courthouse-300x159A recent blog post discussed sweeping changes to New York State’s regulations for rental units.  These changes were recently passed by the state legislature, and signed into law by Governor Cuomo.  While a full discussion of the new law is beyond the scope of this post, suffice it to say that the law makes it more difficult for landlords to remove apartments from rent stabilization, as well as removing the right of a landlord to increase the regulated rent after a tenant vacates and a new tenant moves into the unit.

One effect of this change is to remove the incentive for a landlord to “buy out” a rent regulated tenant.  Prior blog posts have discussed transactions where a landlord would pay a tenant a significant sum of money to vacate a rent regulated apartment.  The reason for these transactions is that the landlord would then be permitted to significantly increase the rent for a new tenant, once the last tenant vacated.  Under the new regulations, the landlord would not be permitted the large “vacancy increase” that was allowed previously.  Therefore, landlords no longer would have an incentive to pay an existing tenant to move out, because the regulated rent would remain the same for a new tenant.

Landlords were not expecting the new regulations, as they were introduced very late in the legislative session.  The new regulations also make it more difficult to evict tenants who do not pay their rent.  As tenant-favorable laws will always be easier to pass in large cities, due to the simple fact that many tenants vote, and they are always more numerous than landlords, the question becomes whether these rent regulations can pass muster under the United States Constitution.

trap-300x225Prior blog posts have discussed the operational aspects of a holdover landlord-tenant eviction proceeding.  Holdover proceedings, unlike non-payment proceedings, occur when a tenant’s lease term has expired, or when a tenant does not have a lease, and either party decides to terminate the tenancy on thirty day’s notice, which is their legal right.  This is in contrast to a non-payment proceeding, which is when a tenant with a valid lease fails to make his rent payments.

For example, a tenant has a lease with a term that ends on December 31.  On January 1, the tenant remains in the premises.  If they make a rent payment for January, they are now considered a month-to-month tenant for as long as the landlord continues to accept the monthly rent under the same terms as the expired lease.  The lease is now considered to be extended on a month-to-month basis as long as the parties agree.

But what happens if the landlord does not want the tenant to remain after the expiration of the lease, even if the tenant continues to pay rent?  The landlord must terminate the month-to-month tenancy by serving a “Notice to Quit” on the tenant.  The Notice to Quit must state that the tenancy will be terminated on no less than thirty days notice.  New York law has held that the termination date should follow the end of the lease term date contained in the original lease.  If the original lease term occurred on the last day of the month, the termination date in the Notice to Quit should also be on the last day of the month.  This may result in the tenant receiving slightly more than thirty days notice, for example, if the Notice to Quit is served on February 15, and the lease term ended on December 31 of the prior year, the Notice will have a termination date of March 31, which is at least thirty days notice, but at the end of the month as legally required, mirroring the original lease term.

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Our readers may be aware of the recent death of fashion icon Gloria Vanderbilt.  Having died at the ripe old age of 95, Ms. Vanderbilt’s life had many interesting dimensions.  From a legal perspective, Vanderbilt experienced a Court proceeding as a young child that is instructive to our clientele.  The Vanderbilt family is one of the historically ultra wealthy families in the United States.  Gloria’s father died when she was an infant, leaving her substantial share of his Estate in trust to be managed by her mother as trustee.  Instead of using the trust as intended, for the care and support of Gloria, the trust was used for her mother’s lavish excursions to Europe and the like.  Fortunately, Gloria’s Aunt observed her mother’s behavior and brought a successful Court action, known as “the trial of the century”, to remove her mother as trustee and obtain custody of Gloria.

The Vanderbilt matter demonstrates that the Surrogate’s Court will certainly intervene when trustee abuse occurs and when the trustee is not managing the trust assets for the benefit of the beneficiary.  There are additional reasons why a petition to remove or replace a trustee will be entertained by the Surrogate’s Court.  For instance, a trustee was named in a document drafted thirty-five years ago when the intended trustee was fifty years old.  Now the trustee expected to serve is eighty-five years old and is not enjoying good health.  An expert draftsman will anticipate this potential issue when drafting a will or trust and will suggest that the named trustee may not be practical.  Also, a will or trust can be subsequently amended by codicil or trust amendment should the client note changes in the named trustee that make such person unfit to serve.  Codicils and trust amendments are less time consuming than engaging in Court intervention at a future time.  Another potential safeguard is to name a corporate trustee (such as a bank) to serve, in order to avoid trustee abuse as well as the possible aging or death of the proposed trustee.

As in the case of Whitney Houston’s executor , there are certain roles that are appropriate for a trustee.  A trustee should be financially savvy and is required to invest assets prudently.  Income and principal of the trust is to be distributed for the purposes named in the trust.  Such purposes may be to maintain the lifestyle to which the beneficiary is accustomed, pay for education, fund enriching travel, cover healthcare costs, and the like.  Your attorney will ask you to consider a responsible and honest person to serve as your trustee.  It is also preferable to consider a trustee who has a good relationship with the beneficiary, as there will be significant interaction between them in the future.

rent-300x200Recently in the news is that state representatives in Albany are considering sweeping changes to New York State’s regulations for rental units. Prior blog posts have discussed past revisions to the rent regulations.  While some of the changes only affect apartments in New York City, others may apply to apartments statewide.  As of this writing, Governor Cuomo has stated that he will sign any bill that the lawmakers pass.

As most New Yorkers are aware, rental prices in New York City are among the highest in the nation.  Whether having the government attempt to control the prices of rental units will result in lower rents overall remains to be seen.  Rent regulation by the government has existed in some form since the World War II years, and keeping rental prices low has not been achieved.  While some regulated tenants benefit, others, whose units are unregulated, may see larger increases. In addition, forcing landlords to charge regulated rents may discourage both the building of new units and investment by landlords in improving existing apartments.  Why spend money on repairs or renovations if rent rates remain fixed by regulation?  Obviously, our representatives do not think that this is a factor.

Of course, not all apartments are subject to rent stabilization.  In Westchester County, where our offices are located, each municipality has the option of adopting the Emergency Tenant Protection Act (ETPA).  A list of these villages, cities, and towns can be found here.  If the units are in a village, city or town which has not adopted the ETPA, then the units are not rent regulated.  In addition, the law only applies to buildings of six or more units.  Therefore, if one owns a three unit apartment building in Westchester, it would not be subject to rent regulations.

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We often have inquiries from clients considering the purchase of a business.  An experienced attorney should be consulted when commencing this process.  Initially, the seller’s attorney will deliver the contract to the buyer’s attorney for negotiation.  Should the business being sold be a franchise, the final contract should be conditioned on approval of the franchisor to the buyer conducting business under the franchise name.

After consulting an accountant to confirm that the business to be purchased is financially viable for the buyer’s future income needs, the financial terms of the deal are to be structured.  There may be a broker who has negotiated the initial terms, which may be modified during the contract negotiation process.  Usually the payments required of the buyer are the delivery of the downpayment to the seller’s attorney to be held in escrow until closing and another payment at closing.  The payment at closing may be the last payment to be made or the buyer may sign a promissory note for subsequent payments to be made after the purchase.

Particular protections need to be in place on behalf of the buyer.  A lien search should be obtained prior to closing, so that the seller obtains lien releases for equipment and tax matters that may have an effect on the buyer.  For example, if a freezer is to be conveyed and the seller has a business loan on such equipment, a UCC Financing Statement is likely to be filed evidencing the loan.  If the loan is not paid at the closing and the UCC remains, the buyer is acquiring the freezer subject to the seller’s loan and will not own it outright.

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Our readers may be aware of the business activities recently announced by the Executor of the Estate of deceased pop icon Whitney Houston.  After having rejected prior business opportunities, the Executor has decided to enter an arrangement with a music and marketing company to have a touring hologram of Ms. Houston’s image, a possible Broadway musical, branding deals, and issue an album of unreleased music tracks.  This activity gives rise to the question; “[h]ow will I know” if promoting business activity is legally proper for an executor in New York?  We suggest that you “don’t trust your feelings” and that you consult an experienced attorney who “know[s] about these things”.

By way of background, if a person dies with a Will, the Surrogate’s Court appoints the executor named in the Will.  The deceased, in “racing with destiny” has “laid the plans” and named her chosen executor in the Will.  The executor’s role is to collect and preserve assets, determine and pay just debts and distribute funds remaining after these activities to the beneficiaries named in the Will.  When drafting a Will , your attorney will include a “powers clause” for the executor.  It could be an extensive list of activities that the executor may conduct, such as making investments, selling property, borrowing money, employing professionals such as accountants and attorneys , making tax elections and the like.  In the alternative, the powers clause may instead be general in nature, such as the full power and authority in all matters as if the deceased is still living.  Of course, the executor is forbidden from self-dealing and transferring assets for the benefit of anyone besides estate beneficiaries.

The activities of Whitney Houston’s executor could be evaluated in multiple ways.  As reported in the news story, she is pursuing new business opportunities rather than winding down the estate, distributing the assets to the beneficiaries and closing the estate.  On the other hand, it may be considered wrong in the Houston estate matter if an executor declines business opportunities that could be lucrative for the beneficiaries and enlarge estate assets.  Certainly, the Houston Estate matter provides an executor unique opportunities to generate additional estate income.  However, most people are not famous.  It is unlikely that the typical executor can legitimately promote additional business activities for reasons besides increasing his own commission.  The executor does personally benefit by increasing potential executor commissions that can be collected, as such commissions are calculated based upon the value of the estateWe would recommend that the executor confer with the beneficiaries to determine if they would rather have the estate maximize its future assets or if they would prefer to have the estate distribute and close without delay.  Although such a discussion is not legally required, it could prevent the beneficiaries from making a claim against the executor for delay in closing the estate if they all agree that such business activity be conducted.

apartment-300x150Prior blog posts have discussed the difference between the two types of landlord-tenant eviction proceedings.  To summarize, non-payment proceedings occur when a tenant fails to pay rent or other charges due to the landlord.  Holdover proceedings, which will be discussed in this post, happen when a tenant’s lease term has expired, or, in certain situations, when a tenant does not have a written lease.

First, let’s discuss situations when a tenant’s lease term has expired.  Most, if not all, written leases, contain a specific lease term.  It may be expressed in terms of a set period, such as one year, and can also give the specific date that the lease will expire.  What happens when the lease term expires, but the tenant remains in possession?  Under New York law, the tenant now becomes a month-to-month tenant.  This means that the lease terms remain in effect, but the lease has been extended for an additional monthly period, assuming that the tenant continues to pay the rent due, and continues to comply with the other lease terms.

By accepting the rent for an additional month, the landlord is agreeing to an extension of the lease for that additional month.  Let’s say the lease expires on March 31.  On April 1, the tenant pays an additional month’s rent check to his landlord, and the landlord accepts the rent, by depositing the check.  Under the law, the parties now have a month-to-month tenancy, which either party can terminate on thirty day’s notice.

rentown-300x171There are many opinions regarding whether being a renter or owner of one’s residence is the correct decision in New York.  Many factors, including one’s economic situation, must be considered in whether to rent or buy real property.  One additional possibility is renting the property with an option to buy.  This post will discuss the legal issues related in entering into such an agreement.

Initially, there must be an agreement with the owner of the property regarding the terms of the rental.  This is commonly documented in the form of a lease.  The lease will delineate the monthly rental amount as well as the lease term and other provisions.  If the parties agree, an option to buy the property can be included in the lease, or as a separate agreement.

The most common arrangement is to provide the renter with the option to purchase the premises at a set price during the rental term, or at the expiration of the rental term.  If the renter exercises her option to buy, then the attorney for the property owner should prepare a contract of sale to be executed by all parties.  The signed contract of sale is necessary should the potential purchaser need to apply for a mortgage loan to purchase the premises.  Any institutional lender will need a copy of the fully executed sale contract in order to process a standard loan application.  In addition, a down payment, typically in the amount of ten percent (10%) of the purchase price is usually also necessary to obtain a traditional bank loan.  The lending institution requires proof of the down payment deposit into the escrow account of the seller’s attorney.

flipMany of our readers are familiar with television programs where people purchase properties in terrible condition, conduct renovations and then sell at a handsome price at the end of the show.  While some New Yorkers may be inspired by these programs, reality often differs from the outcome as depicted on television.  This post will examine some of the pitfalls in “flip” transactions and methods to alleviate some of the legal issues that arise.

Traditionally, a flip transaction takes place as follows.  A purchaser locates a property that is a “good deal”.  Perhaps it is purchased at foreclosure auction , without the opportunity to view the interior of the property or to determine whether tenants occupy the property.  The property is a “good deal” because it is priced below other properties in the area, and is perceived by the purchaser as being in a prosperous area in which their ultimate purchaser will want to live.  Once the property is purchased, the owner will renovate the property and market it for sale.  The flipping purchaser does not intend to use the property for his own occupancy and therefore needs to sell the property as quickly as reasonable.

As most flippers ultimately realize, there is no such thing as a “good deal”.  These transactions are often too good to be true, as these properties are acquired “warts and all”.  Often the flip properties are acquired from foreclosing lenders whose attorneys present contracts that are allegedly nonnegotiable, “need” to be signed immediately and contain unduly harsh closing deadlines that could result in the loss of the downpayment or other penalties.  Flippers should not cave to pressure to sign such contracts without attorney review.  An experienced attorney will inform flippers that they are most likely purchasing the property subject to existing property violations, past due real estate taxes, unpaid water bills, another mortgage that may not have been removed by the foreclosure proceeding, occupants that may need to be evicted and the like.  It may be prudent to order a title search prior to signing such a contract and to resist pressure from the seller to use the title company that it recommends.