Articles Posted in Real Estate Litigation

taxlienPrior blog posts have discussed the concept of surplus monies in foreclosure proceedings.  When a foreclosed property is sold at public auction, the winning bid may exceed the total amount owed to the entity foreclosing on the property.  In such a case, the excess funds are considered “surplus funds,” and the Court-appointed Referee will then deposit the surplus funds with the New York State Department of Finance, which has the authority to disburse the funds to the proper party, upon receipt of a Court order from the Court that handled the original foreclosure case.

Most foreclosure cases involve mortgage debt to an institutional or individual party, usually involving the amounts borrowed by the owner in order to purchase the property, or a loan taken out on the property after it is purchased, such as a second mortgage.  However, there is another category of foreclosures that may generate surplus funds – tax lien foreclosures.

Tax lien foreclosures occur when the owner of real property fails to pay property taxes due on his property.  Unless the property is tax-exempt, such as a property owned by a non-profit or religious institution, there are generally local real estate taxes, such as village, city, school, and county taxes assessed to the property.  Depending on where the property is located, one or more of these taxes would be assessed to the property, either on an annual, semi-annual, or other type of payment schedule as determined by the taxing entity.

throuple-193x300Our firm often fields inquiries from clients regarding successor rights in New York residential rental apartments.  First, experienced counsel should determine whether the premises are subject to rent regulation.  Rent regulation in New York State applies to many, but not all, residential units.  It is more prevalent in New York City than in its surrounding suburbs.  However, it does also cover some rental units in Westchester and Nassau Counties.

Assuming that rent regulation does apply to the premises, then the current occupants may be allowed successor rights once the original party on the lease either passes away or vacates the premises.   For example, let’s assume Grandma rents an apartment subject to rent regulation, and only her name is on the original lease.  As Grandma ages, some of her grandchildren move in to take care of her, and eventually become permanent occupants of the premises.  Even though they are not listed as tenants on the original lease, these individuals, as family members occupying the premises, may be entitled to a successor lease once Grandma passes away or moves out of state.

A recent New York City Court case raises new possibilities regarding the legal definition of “family members” as they apply to more modern, non-traditional relationships.  The case of West 49th Street, LLC v. O’Neill involved a New York City apartment which was occupied by three unmarried individuals, only one of whom was on the rent-stabilized lease.  After the death of the named tenant, one of the other individuals claimed that he was a non-traditional family member, despite the fact that the third individual, and not him, was the “life partner” of the deceased for over twenty-five years.

settlementOur 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.

officebldg-300x259Prior 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.

dividehouse-300x225Our firm handles many partition matters.  A partition action is when one co-owner of a property brings a lawsuit because he no longer wants to co-own a property.  The lawsuit usually demands that the property be sold and the proceeds be equitably divided among or between the various co-owners.  If a partition action is not settled by the parties, the Court will appoint a Referee to sell the property and distribute the proceeds after hearings are held on how the proceeds should be divided.

However, in our experience, most, if not all, partition lawsuits can be settled by the parties before there is a Court-ordered sale.  There are generally three ways in which such actions may be resolved.  Let’s say there are two co-owners of a house, named Amy and Bob.  The first way to settle the action is that Amy buys out Bob’s interest, and becomes the sole owner of the property.  The second way is the reverse, in which Bob buys out Amy’s interest and becomes sole owner.  The third possibility is that Amy and Bob agree to sell the property to a third party, and also agree on how the sales proceeds will be divided between Amy and Bob after the sale.

This post will discuss the first two scenarios.  If one party is buying out another’s interest, it is possible that there is a mortgage lien already on the property.  Before finalizing a settlement, a title search should be conducted. This will show all liens and judgments on the property.  Experienced counsel can order such a search and interpret the results for the parties.  Once this is done, the parties need to decide how an existing mortgage will be handled in any settlement.  This will depend on several factors, such as the balance due on the mortgage, which of the parties has been making the payments, and which party is going to remain at the premises after the settlement.

talleyhouse-300x169A recent news story in the New York Post discusses a real property dispute between Andre Leon Talley, a former Vogue editor, and his (former) friend, George Malkemus III, who also worked in the fashion industry.  Mr. Malkemus is a former shoe executive who expanded Manolo Blahnik in the United States.

The dispute concerns ownership of a mansion located in White Plains, the same City in which our firm’s offices are located.  This post will discuss some of the legal issues involved in the property dispute.

The dispute started when Mr. Malkemus filed a Notice of Petition in Greenburgh Town Court late last year to evict Mr. Talley from the premises.  The Petition was filed after the necessary predicate notices were given to Mr. Talley.  The Petition also demanded back rent from Mr. Talley in an amount over $500,000.00, which is an unusually large amount to be demanded in a residential eviction action.

eviction-moratorium-2-600x270-1-300x135As readers of this blog may be aware, there is currently a moratorium on eviction cases in New York State.  This means that, with certain exceptions, new eviction cases cases cannot be filed with the appropriate Court, and cases which have already been commenced have been “stayed.”  Legally, a case which has been stayed cannot progress towards a resolution, such as a Judgment and Warrant of Eviction, while the stay remains in effect.  In addition, if a Court has already issued a Warrant of Eviction prior to the stay being in effect, the Marshal or Sheriff will generally not proceed with the actual removal of the tenant, unless certain exceptions apply.

Currently, there are two eviction stays in effect, one from New York State, and the other from the federal government.  These stays will be discussed further in this article.

The eviction stay in New York State is currently in effect until May 1, 2021.  However, there are several legal challenges to this stay.  The first involves the current scandal involving the Governor relating to the concealment of the exact figure of New York State nursing home deaths due to COVID-19.  As a result of this, and other controversies involving the Governor, there have been discussions of removing his emergency powers, which were granted to him due to the pandemic.  The executive orders staying New York State evictions were issued by Mr. Cuomo under these emergency powers.  If he his stripped of these powers, he will not have the necessary authority to extend the New York State moratorium when it expires on May 1.  As a result, evictions and eviction cases may resume at that time, unless the state legislature decides to pass emergency legislation extending the moratorium.

coupleOur 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.

foreclose-1Regular readers of this blog have been able to get information on how the COVID-19 pandemic has affected foreclosure actions in New York.  This post will serve as an update on current conditions in New York Courts.

At the beginning of the pandemic, New York Courts closed for all matters, including foreclosure cases.  In addition, executive orders from Governor Cuomo stayed all foreclosure cases from proceeding.  This meant that, at that time, no new foreclosure cases could be filed, and all foreclosure cases previously filed would not be allowed to proceed until allowed by New York State.

This obviously was a benefit to any party subject to a foreclosure action.  Even if the Court had, before the pandemic, granted a judgment of foreclosure and sale, the actual sale was not allowed to proceed.  In addition, both New York State and the federal government imposed further legal restrictions on all evictions.  This meant that even if the foreclosure sale had occurred prior to the “freezing” of all foreclosure cases, the new owner, whether it was the original lender or a successful bidder at a sale, had no legal means of evicting the former owner.

crown-300x224A recent story in the New York Post discusses a lawsuit brought by the City of New York against a prominent couple who are the owners and landlords of a brownstone located in the Crown Heights neighborhood of Brooklyn.  According to the allegations in the lawsuit, the couple sought to evict their tenants without any legal process.  In more detail, they are accused of, among other actions, using force and threatening to use force to induce occupants to vacate, removing occupants’ possessions from the Premises, and changing entrance door locks to the Premises without supplying replacement keys to the occupants.

The lawsuit seeks civil penalties for violations of the New York City Unlawful Eviction Law, as well as a permanent injunction prohibiting the owners from engaging in any further attempt at unlawful eviction of tenants and occupants, or any further tenant harassment.

Our firm has consulted with many landlords over the years regarding potential evictions of tenants.  One course of action that we would never advise a landlord to do is to attempt to evict the tenant themselves, without the benefit of the legal process.  While there are obviously many problem tenants, all tenants in New York State are protected by laws relating to evictions.  Any eviction must start by serving the tenants with the initial notices (known as predicate notices) which advise the tenants that an eviction action may be brought in the future, either because the lease has expired, or because the tenant has failed to pay rent due.

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