deli-300x200Recently, New York City Council Speaker Corey Johnson proposed a new law called the “Small Business Jobs Survival Act.”  The Mayor of New York City, Bill de Blasio, has questioned the legal underpinnings of the proposed law.  The law has also been described as legalizing commercial rent control in New York City.  What are the legal issues involved in commercial rent control, and how will it affect small business owners with commercial leases in New York?  This blog post will address these questions.

Currently, unlike certain residential properties, commercial properties are not subject to rent regulation such as rent control and rent stabilization.  Many residential apartments in New York City, as well as Westchester County, are subject to rent regulation under the rent control and rent stabilization statutes.  What this means is that tenants living in apartments subject to these regulations, under certain conditions, are entitled to perpetual renewal leases which cannot increase rent more than a certain percentage as set by the New York City Rent Guidelines Board.

However, these regulations do not currently apply to commercial properties.  If a store is being rented to a tenant, only the free market regulates the amount of rent to be paid, and whether the lease will be renewed.  Let’s give an example.  A grocery store signs a commercial lease for 5 years with the rent set at $4,000.00 per month.  At the end of the lease term, if the parties have not signed a new lease, the tenant would be considered a holdover and subject to eviction.  Absent any specific provisions in the current lease relating to a lease renewal, the landlord is under no legal obligation to offer a new lease to the tenant.  The landlord is also free, at the end of the lease term, to request a rent increase to $7,000.00 per month.  If the tenant does not agree to the new rental rate, again, they would have to vacate the premises or be subject to eviction.

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Landlords who lease commercial space typically concern themselves with the quality of a proposed tenant so that such character is consistent with that of other tenants occupying the property.  Such concern is reflected in particular provisions found in a commercial lease.  This post will discuss some of the more common tenant “character” provisions.

Signage is important to commercial tenants so that the store’s location is visible and identifiable to potential customers.  Because landlords are concerned that certain signage may look physically unpleasing or be harmful to the reputation of the property, landlords typically specify signage requirements in the lease.  The landlord will reserve the right to approve the signage sought to be used by the tenant and will usually not allow a sign that appears to be too large or has too much neon compared to other signs already used at the property.  Of course, signs containing vulgar words will not be permitted.  When negotiating your lease, your attorney  should also negotiate an exhibit to the lease which will contain a drawing of exactly how your sign will look with specific dimensions referenced.  That way, the parties will have already decided on the approved signage before the lease is signed.

Landlords also want to control store hours.  Many leases have provisions to that effect.  In a shopping mall environment, most leases will require stores to be open for the same number of hours.  Such a provision benefits all tenants, as the mall is more likely to be a thriving place in which to do business if shoppers can visit more than one store.  On the flip side, landlords may demand that a public storefront be closed after a certain hour so that visitors do not “hang out”, impairing the reputation of the property or creating too much noise, impacting neighbors of the property.

sublet-300x232Previous blog posts have discussed potential cooperative rule violations and the procedures to be followed by the co-op when a shareholder violates provisions of the proprietary lease or the house rules.  This post will discuss more specifically the issues which arise when a shareholder attempts to sublet their co-op apartment to another person.

It first should be noted that most co-ops have in their proprietary leases specific rules about who can live in the apartment, if they are not the shareholder listed as an owner on the share certificate.  It is usually limited to direct relatives, such as one’s spouse, children, parents, domestic partner, and the like.  Having these people live in the apartment at the same time as the shareholder is not considered a sublet situation.  However, the proprietary lease usually also has rules limiting usage.  The shareholder must also be living at the apartment, together with the relatives in or guests question.

To give an example, let’s say the shareholder is elderly and shares the apartment with her adult son.  She then decides to move to Florida and wishes for her son to continue living in the apartment in New York.  This would most likely be considered a violation of the proprietary lease by the co-op, as the shareholder is no longer living at the unit.  Such a violation, if discovered by the co-op, could result in a default notice being issued to the shareholder for having unauthorized persons residing at the apartment.  Note again that if the shareholder is living at the unit at the same time with her family, it would probably not be considered a violation.  The reasoning behind this is that the co-op wants their units to be owner-occupied and to approve those occupying the apartment.  They will allow direct family members to share the unit, but only when the owner is also living there.

auctionSeveral of our prior blog posts have dealt with defending foreclosure actions for real property.  However, in New York State, and especially in New York City, many apartments are held as shares in a cooperative corporation, also known as “coops”.  Rather than owning real property, coop owners own shares in a corporation which have been allocated to their apartment within a particular building.  As a result, legally, owners of a coop apartment do not own real property, but instead, they own shares.

This legal distinction makes a difference when an owner defaults on his share loan.  Because coops are not real property, they fall into a category called “non-judicial foreclosures.”  This means that unlike a foreclosure against real property, foreclosure actions against coop shares are not brought by commencing a lawsuit in the Supreme Court, or in any Court.  Instead, the foreclosing lender will issue a series of legal default notices, and, if the default is not cured, it will then hold a public auction of the coop shares belonging to the defaulting shareholder.

Because lenders hold the shares in escrow when they make a loan against the apartment, they have the ability to auction these shares when the shareholder defaults in his loan obligation.  The original share certificate is kept by the lender and not returned to the shareholder until the loan is paid in full.

respectMusic lovers, reeling from the recent news of Aretha Franklin’s death, have now found out that the “Queen of Soul” died intestate, without a will.  This blog has previously addressed the matter of another musician, Prince, having passed away without a will and the legal repercussions.  We  will address the legal issues that have arisen once the “Queen of Soul” passed away without a will.

In Michigan, where Ms. Franklin had her primary residence, the assets of an unmarried person are left in equal shares to her children.  New York would have a similar disposition.  Devil’s advocates might say that if the legal result of having no will is the same as having a will, that the children will inherit the assets, what is the benefit of having a will?  First, if one has a will, the fiduciary of the estate (Executor) can be selected by the decedent, rather than the default person being selected according to statute.  For instance, musicians such as Prince and Aretha Franklin leave vast music catalogs deserving of post-death management by an expert who has knowledge of how to handle such specialized assets.  Second, a person making a will may have a preference for how the assets will be distributed, instead of the statutory default of all children sharing equally.  If Ms. Franklin had devoted greater consideration to this issue, she may have found it appropriate for the “red roses” in the garden in “Spanish Harlem” to be transferred to the child who would most appreciate and care for this asset.  Further, family infighting over her “pink Cadillac” could have been avoided, so that the ride “on the freeway of love” could take place without delay.

Apparently, Ms. Franklin valued privacy and nondisclosure of her assets during her lifetime.  The best way for her to have avoided the additional public disclosure that takes places when one dies without a will would be to have made a revocable trust.  That way, assets titled in the name of the trust would be transferred automatically after death as directed in the trust, with no public disclosure and without Court intervention and the delays that it may entail.

walmart-300x181Recent news in Westchester County is that the Wal-Mart store in downtown White Plains is scheduled to close on August 10 of this yearOur blog  has recently explored the legal issues relating to a store closing for good, especially where there is an existing lease.

An interesting point regarding the Wal-Mart closing is that it is been suggested that the store be replaced with a residential building or be converted as exists into apartments.  Many area residents who decide to move out of New York City are seeking homes in Westchester County.  However, Westchester has a limited housing stock, and many of the current homes in Westchester date from the immediate post-war period, or are even older, and the lack the amenities many new home buyers are seeking.

In addition, the economics of supply and demand mean that due to the low current supply of housing stock in Westchester, housing prices are quite high and will likely continue to rise over time.  Since demand is unlikely to decease, the only way to lower prices would be to increase the supply of housing.  Other areas in the United States are experiencing similar housing shortages.  Further, recent changes to the federal income tax laws concerning limits on the deduction of real estate taxes have affected the real estate market.

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News outlets have recently reported on the Will contest brought by the children of the late country singer Glen Campbell.  This post will address the concepts of diminished capacity and undue influence and whether these concepts can potentially invalidate a Will in New York.

In general, a person can make a Will and disinherit his entire family or those deemed of close relation.  The exception to this rule is that one cannot disinherit a spouse, as spouses qualify for at least a minimal portion of the estate under the concept of elective share.  Potentially a person may be estranged from his family and decide to leave his estate to a friend or someone else who is close to him.  New York Surrogates Courts generally favor the making of a Will and will not invalidate a Will merely because a particular person was disinherited.

However, a Will can be contested on the basis of the diminished capacity of the person making the Will.  Diminished capacity is when the person making the Will is afflicted with a physical or mental ailment which may cloud his judgment or render him unable to know his own wishes.  Let’s say that the testator (the person who made the Will) was suffering from Alzheimer’s disease, like Glen Campbell.  Such an affliction does not automatically invalidate the Will.  New York Courts have held that if the testator had a “moment of lucidity” when the Will was signed, then it will be valid.  So long as the testator understood the general assets of his estate and the “natural objects of his bounty” (the identity of his family members or friends), the Will should be upheld.  Prudent legal practitioners  typically meet alone with the testator before the Will is drafted and before it is signed to ask questions and attempt to evaluate the mental capacity of the testator.  The recollections of the meetings should be memorialized in a memorandum to the client’s file in the event of a Will contest.

money-300x225Prior blog posts have dealt with various aspects of foreclosed properties in New York State.  This post discusses the possibility of a deficiency judgment being entered against the borrower.  This can occur when the value of the property is less than the amount owed by the individual who signed the note and mortgage which is the subject of the foreclosure.

However, what happens when the opposite occurs?  Properties, especially those in Westchester County, may increase in value over time.  There may be certain situations when the value of the property is greater than the amount owed by the borrower.  When such a property is the subject of a foreclosure, there may be a funds surplus after the foreclosure is completed.  For example, a borrower purchases a single family house for $200,000.00, and takes out a mortgage for $150,000.00.  After making payments for many years, he loses his job and is unable to pay his mortgage.  The current balance on the mortgage is now $100,000.00, but the house has appreciated in value and is now worth $400,000.00.  How does this affect the foreclosure process?

As attorneys representing borrowers in the foreclosure process, the first possibility is that the borrower can simply sell the house for its current fair market value, and then use the proceeds from the sale to pay the mortgage in full.   However, there may be some situations in which this is not possible.  Some borrowers wait too long in the foreclosure process before engaging experienced counsel, and it may be too late to sell the property, as the lender has already obtained a judgment of foreclosure and scheduled a public auction of the property.  Another possibility is that the original borrower may have passed away, and her heirs may have failed to engage estate counsel to represent their rights in a foreclosure proceeding before the auction is scheduled.