Cooperative and Condominium

August 11, 2016

Selling a New York Property While in Foreclosure

Prior blog posts have discussed a “short sale” of a property in foreclosure. A short sale is when the house is worth less than the mortgage owed to the lending institution, and the lender agrees to accept less than the full amount owed when the transaction takes place. However, a situation may also arise when a house is worth more than the loan balance, or when the amount owed is small enough that the seller may decide to pay the difference in order to sell the property to a third party. This post will discuss legal issues related to these circumstances.

Many of our firm’s intend to sell their houses or other property in foreclosure. They have listed their properties with a real estate agent, and are confident that the selling price will exceed the amounts owed on the property’s mortgage. In that case, the first legal recommendation is to have an attorney file an answer to the foreclosure complaint in the appropriate court, including all legal defenses . This will allow the homeowner additional time in which to find a buyer for the property while the foreclosure process plays out in Court. Mandatory settlement conferences for foreclosure actions may also further delay a lender’s obtaining of a judgment of foreclosure and sale, allowing more time to market and sell the property.

Once a buyer is procured, it is important that the seller’s attorney immediately prepare a Contract of Sale. Assuming all parties then execute the contract, the buyer’s downpayment should then be deposited in the attorney’s escrow account. The next step would be for the seller’s attorney to contact the attorneys handling the foreclosure for the lending institution. The attorney should provide copies of the fully signed contract, together with proof of the downpayment deposit. At this point, the attorneys for the lender may agree (although legally, they are not obligated) to put a “hold” on any foreclosure litigation, pending the closing of the sale of the property. The reason for this is that at the closing, the lender will be paid in full. Therefore, it is usually not cost effective for a lender to continue to pursue a judgment of foreclosure in Court once there is a signed contract and downpayment.

July 28, 2016

The Implementation of the New Mortgage Closing Disclosure Rules-How’s it Going?

By Weiss & Weiss

In a prior post , we alerted our readers that the HUD real estate closing form as they knew it would be disappearing from closings. In a later post , we informed our readers that the new loan closing disclosure rules were in effect. Several months after the implementation of these rules, we would like to share with you our observations of how clients have been dealing with these new rules.

Fortunately, we have experienced a busy home transaction season. On the flip side, we have observed that transactions are closing approximately one month later than they did prior to the implementation of these new rules. The exception to later closings is when a transaction is all cash, which does not require these disclosure documents and the mandatory waiting periods involved. Longer closing timeframes are a result of lenders taking longer to issue the loan commitment, evaluate collateral, and clear the loan to close. Even if the buyer and seller are ready and anxious to close, the lenders have been disregarding the will of the parties because they can incur substantial fines for failure to provide timely disclosures under the new regulations. Lenders may also need to refund money to borrowers if the closing costs are higher than were disclosed. The mandatory disclosure timeframe can be shortened in rare circumstances, such as an actual emergency. An emergency is not that a buyer is going to have a baby imminently and wants to get settled, but is when a buyer may lose her downpayment by needing to react to a time of the essence closing notice or if the property is about to miss a short sale closing deadline .

Lenders have become much more inconsistent and conservative in recent months. We have found that most lenders are internally deciding to require disclosure timeframes that are longer than required by law. We have noted that one regional lender has required that even more time pass than required than a major national lender that is complying with the law. A lender that is open for business on Saturday may seem to get the parties to closing faster because it can count Saturday as one of the disclosure days.

July 15, 2016

Pot Luck – Smoking Medical Marijuana in Your Apartment

By Weiss & Weiss

A recent news story in Bloomberg News discusses the effects of the legalization of medical marijuana, and its effect on smoking bans in apartments. This blog post will discuss the possible effects of such new legal developments on apartments in the New York City area and its surrounding suburbs.

Although marijuana use for recreational purposes is not yet legal in New York State (although several other states, such as Colorado, have legalized its use for all purposes), it can be used legally in New York for medical purposes. According to the New York State Department of Health’s website, a person with a severe medical condition, such as cancer, HIV, ALS (Lou Gehrig’s disease), Parkinson’s disease, as well as other life-threatening conditions, may be eligible to receive medical marijuana with a prescription from a doctor registered with the Medical Marijuana Program.

Legal issues may arise from the use of medical marijuana, as many rental apartments, cooperatives, and condominium buildings have enacted bans on smoking. Many rental apartments will contain in their leases a ban on smoking within the apartment and in the building common areas. In addition, many cooperative buildings have also started to ban all smoking, even within the individual unit owner’s apartment. These smoking bans were discussed in a prior blog post. Of course, prior to the legalization of medical marijuana, these smoking bans would have also applied to smoking marijuana (or any other smokable substance) in an apartment. The use of an illegal drug within a rental unit may have also likely given a landlord cause to evict the tenant for illegal activity in their apartment.

June 16, 2016

Waiving the Mortgage Contingency Clause- Should Purchasers in New York Take the Risk?

By Weiss & Weiss

Sellers of real estate in New York perceive the current market as one with a tight inventory for desirable properties. In such a market, multiple offers may be available to a seller. In order to select one offer over another, a seller may demand that the buyer who intends to obtain a mortgage waive the standard mortgage contingency clause in the proposed contract. This post will discuss whether waiving the mortgage contingency is a risk that a buyer should take.

In a typical New York real estate contract, various contingencies (conditions) need to be met between signing the contract and closing. Some of the conditions usually include proof of clear title, a satisfactory appraisal , approval of the finances of the cooperative building and the like. If the conditions are not met, the downpayment will be delivered to the seller or the buyer, depending on the circumstances.

A mortgage contingency clause works as follows. After the contract is signed, the buyer is afforded a particular number of days to obtain their loan approval. If the buyer does not obtain the loan, he can show that the loan was declined and request the refund of the downpayment. During this period of time, the seller is required to remove the property from the market and is relying upon this particular buyer to close. If the buyer has a valid legal right to cancel the contract and receive the return of his downpayment, the seller has lost potentially two months in being able to market the property again. In New York, missing an opportunity to market the property during the Spring and Summer seasons could cause the property to be overlooked by buyers until the following Spring, because most contracts are signed in the Spring and Summer months.

May 13, 2016

New York State Landlord Prosecuted – Does this Sound Familiar?

By Weiss & Weiss

Recently in the news is the story regarding New York City landlord Steve Croman. Mr. Croman was arrested for allegedly harassing rent-stabilized tenants into leaving their apartments so that he could increase the rent for new tenants. Longtime readers of our blog will recall other posts which relate to the right to renew a lease, as well as illegal acts and evictions in New York State.

Unfortunately, the current rent system in New York State, and, more specifically, mostly in New York City, gives landlords an incentive to remove tenants, especially long-time tenants, who are paying artificially low rents due to the rent stabilization laws. Of course, this does not excuse harassing and threatening tenants, but it explains why a landlord may resort to these tactics to attempt to remove tenants.

The current rent stabilization system allows the landlord to increase the rent by a certain percentage when a tenant vacates. Although this percentage may vary, it is usually a twenty percent (20%) increase over the prior regulated rent. For example, if a tenant was paying $1,000.00 per month, and vacates, the new tenant may be charged $1,200.00. There may also be additional increases depending on the amount of time which has passed since the last vacancy, as well as increases if the landlord renovates the apartment in question. For buildings that contain more than 35 apartments, the landlord may collect a permanent rent increase equal to 1/60^th of the cost of the apartment improvement. If there are fewer than 35 apartments, the landlord may collect an increase of 1/40^th of the cost.

April 21, 2016

Is This Your First Time? Property Purchases in New York State

By Weiss & Weiss

It’s that time of year again. This author is not thinking about the chirping birds and blooming trees heralding the beginning of Spring. We are thinking about another sign of the season– the first time home purchaser. This post will address issues pertaining to the person buying a home, whether a house or a cooperative or condominium apartment, for the first time. Even if a person has owned a home in another state, real estate in New York is its own animal.

The most important aspect of our advice is that the first time homebuyer should surround himself with seasoned experts throughout the process. In addition, let the experts do their work without your interference. It is usually better for a first time homebuyer to work with a licensed real estate agent and to buy a property that is listed with a real estate agent, as opposed to buying a home that is listed for sale by owner. That way, the real estate agents will resolve many of the issues that commonly develop in a transaction. If both parties are not represented by real estate agents, then the buyer may not know how to best negotiate a favorable price. Comparable sales should also be evaluated to determine the proper price to be offered by a buyer. A real estate agent knows the area best, but also has the resources to locate the comparable sales data and to evaluate the data properly.

The first time homebuyer should also get his finances in order. He should become acquainted with a potential lender or mortgage broker prior to making offers. His offer is more likely to be accepted if accompanied by a pre-approval letter, so that the seller is comfortable with taking the property off the market for this buyer. In addition, the proposed lender or mortgage broker may note possible deficiencies in the buyer’s potential loan application, such as inaccurate credit concerns, the necessity of reducing debt and the like. Given the amount of the typical downpayment to purchase a property in the New York metropolitan area, first time homebuyers may need a gift from their parents or other relatives to pursue the transaction. The buyer should discuss this with the appropriate person in advance. Further, once the gift is made, the parties need to be prepared to show the source of the gift, such as copies of bank statements before and after the gift, from the parent and the child.

March 17, 2016

Fraudulent Conveyances of Real Estate in New York

By Weiss & Weiss

Occasionally, our clients inquire as to whether a real estate transaction could be considered a fraudulent conveyance. This situation can occur when an individual or entity transfers property due to a judgment or pending judgment, in an attempt to evade creditors. In New York, a judgment is a lien on real property for a period of ten years. After ten years, the creditor can move to have the lien extended for an additional ten years. Therefore, those who own real estate may have an incentive to transfer such property to prevent a lien from being placed on it, possibly for a twenty-year period.

New York Debtor and Creditor Law, Article 10, is the state law governing fraudulent transfers. It states that, first, when any defendant transfers property in an attempt to evade a judgment creditor, that transfer is considered fraudulent and may be rescinded in a court action. An important consideration in this evaluation is whether the transfer is made for consideration, that is, whether the person transferring the property received value in exchange for the transfer.

Let’s give a hypothetical situation to help clarify the law. A husband and wife own a house jointly. The husband alone is sued individually for a business debt, and a judgment is obtained against him. Before the judgment is entered by the Court, the husband transfers his one-half interest in his house to his wife, so that the house is solely in his wife’s name. The husband receives no compensation for this transfer.

March 10, 2016

Preserving Real Estate Assets for the Defaulting New York Homeowner

By Weiss & Weiss

It is not unusual for some of our clients to be presented with the following scenario. An owner of a single family house or apartment falls behind on his mortgage and his lender commences a foreclosure proceeding while a sale is pending. In an apartment scenario, the cooperative board pursues a maintenance default matter while a cooperative unit owner is actively attempting to sell the unit. These are not situations where a short sale is sought. Rather, significant equity exists. The anticipated sales proceeds will allow for the full payment of the balance of the mortgage loan or maintenance arrears due to the cooperative.

Another common component of these situations is that the lender or cooperative board is aggressively pursuing their claim, jeopardizing the owner’s ownership of the asset. For instance, if the lender forecloses on the mortgage, the homeowner will lose title to the property and have nothing to sell. If the cooperative default goes to its final conclusion, an auction of the unit (and eviction of the occupant) , the unit owner will likewise lose her ownership interest. These results should be avoided when the closing proceeds are more than sufficient to pay any outstanding amounts due. The goal of the attorney representing the homeowner is to encourage the lender or the cooperative board to delay its proceeding pending the sale of the property , at which time the lender or the cooperative will be paid in full for the monies owed. When a homeowner falls behind in payments due, he may claim to a creditor that he is trying to sell the home in an effort to stall proceedings. While it may be true that the homeowner is trying to sell the home, the following suggestions may make such a claim more credible to the creditor and convince them to delay the proceedings.

First, it is helpful to have a skilled attorney present this information to the creditor. Second, for sale by owner scenerios should not be used. Having a licensed real estate agent involved who has an active listing that can be shown to the creditor is convincing evidence that the home is actively for sale. Third, if there is a signed contract of sale with downpayment monies on deposit and also a loan commitment letter from the purchaser to deliver to the lender or cooperative’s attorney, such documents will show that the means to pay the past due balance will be imminently available. A new loan may be sought by the homeowner as another means to resolve the default. If these strategies are not effective, our attorneys may file an Order to Show Cause with the applicable Court, seeking a temporary restraining order curtailing the creditor’s right to pursue the activity until the sale occurs.

February 25, 2016

Mortgage Modifications in New York State

By Weiss & Weiss

Our firm is often called on to assist homeowners whose properties may be in foreclosure. This can occur when a person falls behind in their mortgage payments to a bank or other lending institution. Because of the high volume of such foreclosures in New York State over the past several years, additional safeguards have been added to the judicial process to protect people from losing their primary residence in a foreclosure case.

Prior blog posts have explained how New York State requires a mandatory settlement conference in most residential foreclosure matters. The main exceptions are cases involving a reverse mortgage, or situations in which the homeowner does not reside at the property being foreclosed, such as a second home or vacation house. Our attorneys will attend settlement conferences in Court to attempt to resolve outstanding foreclosures. Court referees, who meet with the parties in an attempt to resolve these cases, encourage lending institutions to offer mortgage modifications. The first step in the process is that the borrower must provide complete financial information to the lender (or, in most cases, their attorneys). This information usually consists of a standard Request for Mortgage Modification Form (RMA), copies of state and federal tax returns for the last several years, a hardship letter from the borrower explaining why they fell behind on their mortgage, proof of income, bank statements, and other financial records as the lender may request.

Once this information is provided, the lending institution will consider whether a modification is possible. Based on the borrower’s income and assets, as well as the value of the property in question, as well as the mortgage amount, the lender may offer a trial modification. The trial modification may reduce the interest rate on the original mortgage, and may also shift the past due payments to the end of the loan term, allowing a delinquent borrower to resume payments and have the property removed from the foreclosure process. In certain instances, the lender may even reduce the actual amount of principal owed on the mortgage.

February 11, 2016

Getting Engaged this Valentine’s Day?

By Weiss & Weiss

Are you planning to get engaged this Valentine’s Day? While legal concerns may not be particularly romantic, our firm offers the following legal advice pertaining to issues that arise upon marriage in this post. Legal issues arise whether it is a first or second marriage and may become more complicated if there are children from a prior marriage.

Estate planning matters should be considered. If you do not have Wills, it is prudent to consult an estate attorney to develop the appropriate estate planning documents. Wills, trusts, and health care directive documents may be drafted on your behalf. Even if you already have estate documents in place, the beneficiaries and fiduciaries could be different now that you’re engaged. The persons that you select to make health care decisions for you are also likely to change.

If you have children from a prior marriage, provisions should be included in your Will to include a testamentary trust . Your new spouse would be afforded the opportunity to use some of the assets during her life, with the balance left to your children from your prior marriage. Without such a trust, your spouse could remarry and leave monies that you intended for your children to someone else. Also, consider how your estate plan should address personal property. If there are family heirlooms that you would want your children to inherit, rather than your spouse, you should have your attorney specify the particular items in your Will.