Articles Posted in Real Estate Transactions and Finance

We would like to inform our readers that Transfer on Death Deeds (“TOD”) will become an option for property transfers in New York as of July 19, 2024.  Real property such as a house, condominium unit or vacant land is currently transferred by deed.  There are currently various types of deeds available for property transfers in New York State.  A Referee’s Deed applies to the transfer of property by the Court appointed Referee after a foreclosure sale.  An Administrator’s or Executor’s Deed is used by the fiduciary appointed by the Surrogate’s Court in an estate matter  to transfer property to the proper person designated by the Will or who is entitled to the property according to intestacy.  A seller in a standard real estate transaction will deliver a deed based on the level of quality of title promised to the buyer.  Such deeds may be either a quitclaim or warranty deed, or a bargain and sale deed with or without covenants.

Our readers may be familiar with transfer on death designations on bank accounts whereby the account will automatically go to the designee upon the account owner’s death.  Changes to the beneficiary can also be made during the account owner’s lifetime.  TOD deeds will operate in much the same fashion.  Such deeds will need to be signed before two witnesses and notarized before they are recorded before the owner’s death in the clerk’s office in the county in which the property is located.  Similar to the standards in making a Will, the property owner needs to have capacity, not be under fraud or duress, or unduly influenced.  The property owner retains control over the property and can sell or encumber the property with a mortgage.  The designee of the property takes it subject to any liens or mortgages to which the property is subject at the property owner’s death.  The transfer lapses if the beneficiary does not survive the owner, so it is necessary to provide for such a potential event by designating an alternate beneficiary in the TOD deed or by having a qualified attorney provide for such an occurrence in other estate planning documents.  Further, if two joint owners transfer property by TOD deed, the transfer to the beneficiary is not effective until both joint owners pass away.

The property owner can revoke a TOD deed by a properly notarized and recorded document and make a new beneficiary designation on another TOD deed, providing more control than a deed reserving a life estate.  It is important to note that a TOD deed cannot be revoked by a provision in a Will.  Transfer on death allows for the avoidance of a probate or administration proceeding as to that asset, which could prevent the delay and expense of an estate proceeding and avoid a contested estate to the extent that particular assets already have ironclad beneficiaries.  With all transfer on death designations, the property needs to be owned at death for the transfer to the beneficiary to be effective.

We have previously posted concerning a significant amendment to the property condition disclosure law in New York.  Previously, sellers of residential real estate were required to complete a detailed questionnaire concerning property conditions or issue a $500 credit at the closing for failure to deliver the document.  Many sellers, especially those in downstate downstate NY, as serviced by our firm, preferred to issue the $500 credit instead of completing the form.

The new law, which becomes effective on March 20, eliminates the seller’s option to issue the $500 credit.  Instead, it requires the completion and delivery of the form to the buyer before the contract is signed.  Further, it contains more extensive information concerning flood risks and history and whether the property has been insured against flood risk.  This author suggests that the amendment was motivated by devastating floods and water damage that have affected some home buyers in recent years, with the main goal being disclosure of flooding.  The legislature went further than adding flooding disclosures and moved towards requiring full disclosure by the seller.

It remains to be seen how real estate professionals will handle the amended law.  Although sellers are expected to complete the form, real estate agents may end up providing assistance.  It may be preferable that sellers have the completed form ready at the same time that the accepted offer is provided to the seller’s attorney, who will prepare and deliver the proposed contract to the buyer’s attorney, so as not to delay the process of obtaining signed contracts as soon as possible.  Otherwise, sellers may lean on their attorneys for advice in completing the form.

We have been following several national Court rulings concerning compensation paid to buyer’s real estate agents.  A significant Federal Court ruling involved the National Association of Realtors, owner of the powerful “Realtor” trademark.  The case found that a seller should not be required to pay the buyer’s agent’s commission as a condition to having the property listed on Multiple Listing Service (“MLS”).  Similar cases in other jurisdictions have followed.  Of course, a seller could avoid this situation altogether by not even having a seller’s agent.

It had been customary practice for the seller to list her property with a real estate agent affiliated with a real estate brokerage, the “seller’s agent.”  The seller’s agent would enter the listing on MLS, making the property more readily known to buyers and their agents, the “buyer’s agent.”  Without MLS, many properties may not have been located by potential buyers.  The seller would pay a commission in the range of 5%-6% of the sales price at the closing.  When a buyer’s agent was also part of the transaction, the commission would be divided between the seller’s and buyer’s agents.

Sellers in the lawsuits challenged the requirement to also compensate the buyer’s agent, when the seller engaged its own agent, and resented the requirement to pay the buyer’s agent as a condition to having their property listed on MLS.  They suggested that commissions were inflated to allow for the buyer’s agent to also be compensated.

bew-300x140Caveat emptor is a Latin phrase loosely translated to mean “let the buyer beware.”  Real estate in New York State has customarily been transferred under this concept, meaning that the seller is not obligated to disclose property conditions and the onus is on the buyer to discover conditions that may be objectionable.  In 2001, this concept eroded somewhat with the enactment of Article 14 of the Real Property Law, known as the property condition disclosure statement law (“PCDSL”).  Sellers of residential property were required to complete a lengthy questionnaire concerning property conditions.  If the seller preferred not to complete the form, the seller was required to issue a $500 credit to the buyer at the closing, as was customary in downstate counties serviced by our firm.

Recently, Governor Kathy Hochul signed an amendment to the PCDSL that added disclosures concerning flood risks and history.  Most significantly, the amendment, which becomes effective on March 20, 2024, removes the seller’s option to issue a $500 credit to the buyer and requires the completion of the questionnaire before the contract is signed.  The law explicitly states that it is not a warranty by the seller and does not substitute for inspections that the buyer may conduct.  Typically, a real estate agent or experienced real estate attorney will recommend that the buyer hire a professional inspector to evaluate property conditions.  Inspectors will often discover concerns such as asbestos in the furnace room.  A qualified attorney may integrate repair issues in contract negotiations.  Armed with additional information from the completed disclosure form, a buyer may threaten to walk away from a transaction without additional contractual concessions.

The new law provides that knowingly false or incomplete statements made by the seller can subject the seller to claims after the closing.  This is a departure from standard New York law whereby the buyer’s acceptance of the deed at the closing is deemed to be full acceptance of any property conditions, whether known or unknown to the buyer.

power-of-attorney--300x200News 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.

sanfran-300x300Tony 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.

rise-help-up-support-climb-300x192This 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.

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.

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.

floodSeveral of our law firm’s clients have been adversely affected by flooding caused by Hurricane IdaWe 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.

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