Cooperative and Condominium Category Archives — New York Real Estate Lawyers Blog Published by New York Real Estate Attorneys

April 11, 2022

Cold Feet- Do I have to Close?

We have encountered parties to real estate transactions who get “cold feet” between the time of contract signing and closing. These persons may seek to break the legally binding contract that they have signed and cancel the deal. This post will address when failing to perform a real estate contract may be permitted and the risks involved should the contract not be able to be cancelled.

First, this issue will be examined from the perspective of the buyer. Real estate contracts typically contain conditions, such as the property will appraise for at least the contract price, that the buyer will obtain a mortgage commitment, board approval will be issued if the purchase involves a cooperative apartment and there will not be an insurmountable title issue. If any of these conditions are not met and the buyer’s attorney notifies the seller’s attorney within the timeframe required by the contract, the contract can be legally cancelled and the downpayment will be refunded to the buyer.

At times, a buyer attempts to use issues that should have been addressed during the pre-contract due diligence period to cancel the contract. Most contracts state that the buyer has conducted all due diligence and inspections of the property before the contract is signed. The buyer’s concerns about such issues as property conditions, the amount of real estate taxes, or monthly carrying costs of a cooperative or condominium unit must be raised before the contract is signed and are not causes to unravel the contract. A buyer cannot cancel the contract merely because he no longer wants the property or thinks he cannot afford it.

December 1, 2021

Pre-Litigation Settlements of Partition Matters

By Weiss & Weiss

Our firm receives many inquiries from co-owners of properties. As longtime readers of this blog are aware, a partition action can be brought in the appropriate Court when co-owners cannot agree on the disposition of real property. Such an action would demand that the Court appoint a Referee to determine the respective shares of the co-owners, and, if necessary, actually sell the property.

However, there are often situations in which the parties may agree to the disposition of the property without resorting to actual litigation. In this pre-litigation period, the parties, through their attorneys, may negotiate a resolution in which either one party can buy the other’s share of the property, or agree to jointly sell the property and share the proceeds. In such a situation, experienced counsel should prepare a written agreement, to ensure compliance with the parties’ understanding.

What provisions should be included in such an agreement? The agreement should first state that the parties are co-owners of the property, and the exact amount of their percentage shares of ownership. Next, there should be terms for the disposition of the property. For example, two brothers inherit a house from their parents, and agree to sell the property and share the proceeds equally. The agreement should state that the parties will cooperate in hiring a licensed real estate broker to market and sell the property. The agreement may even include more details, such as the name of the real estate broker, and the initial listing price for the property.

May 21, 2021

Surplus Funds in Foreclosure Cases – How to Recover?

By Weiss & Weiss

Prior blog posts have discussed the concept of surplus monies in foreclosure proceedings. Surplus funds occur when a property is sold at a public foreclosure auction, and the amount bid exceeds the amount of debt owed on the property. For example, a homeowner defaults on his mortgage, and owes $300,000.00 to his lender. After extensive legal proceedings, the house is sold at public auction, and the winning bid is $400,000.00. There is therefore an “extra” $100,000.00 now available. Does the defaulting homeowner have a right to these surplus funds?

The answer is yes. In general, subject to other liens, the owner of the property which is sold at auction has the right to collect the surplus funds if the house is sold for more than the foreclosing creditor (usually a bank) is owed. How does the former owner of the property go about collecting these funds? We would advise that any homeowner who may be in such a position to engage experienced counsel to represent his interests. The reason is that collecting surplus funds requires knowledge of the Court system and the procedures necessary to allow the funds to be disbursed.

When a property is sold at auction, a Court-appointed Referee is responsible for collecting the funds from the winning bidder, and paying off the creditor who brought the foreclosure action. Once this is done, the Referee will file a report in the appropriate Court, showing an accounting of the sums received from the auction, and the disbursement of same. The report will also show whether there were surplus funds; that is, whether the winning bid exceeded the amount owed to the foreclosing entity. If that is the case, the Referee will deposit the surplus funds with the Department of Finance in the County in which the foreclosure took place.

January 20, 2021

Couples and Partition Actions in New York

By Weiss & Weiss

Our firm receives numerous inquiries from couples who co-own property, although they have never married. Many couples, whether they be man and woman or single sex couples, either delay getting married or do not get married at all, even if they have children together. Although such couples may say that “it makes no difference” and that a marriage license is “just a piece of paper,” legally, it can make a great difference when an unmarried couple co-owns real estate.

If a legally married couple owns real estate together, any real estate they own jointly is generally considered marital property, and, if they decide to get divorced, the issue of the disposition of the property in question is resolved as part of an overall divorce settlement. If the couple cannot agree whether to sell the property, then the divorce action may go to trial, with a Judge making the decision after hearing the facts in Court.

However, when an unmarried couple purchases real estate together, and decide to split up as a couple, it raises significant legal issues which may require a partition action to resolve. A partition action is brought when two or more people co-own real estate, and no longer wish to co-own the real estate together. This can also apply to cooperative apartments, which are considered ownership of shares in a cooperative corporation, but which can also be the subject of a partition action.

October 8, 2020

Division of the Proceeds in a Partition Action in New York

By Weiss & Weiss

Our firm often handles partition matters where two or more people co-own a property. Under New York law, no one is forced to co-own property if they do not want to. As a result, a partition action may be brought to have the property sold by the Court and the proceeds fairly divided between the co-owners.

Most, if not all, of partition actions are settled without actually having a Court-ordered sale of the property. Usually the parties reach an agreement to either sell the property to a third party or arrange to have one of the parties buy the other’s interest in the property.

However, the question usually arises regarding what may be a fair division of the proceeds in the resolution of a partition case. This post will explore the various factors which may arise in such a situation.

September 23, 2020

Foreclosures – Judicial and Non-Judicial

By Weiss & Weiss

Some of our prior blog posts have dealt with foreclosure actions concerning real property. A recent New York Supreme Court case, however, deals with a different type of foreclosure, and the effects of the COVID-19 pandemic on the same.

Most foreclosure cases in New York State are of the judicial type, and deal with the foreclosure of real property. In a judicial foreclosure, the owner of real property gives a mortgage and note to a lender, in exchange for a loan. The real property is collateral for the loan. If the borrower fails to repay the loan, or otherwise defaults on the loan by failing to follow the loan terms, the lender may file a foreclosure action in the appropriate New York State Court, which would be the Supreme Court in the county in which the property is located.

New York State currently has a moratorium, due to the effects of the coronavirus, on judicial foreclosures. Under this Administrative Order, “no auction or sale of property in any residential or commercial matter shall be scheduled to occur prior to October 15, 2020.” However, not every foreclosure case in New York is a judicial foreclosure, requiring a Court proceeding. Non-judicial foreclosures occur most commonly in coop matters. An owner of a cooperative apartment does not own real property, but, rather, shares in the cooperative corporation, which, in turn, owns the real property on which the building is located. As a result, if the shareholder defaults on a share loan, the lender may foreclosure on the shares without Court intervention. The lender can issue notices under the Uniform Commercial Code (UCC), which is integrated into New York law, and have an auction sale under the UCC rules, without going to Court.

August 7, 2020

Types of Ownership and their Effects on Partition Actions

By Weiss & Weiss

Our firm is frequently asked to bring partition actions on behalf of property owners. For those who have not read all of our blog posts, a partition action is brought when a co-owner of property no longer wishes to own the property, and the other co-owner refuses to sell the property or buy the other out of her share. A Court will eventually order the property sold, and the proceeds divided among all of the owners. Our experience is that the parties will usually settle the matter before this occurs, either by agreeing to sell the property to a third party, or by having one of the owners buy the share of the other owner.

There are two common scenarios in partition actions, which have different effects on the action and the specific elements of how it may be resolved. The first situation is when individuals inherit property after the death of a loved one. Usually, the last of two parents passes away, and leaves property, such as a house, to two or more siblings. The siblings now co-own a house, for which they may or may not have a use. One of the siblings may want to live in the house, or may have already been living at the premises as an adult. That person may wish to remain at the property. However, in such a situation, his sibling may have married and moved out the house, and may even live out of New York State. The sibling who has “moved on” has no use for the property, and wants to have it sold so that he may receive a share of the proceeds for his own needs.

The resolution of this situation may be that the sibling remaining at the property will have to purchase the share of the sibling who does not want the house. If the house has been fully paid for, with no mortgage encumbering it, the sibling remaining at the house may be able to obtain a mortgage and use part of the mortgage proceeds to buy out the interest of their sibling. Such a transaction should be conducted by experienced counsel, as title would need to be transferred to the remaining sibling at the same time that the funds are obtained from the mortgage. At that point, the sibling who does not want the house will transfer her interest, and obtain funds to compensate her for her share of the property.

April 22, 2020

The Show Must Go On – Closings and Coronavirus in New York State

By Weiss & Weiss

Despite current conditions, the purchase and sale of real estate in New York is continuing. This post will discuss how COVID-19 has changed the “nuts and bolts” of an ordinary transaction, from start to finish. First, let’s assume a homeowner wishes to list her home for sale. Due to social distancing expectations, mass showings of properties, such as “open houses,” would be frowned upon, if not prohibited. However, individual showings by appointment of properties, by licensed real estate brokers, may continue. Another option being utilized is virtual showings of properties on various online platforms. This allows potential buyers to view the property while maintaining safety. Younger or first-time homebuyers may be more comfortable with the virtual option, as they usually have more familiarity with online services.

Once there has been an accepted offer, the next step is often the hiring of a home inspector to inspect the property. Currently, this is being allowed, but with the restriction that the inspector will inspect the property alone, without being accompanied by the potential buyer. Once the inspector completes his work and issues a report, the buyer can use this information in contract negotiations.

The parties will then negotiate a Contract of Sale, which is traditionally prepared by the seller’s attorney. As contracts are prepared and transmitted online, current conditions will not affect this portion of the transaction a great deal. The attorneys, buyer, seller, and brokers can still exchange information and offers online or by telephone without violating any social distancing restrictions.

February 27, 2020

Fear Gone Viral

By Weiss & Weiss

Most of us have been recently inundated by reports of the Coronavirus pandemic. 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.

March 15, 2019

Varsity Blues? Misrepresentation in New York Real Estate

By Weiss & Weiss

Many 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.