Landlord and Tenant

October 5, 2012

Examining Potential Personal Liability for Corporate Obligations in New York State

One of the main purposes behind the formation of a corporation in New York State is to insulate the principals of the corporation from personal liability for the corporation’s debts and obligations. The general law is that once a corporate is legally formed, and the business observes the specific requirements for corporate formation and structure, such as the filing with the New York Secretary of State of a certificate of incorporation, the officers and directors of the corporation are not personally liable for the obligations of the corporation.

Of course, as with any general principle of law, there are always exceptions. Some of these exceptions include a situation where it can be shown in Court that the corporation was formed fraudulently, and is serving as a mere “alter ego” of an individual. Proving this can be difficult, and would depend on the individual circumstances of the corporation’s day-to-day operations. This legal concept is known as “piercing the corporate veil,” and is applied very rarely to assign personal liability to a corporation’s officers and directors.

A more common situation, and one which will be examined in more detail in this blog post, is where a corporate officer or director personally guarantees the obligations of the corporation. One example is where the corporation seeks a commercial lease for office space or a retail store. A landlord may demand that a corporate officer personally guarantee the corporation’s obligations under the lease. If the corporation then defaults under the lease, the individual who guaranteed the lease may find himself personally liable for the corporate obligations under the lease.

September 27, 2012

Lawsuits Concerning Conditions in New York City Cooperative Buildings

By Weiss & Weiss

The Wall Street Journal recently reported the filing of a lawsuit by “Law & Order” actress S. Epatha Merkerson concerning conditions in her New York City cooperative apartment. While the lawsuit has gained the attention of the press because it involves a celebrity, the conditions described in the lawsuit are commonly experienced by numerous New Yorkers.

The lawsuit alleges that the condition of the building’s roof caused leaks and mold conditions to the cooperative apartment owned by the actress. After the purchase of the cooperative apartment, the cooperative made repairs to the roof over the plaintiff’s apartment. Said repairs are alleged to have been insufficient, causing continued water leaks and mold to develop. The actress claimed that she was unable to live in the cooperative apartment, as well as being unable to sell the apartment or sublet it at market value.

Most of the claims in the lawsuit involve the statute known as New York State’s Warranty of Habitability Law. This law requires that residential premises be fit for human habitation and that residents not be subjected to conditions that are dangerous, hazardous or detrimental to their life, health or safety. The Warranty of Habitability Law is most commonly applied to rental apartments in New York State. Nonetheless, it is longstanding caselaw in New York State that the Warranty of Habitability Law also applies to cooperative apartments. The application of the Warranty of Habitability differs depending on the type of housing to which it is applied. For instance, if a condition is solely within the walls of the apartment and was not caused by an external factor, it is the responsibility of a cooperative shareholder individually. In a rental unit, the same condition would be the responsibility of the landlord, but not the tenant.

September 7, 2012

Legal Debate Over Fair Housing Settlement in Westchester County Continues

By Weiss & Weiss

As a previous blog post has discussed, Westchester County settled a lawsuit brought in 2009 which alleged that the county falsely certified that it had complied with federal fair housing requirements when it accepted community development funds. This lawsuit was settled under a consent order under which Westchester County agreed to use $51.6 million to build 750 units of “affordable” housing over seven years in 31 communities throughout the county.

Any settlement of a complex litigation matter involves necessary compromises for all parties involved. Complicating the situation is the fact that the settlement was negotiated and executed by County Executive Andrew Spano, who is no longer in office. The current county executive is Rob Astorino, who had no role in the original settlement. A recent editorial by Mr. Astorino in the Journal News states his position on the matter. He believes that the county is complying with its obligations under the settlement agreement, but believes that the U.S. Department of Housing and Urban Development (HUD) is overreaching and has misinterpreted the intent of the agreement.

At the core of the dispute is the question of the required goals of the settlement. Mr. Astorino believes that the settlement is meant to promote affordable housing throughout the county, and is committed to building the 750 units as mandated by the agreement. HUD’s interpretation is that the overall goal is to integrate the county’s housing patterns, and that such integration should be the primary purpose of the settlement.

August 2, 2012

A New York Bidder’s Expectations Concerning the Property Auction Process

By Weiss & Weiss

Those who bid at property auctions in New York are confronted with many potential issues. Auction properties are often attactive to first-time homeowners and to investors because they are perceived as being less expensive than comparable properties. If the property is residential, the bidding process differs based upon whether the property is a single-family house, a condominium unit or a cooperative unit. The type of property, whether it is commercial or residential, may have implications for tenants already in occupancy and whether such tenants may have statutory occupancy rights.

The auction process for a single-family home is similar to the auction process for a condominium unit, because both types of property are real property. The major difference is that common charges are levied by the Board of Managers of a condominium, allowing for the filing and foreclosure of a lien for unpaid common charges by the condominium Board. However, once the matter is in foreclosure, it is supervised and directed by a Court, meaning that same is litigated and requires a judgment of foreclosure issued by a judge before proceeding to auction. In a condominium, mortgage balances take priority over unpaid common charges. As such, in many cases, an auction bidder in an auction for unpaid common charges will likely be taking the unit subject to the outstanding mortgage, requiring the successful bidder to pay mortgage arrears and keep the mortgage current to avoid foreclosure.

Cooperative bidders will experience an auction process that is non-judicial (not supervised or litigated in the Court) unless a party requests that a Court issue an injunction to prevent or delay the auction. Since cooperative maintenance charges take priority over a share loan, it is possible for an auction bidder to obtain the unit for only the amount of the maintenance arrears and sever the security interest of the lender, provided that the auction is properly noticed. Our readers should note that this is an unlikely scenario because most lenders will choose to cure a maintenance default by paying it themselves, because a cooperative unit is likely to be more valuable than the maintenance arrears due to the cooperative.

July 5, 2012

Legal Responses to Defaults by New York Cooperative and Condominium Unit Owners- Part II

By Weiss & Weiss

Our readers should be aware that if the default remains uncured and an auction is necessary, that the distinction between cooperatives and condominiums becomes pronounced. The auction procedure in a cooperative is non-judicial, meaning that it does not require the intervention of a Court, unless a party specifically requests judicial intervention. After a lien is filed against a defaulting condominium owner, all proceedings, including the foreclosure proceeding and the oversight of the auction process, require the intervention of a Judge and take place in a Court.

Cooperative clients should understand what is accomplished once the Proprietary Lease is terminated. In order for the cooperative or another party to obtain legal ownership of the cooperative, the legal auction procedure is then commenced. A Notice of Auction is placed in a newspaper of general circulation and delivered to the unit owner in a legally compliant manner. At the auction, the Terms of Sale and a Memorandum of Sale as prepared by our firm are presented and read aloud by the auctioneer. The successful bidder will obtain the transfer of the apartment in the time frame provided by the Terms of Sale.

While the auction process allows for the obtaining of legal ownership, a Landlord-Tenant procedure is then required to obtain physical ownership of the unit. This proceeding is even required if the unit owner does not leave the unit during the default response procedure. Once the auction notice is advertised in the newspaper, it is not uncommon for our attorneys to entertain telephone calls where a person states incredulously that they can get the apartment for “only $18,000.00” (the amount that may be owed for maintenance). We will remind the caller that there are no warranties as to the status of occupancy or unit condition. The “successful” auction bidder may merely be buying what may be a protracted landlord-tenant case.

April 17, 2012

Landlord-Tenant Actions in Westchester County, New York

By Weiss & Weiss

When a tenant fails to pay their rent, or remains in a property after the expiration of their lease, legal action is often required. Smaller landlords, such as individuals owning a few properties, or people renting out a house, will consult our firm in order to use the proper legal procedures for the removal of a tenant.

The first question to be resolved is whether the action against a tenant would be a “holdover” or a “non-payment.” A holdover proceeding is where a tenant has stayed at the premises beyond the expiration date of their lease. If the tenant continues to pay their rent after a lease term has expired, it creates a month-to-month tenancy with the landlord. This means that as long as the tenant continues to pay monthly rent (usually in the same amount as they were paying at the end of the actual lease term) and the landlord chooses to deposit same, the tenancy is extended, one month at a time. If the landlord wishes to end the tenancy, he must reject all additional rent payments, and give the tenant one month’s written notice to vacate the premises. After the month has expired, if the tenant has failed to vacate, then the landlord should commence a holdover proceeding in the appropriate court. This Court is usually the local court of the town where the property is located.

A non-payment proceeding is appropriate when the tenant fails to pay rent due under a lease. When this happens, the lease should be checked for notice provisions. Notice should be given to the tenant in the manner prescribed under the lease. After written notice has been given, if the tenant has still not paid the rent in question, a non-payment proceeding should be brought in the appropriate local Court.