New York Real Estate Lawyers Blog

January 25, 2018

You Belong With Me: Disclosing Reasons Behind Coop Rejections

Consider the following scenario. A shareholder in a cooperative has been trying to sell her apartment because circumstances have resulted in her opportunity to buy a house in a sunny location out of town. Her buyer is a young professional gentleman who wants to own, rather than rent, and build equity to trade up to another home in the future. Their real estate agents make the deal. All parties look forward to closing. Of course, such a transaction requires approval not only of the lender making the purchase loan but of the cooperative board. Once the buyer obtained his loan commitment, after having submitted numerous financial documents and information, he finds out that either the board will not even interview him or has declined to approve the purchase after the interview was held.

It has been longstanding practice in New York that a board does not have to disclose the reasons why it is declining an applicant. The board is governed by the “business judgment rule” , allowing it broad latitude for its decisions, assuming that most decisions are made for the benefit of the cooperative as a whole. The board’s decision is only subject to being overturned if the parties can prove that the decision was made for an illegal reason, such as discrimination. Let’s say that the proposed buyer is a homosexual, which became obvious by information contained on the board application as to affiliations or as discussed in the interview. Should that have been the reason why the declination was issued and the applicant was able to prove same, the decision could be overturned and subject the board to potential damages because homosexuals are a legally protected group.

It has recently been proposed in the Westchester County Legislature that cooperative boards should be legally required to disclose their reasons for rejection. Those advocating for the rule suggest that it will prevent discrimination and is helpful to “protected classes”. This author feels that the law already protects applicants against boards that discriminate. However, the proposed law would be helpful for other reasons. It contains specific timeframes for the review of applications. Should a board decide not to interview during the summer so that its members can travel, the law would prevent a three month delay in the review of an application. Our readers should be aware that if a person’s loan is declined, reasons will be stated in a letter, allowing the applicant to improve his submission in the future. However, without any stated reason for a board declination, the seller and the real estate listing broker will have no information as to the type of buyer sought by the board. What if the board now prefers that applicants earn more than $100,000 annually, but it has not communicated this information to shareholders? With free disclosure of information, the broker will know how important it is to verify income and will not suggest a buyer who cannot meet the criteria.

January 18, 2018

Is it Time for a Redo?

By Weiss & Weiss

We have written extensively about the pitfalls in not having a will. As such, many clients heed that warning and request that their attorney draft a will and other associated estate documents on their behalf. While these clients have taken responsible action and had their estate documents drafted, additional tasks are required. We suggest that estate documents be reviewed and potentially redrafted on a periodic basis for the reasons highlighted in this post.

Most people experience changes in their life and in the lives of those around them that require revision of estate documents. Such internal changes are as follows. Perhaps the executor appointed in the will does not currently get along with the testator (person making the will) or is unable to perform his duties due to illness or death. Maybe the formerly adorable child is now an irresponsible young adult, whose inheritance should be left in a trust. Perhaps an estrangement of relationship has occurred, so that the testator wishes to disinherit a relative. These events are under the knowledge and control of the testator.

Relationships and events may result in the need to revise estate documents. Some of these events are divorce of the testator or adult child, a grandchild’s birth, receipt of inheritance, retirement, and chronic disability. Your attorney will assist you in adjusting your estate documents whether or not such events are joyous.

January 9, 2018

Sales of Property and Status of Tenants in New York State

By Weiss & Weiss

Our firm handles real estate transactions as well as landlord-tenant matters. At certain times, these two areas of the law may intersect. One situation which occurs frequently is when a multi-family house is sold by its owner, who may have one or more tenants living at the property.

In such a situation, what are the legal responsibilities regarding the tenants? Most standard real estate sale contracts contain a clause requiring that the property be conveyed vacant and free of tenants. Unless there is a rider to the contract modifying this clause, this means that it is the seller’s responsibility to remove all tenants prior to closing. When our attorneys are confronted with such a situation, the first thing to do is to ask the proposed new owner’s attorney whether they wish to retain the tenants living at the premises. It is possible that the new owner would also like to rent the property, or a portion of same, and does not want to go through the time and expense of locating new tenants after the purchase is complete.

If the new owner wishes to retain the tenants after she purchases the property, the next step is to determine whether the current tenants have a written lease for the premises. If they do, the lease should be reviewed by the buyer’s attorney, and, at closing the lease should be legally assigned to the new owner. What this means is that the new owner “steps into the shoes” of the former owner regarding the obligations under the lease. Any security deposit being held by the seller of the property should be transferred to the buyer at the closing. In addition, any rent already paid by the tenant prior to the closing should be pro-rated at the closing. For example, a closing is scheduled for April 15. The tenant pays his monthly rent of $1,000.00 on April 1 as per his lease. At the closing, the buyer should receive a $500.00 credit as his share of the rent for the one-half month that he owns the property. He will collect rent directly from the tenant starting in the first month after the closing.

December 18, 2017

Happy Holidays from Weiss & Weiss

By Weiss & Weiss

December 14, 2017

Components of a Partition Action for Couples

By Weiss & Weiss

Our firm is frequently engaged to handle disputes over property ownership. In many cases, a partition action is necessary. This post will explain the essential components of such an action. The first and most important element is that the dispute be over real property. Although there can be disputes over personal property, such as possessions and vehicles, a partition action can only concern real property. Including other types of property in a partition action should be avoided, as it is not covered by the statute in question, and leads to issues not readily resolvable in such an action.

The real property in question must be located in New York State, and also should be owned jointly by the parties. There are several types of joint ownership in New York. Married couples often own property as joint tenants with right of survivorship. This means that if one of the joint owners passes away, their ownership interest immediately passes to the surviving spouse. However, it is fairly uncommon for a spouse to bring a partition action against the other spouse. The reason for this is that such disputes between spouses are almost always part of a divorce action, where other assets and liabilities are at issue. Therefore, the resolution of the dispute is heard in the Matrimonial Part of the Supreme Court, rather than in a partition action. The Matrimonial Part will usually resolve the dispute over the real property (as well as any other jointly owned property) as part of the divorce case. In certain rare cases, the real property in dispute is not resolved in the divorce action, and then, a separate partition action may be necessary.

In these times, it is becoming more common for couples (whether single sex or heterosexual) to remain unmarried, but still purchase real property together. As married couples may split, so may unmarried couples. However, the legal ramifications of such a split may differ for unmarried couples. Because they are not married, no divorce action can be brought in the Supreme Court Matrimonial Part to resolve all property issues. Therefore, a partition action would be necessary to resolve the issues regarding real property jointly owned by the couple. Such an action would be brought by one of the owners, in order to have the property sold by the Court, if the parties cannot agree between themselves how to dispose of the real estate.

December 8, 2017

Buying a House May Still Be the Right Move

By Weiss & Weiss

Our readers may be aware that there is a movement to pass sweeping Federal tax reforms. Some analysts have suggested that such proposed legislation may not be favorable to highly taxed areas such as New York and that home ownership may be discouraged as a result. The proposed legislation in its current form may limit Federal deductions for real estate taxes to $10,000 per year. Many properties in the areas served by our practice have yearly real estate tax obligations in excess of this amount.

There is a possibility that the legislation will not pass in its current form. Also, homeowners always have the ability to contest their real estate taxes and potentially obtain a reduction. The proposed purchaser may consider a house with taxes lower than or closer to $10,000 per year. Over the course of decades of homeownership, laws affecting deductions of real estate taxes may change. As a result, the decision to own a home should not be dictated merely by whether real estate taxes above $10,000 may be deducted.

Owning a single family home has the following additional benefits. A sense of permanence from creating family memories over many years can only really take place in a house. Building personal equity can only occur when real estate is owned. If a person rents an apartment, he will merely pay rent every month and not have any resulting value to trade in. However, if a house is purchased, the value is likely to increase, leading to a profit when the property is eventually sold. Such profit can be converted to another property or investment in the future.

November 21, 2017

Happy Thanksgiving from Weiss & Weiss

By Weiss & Weiss

November 9, 2017

When There’s a Will There’s a Way

By Weiss & Weiss

As our political landscape is more uncertain than ever after this week’s election results, our readers cannot be certain that estate tax repeal is on the horizon. Also, most people do not own substantial assets so that estate taxes may apply to their estates. However, most of our clients could benefit from the drafting of a Will and other estate documents by a skilled attorney. This post will address the benefits of engaging a qualified attorney to draft your estate documents.

Without a Will, one’s property will be left according to the laws of intestacy. Intestacy distribution through an administration proceeding may serve most people well enough. For instance, if one’s closest surviving relative is a daughter with whom there is a good relationship, the parent would have no problem with the daughter inheriting her entire estate. However, if there is also a son with whom the parent has an estranged relationship, intestacy would result in both children sharing in the estate equally. Since this is not a result favored by the parent, the drafting of a Will is essential so that the parent’s wishes that only the daughter inherit will be honored. Also, should the parent wish for both children to inherit, but in unequal portions, a Will would be needed to address this desire. Likewise, a Will can allocate responsibility for the payment of estate taxes between beneficiaries and may direct that only certain assets be liquidated in order to pay estate taxes.

When working with an attorney to draft estate documents, the opportunity to select an executor to manage the estate is also available. Otherwise, with intestacy, the person who inherits the estate also is appointed to serve as administrator to manage the estate. This may not be a favorable result if this person is not as prudent in managing money as another person that may be selected by the decedent.

November 2, 2017

Outstanding Judgments – Their Effect on Real Estate Transactions

By Weiss & Weiss

In the course of an ordinary real estate transaction, our firm orders a title report on the property being sold. Contained in the title report is a judgment and lien search, which shows any outstanding judgments against the seller and liens against the property. Why is this important? In New York State, a money judgment, when filed in the Supreme Court of a county in which a debtor owns real property, become a lien on property for a period of ten (10) years. Furthermore, a judgment creditor may file a motion at the end of the ten year period to extend the lien for an additional ten years. After twenty years, the judgment is no longer a lien on the property.

Therefore, when a seller of real property has a recorded judgment less than ten years old, it becomes an issue which must be cleared prior to closing. The reason for this is that the contract most likely provides that the property will be conveyed free of judgments and liens, and, in addition, a mortgage lender will not approve a loan to close without resolution of an outstanding judgment or lien. If the judgment remains as a lien on the property, the new owner may find himself subject to a foreclosure proceeding against his newly-purchased property, even though the judgment was not incurred by him.

Since most standard Contracts of Sale in New York contain a clause that the property must be conveyed free of all outstanding liens and judgments, it is the seller’s responsibility to ensure that there are no judgments against the property. Failure to do so would give the potential buyer grounds to have the contract cancelled and receive a refund of their downpayment. Obviously a seller does not want that to happen. What does a seller do when there are outstanding judgments of record?

October 26, 2017

Changing Fashion in New York Commercial Real Estate

By Weiss & Weiss

Our readers may have seen the recent report in The New York Times pertaining to the sale of Lord & Taylor’s flagship location in Manhattan to a co-working space company called WeWork. This seismic change in the use of “America’s Dress Address” is quite significant. Lord & Taylor realized that its huge location in Manhattan was out of fashion and much more valuable when considered as a real estate asset only, rather than the proceeds generated by mostly clothing sales. WeWork is a company most identifiable with the revolutionary means in which millennials are choosing to work. Many millennials tend to be self-employed, but may prefer to work away from home. They demand temporary and flexible work quarters. WeWork allows such people to select a location for the short or long term at a price to be determined, without a long term commitment. The worker or user has a professional location in which to engage in his occupation.

This post will address this transaction from a commercial leasing perspective. The purchaser will use the Lord & Taylor property as its headquarters, through which it will presumably enter other commercial leasing transactions for other properties, and for shared work quarters in this property. When entering commercial lease transactions for other properties, this author would suggest attempting to obtain the following provisions in such commercial leases.

Commercial leases typically identify the permitted use, such as real estate office, medical office and the like. However, in this case, the tenant will want the use to be as broad as possible. For instance, general office use, including co-working space and ancillary use may be suitable for this tenant. That way, when multiple parties occupy and leave the premises and use the space for varied purposes, it will not be a lease violation. Co-working spaces could be shared by diverse parties such as writers, day traders, salesmen as well as those who want to host conferences and meetings and the like.