Articles Posted in Real Estate Transactions and Finance

lock-300x300In 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?

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Our readers may have seen the recent report in The New York Times pertaining to the sale of Lord & Taylor’s flagship location in Manhattan to a co-working space company called WeWork. This seismic change in the use of “America’s Dress Address” is quite significant.  Lord & Taylor realized that its huge location in Manhattan was out of fashion and much more valuable when considered as a real estate asset only, rather than the proceeds generated by mostly clothing sales.  WeWork is a company most identifiable with the revolutionary means in which millennials are choosing to work.  Many millennials tend to be self-employed, but may prefer to work away from home.  They demand temporary and flexible work quarters.  WeWork allows such people to select a location for the short or long term at a price to be determined, without a long term commitment.  The worker or user has a professional location in which to engage in his occupation.

This post will address this transaction from a commercial leasing perspective.  The purchaser will use the Lord & Taylor property as its headquarters, through which it will presumably enter other commercial leasing transactions for other properties, and for shared work quarters in this property.  When entering commercial lease transactions for other properties, this author would suggest attempting to obtain the following provisions in such commercial leases.

Commercial leases typically identify the permitted use, such as real estate office, medical office and the like.  However, in this case, the tenant will want the use to be as broad as possible.  For instance, general office use, including co-working space and ancillary use may be suitable for this tenant.  That way, when multiple parties occupy and leave the premises and use the space for varied purposes, it will not be a lease violation.  Co-working spaces could be shared by diverse parties such as writers, day traders, salesmen as well as those who want to host conferences and meetings and the like.

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Our clients often inquire as to the relevance of surveys in their real estate transactions.  This post will discuss what a survey accomplishes and why our attorneys recommend that their purchasing clients obtain one, even if they are not obtaining a loan.  In this context, we will be discussing the standard land survey, one that identifies such items as structures, fences and easements.

A survey is prepared by a licensed surveyor who will visit the property under contract with documents provided such as a prior survey, deed and the like.  The surveyor will have special instruments that are installed on a tripod, measuring tape and other types of equipment. The goal is to measure and describe precisely the property to be conveyed in the intended transaction.  In Westchester County, New York , property deeds are indexed and recorded primarily by previously assigned block and lot numbers with a property description (known as Schedule A) attached to the Deed.  Our readers may be familiar with the standard Schedule A language, beginning at the point of x, continuing a particular number of feet to y and ending at z.  In order to accurately draft the property description for current conditions, the surveyor needs to visit the property and take measurements of the property lines as exists today.  As such, an old property description may potentially be inaccurate.  An experienced attorney representing a buyer will want a survey to be done to make sure that the description is accurate on the deed being conveyed.

Surveyors also identify any structure built on or within the property lines.  A buyer’s attorney should make sure that any structure is properly permitted, if required by the relevant municipality.  For instance, a house should have a certificate of occupancy or a “pre-date” letter confirming that the town did not require such a document when it was built.  Is a shed or deck on the property?  If so, this may also require a permit in order to be legal.  A buyer’s attorney will want to make sure that the seller has obtained any necessary documents for these structures.  Surveys give clues that permits may be needed.

tiny“Tiny homes” have become popular among those who want their possessions pared down to the necessities so that they can save what may be a large mortgage payment on a large home and enjoy experiences such as adventurous travel in its place.  We  have reported on what we call the clutter reduction program .  Limiting excessive possessions has assisted in the development of the tiny homes movement.  However, tiny homes are not without big problems.  The New York Times  recently reported about the difficulty that tiny home owners have in what should be an obvious issue: where are you permitted to place your tiny home?  Individuals spend hours upon hours designing such homes, with innovative space saving techniques and environmentally friendly building systems, only to neglect the need to determine the proper legal placement of such tiny home.

Tiny homes, as any other structure, require the legal right to use any particular parcel of land.  Perhaps a particular municipality requires that structures be of at least a certain square footage or that lots be of a certain minimum size, in order to discourage the placement of less aesthetically pleasing mobile homes.  Zoning laws could be violated.  For instance, the zoning for a property location may allow for vacant land or commercial use only and the tiny homeowner will be living there.  Likewise, the zoning regulation may allow single family home use only on a lot and a conventional homeowner allowing another residential structure is in effect using the lot for multifamily use.  Also, linkage to municipal sewer systems and electrical grids may be desired.

Now that the tiny home owner has decided that acquiring the legal right to land use is required, this author  will render advice on the means to such acquisition.  Parking your tiny home in a public parking lot is not an answer, as many commercial property owners have posted notices in their parking lots to the effect that no vehicles are permitted during certain hours.  Vacant land owners may post no trespassing signs for the same reason.

dictator-300x200The 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.

divorce-300x199Financial 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.

reverse-300x159A recent New York Times article concerns possible changes to the enforcement of reverse mortgages against surviving spouses.  To those unfamiliar with reverse mortgages, they are a type of mortgage loan which allows elderly borrowers (usually over 62 years old) with sufficient equity in their primary residences to borrow against that equity.  Generally, the sums borrowed do not have to be repaid until after the death of the borrower.  Therefore, the heirs of the borrower, after their death, have the option of repaying the sums due, or selling the property and then paying off the amount of the reverse mortgage, plus any interest accrued.

Other blog posts have discussed the possible pitfalls of reverse mortgages.  The New York Times article concerns a specific problem with many reverse mortgages, that of a surviving spouse.  The issue raised is this: what happens when the home is owned only in the name of the borrower, the borrower has a (usually) younger spouse, and then the borrower passes away, leaving an unpaid reverse mortgage?  Is the surviving spouse forced to sell the property in order to pay off the reverse mortgage, even though they may have lived there for many years with their spouse?

This situation arises in only a small amount of reverse mortgages.  Most couples own property jointly, and may take out a reverse mortgage in both of their names.  In this situation, where both borrowers qualify by meeting the age requirement, the mortgage is not due until the last of the borrowers passes away.  Therefore, the “surviving spouse” situation does not apply where both borrowers are record owners and borrowers.  However, there are situations, often involving a second marriage, where one borrower may qualify by age, and the other “half” is too young and will not qualify as a borrower.  Reverse mortgage companies may require that the property be put in the qualifying buyer’s name alone in order to approve and close a reverse mortgage.  This creates the situation discussed, where the older borrower then dies and the younger spouse, who may have inherited the property is faced with the reverse mortgage lender demanding payment in full while she does not have the assets to pay the mortgage without selling the property in question.

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.