurisprudence degree from the University of Oregon School of Law. While in law school, I served as an editor of the Law Review and worked as a summer associate at a law firm in Oregon. As part of a student clinic program, I also advised inmates at the Oregon State Penitentiary on domestic matters and constitutional law issues. They were my first real "clients."

Upon graduation in 1980, I returned to Hawaii and studied for the bar exam. I took it that summer and passed, and then accepted a clerkship with the Hawaii Supreme Court. I also got married over the Labor Day weekend, so that was a very busy time for me. During the year-long clerkship, I drafted opinions and did legal research for Justice Edward Nakamura, a very distinguished member of the Hawaii Supreme Court. It was an extraordinary opportunity to see and learn how the courts work -- from the inside. The benefits of that clerkship, professionally and personally, stay with me even to this day.

After the clerkship, I joined a Honolulu law firm. I handled cases involving commercial litigation, landlord-tenant law, collections, and business matters. Over the following years, I handled asbestos cases, construction cases, insurance defense work, and commercial litigation. I even did some divorce work for a while. Over the past ten or so years, however, I have focused primarily on commercial litigation, real estate litigation, foreclosures, mechanic's liens, condominium law, collections, contract disputes, and mediation and arbitration.

I have handled some large, complex cases and other more straightforward cases. However, I believe that there are no "small" cases because each case is important to that client. I treat each case in the same way. I also realize that litigation can be expensive, and so I do not institute litigation as a knee-jerk solution to a problem. Other ways to solve problems are always explored. When it is necessary to litigate, I try to be efficient and cost effective. I am a firm believer in a common sense approach to solving problems.

I have been appointed to the Board of Examiners of the Hawaii Supreme Court, which administers the bar exam, as an arbitrator for the First Circuit Court, and as a foreclosure commissioner and receiver for the First Circuit Court. These experiences broaden my knowledge base, which in turn make me a better professional.

I have been in practice for nearly twenty years. I was a "partner" at this firm for a while, but I later became "Of Counsel" because it suits my needs a little better. Just because my name is not in the law firm name does not mean that I am still an apprentice attorney. I have nearly twenty years of experience.

We pride ourselves in being approachable. Please feel free to call me at 523-7544, fax at 526-1231 or e-mail at Rhando@worldnet.att.net if you need to for any reason.

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TELEPHONE SCAM ALERT

There have been a rash of telephone scams. We offer the following reminders:

If you really won a prize, you do not have to pay money to receive the prize.

Lotteries are illegal in Hawaii.

You do not have to advance money to collect your lottery winnings.

Do not give cash or provide information about your credit card or bank accounts to strangers.

Banks do not require you to withdraw money to capture an embezzler.

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UPDATE

There are two recent changes to our web site. We have modified our web site, to include not only our current newsletter, but also an archive for copies of past newsletters.

Our second change was to incorporate changes in the access to State court records. You can now access Circuit Court criminal, civil and adult Family Court records through the Internet. By logging onto the State Judiciary's World Wide web site you can access Circuit Court files seven days a week, 24 hours a day. You would choose the Ho ohiki Aha Ho okolokolo ("Come to Court") selection. This site is in our web site, under the Links and Resources button.

We have been advised you can research cases by name or case number and get information such as party names, case types, listings of court hearings or filings, minutes of hearings, case dispositions, settlement conference report and clerk's minutes. Addresses, telephone numbers and Social Security numbers were deleted for privacy and security reasons. The files go as far back as 1984 and are supposed to be updated within 48 hours of the date of a filing or a hearing. If you wish to read the actual document, you must still go to the legal documents room at the court house.

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Did You Know?

Don't put off until tomorrow what you can do today; by tomorrow there may be a law against it.
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Men fight for freedom and then start making laws to get rid of it.
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The government wants to regulate everybody and everything - except government.
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A man complains about the food when he eats at home and about the price when he eats out.

 

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