New York Real Estate Lawyers Blog

July 19, 2013

Reverse Mortgages: A Risky Opportunity for Seniors

reverse mortgage.jpg Many of us have seen the slick advertisements on television for reverse mortgages. An actor who is popular with our seniors will advocate the advertiser’s reverse mortgage program as a way to tap home equity and enjoy the “good life”, the long awaited vacation or purchase of a new car or boat. However, the reality of reverse mortgages can be quite contrary to these advertisements.

A reverse mortgage is a home equity mortgage program only available to homeowners over the age of 62. These mortgages are insured by the Federal Housing Administration, a division of the Department of Housing and Urban Development. A portion of the home equity is made available for the loan, which proceeds are distributed in several ways. The homeowner can receive the proceeds in (1) monthly installments for so long as he lives in the house, (2) monthly installments for a set period of years or (3) as a line of credit that can be used as needed. Unlike a conventional mortgage, a reverse mortgage does not need to be paid until the borrower dies or no longer occupies the home as his primary residence. Not needing to make a monthly payment while having funds available for home improvements, medical expenses or other retirement needs is obviously highly attractive to seniors.

However, this author wishes to demonstrate particular concerns with respect to reverse mortgages that have actually been experienced by some of her clients. A reverse mortgage borrower must be at least 62 years of age. Let us consider a married couple that jointly owns their home, the wife is 57 and the husband is 63, meaning that only the husband can become the borrower. If the husband dies first, the surviving widow will be unlikely to repay the loan which is now due in full (without selling the house in which she may wish to continue living). The primary residence requirement may also cause difficulties. If the borrower needs to live in a residential care facility indefinitely due to medical issues, the loan will be due in full and the borrower will be unlikely to have the funds to repay. Of course, once the borrower dies, triggering the due in full provision, the lender may not patiently await receipt of the house sale proceeds needed to repay the loan and may commence a foreclosure or other legal proceeding. After the financial crisis of 2008, homes have not sold as readily as in the past, making it more difficult for survivors to sell homes to satisfy the reverse mortgage lender’s schedule. Further, with home values having dropped in recent years, there may be insufficient proceeds from the house sale to pay the loan, making the balance due from the estate.

July 12, 2013

Turn Down the Music

By Weiss & Weiss

New York City’s population density inherently gives rise to noise complaints by cooperative neighbors. The New York Post reported today about a lawsuit filed by a cooperative shareholder against his neighbor for unreasonable noise caused by his neighbor’s piano playing. This blog entry will discuss the various issues raised by this lawsuit.

Cooperatives are legally formed upon the acceptance of its Offering Plan for filing with the Real Estate Finance Bureau of the New York State Attorney General’s Office. The cooperative’s Proprietary Lease and House Rules would be included in its Offering Plan. At the closing, the shareholder signs the Proprietary Lease and House Rules, agreeing to the terms thereof. The Proprietary Lease contains the provisions by which a shareholder has the right to occupy a particular unit and the regulations governing such occupancy, such as the obligation to pay maintenance, sublease rules and rights to transfer the unit. House Rules contain specific itemized rules such as where packages may be delivered, laundry room rules, move-in and move-out regulations, and rules governing which elevator can be used for freight or pets. If the House Rules are violated, such a breach is deemed to be a violation of the Proprietary Lease. The Proprietary Lease contains provisions for the cooperative’s board’s response to a default, typically commenced by the service of a default notice, which may result in the service of a termination notice.

Most Proprietary Leases contain a clause prohibiting a shareholder from making unreasonable noises. Likewise, the House Rules governing many cooperative buildings commonly prohibit the playing of musical instruments between the hours of 11:00 pm and 9:00 am. Once a shareholder finds the noise to be unreasonable, he should bring the matter to the attention of the board of the cooperative, encouraging the commencement of a default procedure against the offending shareholder under the objectionable conduct provisions contained in the Proprietary Lease. Should the Board remain unresponsive, the shareholder may need to commence a lawsuit against the cooperative for failure to enforce the governing documents and against the shareholder who is continuing to make unreasonable noise.

July 3, 2013

Real Estate Flips: Are They Good for the Neighbors?

By Weiss & Weiss

The resurging real estate market brings with it the real estate “flipper”. A flipper is a person or entity that purchases property with the goal of renovating it for a quick sale at a substantial profit. The flipper never intends to occupy the property in the neighborhood. Recently, the Wall Street Journal reported that luxury homes are joining more modest properties in the flip market. Even cooperative and condominium apartments can be subject to flipping.

In a market-oriented society such as ours, one could argue that it is one’s own business as to how one invests and that properties can be purchased and sold despite one’s intent. However, others may argue that it is unseemly for opportunists to purchase properties merely with the intent to harvest a profit. The following are examples of how this plays out. A lender takes back a house in disrepair through the foreclosure process. Prior to the foreclosure, which took years, the house fell into significant disrepair and was unsightly to neighbors. Perhaps hazardous conditions developed from a dismantled oil tank and the removal of copper materials from the home. The foreclosed eyesore potentially reduces the property values of the surrounding neighbors. In this scenario, anyone who eventually purchases the house from the foreclosing lender and rehabilitates it into a habitable and cosmetically pleasing condition should be appreciated. Since the flipper’s goal is to sell to a person who will occupy the home, the flipper is this instance is beneficial to the neighborhood. Ultimately, there will be an occupant who becomes a neighbor contributing to the community.

Flipping takes on a different complexion in a cooperative building. It is not unusual for cooperative apartment corporations to charge a “flip tax” upon the sale of a unit. While flip taxes are typically charged on all sales, the philosophy behind them is to discourage short term ownership merely intended to raise a profit and to move funds back to the cooperative community upon sale in a means to benefit the entire cooperative “neighborhood”. Flip taxes are calculated in several ways, such as by a certain dollar amount per share. If one owns 200 shares and the flip tax is $5 per share, then the flip tax collected would be $1,000. Some buildings calculate the flip tax as a percentage of the sale price. If the sale price is $400,000 and the flip tax is at 1%, then the flip tax charged would be $4,000. Flip taxes may also be calculated as a percentage of the net profit, such as sale price minus original purchase price, less sale expenses such as brokerage commissions and transfer taxes. Flip taxes are to be enacted in accordance with the building’s governing documents, giving particular attention to whether the Board or all shareholders must vote on their enactment and the percentage approval vote required. Since most units within a building are similar and the state of repair is not apparent from the hallway or outside the building, flipping a unit is not necessarily beneficial to the rest of the building unless a flip tax is charged to the seller.

June 28, 2013

Money Does Not Necessarily Buy Happiness for Proposed Estate Beneficiaries

By Weiss & Weiss

huguette clark.jpeg Our readers may be aware of an unusual estate litigation in New York City. Huguette Clark died in 2011 at the age of 104. Being the only surviving child of a copper mining magnate, she left a fortune of approximately three hundred million dollars. Ms. Clark was also highly eccentric. After being hospitalized for a purported legitimate medical condition in New York’s Beth Israel Medical Center, she spent her last decades housed in that hospital, despite having an apartment on Fifth Avenue and at least one mansion in which to reside.

Two Wills are being contested in the litigation, both of which were made within one month of each other when Ms. Clark was 98 years old, six years before her death. The first Will left her estate to distant relatives who were not named and with whom she did not have a personal relationship. The second Will disinherited the distant relatives, increased the bequest to her caregiver, left a bequest to a goddaughter and established a foundation. An art museum in Washington, DC is challenging a bequest of artwork, instead advocating for cash. The state and federal estate taxing authorities are involved in the litigation because additional estate taxes will be due should the case be determined in a particular way.

While due to the large sums of money involved, many people cannot relate to the problems that have arisen in this case, even smaller estates can be subject to some of the same issues. For instance, dying without surviving close relatives opens the door to distant relatives such as first cousins once removed having the authority to challenge a Will offered for probate. In addition, estrangement from close relatives who are not beneficiaries under the Will could result in a Will challenge. People without living relatives or who have estranged relationships are vulnerable to intrusion into their estate plan by caregivers and institutions in their final years. Would Beth Israel Medical Center have allowed Ms. Clark to remain for decades, even if she paid for her housing, if a large bequest had not been negotiated? While the caregiver was undoubtedly of great value to Ms. Clark, did the dependence engendered by the relationship encourage too large a bequest?

June 21, 2013

Real Estate Transactions and Specific Performance

By Weiss & Weiss

A recent article in the Journal News discusses the sale of the Yonkers Polish Community Center to the Church of Jesus Christ of Latter Day Saints. As the author has enjoyed many events at this Center, and will certainly miss attending events if the center is sold, this article discusses the possible legal remedies when one of the parties to a real estate contract will not complete the transaction.

In the situation discussed in the article, the buyer has given the seller a downpayment in the amount of $120,000.00. Although we are not familiar with the specific facts of this transaction, a downpayment is generally held in escrow by the seller’s attorney until the sale closes or the transaction is cancelled because the purchaser could not obtain a loan commitment, or for another contractual reason.

There may be certain situations in which a seller wishes to transfer title to a property, but encounters legal difficulties in doing so. For example, a Religious Corporation, such as a Church or Synagogue, may seek to sell certain property. This subject was addressed in a previous blog post. Such a transaction must be approved by the New York State Attorney General. In addition, our firm has encountered situations where certain congregants challenge the decision to purchase or sell certain Church or Synagogue property in New York Supreme Court.

June 14, 2013

Comparison of Litigating Cases in State Court and Federal Court

By Weiss & Weiss

The Law Offices of Weiss & Weiss are located within walking distance of both New York State Supreme Court (Westchester County) and the United States District Court for the Southern District of New York (White Plains). Our firm handles cases in all forums, including these two Courts. This blog post will discuss the differences between litigating cases in state court as opposed to federal court.

Generally, most civil cases handled by our firm are filed in New York State Supreme Court. Despite its name, New York State Supreme Court is the lowest level of trial court in the State, and is used generally for litigating cases where the amount in dispute is greater than $25,000.00. Each county in the State has its own Supreme Court, so, for the “downstate” portion of New York State, there are Supreme Courts in each of the five boroughs, named for the counties in which they are located (New York, Kings, Queens, Bronx, and Richmond), as well as Nassau, Suffolk, Westchester, and Putnam). The Westchester Supreme Court is located at 111 Dr. Martin Luther King Boulevard in downtown White Plains, a few blocks from Weiss & Weiss.

In order to “make a federal case out of it,” there are certain requirements that must be met to file a case in United States District Court for the Southern District of New York. The Southern District has Courthouses in downtown Manhattan, as well as downtown White Plains. All bankruptcy cases are filed and heard in Federal Court. Therefore, when a debtor files for bankruptcy, our firm is able to file a bankruptcy claim in the White Plains Federal Courthouse on behalf of any creditor that our firm represents.

June 7, 2013

Title is Vital

By Weiss & Weiss

title insurance.jpg Real estate transactions commonly involve the inclusion of title insurance policies. For the purposes of this blog post, we will be discussing title insurance obtained when a person purchases a house. Title insurance is a unique type of insurance, in that the events that are to be covered have already occurred. For instance, an automobile policy covers loss resulting from an accident that could happen after the policy is bound. On the other hand, title insurance covers acts that have already happened but not discovered prior to closing, such as a fraudulent deed in the chain of title.

Attorneys who practice real estate law rely upon title insurance companies and their examiners to identify problems with a particular property. Our firm maintains relationships with the major title insurance companies in our region and determines the most appropriate company to use for particular clients. Title companies also play an important role in reviewing closing documents such as Powers of Attorney to confirm that they are valid and in proper form to record. Ideally, title examiners do not miss documents recorded against a property, such as open mortgages that need to be satisfied as of closing. If the title examiner failed to locate a recorded mortgage or if the seller intentionally or inadvertently misled the parties as to the existence of a mortgage, the title insurance company is generally legally obligated to pay the claim for loss suffered by the purchaser (and its lender) because the mortgage lien was not paid and removed as of closing.

At the request of the purchaser’s attorney , title companies can provide enhanced coverage in certain situations. For instance, by paying a slightly higher premium at closing, the purchaser can obtain a “market value rider” to the policy. This rider provides that the policy coverage limit will inflate to the future market value of the property, regardless of the amount that the purchaser paid at the closing for the property. Generally, a property sold by a real estate broker to an unaffiliated purchaser reflects market value, making the purchase of the market value rider unnecessary to a purchaser looking for prudent means to reduce closing costs. However, if a property is acquired through foreclosure, an estate or through a seller who was not introduced by a real estate broker, the price paid at closing may be well below market value, making the purchase of the market value rider an intelligent move.

May 30, 2013

Renewal of Residential Leases in New York

By Weiss & Weiss

Our firm often fields inquiries from clients regarding residential lease situations. One common question relates to the right to renew an existing lease. This blog post will explain certain conditions which may apply to the renewal of a lease after it expires.

We are first assuming that there is a written lease between the landlord and the tenant for the premises in question. If a tenant takes possession of the premises without any written lease whatsoever (this situation arises more than one would expect), then the tenancy is considered a month-to-month tenancy. This means that either party may terminate the tenancy by giving one month’s notice to the other party. For this reason, a written lease will protect both party’s interest in the tenancy.

A written lease between the landlord and tenant will generally be for a specific period of time. Many leases run for multiple years, such as two, three, or even five year terms. Smaller premises or those for cooperative or condominium apartments may rent for only one year. The question we are asked is what rights the tenant may have to a renewal lease after the lease term expires.

May 17, 2013

Estate Planning is Still Required

By Weiss & Weiss

Our readers who follow politics know that members of Congress have battled in recent years with respect to revisions to the tax law. Specifically, estate, gift, and income taxes have been subject to adjustments. The purpose of this blog post is not to describe the specific changes made to these laws. The laws in this area are fluid and heavily influenced by politics, making them subject to change at almost any time. Because our readers cannot rely on consistency in the tax law, they must be mindful of their estate plans, beneficiary designations, and means by which title is held. The goal is so that intended recipients receive intended assets and that taxes are reduced as much as legally possible.

Further, while some of the tax laws have been revised at the Federal level, they have not been so adjusted in New York State. As such, estates valued at more than one million dollars are subject to New York State estate tax. In the New York metropolitan area, it is easy to accumulate one million dollars in assets, which could be deemed the value of real estate (net of the balance of a mortgage), life insurance policies that are considered to be revocable and other assets.

In any tax climate, estate planning will always be needed for the purpose of naming guardians for minor children, providing for beneficiaries with special needs such as those with physical or mental disabilities, identifying those persons desired to serve as executors and for establishing business succession plans. People with property in multiple states also require estate planning services, as different states may have their own estate tax, necessitating strategies to achieve tax reduction. In addition, same sex couples require estate planning, even if they reside in a state where they are considered legally married, to determine the allocation of assets in other states and to ensure that the spouse receives intended assets, rather than blood relatives.

May 10, 2013

Out-of-State Judgments and their Collection in New York State

By Weiss & Weiss

Our firm is often asked to enter judgments on behalf of creditors. A judgment can be obtained in several ways. If a lawsuit is brought, and the defendant does not respond, a default judgment may be obtained. A case may also go to trial, and, if successful, a judgment may result. In addition, other situation can arise where a client obtains a judgment in another state, other than New York. These are known as “foreign” judgments, even though they are still obtained within the United States.

Article IV, Section 1 of the Constitution says that “[F]ull Faith and Credit shall be given in each State to the public Acts, Records, and judicial Proceedings of every other State.” This means that if a lawsuit is brought in another state, goes to trial, and a judgment is obtained, then every state in the U.S. must consider that judgment valid, and allow it to be entered in their own state. The main reason that one would want a foreign judgment entered in New York is because the debtor has assets within New York. Collecting such a judgment will be addressed in the second part of this blog post.

New York Civil Practice Law and Rules Article 54 regulates the entry of foreign judgments in New York State. It allows foreign judgments which were not obtained by default or confession of judgment to be entered in New York. In order to enter such a judgment, the original judgment must be authenticated. This generally means that an official, such as a Judge, in the state where the original judgment was entered, must provide an affidavit that the judgment is currently valid. The original judgment must usually contain a raised seal from the originating state. In addition, the judgment creditor must provide an affidavit stating that the judgment was not entered by default, that it has not been paid, and provide the name and last known address of the judgment debtor. Our firm has extensive experience in preparing such affidavits and entering foreign judgments in New York State.