Articles Posted in Real Estate Litigation

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.

money-300x225Prior blog posts have dealt with various aspects of foreclosed properties in New York State.  This post discusses the possibility of a deficiency judgment being entered against the borrower.  This can occur when the value of the property is less than the amount owed by the individual who signed the note and mortgage which is the subject of the foreclosure.

However, what happens when the opposite occurs?  Properties, especially those in Westchester County, may increase in value over time.  There may be certain situations when the value of the property is greater than the amount owed by the borrower.  When such a property is the subject of a foreclosure, there may be a funds surplus after the foreclosure is completed.  For example, a borrower purchases a single family house for $200,000.00, and takes out a mortgage for $150,000.00.  After making payments for many years, he loses his job and is unable to pay his mortgage.  The current balance on the mortgage is now $100,000.00, but the house has appreciated in value and is now worth $400,000.00.  How does this affect the foreclosure process?

As attorneys representing borrowers in the foreclosure process, the first possibility is that the borrower can simply sell the house for its current fair market value, and then use the proceeds from the sale to pay the mortgage in full.   However, there may be some situations in which this is not possible.  Some borrowers wait too long in the foreclosure process before engaging experienced counsel, and it may be too late to sell the property, as the lender has already obtained a judgment of foreclosure and scheduled a public auction of the property.  Another possibility is that the original borrower may have passed away, and her heirs may have failed to engage estate counsel to represent their rights in a foreclosure proceeding before the auction is scheduled.

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.

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.

reverse-300x206Prior blog posts have discussed the legal ramifications of reverse mortgages, which are becoming more common, and, with this, have become the subject of more court actions, including foreclosure cases.  Reverse mortgages allow a person to borrow against the equity in their home, and are limited to those homeowners older than age 62.  The sums borrowed against a person’s primary residence are usually not legally required to be repaid until after the borrower’s death.

Of course, no one lives forever, and, eventually, all things must pass.  At that point, the legal heirs of the borrower will often receive collection notices from the reverse mortgage lender, demanding repayment of the loan.  This post will discuss the legal options available to the heirs when a reverse mortgage has become due as a result of the borrower’s death.

The first recommendation is that the heirs retain experienced legal counsel to represent their interests.  Counsel should examine the documents underpinning the reverse mortgage, and check to ensure that the borrower actually took out the loan, and understood the ramifications of the transaction.  Unscrupulous lenders may take advantage of our senior citizens, some of whom may not be in top shape physically or mentally.  If a surviving heir suspects this to be the case, the reverse mortgage may be challenged in Court, depending on the overall circumstances of the transaction.

squatter-300x200A recent article in the New York Post discusses a 61 year old man who had refused to move out of his Hunter College dorm room, where he had lived for the past 38 years.  Obviously, this is not the ordinary landlord-tenant matter, in which a tenant has a written lease with their landlord, and the rights and obligations of the parties are clearly defined.  Although most eviction matters involve a landlord-tenant relationship, there are certain situations which involve a different legal framework, which will be discussed in this blog post.

The first type of unconventional situation is that of a licensee.  A licensee is a person who is given permission to live at the premises by the owner of the premises.  Usually, the licensee is not paying rent.  One example would be an unmarried couple, where one person is the sole owner of the property.  The other person moves into the premises with the consent and permission of the owner.  After some time passes, the couple may develop relationship problems, and decide to split up.  What happens if the licensee refuses to move out of the premises at that point?

In order to evict the licensee, a special proceeding must be commenced, usually in the local landlord-tenant Court, under Real Action Property and Proceedings Law, Section 713(7).  This section of the law covers eviction proceedings where no landlord-tenant relationship exists.  The first step would be for the property owner to revoke their permission for the licensee to live at the premises.  We would recommend this be done in writing, with experienced counsel preparing the necessary documents.  Once the notice of termination has been given, the licensee has ten days to vacate the premises.  If they fail to do so, an eviction proceeding can be brought in the appropriate forum.

divorce-300x225
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.

familyeviction-300x300Our firm receives many inquiries regarding property disputes among family members.  Often, several relatives may inherit property from a deceased relative, and cannot agree on how the property is to be maintained, whether the property should be sold, and who should live at the property.

Prior blog posts have discussed the possibility of a partition action when the owners cannot agree on the disposition of the property.  An additional question often raised, in several different contexts, is whether a family member, living at the premises, can be legally evicted.  The answer to this question involves delving into the situation in further detail, and is far from simple.

The first question to be asked is whether the person sought to be evicted is an owner of the property, whether through inheritance or other type of transfer.  If that family member is a legal owner of the property, the general answer is that person cannot be legally evicted.  In general, any owner of a property, even a partial owner, has a right to reside at the premises.  Let’s assume two brothers inherit a house from their parents.  Both brothers now own 50% of the house, and both have a legal right to reside at the house without paying rent to the other.  However, they are both legally obligated to equally share the costs of the upkeep of the house, such as routine maintenance and real estate taxes.  Neither would have the legal right to bring an eviction action against the other.  The situation could be resolved by one of the brothers buying the other’s interest, or selling the property to a third party, and splitting the net proceeds.