Real Estate Transactions and Finance

May 6, 2016

House Rentals in New York- Legal Issues to Consider

Some of our clients have a reason why they will not live in their house in New York for a particular period of time. Perhaps an employment assignment in another location has caused the homeowner to leave the area for a set period of time and the homeowner intends to return to the house. Maybe the homeowner is downsizing, but the sale market is not strong enough to command the price sought by the homeowner. For those intending to rent their home, we wish to convey the following advice.

We suggest that you have professionals involved. Engage the service of a licensed real estate broker. The fee, usually one to two months’ rent, is a relatively modest amount to pay to insure that a professional locates a reliable tenant. If you decide to forego the services of a real estate agent , make sure that you carefully evaluate the proposed tenant by obtaining references from prior landlords and perform a credit check. Whether the tenant is located by a real estate broker or by your own efforts, trust your instinct if the tenant raises any concerns whatsoever and do not rent the house to such a person. Prior to the delivery of possession, walk through the house with the tenant, in order to show how appliances work and to document conditions together.

We also recommend that you engage the services of an attorney to have a lease drafted by a professional. A professionally drafted lease is important to have for several reasons. It will clearly identify the appropriate provisions, even if the relationship with the tenant ends up going smoothly. Your attorney will be prepared to cover changes in the law that the landlord may not be familiar with, such as the requirement to advise the tenant whether an automatic sprinkler system is present at the premises. In the event that a legal proceeding is required against the tenant for non-payment and other matters, having a professionally prepared lease will most likely cover items that protect the landlord in such a proceeding. If you intend to rent the house repeatedly, you may want to ask your attorney to also provide a form that can be used by you in the future as your needs warrant.

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.

April 6, 2016

Assignment of Commercial Leases in New York

By Weiss & Weiss

Our firm is often involved in landlord-tenant situations involving assignments of commercial leases. What this means is that one party to a commercial lease (usually the tenant) wishes to transfer their rights and responsibilities to a third party, either an individual or company who is not a party to the original lease. Most often this occurs when there is a potential sale of the business associated with the lease.

For example, a commercial tenant operates a car repair business and has a lease for the business for a period of five years. A third party approaches the business owner and offers to buy the business. As part of the purchase, the lease needs to be assigned from the current tenant to the purchaser of the business.

The main legal issue relates to the lease itself. Most, but not all, commercial leases contain a clause allowing assignment of the lease to a third party with the consent of the landlord. They may also state that such consent is not to be unreasonably withheld or delayed. Some leases will further delineate what “unreasonable” may entail. For example, it may state that it is not reasonable to refuse consent to a purchaser who intends to operate the same type of business as the current tenant, assuming they have the financial standing to assume the lease.

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 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.

December 11, 2015

Let’s Adjust: Calculating Amounts Due at New York Real Estate Closings

By Weiss & Weiss

Those people who are new to the real estate closing process in New York may not be aware that the amount delivered by the purchaser at closing is not as simple as the amount of the downpayment as subtracted from the purchase price. Adjustments are to be made for real estate taxes, vendors serving the property, and potentially remediating a seller-caused situation. Our real estate attorneys are experienced in making such calculations and in delivering the information to the parties in a timely fashion in order to prepare for closing.

The first adjustment to be made involves a credit to the purchaser for the amount of the downpayment. Another common adjustment is a $500.00 credit to the purchaser for the property disclosure statement. New York State law mandates that a seller complete a detailed questionnaire and deliver same to the purchaser. In the absence of the completion of such questionnaire, the purchaser is given a credit of $500.00 against the purchase price at closing. Certain sellers, such as estates, are exempt from the requirement to deliver a property disclosure statement and are not required to apply a credit at closing. Interestingly enough, it has become the custom for sellers to complete the disclosure questionnaire in upstate New York, while most sellers in the downstate area served by this firm typically do not produce such a statement. Our attorneys advise sellers concerning whether they should deliver such a disclosure in their specific situation.

Real estate taxes are another common source of adjustments between the parties to a transaction. In Westchester County, New York, the area in which our firm is located, there are two or three different types of real estate taxes, all of which cover different periods of time in the calendar year. For instance, County taxes cover the calendar year, January 1-December 31. School taxes cover the dates July 1-June 30. In those jurisdictions subject to Village taxes, the year is calculated from June 1-May 31. Even though the various real estate taxes cover particular periods of time, the taxes are not necessarily due on these specific dates. County taxes are due on April 1, with penalty for late payment being applied on April 30.

November 12, 2015

The Online Conduct of Cooperative and Condominium Disputes

By Weiss & Weiss

With the prevalent use of the internet, grievances against cooperative and condominium boards can spread like wildfire. The means used may be standard e-mail forwarded to all unit owners, a specifically developed Facebook or Google chat page, a publically accessible website, or another type of private intranet system. The New York Times recently published an article concerning the airing of disagreements online with an audience of all unit owners and the implications. In the past, if a neighbor had a complaint, she would approach one of the board members individually and directly, so that all unit owners would not be aware of the grievance. As an alternative, it is almost expected that a unit owner will raise concerns loudly and perhaps not so politely during the annual meeting. Such concerns will be addressed in front of all unit owners present.

Now it is not uncommon for unit owners to have a day-to-day online community, allowing for constant communication of all matters. Online discussions may concern such matters as whether a neighbor is willing to watch a pet while someone is away, whether someone wants to buy unneeded furniture or more serious matters concerning how the building is being run. The board may be publically attacked for building conditions or for the manner in which a financial transaction was handled. Modern online communities make it almost too easy for unhappy unit owners to gather strength. Some proponents argue that such an online community encourages transparency of the board. The board is continually required to state and justify their actions. Even though the board is legally required to be responsive to all unit owners and must follow the business judgment rule , the current expectation that every action of the board should be known and debated among all unit owners is likely to diminish the authority of a current board.

With the potential reduced authority of a board, the takeover of a board is a potential concern. Opponents of such online communities argue that such communities are developed merely for the purpose of such a takeover. Using the online method as an easily disseminated platform, it is easier than ever for dissident groups to develop allies and arrange for other unit owners to elect them to the board. Once opinions are readily shared, the slate of dissident candidates likewise develops more easily than in the past.

October 15, 2015

Insurance Disputes in New York Concerning Damages to Real Estate

By Weiss & Weiss

As many of us know, insurance carriers are most profitable when they collect premiums and resist paying claims. Some of our clients consult us when they have a legitimate insurance claim that is not being paid, so that we can interpret their insurance policy and pursue the insurance company to properly manage the claim. There may be a casualty event in a cooperative or condominium building where it is not clear whether the building’s or individual owner’s insurance carrier is responsible for the claim. This post will address the legal issues that arise with respect to insurance claims pertaining to real estate.

Our attorneys recommend to individuals purchasing apartment units that they procure their own insurance policies, whether or not the building requires same. Otherwise, damages within the walls of the apartment unit need to be paid out-of-pocket by the unit owner. When a unit owner has her own insurance, such policy will cover damage within the unit, such as water damage to interior finishes and painting and wallpaper that are not covered by the building’s insurance. Further, our firm recommends that contractors engaging in apartment renovations to common areas of the building or to individual units demonstrate adequate insurance coverage for damages that may occur during the renovation.

The following is a typical scenario involving the cooperative and condominium boards or individual unit owners that we represent. A casualty event such as a severe ice and snow storm causes ice dams to appear in the gutters of the building. Such ice dams eventually melt, causing mold within the walls between apartment units and water leaks within specific units. How do the applicable insurance policies manage the resulting insurance claims? The entire building will most likely have insurance coverage. However, most buildings in their proprietary leases or bylaws provide that building insurance only covers common areas and damages within the walls of the building between units. As a general guideline, if the repair necessitates the removal of the wall in order to make the repair, then it is the responsibility of the building, rather than the unit owner. Therefore, the building’s insurance should pay the claim.

October 2, 2015

The Changes Are Here- New Mortgage Disclosure Rules Effective Date Has Finally Arrived

By Weiss & Weiss

As stated in a prior post , we promised to keep you advised of the progress of intended updates to the mortgage disclosure regulations. Due to comments from the loan industry, the effective date of the regulations was pushed back from August 1 to October 3, 2015. The delay in the implementation allowed for certain revisions to the intended regulations and allowed for the loan industry to engage in the task of preparing to close loans consistently with the new regulations.

If you are applying for a residential mortgage after October 3, 2015, these revisions will apply to your loan. Within three business days after your loan application is submitted, a Loan Estimate is to be provided to the borrower. This document will provide the loan amount, interest rate, monthly payment, estimated taxes and insurance and anticipated cash required to close.

The major concept behind the new regulations is that additional charges to the borrower of any type are not to be disclosed for the first time at the closing. Collection and sharing of accurate data concerning charges among those professional partners involved in the closing is crucial. Also, attorneys in New York will need to get accustomed to preparing the final financial details of closings much more in advance than is currently typical. Those attorneys who do not conduct many real estate closings may not be abreast of these developments and may not be prepared to act.