Real Estate Litigation

December 13, 2013

Actions for Damages After a Closing for Property Conditions

Our firm recently defended the sellers of a house located in Westchester County. When the property was originally inspected by the buyers, prior to a contact being entered into, a rodent infestation was discovered in the attic of the house. The buyers and sellers agreed that the infestation would be remedied prior to the closing. Our client hired an exterminator, who removed the offending creatures, and sealed off the access point through which they had entered the attic of the house.

Several days prior to closing, a “walk-through” was conducted. For inexperienced buyers, a walk-through usually is scheduled immediately before the closing. The purpose of a walk through is for the buyers to check the condition of the house and appliances, and make sure that the sellers have performed any and all repairs, such as re-painting, replacement of broken appliances, or, in the case we discussed, removal of any unauthorized animals residing at the premises. At the time of the walk-through in question, no rodents were seen by the buyers, and the closing occurred as scheduled.

A few months after the closing, the buyers alleged that they discovered a “new” rodent infestation in another part of the attic. Of course, it is beyond anyone’s knowledge as to whether these creatures were part of the group discovered at the original inspection, or a new group of animals who took up residence after the closing. The buyers made a demand on the sellers for compensation for damages caused by the creatures (they had chewed through some electrical wires and insulation in the attic), as well the cost of removing them from the attic. Our clients refused, stating that they had complied with the terms of the original Contract of Sale, requiring extermination pre-closing. The buyers then filed a lawsuit in Westchester County Supreme Court for damages.

November 14, 2013

Eviction Actions After Foreclosure in New York State

By Weiss & Weiss

Some of our prior blog posts have dealt with the legal issues relating to foreclosure prosecutions and defenses in New York State. As discussed in these posts, foreclosures are legal actions in which a mortgage holder will legally obtain title to real property from a defaulting borrower. After obtaining a foreclosure judgment, the property is auctioned to the highest bidder, which is usually the lender bringing the action. The Referee will then prepare a Referee’s Deed transferring title to the successful bidder.

One question that often arises is when the owner continues to occupy the foreclosed property, or when there are tenants in the foreclosed property. What happens to these occupants when the foreclosure procedure is complete and title is transferred? There are several answers to this question.

When the original owner continues to live in the property after a lender has obtained title by a Referee’s Deed in foreclosure, the new owner must take legal action to evict the occupant. In New York State, such evictions can be accomplished under New York Real Property Actions and Procedures Law § 713. This section provides grounds for eviction “where no landlord-tenant relationship exists.” Subsection 5 provides that if the property has been sold in foreclosure, then a certified copy of the deed in foreclosure must be exhibited to the persons to be evicted from the premises.

October 31, 2013

Purchases of Distressed Mortgages on Foreclosed Properties in New York

By Weiss & Weiss

Some of our firm’s clients are in the business of purchasing notes and mortgages encumbering properties which are being foreclosed. This blog post will discuss the legal necessities behind such transactions. Careful planning, as well as consultation with legal counsel, can ensure that such acquisitions comply with all legal requirements and ensure that the purchaser obtains marketable title so that properties so acquired can be resold expeditiously if desired.

Most purchases involve notes and mortgages obtained from banks or other major institutional lenders. Although private mortgages can be purchased, a potential buyer may encounter more issues when buying a mortgage from a private lender, as opposed to a large financial institution. The first step in such a transaction is agreeing on the purchase price. The purchaser must determine the overall value of the property, usually through an appraisal as well as an inspection of the premises. Other financial information can also be obtained, such as rent rolls, which show rental income for commercial or other rental properties, such as apartment buildings. The purchaser then offers to buy the outstanding mortgage from the lender for a price lower than the amount owed by the defaulting current owner.

Major financial institutions will generally have a form contract that the purchaser of the mortgage in question must execute. Such agreements are usually not subject to substantial negotiation. The seller of the mortgage needs to agree to provide an assignment of the mortgage to the purchaser of the mortgage. The seller should also be obligated to provide the original note and mortgage documents as signed by the mortgagor. It is essential that the original loan documents be obtained in such a transaction. Without them, the right to collect on the mortgage by the purchaser may be challenged in Court, creating a major issue for a purchaser.

October 21, 2013

Rent Stablization and Bankruptcy in New York State

By Weiss & Weiss

An article in today’s New York Times discussed a case currently pending before the United States Court of Appeals for the Second Circuit. The litigation discussed involves a rent stabilized tenant who filed for Chapter 7 personal bankruptcy. Although the details of bankruptcy law are beyond the scope of this post, Chapter 7 bankruptcy involves a liquidation of the debtor’s assets, and will extinguish most debts of the debtor, making them uncollectible by the creditors.

In this case, the debtor filing bankruptcy was a tenant in a rent stabilized apartment. Rent stabilization is a type of rent regulation in larger cities in New York State that fixes the rent which a landlord may charge to tenants. It is most prevalent in New York City, but not every apartment will qualify for rent stabilization protection. For example, when one rents a cooperative apartment from the owner, rent stabilization will not apply. In addition, tenants whose income level exceeds a certain threshold may be disqualified from rent stabilization protection.

Rent stabilization protects the tenant in several ways. First, it limits the annual amount by which a landlord may increase the rent for the apartment. This amount is set each year by the Rent Guidelines Board, and their decisions are subject to annual predictable controversy as tenant groups lobby for smaller or no increases, and landlord groups request larger increases. Secondly, a tenant in a rent stabilized apartment is legally entitled to a lease renewal when their current lease expires.

October 9, 2013

Where’s the Bellhop?

By Weiss & Weiss

Regional news outlets in the New York metropolitan area recently reported on Airbnb, an online search engine used to locate short term rentals for those wishing to occupy an apartment in New York City. The Environmental Control Board of the City of New York evaluated whether an Airbnb rental of a room in an apartment, while one of the permanent residents remained in the apartment, constituted illegal use of a residential apartment. The Administrative Law Judge who heard the matter found that “temporary occupancy of the apartment by a paying boarder with a permanent occupant present was consistent with the occupancy of the apartment for permanent residence purposes.” New York State’s Multiple Dwelling Law permits occupancy for fewer than thirty days if the permanent occupant is also present OR incidental occupancy for fewer than thirty days without the presence of the permanent occupant so long as no monetary compensation is paid. Notwithstanding the case at issue, State Senator Krueger maintained that “short-term rentals of apartments in residential buildings without any permanent residents present remains unambiguously illegal.”

The Airbnb case reminds this author of a case that she litigated several years ago entitled Hoffman v. 345 East 73rd Street Owners Corp. (New York Law Journal 10/2/1992 p. 26 col. 4). The Hoffman case involved a shareholder in a cooperative building who was renting out his apartment as a “bed and breakfast” accommodation, without his presence, in order to cover his expenses in maintaining the apartment. The cooperative board discovered his illegal arrangement when one of his guests, with suitcase in hand, asked the doorman “where’s the bellhop?” Mr. Hoffman sued the cooperative for interfering with his right to use his apartment as he wished, but did not prevail in the lawsuit.

The focus of the recent press concerning this issue is whether apartment owners or renters are illegally maintaining a hotel business and, in doing so, failing to pay the hotel occupancy tax to the authorities that collect same. While these are important topics, they are outside of the scope of this blog post. We wish to discuss occupancy rules and restrictions contained in documents to which apartment owners and renters are subject. The proprietary lease at issue in the Hoffman case is very similar to most proprietary leases in New York City. It allows occupancy as a personal residence by the shareholder and (emphasis added) persons of particular relationship to the shareholder, as well as guests for no more than one month if (emphasis added) the shareholder is in residence at the same time. Standard proprietary lease language does not contemplate commercial use in this manner, being paid by someone to use the apartment while the owner is not also present.

September 27, 2013

Weiss & Weiss Blog- Case Updates

By Weiss & Weiss

From time to time, our attorneys become aware of updates relating to matters that we have discussed in our blog posts. This week, we have three such cases in which there have been new developments.

The Huguette Clark estate litigation has been the subject of a previous blog post . Our readers may be aware that the case was in the process of jury selection for a trial to be held. As is common, pre-trial procedures (and perhaps the Judge’s attitude that was displayed throughout the process) led the parties to believe that it may be more fruitful to settle the matter. Some of the details of the settlement were reported this week in the New York Times . The settlement distributed the estate as a “hybrid” of the two disputed wills. According to the settlement, distant relatives will receive a large portion of the estate (consistent with the first will) while various arts charities and a foundation will receive another large portion (consistent with the second will). The bequest to the caretaking nurse was nullified and she was ordered to return gifts received during Ms. Clark’s lifetime to the Estate. The attorney and accountant who were to benefit from the second will also had their bequests nullified. The arts charities will undoubtedly share the artwork with the general public, so that the settlement benefits the public interest. The lesson to be learned from the Clark Estate case is that those who inappropriately influence the elderly will not ultimately benefit from their acts.

Prior blog posts have discussed a federal lawsuit against Westchester County regarding grants from the U.S. Department of Housing and Urban Development (HUD). The lawsuit claimed that Westchester’s local zoning laws acted in a discriminatory manner towards those seeking to provide low-income housing.

July 19, 2013

Reverse Mortgages: A Risky Opportunity for Seniors

By Weiss & Weiss

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.

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.