Cooperative and Condominium

March 28, 2018

Starting a Foreclosure Action in New York

Our 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 counsel. Foreclosure 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.

January 25, 2018

You Belong With Me: Disclosing Reasons Behind Coop Rejections

By Weiss & Weiss

Consider the following scenario. A shareholder in a cooperative has been trying to sell her apartment because circumstances have resulted in her opportunity to buy a house in a sunny location out of town. Her buyer is a young professional gentleman who wants to own, rather than rent, and build equity to trade up to another home in the future. Their real estate agents make the deal. All parties look forward to closing. Of course, such a transaction requires approval not only of the lender making the purchase loan but of the cooperative board. Once the buyer obtained his loan commitment, after having submitted numerous financial documents and information, he finds out that either the board will not even interview him or has declined to approve the purchase after the interview was held.

It has been longstanding practice in New York that a board does not have to disclose the reasons why it is declining an applicant. The board is governed by the “business judgment rule” , allowing it broad latitude for its decisions, assuming that most decisions are made for the benefit of the cooperative as a whole. The board’s decision is only subject to being overturned if the parties can prove that the decision was made for an illegal reason, such as discrimination. Let’s say that the proposed buyer is a homosexual, which became obvious by information contained on the board application as to affiliations or as discussed in the interview. Should that have been the reason why the declination was issued and the applicant was able to prove same, the decision could be overturned and subject the board to potential damages because homosexuals are a legally protected group.

It has recently been proposed in the Westchester County Legislature that cooperative boards should be legally required to disclose their reasons for rejection. Those advocating for the rule suggest that it will prevent discrimination and is helpful to “protected classes”. This author feels that the law already protects applicants against boards that discriminate. However, the proposed law would be helpful for other reasons. It contains specific timeframes for the review of applications. Should a board decide not to interview during the summer so that its members can travel, the law would prevent a three month delay in the review of an application. Our readers should be aware that if a person’s loan is declined, reasons will be stated in a letter, allowing the applicant to improve his submission in the future. However, without any stated reason for a board declination, the seller and the real estate listing broker will have no information as to the type of buyer sought by the board. What if the board now prefers that applicants earn more than $100,000 annually, but it has not communicated this information to shareholders? With free disclosure of information, the broker will know how important it is to verify income and will not suggest a buyer who cannot meet the criteria.

December 14, 2017

Components of a Partition Action for Couples

By Weiss & Weiss

Our firm is frequently engaged to handle disputes over property ownership. In many cases, a partition action is necessary. This post will explain the essential components of such an action. The first and most important element is that the dispute be over real property. Although there can be disputes over personal property, such as possessions and vehicles, a partition action can only concern real property. Including other types of property in a partition action should be avoided, as it is not covered by the statute in question, and leads to issues not readily resolvable in such an action.

The real property in question must be located in New York State, and also should be owned jointly by the parties. There are several types of joint ownership in New York. Married couples often own property as joint tenants with right of survivorship. This means that if one of the joint owners passes away, their ownership interest immediately passes to the surviving spouse. However, it is fairly uncommon for a spouse to bring a partition action against the other spouse. The reason for this is that such disputes between spouses are almost always part of a divorce action, where other assets and liabilities are at issue. Therefore, the resolution of the dispute is heard in the Matrimonial Part of the Supreme Court, rather than in a partition action. The Matrimonial Part will usually resolve the dispute over the real property (as well as any other jointly owned property) as part of the divorce case. In certain rare cases, the real property in dispute is not resolved in the divorce action, and then, a separate partition action may be necessary.

In these times, it is becoming more common for couples (whether single sex or heterosexual) to remain unmarried, but still purchase real property together. As married couples may split, so may unmarried couples. However, the legal ramifications of such a split may differ for unmarried couples. Because they are not married, no divorce action can be brought in the Supreme Court Matrimonial Part to resolve all property issues. Therefore, a partition action would be necessary to resolve the issues regarding real property jointly owned by the couple. Such an action would be brought by one of the owners, in order to have the property sold by the Court, if the parties cannot agree between themselves how to dispose of the real estate.

December 8, 2017

Buying a House May Still Be the Right Move

By Weiss & Weiss

Our readers may be aware that there is a movement to pass sweeping Federal tax reforms. Some analysts have suggested that such proposed legislation may not be favorable to highly taxed areas such as New York and that home ownership may be discouraged as a result. The proposed legislation in its current form may limit Federal deductions for real estate taxes to $10,000 per year. Many properties in the areas served by our practice have yearly real estate tax obligations in excess of this amount.

There is a possibility that the legislation will not pass in its current form. Also, homeowners always have the ability to contest their real estate taxes and potentially obtain a reduction. The proposed purchaser may consider a house with taxes lower than or closer to $10,000 per year. Over the course of decades of homeownership, laws affecting deductions of real estate taxes may change. As a result, the decision to own a home should not be dictated merely by whether real estate taxes above $10,000 may be deducted.

Owning a single family home has the following additional benefits. A sense of permanence from creating family memories over many years can only really take place in a house. Building personal equity can only occur when real estate is owned. If a person rents an apartment, he will merely pay rent every month and not have any resulting value to trade in. However, if a house is purchased, the value is likely to increase, leading to a profit when the property is eventually sold. Such profit can be converted to another property or investment in the future.

November 2, 2017

Outstanding Judgments – Their Effect on Real Estate Transactions

By Weiss & Weiss

In the course of an ordinary real estate transaction, our firm orders a title report on the property being sold. Contained in the title report is a judgment and lien search, which shows any outstanding judgments against the seller and liens against the property. Why is this important? In New York State, a money judgment, when filed in the Supreme Court of a county in which a debtor owns real property, become a lien on property for a period of ten (10) years. Furthermore, a judgment creditor may file a motion at the end of the ten year period to extend the lien for an additional ten years. After twenty years, the judgment is no longer a lien on the property.

Therefore, when a seller of real property has a recorded judgment less than ten years old, it becomes an issue which must be cleared prior to closing. The reason for this is that the contract most likely provides that the property will be conveyed free of judgments and liens, and, in addition, a mortgage lender will not approve a loan to close without resolution of an outstanding judgment or lien. If the judgment remains as a lien on the property, the new owner may find himself subject to a foreclosure proceeding against his newly-purchased property, even though the judgment was not incurred by him.

Since most standard Contracts of Sale in New York contain a clause that the property must be conveyed free of all outstanding liens and judgments, it is the seller’s responsibility to ensure that there are no judgments against the property. Failure to do so would give the potential buyer grounds to have the contract cancelled and receive a refund of their downpayment. Obviously a seller does not want that to happen. What does a seller do when there are outstanding judgments of record?

September 7, 2017

Who’s the Dictator?

By Weiss & Weiss

The New York Post recently reported a news story wherein a condominium property manager “decorated” the common areas of the building with Nazi and other historic propaganda relating to dictators. Residents of the building felt threatened and intimidated by other activities of the property manager, including alleged physical threats. This story is an exaggerated version of many tales told by clients of this firm . In this post, we will discuss suggestions for managing abusive employees of cooperative and condominium buildings as well as hostile environments created by certain board members.

The cooperative or condominium building is legally responsible for the acts of its employees. The exception to this rule is criminal activity, with which the perpetrator bears responsibility. If an employee is abusive to unit owners or denying services to particular shareholders, the board has an obligation to discipline or remove the offending employee. Boards should consult with a qualified attorney in the event that the employee is a union member in order to strategically handle the employment situation, so that the building is not subject to a grievance filed with the union.

If the board is not responsive to shareholder complaints, it may be appropriate to seek an election to replace current board members with those more in keeping with unit owner sentiment. First, one should request that an experienced attorney review the governing documents to determine how to legally hold a special or general election to replace the board. Then, all procedures outlined in the governing documents should be followed so that the election is not subject to being overturned. Hopefully, this will result in a new board being installed that will manage the offending situation by suitable means.

August 25, 2017

Divorce and Foreclosure – What are Your Rights?

By Weiss & Weiss

Financial troubles can be the cause of much stress for married couples. Often, these stresses lead to a couple separating, and ultimately, divorcing. In such situations, there will always almost be issues regarding the marital residence, be it a house or an apartment. Due to the financial issues, the property may already be in foreclosure. This blog post will explore the legal issues relating to married couples who own property which may be in foreclosure, and the issues that arise if a divorce proceeding occurs.

The first assumption is that the property in question is owned by both parties. The legal term for such ownership is tenants by the entirety. This means that the property is jointly owned by a married couple, and if either party passes away, their ownership share automatically passes to the surviving spouse. It should be noted that tenants by the entirety only applies to married couples. Once a divorce is finalized, the ownership interest changes to tenants in common, which means that the interest does not automatically transfer upon death to the survivor, but remains as part of the estate of the deceased.

Of course, when the parties are divorcing, the ownership of the martial residence is usually a major issue. If the property is in foreclosure, or is likely to become the subject of a foreclosure case in the near future, such issues must be addressed as part of the divorce proceedings. There are several possibilities in this situation. First, if there is equity in the property, and neither party wants to remain in the marital residence, the property may be sold, with the couple sharing the proceeds as per their divorce agreement. In the course of such a sale, any outstanding mortgage would be paid off, and any foreclosure proceedings would be discontinued as a result of such a sale. This is probably the easiest solution, although not always possible.

June 22, 2017

Property Sales and Bankruptcy in New York

By Weiss & Weiss

Prior 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.

June 15, 2017

“Legal” Gift Ideas for Dad on Father’s Day

By Weiss & Weiss

Our 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.

May 19, 2017

Up on the Roof

By Weiss & Weiss

Now that the weather has finally improved in the New York metropolitan area 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.