Articles Posted in Cooperative and Condominium

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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.

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.

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.

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?

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.

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.

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.

landlord-tenant-disputes-300x194A recent article in the New York Times discusses a large-scale study of evictions in the United States.  More than 83 million records were studied, and the impact on the our society as a whole was further examined.  Our law firm is a rarity in that we represent both landlords as well as tenants in eviction matters (of course, not in the same case!).  Most private law firms specialize in representing only landlords.  As a result, their clients tend to be owners of large properties, or corporations who own many buildings.  They do their work in bulk, often bringing many cases at once, and seeking to resolve them during court appearances en masse with the tenants who appear.

Tenants seeking proper legal representation may have fewer options.  They will have to seek out private law firms, such as ours, which represents both landlords and tenants.  As the New York Times article discusses, many tenants do not have the means to obtain legal representation in eviction cases.  They are faced with the prospect of a Court appearance where the landlord is often represented by experienced counsel who knows all the aspects of the legal system.

As a result of this imbalance, many Courts attempt to assist the tenants during their appearances.  Of course, legally, Judges must be neutral in their application of justice.  They may advise unrepresented tenants to obtain legal counsel and allow the appearance to be adjourned in order for the tenant to retain an attorney.  They may also ask the tenants whether they understand the legal proceedings, and review with the parties the details of any settlement agreement entered into between themselves and counsel for the landlord.  Our experience has been that the Judges, especially those in Westchester County, have on the whole been fair and impartial to both sides in these cases.

forecloseOur firm is often retained to defend property owners whose home is in foreclosure.  Most often, the entity bringing the foreclosure proceeding is a major lending institution, such as a national bank or credit union.  However, there are two sides to every story.  Some of our clients are individuals who have loaned money and taken back a note and mortgage on another’s real property.  The borrower has defaulted on his payments, and the lender does not know what to do.  This blog post will discuss how an individual lender can proceed with their own foreclosure action.

Our recommendation is to hire experienced counselForeclosure is a very complicated and detailed procedure under New York law.  If the action is not brought correctly, it may be dismissed by the Court.  Moreover, even if no opposition to the action is received, it may later be overturned, or a title company may refuse to insure the title of the property after the foreclosure process is complete, because of possible procedural irregularities in the foreclosure proceeding.

The first step in commencing a foreclosure proceeding would be for counsel to thoroughly review the note and mortgage documents.  These are the documents signed by the borrower, and are important to ascertain the legal requirements for a specific foreclosure.  For example, the note may call for monthly payments in a certain amount on certain dates.  If these payments are not received, it would constitute a default under the note.