Articles Posted in Real Estate Transactions and Finance

shortsaleOur firm frequently has clients who own property that is in foreclosure.  Often, these parties wish to sell their property and move on from the situation.  Once a sales price is agreed upon, the important question to be asked is whether the proceeds from the sale are sufficient to pay off the debt on the property, or, if not, what the expected deficiency will be.  As attorneys for the person selling a property in foreclosure, we would calculate the amount of all liens and judgments on the property, including the mortgage or mortgages in default, the costs and expenses of the sale, including New York State transfer tax and any local transfer tax, as well as the agreed upon broker’s commission for the sale.

This figure is then compared to the negotiated sales price for the property, as per the Contract of Sale.  In many situations, the proceeds may comfortably exceed the debts on the property and the expenses of sale.  For example, the total debt and expenses of sale may total $400,000.00, and the sales price may be $500,000.00.  In this case, the seller may move ahead with the closing and expect to walk away with some additional funds after all costs and expenses of the sale are paid, including the broker’s commission and transfer taxes associated with the transaction.

But what happens if there are insufficient funds from the sales price to cover the debts and expenses encumbering the property?  Let’s say the debt and expenses of sale are $400,000,00, and the sales price is only $375,000.00.  In that situation, the person selling the property has several options, which will be discussed in this blog post.

bankruptcy-300x200Prior 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.

fatherOur 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.

roof-300x237Now that the weather has finally improved in the New York metropolitan area ny-300x154  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.

guarantyMany landlords of commercial property  require that the obligations of the tenant be guaranteed by an individual or affiliated entity.  Most tenants of commercial leases are an entity, such as a corporation or limited liability company, whose only asset is the business engaged in the leased premises.  If the entity tenant cannot perform its lease obligations or leaves before the end of the lease, the landlord has no remedy besides renting the premises to a new tenant.  For this reason, most landlords require that an individual or entity closely affiliated with the tenant guaranty the tenant’s requirements.  That way, other assets of the guarantor may be available to the landlord if the tenant defaults under the lease.  This post will examine the various types of guaranties that may be requested by a landlord.

A full guaranty is the most broad, wherein the guarantor covers all of the tenant’s obligations under the lease.  Such obligations would include paying rent, real estate tax escalations, utility payments, common area maintenance payments, maintaining proper insurance, repair obligations and the like.  Landlords prefer this type of guaranty because there is no limit on the amount or extent of the obligation covered.  Also, the landlord does not need to meet any condition before enforcing the guaranty against the guarantor.

A partial guaranty is more limited.  Perhaps the obligations covered are only those that are monetary in nature or up to a certain amount.  Other limited guaranties may cover lease obligations such as keeping up with maintenance and repair obligations.  Partial guaranties could also “burn down” or “sunset” over time.  For instance, after a certain period of perfect performance by the tenant, the amount guaranteed reduces or the partial guaranty terminates entirely.  In partial guaranties, the landlord may need to meet certain conditions before it is enforced against the guarantor.

18If you are like this author , someone close to you may be about to turn eighteen years of age.  This post will discuss the legal ramifications of turning eighteen.  Additional rights and privileges as well as legal responsibilities occur once a “child” becomes eighteen.  Such a person can now vote, run for office, legally support oneself, and be employed full-time.  An eighteen year old male will be penalized if he does not register for the military draft.  All eighteen year olds are treated as adults if they commit a crime.  Since we  practice particular areas of law, this author will address the implications of turning eighteen as they apply to those areas of law.  Also, rights and obligations vary by state, so this post will only address these matters as they relate to New York.

Eighteen year olds have the right to enter a contract and to apply for credit.  Therefore, our soon-to-be eighteen year old can apply for a mortgage and sign a contract to buy a house.  Contracts involving real estate, whether for sale or for a lease of more than one year must be in writing.

Once a person is eighteen, he can make a Will and other estate documents.  While we do not want to consider that someone so young may pass away, without a Will, his assets will be distributed according to New York’s intestacy law.  Also, an eighteen year old can inherit from someone who named him in a Will or in an Administration proceeding if he is of the proper degree of relation according to the New York statute.  Since many eighteen year olds may not be sophisticated enough to inherit substantial assets, those drafting Wills may decide to leave such assets to the child in trust until such age as they anticipate that the child will be mature enough to manage the assets.

springmarketkNow that we’re entering the Spring real estate market , we should anticipate that our real estate clientele will be entering into new real estate contracts for their real estate purchases.  Certain clauses of such contracts should be negotiated in a particular manner, depending upon whether your attorney  is representing a buyer or a seller.

A seller may have decided to forego the services of a professional real estate agent  or the property may have been on the market for an extended period of time.  In these situations, the seller may be more amenable to certain requests of the buyer, such as making certain repairs before closing.  The seller may not know that some of the requests are not customary or may need to move the property, which may result in more flexibility on such matters.

Your attorneys  should pay particular attention to personal property issues , whether representing a buyer or a seller.  The seller will be disappointed to find that a treasured chandelier was not excluded from the personal property to be sold with the house.  A buyer may not approve of the removal of wall scones, without repairs being made to the wall after removal.

stripcenterOur firm is routinely involved in commercial lease negotiations.  This post will address the “give and take” that takes place in such negotiations, while discussing the legal issues that commonly arise.  For convenience sake, let’s assume that our attorney is negotiating on behalf of a retail store tenant engaged in a food business in a suburban strip center.

Commercial leases typically span several decades and are not rent-regulated.  Both landlord and tenant cannot envision business conditions or pricing over such a timeframe.  Most leases will run for an initial term, potentially for ten years.  The parties may wish to include a renewal provision, potentially for another five years.  Is such a renewal term to be a requirement for the landlord to offer or an option to renew on behalf of the landlord or tenant?  If the option to renew is for the tenant, one may find provisions as to the timeframe in which to exercise the option, so that the landlord can make the space available to another tenant without a vacant period of time.

The determination of rent to be charged during the renewal period is tricky.  The parties could state in the current lease that the renewal period rent will be a certain percentage above that charged in the last year of the lease.  This provides certainty but may be too high or too low for market conditions at the time of renewal.  The other option is for the renewal rent to be determined by an appraiser to be mutually selected by the landlord and tenant.  The inherent problems in this formula are that there may be a disagreement on the selection of the appraiser and the rent to be charged would be uncertain.

church-300x225News reports have recently discussed the Archdiocese of New York and their seeking Court approval to mortgage church-owned property.  The purpose behind such action is for the Church to obtain a loan of $100,000,000.00 from JP Morgan, Chase, N.A., backed by a mortgage on Church-owned property located at 457 Madison Avenue in midtown Manhattan.  The loan proceeds will apparently be used to pay monetary settlements to the victims of the Church child abuse scandal.

Laymen may be asking why Court approval is necessary for such a transaction.  If an individual owns property, and seeks to obtain a mortgage on the property in order to raise funds, generally, Court approval is not needed.  The difference in this situation is that the Archdiocese of New York is a Religious Corporation, and, as such, is subject to the New York Religious Corporations Law.

As prior blog posts have discussed, any New York Religious Corporation seeking to buy property, sell or lease property, or obtain a loan backed by a mortgage on property it owns, must obtain approval of the New York State Attorney General’s Office.  The reason behind this statute is to make sure that a religious institution is not “sold out” from under its members by unscrupulous individuals or leaders.  Most religious institutions, of course, do not own the large real estate portfolio that the Archdiocese of New York does, and may own a single building which is used for its offices and place of worship.  The Religious Corporation Law protects all such institutions by requiring Court approval for such important real estate transactions, in order to insure that loan proceeds are used for purposes that congregants will believe will advance the legitimate interests of the church.

210deathThe timing of death is never particularly welcome.  Some families are prepared, in that the deceased was elderly, maybe ill, and living in a nursing home.  Perhaps such a person also had the foresight to have their attorney prepare her Will and other estate documents.   Others may pass away at a relatively young age, in the prime of life, with ongoing financial and personal activities.  This post will examine the legal ramifications of passing away while a legal matter is pending.

Imagine that the deceased was a party to a contract concerning the sale of a house which has not yet closed.  The first step that the survivors would need to undertake is to review the contract and determine if it addresses the potential death of one of the parties before the closing.  In most cases, the seller is bound to the terms of the contract through her successors.  This means that the survivors cannot decide to nullify the contract and move into the house.  However, the seller is not available to conclude the transaction.  The attorney for the seller  would need to apply to the Surrogate’s Court  to apply for Letters Testamentary or Letters of Administration , which appoints the appropriate fiduciary to act for the Estate in order to complete the closing.  Should circumstances warrant, it may be prudent to apply for Preliminary Letters Testamentary or Preliminary Letters of Administration, to permit the sale to conclude if it is jeopardized by a continued delay.

If the deceased was the potential purchaser of the house, the contract is likely to allow the purchaser’s survivors to cancel the contract.  This is a logical result, as the transaction is inherently dependent upon the purchaser maintaining a job in order to pay the mortgage and other carrying costs of the house.  Forcing this transaction to conclusion is a cruel result.  In most cases, the downpayment is refundable.  However, some contracts only provide that half or none of the downpayment would be refunded.  It is advisable to have your attorney negotiate a favorable disposition for the downpayment in this instance when representing a purchaser, even if he is a young person.