Articles Posted in Real Estate Litigation

convent-300x223Recently in the news is a decision in a lawsuit regarding the potential eviction of a defrocked nun in a Russian Orthodox convent located in Nanuet, New York.  This case is an interesting intersection of two areas of the law that our firm practices; namely, how the decisions of a religious organization can affect the disposition of real property, as well as the residents of said real property.

Prior blog posts have discussed how religious corporations must obtain approval from the New York State Attorney General in order to sell, lease, or mortgage real estate owned by the religious organization.  This often causes disputes where there are different factions within the religious organization, and these factions cannot agree on whether to sell real estate in order to relocate the place of worship.  As prior posts have discussed, courts are reluctant to intervene in disputes which are solely the result of disputes over religious doctrine.  However, disputes over control of a religious organization which can be resolved on the basis of neutral principles, that is, without second-guessing decisions made solely on the basis of theological grounds, may be resolved by the court.

The First Amendment to the United States Constitution generally forbids government involvement in religious disputes.  This principle also applies to the Courts, which are, in essence, instruments of the government, whether state or federal.  The lawsuit under discussion involves attempts to allow an ejectment action against a nun who was defrocked by her parent religious organization, the Russian Orthodox Convent Novo-Diveevo.  Our blog has previously discussed evictions against certain “non-traditional” tenants, such as licensees and invitees, who usually do not have written leases, but reside at certain properties.  The usual course of action in such matters is to serve a Notice to Quit, giving the tenant (often referred to as a licensee or invitee, depending on the specific situation) thirty days in which to vacate the premises.  If they do not vacate, the owner of the property can then either bring a petition for eviction in the local landlord-tenant court, or, in cases involving more complex issues, a civil action for ejectment in the Supreme Court in which the property is located.

auction-300x200Our firm receives many inquiries from parties who intend to bid at a foreclosure sale.  Foreclosure sales most often occur when a party is unable to pay a mortgage encumbering a property, and a foreclosure judgment is obtained by the lender.  What happens next?  A foreclosure sale, or auction, is scheduled by the lender.  This must be properly noticed by having all parties served with the Notice of Sale, as well as having the Notice published in a general circulation publication, which the Court will order, such as the Journal News in Westchester.

Once all notices have been given, the sale is usually held in the lobby of the Courthouse of the Supreme Court in the County in which the foreclosed property is located.  Most courthouses in New York State set aside a specific area or room in their building to hold such auctions, which are open to all members of the public.  Prior to the auction date, it is wise for potential bidders to have experienced counsel review the terms of sale.

The sale is then conducted by the Referee for the foreclosed property.  The Referee is an individual, usually an attorney, who has been appointed by the Court to conduct the auction and transfer the property after a judgment of foreclosure has been obtained by the lender, who is the plaintiff in the foreclosure lawsuit.  The Referee’s role is to prepare all documents, conduct the auction sale, and then prepare the property transfer documents and convey all funds to the lender after the auction.

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.