New York Real Estate Lawyers Blog

September 27, 2013

Weiss & Weiss Blog- Case Updates

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.

September 20, 2013

Islamic Compliant Real Estate Mortgages and Loans in New York State

By Weiss & Weiss

Observant Muslims in New York State who seek financing for the purchase of residential or commercial real estate may have issues with traditional mortgage loans. The reason for this is that, under traditional interpretations of Koranic law, the payment or receiving of interest is considered forbidden (“haram”). While a thorough theological explanation is beyond the scope of this article, the main principal involved is that, under strict Islamic law, the exchange of capital alone for debt is not balanced by any significant advantage to the borrower, because it is not associated with the type of risk that a business venture would entail. Therefore, a loan of funds which generates interest for the lender, to be paid by the borrower, is considered profiteering and contrary to the laws of Islam.

Therefore, a traditional mortgage loan, in which funds are lent for the purchase of a property, either residential or commercial, and the funds are paid back over time to the lender with interest, would be considered non-compliant with Islamic law. This prohibition would apply both to the borrower as well as to the lender.

This raises a dilemma for an individual who wishes to purchase real property. The first solution which comes to mind is simply to pay the full purchase price for the property, and not obtain any type of loan. However, most people do not have the funds to pay for a property “up front,” and therefore require a loan of some type in order to complete the transaction. Most home purchases in New York State require a 10% downpayment of the purchase price. For example, if the purchase price is $500,000.00, the purchaser would pay $50,000.00 prior to closing, and the remainder at closing. At closing, most purchasers would then use funds loaned to them by a bank or other institutional lender to complete the transaction. The lender would record the mortgage on the property to secure the loaned funds. The purchaser would repay these funds over time, paying annual interest on the amount borrowed.

September 13, 2013

The Fluctuating Legal Rights of Same-Sex Couples

By Weiss & Weiss

gay israelis.jpg The fiftieth anniversary of the March on Washington was recently acknowledged, celebrating the great civil rights battle for equality for our African-American citizens. More recently, same-sex couples have also been engaged in their own battle for equal treatment in issues such as the right to marry, taxation, health and pension benefits, and similar property and economic matters.

In June, 2013, the United States Supreme Court struck down the Defense of Marriage Act of 1996 (“DOMA”). DOMA specified that “…the word “marriage” means only a legal union between one man and one woman…and the word “spouse” refers only to a person of the opposite sex who is a husband or a wife”. The case at issue involved a lesbian couple who were married in Canada. One of the parties died and left her estate to her partner. The surviving widow filed the federal estate tax return that was due. Because the federal government did not consider the couple married for estate tax purposes, the estate was not qualified to apply the marital deduction available to heterosexual married couples, increasing the estate tax bill by several hundred thousand dollars. The Supreme Court ruled that it is a violation of equal protection principles and an infringement on state sovereignty for the federal government to maintain such a position. In Windsor, the Court determined that same-sex married couples are to be treated as married heterosexual couples and ordered the refund of the excessive tax payment.

In late August, 2013, the Internal Revenue Service issued a subsequent ruling that legally married same-sex couples will be recognized as married, even if the state in which they live does not recognize same-sex marriages. Our readers should know that two legal standards are at play. The “place of celebration” standard mandates that a couple will receive benefits as long as they are legally married, regardless of whether the state in which they now live recognizes the union. The “place of residence” standard mandates that if the state in which the couple lives does not recognize their union, then the couple will not receive benefits.

August 23, 2013

Albert Pujols and Defamation Law

By Weiss & Weiss

Recent blog posts have discussed the legal ramifications of the use of performance enhancing drugs (“PED’s”) by baseball players, especially as it relates to Yankees slugger Alex Rodriguez. Several recent developments regarding these issues have raised a new legal point, a discussion of which may be helpful to our blog readers.

More specifically, former player Jack Clark, who has been retired from baseball since 1992, stated during his radio show that he believes that current Angel player Albert Pujols has used PED’s throughout his career. Reaction to this statement was immediate, with Pujols denying he had ever used PED’s, and stating that he would sue Clark for libel. In addition, the radio station employing Clark as a talk show host promptly fired Clark and distanced themselves from his comments.

The legal issues that we will discuss here are whether Pujols should sue for libel, and the likelihood of success of such a lawsuit. Legal claims for libel (written statements) and slander (spoken statements) are commonly called defamation actions. Broadly, they are claims that someone either spoke or wrote an untrue statement that harmed one’s reputation in the community. In order to prove such a claim, one would first have to prove that the statement was made, that such statement was untrue, and that one’s reputation was harmed as a result of the untrue statement.

August 16, 2013

Appraisal Results: An Important Threshold in the Loan Process

By Weiss & Weiss

An appraisal is an objective determination of valuation of an object or property. Lenders require an appraisal before the loan is funded at closing. If a purchaser is obtaining a loan for $400,000.00 and the purchase price is $500,000.00, then the lender will not fund the loan unless the appraiser determines that the property is worth at least $500,000.00. If the property appraises for less than $500,000.00, the parties have various options.

Typically, contracts to purchase real estate contain mortgage contingency clauses, which essentially provide that if the purchaser does not obtain a commitment from an institutional lender within a certain period of time after having applied for such financing according to the contract, then the purchaser can cancel the contract and obtain the refund of his downpayment. In New York contracts, a portion of this standard loan contingency provision states that if the commitment is conditioned on the lender’s approval of an appraisal, then the purchaser is not bound until and unless the lender has approved the appraisal.

Prior to the “Great Recession”, it was not uncommon for loan officers to interact directly with appraisers by engaging their services and suggesting the amount needed for the property valuation by “prompts”. If the purchase price in the contract or the loan amount applied for in a refinancing was $350,000.00, the property must be “worth” at least $350,000.00. However, as learned in recent years, property values were inflated in some instances to justify the transactions and the homeowner was left with an “underwater” property, with the loan amount exceeding the property value. As a result, lenders reacted and became more conservative. Appraisers are now more independent and objective. A loan officer is now strictly forbidden from contacting the appraiser. Another result is that appraisers from Long Island may be evaluating properties in Westchester, making them unfamiliar with the nuances of a locality that may enhance value.

August 9, 2013

A-Rod and Arbitration

By Weiss & Weiss

New York Yankees slugger Alex Rodriguez (hereinafter “A-Rod”) was recently suspended for 211 games by Major League Baseball for his involvement with performance-enhancing drugs. However, as of this writing, A-Rod is currently playing third base for the Yankees. Why is this? The reason is that the collective bargaining agreement between the Major League Baseball Players Association (MLBPA) and Major League Baseball (MLB) allows any player suspended for this reason to appeal his penalty to a neutral, third-party arbitrator, and to continue to play until the arbitration appeal is resolved.

The existence of a neutral arbitrator in these situations is quite common in most labor – management agreements. In fact, the first executive director of the MLBPA, Marvin Miller, had a background working for the United Steelworker’s Union prior to taking the MLBPA position. Because of his prior experience negotiating with U.S. Steel, he recognized the importance of a neutral, third party arbitrator to resolve disputes. In the 1968 Basic Agreement between MLB and the MLBPA, the parties agreed to the appointment of such an arbitrator.

In 1976, Peter Seitz, as arbitrator, resolved a dispute involving whether a player could “play out his option” and become a free agent after his existing contract expired and was renewed for one year by his team. Seitz ruled that the team’s renewal option was for one year only, and, after that renewal or “option” year, a player would become a free agent, free to negotiate with any team. The team owners were quite chagrined at this outcome, and immediately fired Seitz, but the ruling stood, giving players the leverage to negotiate a new labor agreement allowing them to become free agents after a certain period of major league service time.

July 26, 2013

Proving Damages in Intellectual Property Litigation

By Weiss & Weiss

Our firm recently litigated a case in which another company admitted to infringing on the trade name of our client. A trademark is a name, symbol or other design used to identify goods or services used in commerce. An example would be “Coca-Cola” for soft drinks. To legally protect a trade name, the first requirement is generally registration with the United States Patent and Trademark Office. Registering a trademark will enable a trademark owner to legally prevent other businesses from using said name for similar goods and services. There are many requirements for registration, and our firm is experienced in registering trade names and designs on behalf of our clients, many of whom own small businesses in Westchester County and the surrounding geographic area.

Once a name has been formally registered with the United States Patent and Trademark Office (“USPTO”), it is generally the job of the trademark owner (and their attorneys) to insure that another company is not infringing on that mark. Unfortunately, the USPTO is not a enforcement agency for trademark owners. Once it allows a mark to be registered, the trademark owner is generally responsible for commencing litigation against any other companies who may be infringing on the registered mark. For example, if our firm registers a trademark for “Debbie’s Deli” for restaurant services, and another deli opens in the immediate vicinity called “Debby’s Deli,” our firm would bring a trademark infringement action in the appropriate forum (usually United States District Court in White Plains), seeking an injunction against the infringing company, as well as money damages.

The general legal standard for infringement is whether an average customer would be likely to be confused into thinking the infringing name is the original protected company. If a Court finds infringement, there are several remedies that it can award. Most common would be an injunction (a Court order) against the infringing party forbidding it from continuing to use the infringing name. If the party violates the injunction, it can be held in contempt of Court.

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.

July 3, 2013

Real Estate Flips: Are They Good for the Neighbors?

By Weiss & Weiss

The resurging real estate market brings with it the real estate “flipper”. A flipper is a person or entity that purchases property with the goal of renovating it for a quick sale at a substantial profit. The flipper never intends to occupy the property in the neighborhood. Recently, the Wall Street Journal reported that luxury homes are joining more modest properties in the flip market. Even cooperative and condominium apartments can be subject to flipping.

In a market-oriented society such as ours, one could argue that it is one’s own business as to how one invests and that properties can be purchased and sold despite one’s intent. However, others may argue that it is unseemly for opportunists to purchase properties merely with the intent to harvest a profit. The following are examples of how this plays out. A lender takes back a house in disrepair through the foreclosure process. Prior to the foreclosure, which took years, the house fell into significant disrepair and was unsightly to neighbors. Perhaps hazardous conditions developed from a dismantled oil tank and the removal of copper materials from the home. The foreclosed eyesore potentially reduces the property values of the surrounding neighbors. In this scenario, anyone who eventually purchases the house from the foreclosing lender and rehabilitates it into a habitable and cosmetically pleasing condition should be appreciated. Since the flipper’s goal is to sell to a person who will occupy the home, the flipper is this instance is beneficial to the neighborhood. Ultimately, there will be an occupant who becomes a neighbor contributing to the community.

Flipping takes on a different complexion in a cooperative building. It is not unusual for cooperative apartment corporations to charge a “flip tax” upon the sale of a unit. While flip taxes are typically charged on all sales, the philosophy behind them is to discourage short term ownership merely intended to raise a profit and to move funds back to the cooperative community upon sale in a means to benefit the entire cooperative “neighborhood”. Flip taxes are calculated in several ways, such as by a certain dollar amount per share. If one owns 200 shares and the flip tax is $5 per share, then the flip tax collected would be $1,000. Some buildings calculate the flip tax as a percentage of the sale price. If the sale price is $400,000 and the flip tax is at 1%, then the flip tax charged would be $4,000. Flip taxes may also be calculated as a percentage of the net profit, such as sale price minus original purchase price, less sale expenses such as brokerage commissions and transfer taxes. Flip taxes are to be enacted in accordance with the building’s governing documents, giving particular attention to whether the Board or all shareholders must vote on their enactment and the percentage approval vote required. Since most units within a building are similar and the state of repair is not apparent from the hallway or outside the building, flipping a unit is not necessarily beneficial to the rest of the building unless a flip tax is charged to the seller.