Monday, August 12, 2013

Tax-Related Appraiser Liability Claims

In the last several years, we have seen more negligence claims relating to appraisals performed for tax purposes, especially appraisals for conservation easements, charitable deductions, and estate or gift tax.  The IRS is particularly focused at this time on scrutinizing appraisals of conservation and preservation easements submitted for the purpose of substantiating a charitable deduction by the property owner/tax payer.  Here, the property owner is generally proposing to record an easement over his property to protect a natural aspect or preserve historic features like a building facade.  The easement typically will be donated to and held by a charitable organization, such as a land trust or historic preservation trust, or by a government agency.  The appraisal will then be used by the property owner to claim a charitable deduction or other tax incentive.  The owner obviously will hope for a valuation that maximizes these benefits.

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Wednesday, August 7, 2013

Does USPAP Prohibit an Appraiser from Disclosing Confidential Appraisal Information to Defense Counsel? Handle the "Issue" in Your Engagement Agreement

[This post is adopted from a larger post about confidentiality.]

With respect to an appraiser’s confidentiality responsibilities, USPAP’s Ethics Rule provides: 
“An appraiser must not disclose: (1) confidential information; or (2) assignment results to anyone other than: the client; persons specifically authorized by the client; state appraiser regulatory agencies; third parties as may be authorized by due process of law; or a duly authorized professional peer review committee ...”
Some appraisers and USPAP instructors -- but not this lawyer -- believe that USPAP’s confidentiality rule bars an appraiser from providing confidential appraisal information to the appraiser’s own legal defense counsel without specific client authorization. That position would leave the appraiser in the absurd position of having to ask for a client’s authorization to provide information to defense counsel while being threatened or sued by that very same client.  Even more absurdly, it would prohibit the appraiser from ever providing such information to defense counsel or even using the information for his or her own defense at all when the client no longer exists to ask for permission and the appraiser is being threatened or actual sued by a third party.  If followed, this reading of USPAP prevents the appraiser from obtaining informed legal advice and representation when faced with a liability action or disciplinary action and just about makes the appraiser defenseless.

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Monday, August 5, 2013

Appraiser Confidentiality: Loose Lips, Big Claims, USPAP Absurdity, and Subpoenas

Allegedly “Loose Lips” Cause a Big Claim.

A recent and relatively big appraiser liability claim involved a commercial appraiser’s alleged breach of confidentiality.  The damages paid to the plaintiff were significant.  According to the plaintiff’s complaint (my recounting of the facts here is simplified), a lender had engaged the appraiser to perform an appraisal for a construction loan to the developer of a shopping center.  Some of the information received by the appraiser included lease commitments from prospective tenants. The anchor tenant was a well-known retailer.  The appraiser completed the assignment, but for reasons unrelated to the appraisal, the lender declined to make the loan. 

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Friday, August 2, 2013

Foolishness: Appraiser E&O Information Attached to Appraisal Reports

We see it again and again: AMCs and lenders demanding that appraisers attach E&O insurance information to the back of their appraisal reports.  It's not just a bad idea for

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