reverse-300x159A recent New York Times article concerns possible changes to the enforcement of reverse mortgages against surviving spouses.  To those unfamiliar with reverse mortgages, they are a type of mortgage loan which allows elderly borrowers (usually over 62 years old) with sufficient equity in their primary residences to borrow against that equity.  Generally, the sums borrowed do not have to be repaid until after the death of the borrower.  Therefore, the heirs of the borrower, after their death, have the option of repaying the sums due, or selling the property and then paying off the amount of the reverse mortgage, plus any interest accrued.

Other blog posts have discussed the possible pitfalls of reverse mortgages.  The New York Times article concerns a specific problem with many reverse mortgages, that of a surviving spouse.  The issue raised is this: what happens when the home is owned only in the name of the borrower, the borrower has a (usually) younger spouse, and then the borrower passes away, leaving an unpaid reverse mortgage?  Is the surviving spouse forced to sell the property in order to pay off the reverse mortgage, even though they may have lived there for many years with their spouse?

This situation arises in only a small amount of reverse mortgages.  Most couples own property jointly, and may take out a reverse mortgage in both of their names.  In this situation, where both borrowers qualify by meeting the age requirement, the mortgage is not due until the last of the borrowers passes away.  Therefore, the “surviving spouse” situation does not apply where both borrowers are record owners and borrowers.  However, there are situations, often involving a second marriage, where one borrower may qualify by age, and the other “half” is too young and will not qualify as a borrower.  Reverse mortgage companies may require that the property be put in the qualifying buyer’s name alone in order to approve and close a reverse mortgage.  This creates the situation discussed, where the older borrower then dies and the younger spouse, who may have inherited the property is faced with the reverse mortgage lender demanding payment in full while she does not have the assets to pay the mortgage without selling the property in question.

ralph-300x200News outlets have recently reported a conflict between local business Ralph’s Italian Ices in Mamaroneck and local officials, who are seeking to close the business due to noise and parking issues.  While we do not know how this specific situation will resolve itself, many of our firm’s clients are small businesses who may find themselves in similar situations.  This post will discuss the legal issues involved when a commercially leased property has issues relating to compliance with local regulations.

A business owner seeking to lease commercial property should first have counsel research the property in question.  Issues such as allocation of parking spaces, permitted hours of operation, and legal as-of-right zoning of the proposed location must be thoroughly vetted prior to signing any commercial lease.  Zoning is particularly important.  If the property being leased is not zoned for the proposed tenant’s use, a special use permit must be obtained from the locality in which the premises are located.  A special use permit allows the property to be used for a non-conforming use outside the legal as-of-right zoning.

When such a permit is necessary, the tenant’s attorney should make sure that a contingency clause is inserted in the commercial lease to allow for the obtaining of such a permit.  Obtaining such a permit requires a detailed application, formal notification of adjacent property owners of the pending application, and, usually, attendance at a zoning board hearing to explain the situation at a hearing before the town zoning board.  Therefore, the lease should contain a clause that the proposed tenant will make a good faith application to the zoning board for a special use permit, and, if such application is rejected, that the tenant would have the option to terminate the lease in question.  Otherwise, a tenant may lease a property, and discover that they cannot open their business due to not being in compliance with zoning regulations.  A contingency clause allows the tenant to apply for a special use permit without the risk that they may be committed to a long-term lease without the ability to legally operate their business.

shortsaleOur firm frequently has clients who own property that is in foreclosure.  Often, these parties wish to sell their property and move on from the situation.  Once a sales price is agreed upon, the important question to be asked is whether the proceeds from the sale are sufficient to pay off the debt on the property, or, if not, what the expected deficiency will be.  As attorneys for the person selling a property in foreclosure, we would calculate the amount of all liens and judgments on the property, including the mortgage or mortgages in default, the costs and expenses of the sale, including New York State transfer tax and any local transfer tax, as well as the agreed upon broker’s commission for the sale.

This figure is then compared to the negotiated sales price for the property, as per the Contract of Sale.  In many situations, the proceeds may comfortably exceed the debts on the property and the expenses of sale.  For example, the total debt and expenses of sale may total $400,000.00, and the sales price may be $500,000.00.  In this case, the seller may move ahead with the closing and expect to walk away with some additional funds after all costs and expenses of the sale are paid, including the broker’s commission and transfer taxes associated with the transaction.

But what happens if there are insufficient funds from the sales price to cover the debts and expenses encumbering the property?  Let’s say the debt and expenses of sale are $400,000,00, and the sales price is only $375,000.00.  In that situation, the person selling the property has several options, which will be discussed in this blog post.

bankruptcy-300x200Prior blog posts have discussed the effect of filing for bankruptcy on properties which may be in foreclosure.  This post will explain what may happen to the property after a bankruptcy filing; namely, can the property still be sold to a third party, and under what circumstances.

Once a party to a foreclosure action files for federal bankruptcy protection, the Bankruptcy Court issues a stay on all pending legal proceedings.  A stay means that all pending legal proceedings must cease, and no new proceedings can be commenced.  This often occurs when the property in question is on the verge of being sold in a foreclosure auction.  Once a creditor has obtained a foreclosure judgment, and complies with all preliminary requirements (such as public advertising) for a public sale, in general, the only way to stop such a sale is for the debtor to file for bankruptcy.

The bankruptcy filing can even happen on the day before the scheduled auction sale.  Once the filing is made, notice is given to all creditors, who must cease all litigation and post-judgment proceedings, including a scheduled foreclosure auction.  If the creditor wants to proceed with the sale, it must file a motion with the Bankruptcy Court to lift the automatic stay of all proceedings.  This may take several months.  In addition, they are only permitted to proceed against the property in question, and not against the individual filing for bankruptcy.

fatherOur firm wants to extend its best wishes to all Dads for a happy Father’s Day.  We would like to mention some gift ideas of a legal nature that cannot be purchased in an ordinary department store.

Your Father may be on the verge of retirement.  As such, he may be in the market for a qualified attorney  who will negotiate and document the terms of his business sale.  Such a sale may involve preparation of a contract of sale, coordination of the payoff of a business or equipment loan, closing document drafting and the like.  Once the transaction is complete, your Dad can enjoy a care-free retirement.

If your Father is not ready to retire, he may have an ongoing business in the process of relocation.  Our attorneys would welcome the opportunity to negotiate the commercial lease for the new space. We would negotiate its terms in a manner most favorable to dear old Dad.

Time-to-GoPrior blog posts have discussed eviction actions after foreclosures in New York State.  Recently, due to the increased number of cases going to a final judgment of foreclosure and sale, and then being sold, there is an increased amount of tenants in foreclosed properties.  This post will discuss the legal status of these tenants and the possibility of eviction.

A fast summary of the legal foreclosure proceedings is in order at this point.  Once a Court issues a final judgment of foreclosure and sale, the property in question is then sold at public auction.  The highest bidder then pays the amount bid to the court-appointed Referee, and receives a Referee’s Deed, which is evidence of their ownership of the property.  The former owner’s interest is extinguished, together with the interest of any of the former owner’s judgment creditors.

Of course, the former owner may never vacate the premises.  Once their ownership interest is extinguished, they are subject to eviction by the new owner (the successful bidder at the foreclosure auction).  This may be the original lending institution, or an individual or corporate third party who purchases the property as an investment.  If the former owner is still occupying the premises, they are considered a holdover tenant.  Under the law, they must receive proper notice prior to an eviction proceeding being brought.  If they do not vacate within a particular period of time, the new owner can then commence a holdover eviction proceeding in the appropriate local court having jurisdiction over landlord-tenant matters.  For example, if the property was located in White Plains, then a holdover proceeding would be brought in White Plains City Court.

roof-300x237Now that the weather has finally improved in the New York metropolitan area ny-300x154  and Memorial Day weekend is fast approaching, many of our readers  may want to consider whether their cooperative building  provides access to their rooftop.  Carole King and Gerry Goffin , and later James Taylor , have sung these words while imagining their roof decks: “I climb way up to the top of the stairs and all my cares just drift right into space.”  Our readers must wonder is such a “…paradise…trouble proof?” This post will examine the legal issues to consider when converting an ordinary roof of a cooperative building into a recreational roof deck.

First, we will examine this situation assuming that the roof deck amenity is to be shared by all residents of the cooperative.  A qualified attorney  should review the cooperative’s governing documents to determine whether the Board of Directors or all shareholders are required to approve this project.  If a building-wide assessment needs to be implemented to fund the project, the governing documents may also advise your attorney  whether a Board resolution or a vote of the shareholders at an annual or special shareholders meeting  is required to authorize the assessment.

Next, let’s consider another situation, where the roof deck amenity is to be used exclusively by only one shareholder, usually the resident on the top floor.  The shareholder has agreed to buy this common area space, thus enhancing the cooperative’s coffers.  Prior to the project, the roof is common space owned by the cooperative.  For any particular shareholder to purchase this space, shares of stock need to be allocated to the space.  Unissued stock is called treasury stock.  Hopefully, the cooperative at issue has not already issued all of its stock.  A specialized real estate broker needs to determine that the number of shares to be issued to this area bear a reasonable relationship to the proportion of shares already issued for apartments in the building.  For instance, the broker will consider that 100 shares are issued for apartment 5A with 1,000 square feet and likewise for other apartments.  From that data, the broker will determine how many shares should be issued for the roof deck and the resulting purchase price.  Also, the cooperative attorney  will need to obtain a “no-action letter’ from the Attorney General of the State of New York  authorizing that a certain number of shares be issued for the space and that the cooperative is legally authorized to sell it to the shareholder.

guarantyMany landlords of commercial property  require that the obligations of the tenant be guaranteed by an individual or affiliated entity.  Most tenants of commercial leases are an entity, such as a corporation or limited liability company, whose only asset is the business engaged in the leased premises.  If the entity tenant cannot perform its lease obligations or leaves before the end of the lease, the landlord has no remedy besides renting the premises to a new tenant.  For this reason, most landlords require that an individual or entity closely affiliated with the tenant guaranty the tenant’s requirements.  That way, other assets of the guarantor may be available to the landlord if the tenant defaults under the lease.  This post will examine the various types of guaranties that may be requested by a landlord.

A full guaranty is the most broad, wherein the guarantor covers all of the tenant’s obligations under the lease.  Such obligations would include paying rent, real estate tax escalations, utility payments, common area maintenance payments, maintaining proper insurance, repair obligations and the like.  Landlords prefer this type of guaranty because there is no limit on the amount or extent of the obligation covered.  Also, the landlord does not need to meet any condition before enforcing the guaranty against the guarantor.

A partial guaranty is more limited.  Perhaps the obligations covered are only those that are monetary in nature or up to a certain amount.  Other limited guaranties may cover lease obligations such as keeping up with maintenance and repair obligations.  Partial guaranties could also “burn down” or “sunset” over time.  For instance, after a certain period of perfect performance by the tenant, the amount guaranteed reduces or the partial guaranty terminates entirely.  In partial guaranties, the landlord may need to meet certain conditions before it is enforced against the guarantor.