Real Estate Transactions and Finance

September 24, 2024

Legal Issues Relating to the Sale of Inherited Property

Our firm has often been consulted by clients who inherited a house from their parents, and wish to sell the property, as they may have moved out-of-state, and the property became vacant after the passing of the last parent.

Usually, this is a straightforward transaction, which often requires legal assistance in acquiring legal authority to sell the property as part of an estate. This involves experienced counsel filing for letters testamentary (if there is a will) or letters of administration (if there is no will). Once the Surrogate’s Court issues the proper legal document, then the sale can proceed.

However, there is often another issue, which may become known to the surviving children only after their parents’ death. It is possible that the parents borrowed against the property, even after the original mortgage that they took out to purchase the premises was paid off. Often a reverse mortgage is taken out by the elderly parents, in order to raise funds to continue to live in the house. Generally, such mortgages are only available to homeowners over the age of 62. Once the loan funds are disbursed, there are no monthly payments. The full amount of the loan would then be due after the death of the last borrower.

September 18, 2024

Considerations When Making a Will as to Potential Property Sharing by Heirs

By Weiss & Weiss

Clients consulting our firm with respect to will drafting often ask how to leave a house or cooperative apartment to potential heirs when there may be more than one surviving child. Perhaps a person owns a house and wants to leave it to all three of her children in her Will. Concerns arise when one of the children has been living in the house all of his life or only one of the children frequently enjoys the use of the house as a vacation home. In either case, the remaining children have no use for the property. The well-intentioned parent may be inadvertently causing a family dispute after her death. If the child who wants the property does not have the financial ability to buy out his siblings, by mortgage financing or otherwise, the remaining siblings may have no choice except for engaging an experienced attorney to commence a partition action.

The person making the Will also needs to determine whether she wishes for her children to inherit in equal portions. For example, if the house is of particular interest to one child and there are other assets available to be distributed to the other children, the parent may decide to leave the other assets to the other children, so that each child receives substantially similar disbursements.

We have reviewed documents prepared by others providing that a person can continue to reside in the house until a particular triggering event such as vacating the house or death, after such event those who will inherit the property can have full access and sell it if they wish. Such a document may provide that the occupant pay the property expenses while occupying. This arrangement is not one that we recommend because it delays the delivery of the asset to the intended owner(s) and the occupant may not meet property upkeep demands, which provisions are difficult to enforce.

August 19, 2024

Sweeping Changes to Real Estate Agent Commission Rules are Now in Effect

By Weiss & Weiss

We previously posted about significant changes to the rules concerning real estate agents’ commissions. These changes became effective in recent days. Previously, sellers paid a commission to the buyer’s agent in the amount indicated in the listing in the multiple listing service (“MLS”), the primary source of real estate listings. The recent changes state that the seller is no longer permitted to offer a commission on MLS and is not required to pay the buyer’s agent at the sale. This post will examine the effect that this drastic change will have upon buyers.

With the exception of “open houses,” where any buyer can arrive and tour the property, buyers who make appointments to view properties are required to sign a compensation agreement with the buyer’s agent who shows the property to them. In particular, inexperienced first time homebuyers are at a disadvantage. The agreement may contain terms that may be unacceptable to a buyer, such as exclusivity (agent is paid even if she did not show the property eventually being purchased to a buyer), length of time (buyers should not be tied to an agent for long time periods), conditions to be met before the commission is to be paid and price (lower percentage, flat fee or hourly fee). In a tough real estate market with elevated interest rates, it may be counterproductive for a buyer to be responsible for the additional costs of his real estate agent as well.

It should be noted that sellers still have the option to pay the buyer’s agent’s commission, which counteracts a buyer’s agent’s inclination to steer a buyer away from a property for which she will not be compensated. This increases the visibility of a property to buyers.

May 17, 2024

Breaking News: “Transfer on Death” Deeds Become Option in New York

By Weiss & Weiss

We would like to inform our readers that Transfer on Death Deeds (“TOD”) will become an option for property transfers in New York as of July 19, 2024. Real property such as a house, condominium unit or vacant land is currently transferred by deed. There are currently various types of deeds available for property transfers in New York State. A Referee’s Deed applies to the transfer of property by the Court appointed Referee after a foreclosure sale. An Administrator’s or Executor’s Deed is used by the fiduciary appointed by the Surrogate’s Court in an estate matter to transfer property to the proper person designated by the Will or who is entitled to the property according to intestacy. A seller in a standard real estate transaction will deliver a deed based on the level of quality of title promised to the buyer. Such deeds may be either a quitclaim or warranty deed, or a bargain and sale deed with or without covenants.

Our readers may be familiar with transfer on death designations on bank accounts whereby the account will automatically go to the designee upon the account owner’s death. Changes to the beneficiary can also be made during the account owner’s lifetime. TOD deeds will operate in much the same fashion. Such deeds will need to be signed before two witnesses and notarized before they are recorded before the owner’s death in the clerk’s office in the county in which the property is located. Similar to the standards in making a Will, the property owner needs to have capacity, not be under fraud or duress, or unduly influenced. The property owner retains control over the property and can sell or encumber the property with a mortgage. The designee of the property takes it subject to any liens or mortgages to which the property is subject at the property owner’s death. The transfer lapses if the beneficiary does not survive the owner, so it is necessary to provide for such a potential event by designating an alternate beneficiary in the TOD deed or by having a qualified attorney provide for such an occurrence in other estate planning documents. Further, if two joint owners transfer property by TOD deed, the transfer to the beneficiary is not effective until both joint owners pass away.

The property owner can revoke a TOD deed by a properly notarized and recorded document and make a new beneficiary designation on another TOD deed, providing more control than a deed reserving a life estate. It is important to note that a TOD deed cannot be revoked by a provision in a Will. Transfer on death allows for the avoidance of a probate or administration proceeding as to that asset, which could prevent the delay and expense of an estate proceeding and avoid a contested estate to the extent that particular assets already have ironclad beneficiaries. With all transfer on death designations, the property needs to be owned at death for the transfer to the beneficiary to be effective.

March 15, 2024

The Day Has Come: Amended Property Condition Disclosure Law Becomes Effective

By Weiss & Weiss

We have previously posted concerning a significant amendment to the property condition disclosure law in New York. Previously, sellers of residential real estate were required to complete a detailed questionnaire concerning property conditions or issue a $500 credit at the closing for failure to deliver the document. Many sellers, especially those in downstate NY, as serviced by our firm, preferred to issue the $500 credit instead of completing the form.

The new law, which becomes effective on March 20, eliminates the seller’s option to issue the $500 credit. Instead, it requires the completion and delivery of the form to the buyer before the contract is signed. Further, it contains more extensive information concerning flood risks and history and whether the property has been insured against flood risk. This author suggests that the amendment was motivated by devastating floods and water damage that have affected some home buyers in recent years, with the main goal being disclosure of flooding. The legislature went further than adding flooding disclosures and moved towards requiring full disclosure by the seller.

It remains to be seen how real estate professionals will handle the amended law. Although sellers are expected to complete the form, real estate agents may end up providing assistance. It may be preferable that sellers have the completed form ready at the same time that the accepted offer is provided to the seller’s attorney, who will prepare and deliver the proposed contract to the buyer’s attorney, so as not to delay the process of obtaining signed contracts as soon as possible. Otherwise, sellers may lean on their attorneys for advice in completing the form.

January 30, 2024

Buyer’s Real Estate Agents: Are Their Days Numbered?

By Weiss & Weiss

We have been following several national Court rulings concerning compensation paid to buyer’s real estate agents. A significant Federal Court ruling involved the National Association of Realtors, owner of the powerful “Realtor” trademark. The case found that a seller should not be required to pay the buyer’s agent’s commission as a condition to having the property listed on Multiple Listing Service (“MLS”). Similar cases in other jurisdictions have followed. Of course, a seller could avoid this situation altogether by not even having a seller’s agent.

It had been customary practice for the seller to list her property with a real estate agent affiliated with a real estate brokerage, the “seller’s agent.” The seller’s agent would enter the listing on MLS, making the property more readily known to buyers and their agents, the “buyer’s agent.” Without MLS, many properties may not have been located by potential buyers. The seller would pay a commission in the range of 5%-6% of the sales price at the closing. When a buyer’s agent was also part of the transaction, the commission would be divided between the seller’s and buyer’s agents.

Sellers in the lawsuits challenged the requirement to also compensate the buyer’s agent, when the seller engaged its own agent, and resented the requirement to pay the buyer’s agent as a condition to having their property listed on MLS. They suggested that commissions were inflated to allow for the buyer’s agent to also be compensated.

September 28, 2023

Let the Buyer Beware?

By Weiss & Weiss

Caveat emptor is a Latin phrase loosely translated to mean “let the buyer beware.” Real estate in New York State has customarily been transferred under this concept, meaning that the seller is not obligated to disclose property conditions and the onus is on the buyer to discover conditions that may be objectionable. In 2001, this concept eroded somewhat with the enactment of Article 14 of the Real Property Law, known as the property condition disclosure statement law (“PCDSL”). Sellers of residential property were required to complete a lengthy questionnaire concerning property conditions. If the seller preferred not to complete the form, the seller was required to issue a $500 credit to the buyer at the closing, as was customary in downstate counties serviced by our firm.

Recently, Governor Kathy Hochul signed an amendment to the PCDSL that added disclosures concerning flood risks and history. Most significantly, the amendment, which becomes effective on March 20, 2024, removes the seller’s option to issue a $500 credit to the buyer and requires the completion of the questionnaire before the contract is signed. The law explicitly states that it is not a warranty by the seller and does not substitute for inspections that the buyer may conduct. Typically, a real estate agent or experienced real estate attorney will recommend that the buyer hire a professional inspector to evaluate property conditions. Inspectors will often discover concerns such as asbestos in the furnace room. A qualified attorney may integrate repair issues in contract negotiations. Armed with additional information from the completed disclosure form, a buyer may threaten to walk away from a transaction without additional contractual concessions.

The new law provides that knowingly false or incomplete statements made by the seller can subject the seller to claims after the closing. This is a departure from standard New York law whereby the buyer’s acceptance of the deed at the closing is deemed to be full acceptance of any property conditions, whether known or unknown to the buyer.

August 7, 2023

Who has the Power?

By Weiss & Weiss

News outlets have recently reported that Senator Dianne Feinstein has given a power of attorney to her daughter. Concerns over the Senator’s mental competency have arisen as a result. For the reasons discussed in this post, appointing an agent by power of attorney does not necessarily mean that one is incompetent to handle one’s legal and financial affairs.

In New York State, there are various types of powers of attorney, governed by a provision of the General Obligations Law. In all cases, the person making the power of attorney is the principal who appoints a person or persons to act on one’s behalf, an agent. The standard form of power of attorney appoints one or two agents, who may or may not be required to act together. Up to any of fifteen legal actions can be authorized or all fifteen actions can be authorized. Some examples of the actions that could be authorized include real estate transactions, banking, insurance and tax matters. The document needs to be initialed and signed by the principal, as well as notarized and witnessed by two persons. The agent cannot be a notary or witness to the document, but the agent needs to sign a portion of the document before a notary accepting the role as agent. This type of power of attorney is effective immediately and is not dependent upon whether a person is competent.

The standard power of attorney can also limit the agent to acting with respect to a specific matter. For instance, if the principal will not be attending her house closing, she can appoint her attorney for the limited purpose of all matters required to complete a specific transaction. In this case, only some of the fifteen potential actions will be authorized. This limitation protects both the principal and the agent, since the agent cannot conduct actions beyond those required for the closing. The agent appointed could be a spouse or other relative, a friend or one’s attorney. Depending upon the closeness of the relationship and the degree of trust, the principal will decide whether the authority should be immediate or limited in any way.

July 28, 2023

From Rags to Riches: Legal Issues Raised by the Death of Tony Bennett

By Weiss & Weiss

Tony Bennett was beloved by those young and old not only as a talented singer, but as a World War II veteran and civil rights icon. His recent death at the age of 96 was not unexpected. This post will identify the legal issues that may be raised when a person such as Tony Bennett passes.

Mr. Bennett could be considered to have been in a New York State of Mind, having been born and dying in New York State. He was considered to be well-liked by all, except for potentially his two ex-wives who may have said “I’ve Got You Under My Skin” as they completed their divorce proceedings. We have posted previously as to whether an estranged or divorced spouse has the legal right to inherit. Even a promise to include an ex-spouse in one’s Will, as may be desirable in resolving a divorce proceeding, is not enforceable in New York. Unless Mr. Bennett had explicitly left assets to his ex-wives in a Will or Trust, these ex-spouses would not have a valid claim to his estate.

The admired crooner was married to his third wife at the time of his death. Potentially his most recent wife had a conflict with his four children, whose mothers were either his first or second wives. In addition, two of his four children assisted Mr. Bennett in his career, so he may have wanted to leave them more assets or they stand to gain other financial benefits from having worked alongside their father. It should be noted that Mr. Bennett’s two daughters were also the children of his second wife and but were born before their marriage. If Tony had no Will, an estate administration would need to be conducted and proof of paternity would need to be established so that his daughters could legally inherit from his estate.

June 1, 2023

Our Obsession with Succession

By Weiss & Weiss

This post comes with a “spoiler alert” warning. Like many, this author has become obsessed with the Max show Succession, not merely as a television viewer, but for the legal issues raised by the storylines. We will discuss the multiple legal issues covered in the Emmy award-winning series.

The jaw dropping images of real estate are practically a character on the show. The townhouse on Fifth Avenue across from the Metropolitan Museum of Art was the primary residence of Waystar/Royco’s founder and patriarch Logan Roy. The home was shared with his third wife, who obtained the property in their divorce. After Logan’s death, Marcia and Logan’s oldest child Connor were visiting the home. Marcia and Connor started a discussion whereby Connor expressed interest in buying the home from Marcia, who said that she was looking for sixty to seventy million dollars. Connor said he would pay sixty-three million dollars, and they verbally agreed to the deal. A verbal agreement to sell real estate is not binding in New York State. The statute of frauds requires that contracts pertaining to real estate be in writing. Marcia could have backed out of her agreement to sell the property to Connor. However, Connor and his wife were in control of the townhouse in a later episode, so Marcia must have followed through with her oral agreement to sell the property to Connor.

Estate matters also figure prominently in the series. Connor introduces a “sticker system” to distribute personal property in the townhouse that he purchased. Logan’s children were to affix stickers to personal property in Logan’s townhouse to indicate which items they wanted. Then, the “second tier bereaved,” such as Logan’s last mistress, would have an opportunity to select items. While this may be a relatively good method with which to distribute personal property, the question arises as to why Connor was in charge of this process. Was he nominated as Executor of Logan’s estate? It would not be realistic for Connor to have been officially appointed as Executor within days of Logan’s death. Another possibility is that Marcia owned these items as part of the acquisition of the townhouse in her divorce and that she decided to sell the items to Connor along with the townhouse.