Real Estate Transactions and Finance

August 7, 2023

Who has the Power?

News outlets have recently reported that Senator Dianne Feinstein has given a power of attorney to her daughter. Concerns over the Senator’s mental competency have arisen as a result. For the reasons discussed in this post, appointing an agent by power of attorney does not necessarily mean that one is incompetent to handle one’s legal and financial affairs.

In New York State, there are various types of powers of attorney, governed by a provision of the General Obligations Law. In all cases, the person making the power of attorney is the principal who appoints a person or persons to act on one’s behalf, an agent. The standard form of power of attorney appoints one or two agents, who may or may not be required to act together. Up to any of fifteen legal actions can be authorized or all fifteen actions can be authorized. Some examples of the actions that could be authorized include real estate transactions, banking, insurance and tax matters. The document needs to be initialed and signed by the principal, as well as notarized and witnessed by two persons. The agent cannot be a notary or witness to the document, but the agent needs to sign a portion of the document before a notary accepting the role as agent. This type of power of attorney is effective immediately and is not dependent upon whether a person is competent.

The standard power of attorney can also limit the agent to acting with respect to a specific matter. For instance, if the principal will not be attending her house closing, she can appoint her attorney for the limited purpose of all matters required to complete a specific transaction. In this case, only some of the fifteen potential actions will be authorized. This limitation protects both the principal and the agent, since the agent cannot conduct actions beyond those required for the closing. The agent appointed could be a spouse or other relative, a friend or one’s attorney. Depending upon the closeness of the relationship and the degree of trust, the principal will decide whether the authority should be immediate or limited in any way.

July 28, 2023

From Rags to Riches: Legal Issues Raised by the Death of Tony Bennett

By Weiss & Weiss

Tony Bennett was beloved by those young and old not only as a talented singer, but as a World War II veteran and civil rights icon. His recent death at the age of 96 was not unexpected. This post will identify the legal issues that may be raised when a person such as Tony Bennett passes.

Mr. Bennett could be considered to have been in a New York State of Mind, having been born and dying in New York State. He was considered to be well-liked by all, except for potentially his two ex-wives who may have said “I’ve Got You Under My Skin” as they completed their divorce proceedings. We have posted previously as to whether an estranged or divorced spouse has the legal right to inherit. Even a promise to include an ex-spouse in one’s Will, as may be desirable in resolving a divorce proceeding, is not enforceable in New York. Unless Mr. Bennett had explicitly left assets to his ex-wives in a Will or Trust, these ex-spouses would not have a valid claim to his estate.

The admired crooner was married to his third wife at the time of his death. Potentially his most recent wife had a conflict with his four children, whose mothers were either his first or second wives. In addition, two of his four children assisted Mr. Bennett in his career, so he may have wanted to leave them more assets or they stand to gain other financial benefits from having worked alongside their father. It should be noted that Mr. Bennett’s two daughters were also the children of his second wife and but were born before their marriage. If Tony had no Will, an estate administration would need to be conducted and proof of paternity would need to be established so that his daughters could legally inherit from his estate.

June 1, 2023

Our Obsession with Succession

By Weiss & Weiss

This post comes with a “spoiler alert” warning. Like many, this author has become obsessed with the Max show Succession, not merely as a television viewer, but for the legal issues raised by the storylines. We will discuss the multiple legal issues covered in the Emmy award-winning series.

The jaw dropping images of real estate are practically a character on the show. The townhouse on Fifth Avenue across from the Metropolitan Museum of Art was the primary residence of Waystar/Royco’s founder and patriarch Logan Roy. The home was shared with his third wife, who obtained the property in their divorce. After Logan’s death, Marcia and Logan’s oldest child Connor were visiting the home. Marcia and Connor started a discussion whereby Connor expressed interest in buying the home from Marcia, who said that she was looking for sixty to seventy million dollars. Connor said he would pay sixty-three million dollars, and they verbally agreed to the deal. A verbal agreement to sell real estate is not binding in New York State. The statute of frauds requires that contracts pertaining to real estate be in writing. Marcia could have backed out of her agreement to sell the property to Connor. However, Connor and his wife were in control of the townhouse in a later episode, so Marcia must have followed through with her oral agreement to sell the property to Connor.

Estate matters also figure prominently in the series. Connor introduces a “sticker system” to distribute personal property in the townhouse that he purchased. Logan’s children were to affix stickers to personal property in Logan’s townhouse to indicate which items they wanted. Then, the “second tier bereaved,” such as Logan’s last mistress, would have an opportunity to select items. While this may be a relatively good method with which to distribute personal property, the question arises as to why Connor was in charge of this process. Was he nominated as Executor of Logan’s estate? It would not be realistic for Connor to have been officially appointed as Executor within days of Logan’s death. Another possibility is that Marcia owned these items as part of the acquisition of the townhouse in her divorce and that she decided to sell the items to Connor along with the townhouse.

February 24, 2023

New York Real Estate- The Tenant Becomes the Owner

By Weiss & Weiss

We have observed that the current inventory of houses available to purchase in the area serviced by our attorneys is low. In addition, many houses are rented. When the tenant and landlord have a good relationship, it is not unusual for the parties to agree that the tenant will buy the house from the owner. This post will address the legal issues involved in such a transaction whereby the tenant becomes the buyer and the landlord becomes the seller.

The first action that both parties should take is to engage the services of an experienced real estate attorney. Such a transaction would be considered “for sale by owner” , since neither party would be using the services of a real estate agent. As such, the attorneys will need to develop the particulars of the deal terms that will be included in the contract, such as the purchase price, downpayment amount, whether there are conditions such as a mortgage contingency, and deadlines for obtaining the mortgage commitment and closing. One concern is that the property may not appraise to at least the amount in the contract since it was not offered on the open market through a real estate agent who is familiar with appropriate pricing for the property. If the appraised value is lower than the purchase price, the buyer will not be able to obtain the mortgage in the anticipated amount needed to close.

A tenant occupying the property is already familiar with property condition and may not find it necessary to make repair requests. However, it may behoove the buyer to conduct due diligence and order a professional engineer’s inspection that will evaluate systems servicing the house such as the furnace, hot water heater and roof. These are elements that a tenant may not consider when renting a house, but a potential owner should evaluate before signing a contract. A proposed owner may also be concerned as to whether proper permits exist for improvements made to the house, while a tenant would not have considered such issue before moving in.

April 11, 2022

Cold Feet- Do I have to Close?

By Weiss & Weiss

We have encountered parties to real estate transactions who get “cold feet” between the time of contract signing and closing. These persons may seek to break the legally binding contract that they have signed and cancel the deal. This post will address when failing to perform a real estate contract may be permitted and the risks involved should the contract not be able to be cancelled.

First, this issue will be examined from the perspective of the buyer. Real estate contracts typically contain conditions, such as the property will appraise for at least the contract price, that the buyer will obtain a mortgage commitment, board approval will be issued if the purchase involves a cooperative apartment and there will not be an insurmountable title issue. If any of these conditions are not met and the buyer’s attorney notifies the seller’s attorney within the timeframe required by the contract, the contract can be legally cancelled and the downpayment will be refunded to the buyer.

At times, a buyer attempts to use issues that should have been addressed during the pre-contract due diligence period to cancel the contract. Most contracts state that the buyer has conducted all due diligence and inspections of the property before the contract is signed. The buyer’s concerns about such issues as property conditions, the amount of real estate taxes, or monthly carrying costs of a cooperative or condominium unit must be raised before the contract is signed and are not causes to unravel the contract. A buyer cannot cancel the contract merely because he no longer wants the property or thinks he cannot afford it.

September 17, 2021

Shelter From the Storm- Ida’s Legal Issues

By Weiss & Weiss

Several of our law firm’s clients have been adversely affected by flooding caused by Hurricane Ida. We wish to offer our sympathy for all of those affected. This post will address the legal issues raised from this storm event and offer potential solutions.

Let’s consider the issues from a purchaser’s perspective. Prior to entry into a contract, due diligence should be conducted by the purchaser concerning potential property issues. Most notably, it should be determined before the contract is signed whether the property is in a flood zone, so that the purchaser can consider whether he wishes to take on this potential additional risk. In addition, if the property is in a flood zone, the lender will most likely require the purchaser to obtain flood insurance, which is quite costly and will be added to the monthly mortgage payment after closing. The mortgage lender will need to be involved because the value of the collateral, the house, may have been severely damaged and the lender will want to ensure that the property is rebuilt to its former state. Also, lenders may be willing to grant a payment forbearance to the purchaser, so that mortgage payments will not be due for a set period of time from borrowers affected by a disaster.

The following issues are of concern to a property seller when a significant flood event occurs. Properties are appraised during the purchaser’s loan application process to confirm that the property value supports the amount of the loan. Lenders will want to conduct an additional inspection after the flood to confirm that the property has not been damaged or otherwise lost value after the date of the appraisal. Concerned purchasers and their home inspectors may also be expected to make another evaluation of property condition.

April 23, 2021

Settlement of Partition Actions – Issues to Consider

By Weiss & Weiss

Our 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.

February 10, 2021

New York Real Estate Broker Agreements- The Essentials

By Weiss & Weiss

Now that the fall real estate market has ended, parties to real estate transactions are starting to prepare for the busy spring market. Some sellers make the decision to forego the services of a professional real estate agent. Other parties determine that using a real estate agent is essential to achieving the optimal high price and favorable terms sought. This post will address the process involved in engaging a real estate agent.

This author has found that over a period of decades, sellers prefer to work with an agent whose office is close to their home. Such an agent may also live in the same neighborhood and would be very familiar with issues that are of concern to buyers. Information on school registration, recreational facilities nearby and even medical providers will make a buyer feel at home and more comfortable selecting a particular house. Agents in close proximity provide convenience in showings as often as needed and monitoring of property conditions. As such, it is not unusual for a seller to ask neighbors for a referral.

The agent located will visit the home, provide suggestions for repairs and staging that may facilitate a quick sale and a recommended listing price. Whether the agent owns her own brokerage or works for another brokerage, the seller will be presented with an agreement to sign and other disclosures such as lead paint and COVID disclosures, before photos of the home are taken and the property is listed on the Multiple Listing Service, allowing for exposure of the real estate listing to all buyers searching for a new home. As an explanation, an agent may work for a brokerage with which he has an arrangement for shared compensation.

September 23, 2020

Foreclosures – Judicial and Non-Judicial

By Weiss & Weiss

Some of our prior blog posts have dealt with foreclosure actions concerning real property. A recent New York Supreme Court case, however, deals with a different type of foreclosure, and the effects of the COVID-19 pandemic on the same.

Most foreclosure cases in New York State are of the judicial type, and deal with the foreclosure of real property. In a judicial foreclosure, the owner of real property gives a mortgage and note to a lender, in exchange for a loan. The real property is collateral for the loan. If the borrower fails to repay the loan, or otherwise defaults on the loan by failing to follow the loan terms, the lender may file a foreclosure action in the appropriate New York State Court, which would be the Supreme Court in the county in which the property is located.

New York State currently has a moratorium, due to the effects of the coronavirus, on judicial foreclosures. Under this Administrative Order, “no auction or sale of property in any residential or commercial matter shall be scheduled to occur prior to October 15, 2020.” However, not every foreclosure case in New York is a judicial foreclosure, requiring a Court proceeding. Non-judicial foreclosures occur most commonly in coop matters. An owner of a cooperative apartment does not own real property, but, rather, shares in the cooperative corporation, which, in turn, owns the real property on which the building is located. As a result, if the shareholder defaults on a share loan, the lender may foreclosure on the shares without Court intervention. The lender can issue notices under the Uniform Commercial Code (UCC), which is integrated into New York law, and have an auction sale under the UCC rules, without going to Court.

September 11, 2020

Changing Conditions in New York’s Commercial Leasing Landscape Require Flexible Strategies

By Weiss & Weiss

We note that recent news concerning New York’s commercial real estate landscape has been rapid and stunning. Iconic businesses such as Sears, JC Penney, Modell’s and Brooks Brothers have filed for bankruptcy protection or closed retail stores, office spaces remain underutilized and the restaurant business is experiencing significant challenges. Tenants that remain are rethinking their need for expensive commercial space. Landlords are considering converting properties to new uses in order to fully lease available space. This post will examine some of the current trends in commercial leasing and provide suggestions as to how such challenges may be overcome.

Century 21, the iconic downtown Manhattan retail fixture, announced that it is closing all of its stores. As we reflect on the 9/11 terrorist attacks today, we also recall that Century 21 was committed to operating near the World Trade Center, rebuilt and reopened. Unfortunately, the effects of Coronavirus on its business could not be overcome due to the tenant’s inability to collect on its claim for business interruption insurance. Such insurance may be required by a landlord in a commercial lease. It provides that if a tenant’s business is interrupted, that lost revenues and the like will be paid and will cover the rent that the tenant could not pay due to lost revenues. Business interruption insurance covers lost revenues due to physical damage from terrorist attack or casualty, but often contains exclusions for matters such as a pandemic. Even though common sense dictates that coronavirus has interrupted business to the extent that insurers should cover the claims, many tenants have been unable to collect on such insurance and use those funds to become current on their rent obligations. Without revenues, tenants have been otherwise unable to pay their rent and have decided to vacate space.

In the office market, Covid 19 has frightened corporate leaders and employees, leading to many expecting to work from home for months to come. This is leading to high office vacancy rates and new leases (if any) for shorter terms. Subleases may become more prevalent so that tenants do not have to commit to long-term financial obligations.