Elite Escrow Exclusive
December 2014 
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Elite Escrow wishes you 
a Happy Holiday Season and a
Prosperous New Year!
In This Issue
Escrow Tip of the Month - Withholding on Installment Sales

What is an Installment Sale?  This is a property sale where the seller receives at least one payment after the tax year of the sale (i.e. a Seller Carry-Back)

What are the withholding requirements? The Franchise Tax Board requires buyers to withhold on the principal portion they receive in escrow and each installment payment that they make to the seller.  FTB requires this to match the withholding credit to the income the seller reports on their income tax return.

FTB does NOT require withholding:  
- If other exemptions apply, see Form 593-C, Real Estate Withholding Certificate   
- On the installment payment's interest portion.

How to calculate installment payment withholding:  Withholding amount is calculated with either the Total Sales Price Method or the Alternative Withholding Calculation certified on Form 593.

What should the BUYER know?  As an accommodation, the Escrow Holder will assist the Buyer during escrow with the appropriate forms and withholding on the first installment payment made in escrow. After escrow has closed the Buyer must continue to withhold on all subsequent installment payments and provide the FTB with all required forms.

What should the SELLER know?  The Seller must file the appropriate CA tax return, report the installment sale income and claim the related withholding credit in each taxable year in which the installment payment is received. 

Solar Power Lease Agreements in a Real Estate Transaction 

Leased solar power systems are gaining prominence as a low-cost method for going solar.  These systems, however, can create issues in a real estate sales transaction and the property owner's ability to sell the property.

In most cases, the solar provider will file a UCC-1 with the Secretary of State and records it against the property.  The UCC-1 references the lease agreement.  The recordation of the UCC-1 secures the solar provider's interest in the solar equipment.

The lease agreement itself may place restrictions on the homeowner's ability to sell their property.  According to most of the leases currently in use, a homeowner has several options when selling their property:

1) Purchase the system in full at closing.
2) Make a "prepayment" of all lease payments due under the lease
3) Assign the lease to the new purchaser

If one of these options is not exercised, the homeowner may be in breach of the lease agreement and the solar provider can file a lien against the property. For this reason, the title company will not issue a policy of title insurance involving a solar lease until the lease is cleared.

Purchasing the equipment outright can be quite expensive and most homeowner's are opting to transfer the lease to the new buyer.

In most cases, the new buyer can expect to be contacted by the solar provider and provided with a credit check/identity verification application (or similar form).  If the buyer's credit check is "passed", the solar provider will provide assignment documents to the escrow holder for the Lessee and Buyer to sign prior to the close of escrow.  (Note: This is the typical procedure that we have encountered in our escrow files, the process may differ depending on the solar providers procedure).   If the buyer failed the credit check, the solar provider may require the system be paid for in full at closing and will process the paperwork for a system buyout.

Eric R. Ginder, a member of the SDAR Risk Mgmt Committee suggests that "a seller with a leased solar power system should condition their acceptance upon 1) the buyer's obligation to apply to the solar provider for an assumption of the lease and 2) the solar provider's acceptance of the buyer's offer should be contingent upon the buyer successfully assuming the solar lease.  That way, if the buyer refused to assume the lease, or the solar provider refuses the buyer's assumption of the lease, the seller can cancel the transaction without the obligation to purchase the equipment."   Read Eric Ginder's full article here

Source:  The San Diego Realtor.  Article by Eric R. Ginder.
Holiday Trivia

 

Who is the poinsettia named after? 

  • The poinsettia was names for Joel Poinsett, a U.S. ambassador to Mexico, who introduced it to the United States from Mexico in 1829.

Why do people hang mistletoe in doorways?  

  • The ancient druids believed mistletoe had magic powers as well as medicinal properties. Later, the custom developed in England (and later in the U.S.) of kissing under the mistletoe, an action once believed to lead inevitably to marriage.

When did Christmas become so commercialized? 

  • Macy's first remained open until midnight on Christmas Eve in 1867.  The store first featured window displays with a Christmas theme in 1874, and the holiday seaon has never been the same since. 
Why do we decorate Christmas trees?
  • Decorating Christmas trees is an age-old German tradition in which people hung trees known as paradise trees with religious symbols.  The modern-day American practice of adorning a tree with decorations originated in Victorian England.  German settlers brought the custom to the United States and the practice continues to this day.
What does the word Hanukkah mean?
  • Re-dedication - referring to the Second Temple reclaimed by the Maccabees.
When is the menorah lit?
  • After Sunset.  Lighting of the menorah is the main Hanukkah tradition. Candles are added onto the candelabrum from right to left, but are lit only from left to right. 
What is the key ingredient in traditional Hanukkah food?
  • Oil is the key ingredient of the foods, which is a sign of tribute to the miracle of purified oil.
In what year was the New Year's ball first dropped in New York City's Times Square?
  • This Times Square tradition started in 1906.
Where did the tradition of using a baby to signify the new year come from?
  • The ancient Greeks began this tradition around 600 B.C.  They would carry a baby around in a basket to honor Dionysus, the god of fertility, and symbolize his annual rebirth.
The NEW YEAR is upon us - now is the time to establish NEW healthy habits!


Meet the Sales Team

Carol Miller
Becky Ahring
Shanon Leder Jensen
Sydney
Carol Miller
619-787-1288
Becky Ahring
619-892-2008
Shanon Leder Jensen
619-607-1053
Sydney Phillips
858-775-3051
Click HERE to meet the Escrow Teams!

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