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potA recent news story in Bloomberg News discusses the effects of the legalization of medical marijuana, and its effect on smoking bans in apartments.  This blog post will discuss the possible effects of such new legal developments on apartments in the New York City area and its surrounding suburbs.

Although marijuana use for recreational purposes is not yet legal in New York State (although several other states, such as Colorado, have legalized its use for all purposes), it can be used legally in New York for medical purposes.  According to the New York State Department of Health’s website, a person with a severe medical condition, such as cancer, HIV, ALS (Lou Gehrig’s disease), Parkinson’s disease, as well as other life-threatening conditions, may be eligible to receive medical marijuana with a prescription from a doctor registered with the Medical Marijuana Program.

Legal issues may arise from the use of medical marijuana, as many rental apartments, cooperatives, and condominium buildings have enacted bans on smoking.  Many rental apartments will contain in their leases a ban on smoking within the apartment and in the building common areas.  In addition, many cooperative buildings have also started to ban all smoking, even within the individual unit owner’s apartment.  These smoking bans were discussed in a prior blog post.  Of course, prior to the legalization of medical marijuana, these smoking bans would have also applied to smoking marijuana (or any other smokable substance) in an apartment.  The use of an illegal drug within a rental unit may have also likely given a landlord cause to evict the tenant for illegal activity in their apartment.

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Recent posts on this blog have discussed legal issues relating to house rentals in New York.  Many of our clients have second houses, vacation homes, or multiple properties which they rent to tenants.  This post will discuss legal issues that arise when an owner seeks to sell a property that is currently being rented to a tenant.

The first issue which may arise relates to access to the property in question for potential buyers.  We advise that any house lease contain a clause that allows the landlord (and their agents) reasonable access to the property to show it to possible buyers.  This will allow the property to be shown to third parties during the tenancy in question.  Another issue that will arise is ensuring that the tenant keep the property in good repair.  Again, the lease with the tenant should contain a clause relating to the tenant’s obligations in maintaining the property.  This may include using the same vendors which the owner/landlord currently uses.  We also advise that an experienced attorney draft specific provisions relating to the tenant’s obligations concerning the conditions of the house, such as the vendors to be used for outside maintenance, roof and gutters, and repairs to appliances.

Of course, the tenant should be advised by the landlord that the property may be sold.  Some leases may contain clauses allowing the tenant to purchase the property, either at a set price or “at a price to be agreed to between the parties.”  The problem with the latter clause is that if the parties cannot agree on a price, then there will be no purchase.  We would advise using a specific amount in any such purchase option clause, but also having a specific date by which the tenant must exercise their option to purchase.  Then, if the option is not exercised, it will lapse and be of no further effect.

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mtgcont
Sellers of real estate in New York  perceive the current market as one with a tight inventory for desirable properties.  In such a market, multiple offers may be available to a seller.  In order to select one offer over another, a seller may demand that the buyer who intends to obtain a mortgage waive the standard mortgage contingency clause in the proposed contract.  This post will discuss whether waiving the mortgage contingency is a risk that a buyer should take.

In a typical New York real estate contract, various contingencies (conditions) need to be met between signing the contract and closing.  Some of the conditions usually include proof of clear title, a satisfactory appraisal , approval of the finances of the cooperative building and the like.  If the conditions are not met, the downpayment will be delivered to the seller or the buyer, depending on the circumstances.

A mortgage contingency clause works as follows.  After the contract is signed, the buyer is afforded a particular number of days to obtain their loan approval.  If the buyer does not obtain the loan, he can show that the loan was declined and request the refund of the downpayment.  During this period of time, the seller is required to remove the property from the market and is relying upon this particular buyer to close.  If the buyer has a valid legal right to cancel the contract and receive the return of his downpayment, the seller has lost potentially two months in being able to market the property again.  In New York, missing an opportunity to market the property during the Spring and Summer seasons could cause the property to be overlooked by buyers until the following Spring, because most contracts are signed in the Spring and Summer months.

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deficiencyPrevious blog posts have discussed foreclosures in New York State.  Many of our clients own either residential or commercial property and may not be able to make their mortgage payments.  They may become subject to a foreclosure lawsuit brought in the appropriate Supreme Court, in which the lender seeks to foreclose on its mortgage and take over ownership of the property in question.

However, our firm is often asked what happens after the lender takes ownership of the property from the borrower.  This is usually done after a public foreclosure sale of the property before a court-appointed Referee.  The Referee will then prepare a Referee’s Deed, in which ownership of the property is transferred from the borrower to the entity which was the successful high bidder at the foreclosure sale.  The Referee’s Deed is then recorded with the County Clerk’s Office in the county in which the property is located.

Does the foreclosure action end at that point?  Generally the answer is yes, but not always.  The lender, which can be either an institution such as a bank or credit union, or an individual, may seek a deficiency judgment against the borrower after the foreclosure sale is finished. Whether this happens is dependent on the successful bidder at the foreclosure sale.  Before the public auction, the lender will make public the amount which the borrower owes on the property.  This amount will include all principal and interest on the loan being foreclosed, the costs of the foreclosure, including attorney’s and referee’s fees and court costs, as well as any other expenses that the lender incurred in foreclosing the property.  Let’s assume that this amount is $500,000.00.  Any third-party bidder (anyone who is not the lender) for the property must bid at least this amount for the property.  In the example given, the bidding would have to start at $500,000.00.  Assuming someone believes the property is worth at least this amount, the highest bid which exceeds $500,000.00 would pay this amount to the Referee and become the owner of the property.  The first $500,000.00 of the successful bid would be paid to the lender, with any remaining sums going to any creditors of the borrower who have appeared in the foreclosure action, and any surplus after that paid to the borrower.  In such a case, there would be no deficiency judgment.

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militaryMany of our readers are looking forward to the upcoming Memorial Day holiday weekend.  Most of us are thinking of spending time at a backyard barbeque or taking advantage of a sale at a department store.  Memorial Day also has a more somber connotation, thanking our military for the ultimate sacrifice that they have made for our country.  As attorneys, we wish to bring to your attention particular legal matters with which we can assist should your loved one make such a sacrifice for our country.

We think of our military as young and not wealthy as yet.  Saving estate taxes is not the concern of this population.  However, estate and financial planning is still needed due to the inherent danger in their profession and their age.  For instance, an accident could result in permanent disability or death.  The service member may get married.  These changes could have significant consequences if the proper legal documents are not drafted by a skilled professional.

In the absence of a Will , the service member would be deemed to die intestate and an Administration proceeding would be required to manage the person’s assets and liabilities.  Concerns with the disposition of personal property need to be addressed, preferably in a Will.

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touroRecently in the news is a story relating to control over Touro Synagogue, located in Newport, Rhode Island.  The Touro Synagogue was built prior to the Revolutionary War and is one of the oldest congregations in the United States.  As with many older institutions, over the centuries, the original congregation and their descendants eventually moved from the area in question.  Many of these individuals settled in New York, and formed a new congregation, named Shearith Israel.  The original congregation in Rhode Island dwindled and even fell dormant for a period of time.

According to the Court records, there is a dispute between the current congregation of Touro Synagogue, now named Jeshuat Israel, and the New York congregation, Shearith Israel, over who was the rightful owner of the Touro Synagogue, and who has the right to make decisions such as the sale of ornaments in order to raise funds.

Our firm has handled similar cases involving control over religious institutions.  Many churches and synagogues experience changing congregations and conditions over a long period of time.   Depending on the location of the institution, members may move from the area, causing a sharp decrease in active membership.  At that point, the institution must decide whether to continue in its present location, or consider moving to another part of the New York where membership may increase.  Moving an institution will usually involve the sale of the current location.  Such a sale must be approved by the Board of Trustees or other governing body of the institution in question.  Prior blog posts have discussed the handling of legal disputes relating to control over a religious corporation.

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cromanRecently in the news is the story regarding New York City landlord Steve Croman.  Mr. Croman was arrested for allegedly harassing rent-stabilized tenants into leaving their apartments so that he could increase the rent for new tenants.  Longtime readers of our blog will recall other posts which relate to the right to renew a lease, as well as illegal acts and evictions in New York State.

Unfortunately, the current rent system in New York State, and, more specifically, mostly in New York City, gives landlords an incentive to remove tenants, especially long-time tenants, who are paying artificially low rents due to the rent stabilization laws.  Of course, this does not excuse harassing and threatening tenants, but it explains why a landlord may resort to these tactics to attempt to remove tenants.

The current rent stabilization system allows the landlord to increase the rent by a certain percentage when a tenant vacates.  Although this percentage may vary, it is usually a twenty percent (20%) increase over the prior regulated rent.  For example, if a tenant was paying $1,000.00 per month, and vacates, the new tenant may be charged $1,200.00.  There may also be additional increases depending on the amount of time which has passed since the last vacancy, as well as increases if the landlord renovates the apartment in question.  For buildings that contain more than 35 apartments, the landlord may collect a permanent rent increase equal to 1/60th of the cost of the apartment improvement.  If there are fewer than 35 apartments, the landlord may collect an increase of 1/40th of the cost.

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houserentalSome 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.

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princeFans of the musician Prince were distressed to learn of his untimely passing last week.  News reports now circulating have noted that Prince died without a Will.  This post will address the implications of dying without a Will.  As this firm is located in New York State, this post will address this issue from the standpoint of the law in New York.

When a person dies without a Will, an Administration proceeding is conducted.  Such a proceeding is undertaken in Surrogate’s Court.  The attorney for the surviving relative files a Petition in the proceeding.  The surviving relative of the closest relationship will apply to be Administrator of the estate.  In Prince’s case, we have heard that he was not survived by a spouse, children, or parents, making his sister the first person to be qualified to be Administrator of the estate.  Both New York and Minnesota provide that half-siblings are ranked in a similar fashion, so that half-siblings may potentially share in the administration duties of the sister who filed the Petition.  When significant sums of money are at stake, a kinship proceeding may also be filed to determine whether other relatives should be given the opportunity to share in the estate.  Once the proper fiduciary is appointed by the Court, particular duties need to be undertaken.

What if Prince’s doves continue to cry after his death?  If he had a Will, his pets could have been provided for in his estate plan.   Absent such provisions, any pets would become the property of the person(s) appointed administrators.  For pet lovers, this disposition could become a major problem if the person receiving the pets has no interest in taking care of beloved animals.  Prince’s Little Red Corvette must also be considered.  In New York, personal property could be specifically identified in a Will as a specific bequest, left in the residuary clause for the person intended to inherit all unspecified property or will be left to the person qualifying as Administrator if there is no Will.

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