COVID-19 Update: How we are serving and protecting our clients.

Articles Posted in Cooperative and Condominium

By

sickMost of us have been recently inundated by reports of the Coronavirus pandemic.      virus Although many of our readers do not travel to some of the afflicted locations, fear has a way of becoming contagious in its own right and can have negative business consequences.  Fundamentally, the fear is based upon not only becoming sick but also on the effect that widespread contagious illness can have upon the economy.  This post will address how our attorneys  respond to unfavorable financial times and the strategies to be rendered.

Real estate transactions  tend to be voluntary business activities.  For instance, a proposed buyer may be renting an apartment and be in the market to potentially purchase a house.  Typically, a buyer needs liquid cash assets to post a downpayment and have the cash needed to close.  If the stock market continues its losses of the past few days, a buyer may decide not to move forward because he needs to sell additional assets than previously intended in order to raise the cash needed.  An experienced attorney  would advise such a person that real estate is an investment that can be sold at a future date, hopefully at a profit.  However, continuing to rent an apartment does not provide an asset to be sold at a future date or potential tax benefits such as deducting mortgage interest and real estate taxes paid.  Now that we are about the enter the Spring market , new inventory and opportunities for buyers are available.  Perhaps if a seller is concerned that her house will not sell as readily in this economy, the price may be reduced to attract additional buyer interest.

Certainly, commercially leased properties  may see reduced customer traffic if consumers are afraid to be in public places and prefer to order products online or not visit restaurants where ill persons may be present.  If such conditions persist, a tenant may need a seasoned lawyer to negotiate a lease modification or lease surrender , thus assisting the tenant in not being required to continue in a lease that is not consistent with current economic conditions.  If such a modification cannot be negotiated, the tenant may be advised to “go dark” .  Should the landlord not be willing to accept these options, he may seek to bring a landlord-tenant proceeding against the tenant.

Continue reading

By

cheatingMany of our readers are aware of the recent college admissions cheating scandal.  Credentials of proposed candidates were misrepresented in an effort to obtain admission to prestigious colleges.  Parties to real estate transactions in New York may also misrepresent financial qualifications and property conditions in an effort to close the sale of a property.  This post will address the types of misrepresentations that may occur in real estate transactions and the remedies if such misrepresentation is discovered.

From the prospective of a purchaser, misrepresentation can take the following forms.  It is not unusual for a contract to purchase a house to contain a provision that the purchaser represents that she has adequate funds to close, has not filed bankruptcy during the past seven years, and is not aware of any judgments filed against her.  The purpose of this clause is to deter a seller from entering a contract, taking the property off the market and later discovering that the purchaser cannot obtain cooperative board approval  or obtain a loan commitment due to facts that the purchaser knew at the outset of the transaction.

Purchasers also are often required to represent that a loan application will be pursued with diligence.  A purchaser may falsely elevate financial details on his mortgage application in an effort to qualify for a mortgage for which he is not otherwise qualified.  Lenders protect themselves as to this potential form of misrepresentation by requiring proposed borrowers (and applicants for short sale approval) to deliver a signed IRS form 4506-T.  This document allows the lender to obtain tax returns directly from the IRS, in case the borrower falsified tax returns delivered to the lender in an effort to look more favorable as a borrower.  In addition, lenders typically contact the borrower’s employer immediately before the closing to confirm continued employment and salary awarded.  Cooperative applications commonly contain personal and business letters of reference.  Due diligence may dictate that the authors of such letters be contacted to confirm that they did indeed write and submit such letters as part of the board application.

Continue reading

By

auction-300x102
We have advised our readers of the process for bidding at a foreclosure auction sale in New York.  Perhaps you have attended the auction, participated and made the highest, winning bid.  This post will address what happens next.

Upon making the highest bid, the participant will need to make an immediate payment of ten (10%) percent of the bid price.  The auctioneer will provide a written receipt and the parties will sign the receipt.  The successful bidder should contact an experienced attorney  and provide the Notice of Sale, Terms of Sale and Receipt to his attorney.  Your attorney should review these documents to ensure compliance by the successful bidder as well as the party auctioning the property.

Typically, Terms of Sale provide for the bidder to close and receive the Referee’s Deed to the property within thirty (30) days of the auction sale.  Failure to do so may result in the loss of the deposit and the auctioning party offering the property to the next highest bidder or holding a second auction.  Therefore, the successful bidder should be prepared to pay the balance with readily available liquid funds, without the need to apply for a mortgage.  The attorney should order a title report, which will be bound in a title policy at closing, so that no other liens will encumber the property and the status of real estate tax payments is known for adjustment purposes.  Then, the successful bidder will have the benefit of title insurance.

Continue reading

By

eviction-300x220Our firm frequently handles eviction actions on behalf of both landlords and tenants.  In order to commence an eviction action, the tenant is served with a Notice of Petition and Petition.  These documents state the date, time and location of the Court in which to appear. One common occurrence is when a tenant fails to appear in Court for a scheduled hearing.  This post will address how such a situation is resolved.

Sometimes the tenant fails to appear at the hearing.  Whether it is because they did not actually receive the notice, cannot get to Court for health reasons, a failure to understand the nature of the proceedings, or otherwise, the Court will enter a default against the tenant.  What this means is that by failing to appear and present a defense, the landlord is entitled to receive the relief requested in their Petition.  Depending on the type of eviction proceeding, this relief will usually consist of a money judgment (in a non-payment proceeding) for the amount of rent claimed to be owed by the tenant, as well as a warrant of eviction.  The warrant is a legal document that allows the property owner to enlist a City Marshal or Sheriff (depending on where the property is located) to physically evict the tenant and remove his belongings from the premises.

Depending on the particular local court in which the action is brought, the Judge may sign these documents immediately or they may be submitted to the Court Clerk for the Judge’s signature at a future date.  Once the warrant is signed, the landlord will send it to the City Marshal or Sheriff to proceed with the eviction.   The tenant will then be served with a 72 hour notice, which states that the eviction will proceed in three days.

Continue reading

By

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.

Continue reading

By

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.

Continue reading

By

OwnershipLast week’s blog post discussed legal issues relating to a foreclosure as it applies to cooperative apartments in New York State.  To summarize, because cooperatives are considered shares in a corporation, and not real property, different legal procedures are necessary when an owner of a co-op defaults on her share loan or maintenance payments.

This blog post relates what happens when two or more co-owners of a property are unable to agree on the disposition of a jointly-owned cooperative, or “co-op” apartment.  A recent article in the New York Post describes a situation where a Manhattan woman purchased a co-op apartment on the Upper East Side with her fiancé in 2005, shortly after they got engaged.

Unfortunately, in 2007 the couple became estranged and the engagement was called off.  One of the parties occupied the apartment, and the other moved out.  The parties agreed that the woman who was actually living at the apartment would pay her ex-fiance 50% of the value of the apartment.  However, in the 11 years subsequent, she has failed to do so, continues to live at the apartment, refusing to give access to her ex-fiance.  What is the legal remedy for this situation?

Continue reading

By

building-300x225Many of our prior blog posts have discussed foreclosures of real property.  But what happens when the owner of a cooperative or “co-op” apartment cannot pay his share loan or maintenance?  Although the term “foreclosure” generally applies to the taking of real property by a lienholder, a co-op owner does not own real property, but owns shares in the cooperative corporation which have been allocated to his apartment within a larger building.

A co-op owner is issued a share certificate, which states how many shares he owns, as well as listing the name of the co-op corporation, the address, and the specific apartment number. He is also issued a proprietary lease by the co-op, which allows occupancy of a particular unit and states the terms and conditions of his share ownership.  When taking out a share loan to purchase the co-op, the buyer/owner must pledge his shares as collateral for the loan.  The actual share certificate and proprietary lease must be physically delivered to the lender (or its legal representative) at the closing, to be held as collateral until the loan is paid in full.

However, there may be situations where an owner cannot make his share loan payments, and the lender seeks take permanent possession of the collateral, which is the share certificate.  In New York, this is known as non-judicial foreclosure.  This means that an action is not brought in Supreme Court, where real property foreclosure actions are generally commenced.  Instead, the foreclosing lender must bring a proceeding outside of the Court system.  This is usually done by sending default and termination notices to the borrower.  If the borrower does not cure the default within a given amount of time, then the lender can notice a public sale of the shares pursuant to New York’s Uniform Commercial Code, Article 9.  This law sets forth the terms and conditions under which a non-judicial sale of the shares can be held.  Assuming that notice has been properly given, there may be an auction sale of the shares, in which any party can submit a bid.  The high bidder, which is usually the lender, then takes possession of the shares in question.  It should be noted that the co-op board must approve any actual occupant of the apartment, even if the apartment is owned by another party subsequent to the auction sale.

Continue reading

By

know-the-rules-300x167Our firm is called upon to both defend and prosecute mortgage foreclosure actions.  One of the first questions that should to be asked is who holds the mortgage loan, meaning the party who is entitled to bring the action.  In most cases, it is an “institutional lender,” such as a bank or a credit union.  However, there may be situations where the lender, or the note holder, is not an institutional lender.  This can occur in several ways.  Often, the institutional lender sells the mortgage and note to a third party.  This purchaser can be a company or a private individual.  The third party takes an assignment of the note and mortgage, and “steps into the shoes” of the institutional lender.  They pay a fixed amount to the original lender, and hope to make a profit by foreclosing the property and selling it for a greater sum than they paid for the loan.

There can also be situations where the loan originator is a private individual.  This can occur when a family member loans another family member funds to purchase a house or apartment, and takes back a note and mortgage, to be repaid over time.  Another possibility is that the seller of the property loans the funds to the buyer, and a purchase money mortgage is used to secure the debt of the buyer.

A person who may be in foreclosure may now ask, what’s the difference whether the holder of a mortgage and note is an institutional lender or a private individual?  Our experience has shown that the identity of the lender can make for quite a variation in the litigation and resolution of a foreclosure case.

Continue reading

By

lowSome of our clients have recently inquired as to whether their cooperative board may have been declined their proposed sale because the proposed purchase price is too low.  As we have indicated in previous posts , cooperative boards can decline a purchase for any or no reason so long as such reason does not discriminate against protected classes.  Once a seller hears that their well-qualified purchaser has been declined, sometimes they suspect that it is because they accepted a price that was too low.  Should a cooperative board be willing to disclose this possibility, there are steps that the seller can take to keep the deal alive.

Let’s explore the rationale for a cooperative board declining a sale because the price is too low.  The board is likely concerned that a sale price significantly lower than others in the building may adversely affect valuations of other apartments, so that all units for sale in the future may be potentially valued at a lower price as a result.  The board, as a fiduciary for all shareholders, wishes to maintain elevated apartment prices for the benefit of all shareholders.  As such, declining a purchase because the price is too low is perfectly legal.

However, the seller may be willing to accept what appears to be a low price for the following reasons.  Perhaps he is in financial distress, owes maintenance arrears and cannot cover the past due charges without selling the unit.  In this case, it is better for the cooperative as a whole if this person sells so that a financially secure buyer owns the unit instead and is current in her maintenance payments.  Also, the shareholder may be getting divorced or has been relocated in his job, making it necessary to sell.

Continue reading