Real Estate Transactions and Finance

January 10, 2020

New Foreclosure Law Passed in New York

A recent article reports on a new law signed by New York Governor Andrew Cuomo which is meant to assist defendants in foreclosure actions. This article will explain the law, as well as its possible impact on both plaintiffs and defendants in foreclosure lawsuits.

The law amended Article 13 of the New York Real Property Actions and Proceeding Law to allow a defendant to raise the issue of “standing” at any time in the legal proceedings. A non-attorney may first ask what is the issue of standing and how this change in the law benefits a party being foreclosed. Standing is a legal defense relating to the plaintiff’s basic right to bring a foreclosure action (or any other type of action). In order to commence a foreclosure lawsuit, the lender (usually a bank or loan servicer) must show that it is a corporation licensed to do business in New York State, and also it is the holder of the note and mortgage which is the subject matter of the lawsuit.

Failure to meet these requirements may result in the lawsuit being dismissed due to a lack of standing. Because many loans are transferred between different lenders and loan servicers on a frequent basis, it is entirely possible that the party bringing the foreclosure action may not have “standing” as the loan may have been sold to another entity prior to the case being filed. In that case, the plaintiff may lack standing, and the action may be dismissed.

October 4, 2019

Do Real Estate Sales by Religious Institutions Benefit Congregants?

By Weiss & Weiss

We wish to share a recent news article with our readers concerning whether selling real estate owned by religious institutions to developers benefits congregants and the neighborhood in general. Many properties owned by religious institutions have been owned by the organization for decades and, during that time, served the needs of congregants. However, perhaps over the years the particular population of a religious denomination in an area has dwindled and the institution is currently serving a greatly reduced number of congregants. In addition, long-held properties may be facing deferred maintenance issues such as a roof that needs replacement and the like.

Of course, real estate developers have always been hungry for a good deal and target congregations that may own such obsolete properties. Such developers seek to demolish the religious building and change the use entirely, perhaps to build luxury apartments to be sold for a handsome price. As a result, not only does the religious institution cease to exist, but the character of the neighborhood may change. Persons served by the soup kitchen in the church will have to find somewhere else to go while a wealthy developer will count his money.

The law in New York does provide some safeguards for congregants in this situation. As we have discussed in prior posts , a New York Religious Corporation seeking to sell, lease or buy 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 Attorney General reviews a petition presented by the institution in support of the contemplated transaction. Such petition needs to contain the governing documents of the religious institution, proof of the due calling and required vote of the trustees and congregants as needed by the governing documents and a complete description of the transaction in an affidavit. In sum, the Attorney General is also looking to confirm that the proposed deal benefits the congregants. For instance, if the transaction reduces mortgage debt and the new mortgage has more favorable terms, the Attorney General is likely to approve it. In the alternative, if the building is sought to be sold and a new building may be built in a distant location which prohibits attendance by current congregants, the Attorney General may determine that such a deal will not adequately serve the needs of current congregants and will be rejected.

September 11, 2019

Pumpkins, Changing Leaves and the Fall Real Estate Market in New York

By Weiss & Weiss

The prevalence of pumpkin flavored products and the approach of colorful leaves signals that we have entered the Fall real estate market in New York. This post will address the implications of the change of seasons and how that affects real estate transactions. For the purposes of this discussion, single family homes are being analyzed because apartments and townhouses sell more easily during all times of the year.

Negotiation strategies employed by your attorney may change once the Spring market has passed. In the area served by our attorneys , many single family homes are listed in the late Winter or early Spring, are in contract by June and close in August. This typical schedule follows the needs of those purchasers who wish to have their children start school in early September in their new home.

A seller’s situation will depend upon whether her home was listed since the Spring and did not sell or is a new listing as of the Fall. A new listing may receive more attention from buyers because inventory is typically lower in the Fall and older listings have already been evaluated by buyers. Sellers who have listed their home for several months may already need to consider price reductions and other concessions in order to sell the property. It should be noted that reducing the price will potentially allow the property to more readily appraise to the figure indicated in the contract.

May 30, 2019

Considerations for Buying a Business in New York

By Weiss & Weiss

We often have inquiries from clients considering the purchase of a business. An experienced attorney should be consulted when commencing this process. Initially, the seller’s attorney will deliver the contract to the buyer’s attorney for negotiation. Should the business being sold be a franchise, the final contract should be conditioned on approval of the franchisor to the buyer conducting business under the franchise name.

After consulting an accountant to confirm that the business to be purchased is financially viable for the buyer’s future income needs, the financial terms of the deal are to be structured. There may be a broker who has negotiated the initial terms, which may be modified during the contract negotiation process. Usually the payments required of the buyer are the delivery of the downpayment to the seller’s attorney to be held in escrow until closing and another payment at closing. The payment at closing may be the last payment to be made or the buyer may sign a promissory note for subsequent payments to be made after the purchase.

Particular protections need to be in place on behalf of the buyer. A lien search should be obtained prior to closing, so that the seller obtains lien releases for equipment and tax matters that may have an effect on the buyer. For example, if a freezer is to be conveyed and the seller has a business loan on such equipment, a UCC Financing Statement is likely to be filed evidencing the loan. If the loan is not paid at the closing and the UCC remains, the buyer is acquiring the freezer subject to the seller’s loan and will not own it outright.

May 3, 2019

Renting to Own in New York

By Weiss & Weiss

There are many opinions regarding whether being a renter or owner of one’s residence is the correct decision in New York. Many factors, including one’s economic situation, must be considered in whether to rent or buy real property. One additional possibility is renting the property with an option to buy. This post will discuss the legal issues related in entering into such an agreement.

Initially, there must be an agreement with the owner of the property regarding the terms of the rental. This is commonly documented in the form of a lease. The lease will delineate the monthly rental amount as well as the lease term and other provisions. If the parties agree, an option to buy the property can be included in the lease, or as a separate agreement.

The most common arrangement is to provide the renter with the option to purchase the premises at a set price during the rental term, or at the expiration of the rental term. If the renter exercises her option to buy, then the attorney for the property owner should prepare a contract of sale to be executed by all parties. The signed contract of sale is necessary should the potential purchaser need to apply for a mortgage loan to purchase the premises. Any institutional lender will need a copy of the fully executed sale contract in order to process a standard loan application. In addition, a down payment, typically in the amount of ten percent (10%) of the purchase price is usually also necessary to obtain a traditional bank loan. The lending institution requires proof of the down payment deposit into the escrow account of the seller’s attorney.

April 26, 2019

Flip or Flop: New York Edition

By Weiss & Weiss

Many of our readers are familiar with television programs where people purchase properties in terrible condition, conduct renovations and then sell at a handsome price at the end of the show. While some New Yorkers may be inspired by these programs, reality often differs from the outcome as depicted on television. This post will examine some of the pitfalls in “flip” transactions and methods to alleviate some of the legal issues that arise.

Traditionally, a flip transaction takes place as follows. A purchaser locates a property that is a “good deal”. Perhaps it is purchased at foreclosure auction , without the opportunity to view the interior of the property or to determine whether tenants occupy the property. The property is a “good deal” because it is priced below other properties in the area, and is perceived by the purchaser as being in a prosperous area in which their ultimate purchaser will want to live. Once the property is purchased, the owner will renovate the property and market it for sale. The flipping purchaser does not intend to use the property for his own occupancy and therefore needs to sell the property as quickly as reasonable.

As most flippers ultimately realize, there is no such thing as a “good deal”. These transactions are often too good to be true, as these properties are acquired “warts and all”. Often the flip properties are acquired from foreclosing lenders whose attorneys present contracts that are allegedly nonnegotiable, “need” to be signed immediately and contain unduly harsh closing deadlines that could result in the loss of the downpayment or other penalties. Flippers should not cave to pressure to sign such contracts without attorney review. An experienced attorney will inform flippers that they are most likely purchasing the property subject to existing property violations, past due real estate taxes, unpaid water bills, another mortgage that may not have been removed by the foreclosure proceeding, occupants that may need to be evicted and the like. It may be prudent to order a title search prior to signing such a contract and to resist pressure from the seller to use the title company that it recommends.

March 15, 2019

Varsity Blues? Misrepresentation in New York Real Estate

By Weiss & Weiss

Many of our readers are aware of the recent college admissions cheating scandal. Credentials of proposed candidates were misrepresented in an effort to obtain admission to prestigious colleges. Parties to real estate transactions in New York may also misrepresent financial qualifications and property conditions in an effort to close the sale of a property. This post will address the types of misrepresentations that may occur in real estate transactions and the remedies if such misrepresentation is discovered.

From the prospective of a purchaser, misrepresentation can take the following forms. It is not unusual for a contract to purchase a house to contain a provision that the purchaser represents that she has adequate funds to close, has not filed bankruptcy during the past seven years, and is not aware of any judgments filed against her. The purpose of this clause is to deter a seller from entering a contract, taking the property off the market and later discovering that the purchaser cannot obtain cooperative board approval or obtain a loan commitment due to facts that the purchaser knew at the outset of the transaction.

Purchasers also are often required to represent that a loan application will be pursued with diligence. A purchaser may falsely elevate financial details on his mortgage application in an effort to qualify for a mortgage for which he is not otherwise qualified. Lenders protect themselves as to this potential form of misrepresentation by requiring proposed borrowers (and applicants for short sale approval) to deliver a signed IRS form 4506-T. This document allows the lender to obtain tax returns directly from the IRS, in case the borrower falsified tax returns delivered to the lender in an effort to look more favorable as a borrower. In addition, lenders typically contact the borrower’s employer immediately before the closing to confirm continued employment and salary awarded. Cooperative applications commonly contain personal and business letters of reference. Due diligence may dictate that the authors of such letters be contacted to confirm that they did indeed write and submit such letters as part of the board application.

February 8, 2019

Bucket List- Who’s in Charge after Your Death?

By Weiss & Weiss

So long as one is alive and mentally capable, one is in control of her own financial and legal affairs. Once a person passes away, a fiduciary needs to be appointed by the Surrogate’s Court to determine and pay estate debts , collect and distribute assets, file relevant tax returns and pay taxes, vacate a rental property used by the deceased or sell a property owned by the deceased. Also, if the deceased left minor children surviving, a guardian needs to be appointed to care for the children on a daily basis. This post will explore the types of fiduciaries that may be involved after a person’s death and how they are appointed.

If a person dies without a will (intestate), the Court will appoint an Administrator to serve. The Administrator to be appointed will be the same person who will inherit according to the intestacy statute. For instance, if the closest survivor is a sister, such person will inherit the deceased’s assets and serve as the estate administrator. Guardians for minor children (under 18 years of age) will need to be appointed by the Court in the event that the person dies intestate. Since a parent should not leave it to the Court to appoint a guardian for her children, it is prudent for such person to engage the services of a qualified professional to draft a will containing her wishes relative to fiduciaries.

We have posted previously about the merits of having a will and/or trust. In either case, fiduciaries are selected by the person making the will or trust. Executors are formally nominated in wills. They are charge of paying valid financial obligations and distributing assets that are collected. The testator (person making the Will) can select the best person in her life for the position of executor. Perhaps she is estranged from family and would prefer not to have the Court appoint the surviving relative according to statute in the case of intestacy. Also, the testator may have a friend who is sophisticated with respect to financial matters and is best suited to act as executor. Trustees of trusts take on similar roles as executors. Of course, selecting a guardian to raise one’s children in the event of death is a highly personal and important choice to be exercised.

January 10, 2019

Up Against a Wall- Legal Negotiation Strategies

By Weiss & Weiss

Our readers who follow the news are aware that the Federal government has been partially shut down for several weeks. President Trump has taken the position that he will not agree to re-open the government unless a wall is erected along our southern border. The Democratic leadership has responded that it will absolutely not agree that a wall is to be installed. It is not the goal of this author to side with either of these positions. Rather, we find it striking that neither side is negotiating effectively. By stating an absolute, such as there must or must not be a wall, both sides are preventing a satisfactory resolution; which requires agreeing to terms that inherently will be neither of these positions. Presenting an “all or nothing approach” is not how matters are successfully concluded. This post will address one of the tools that experienced attorneys have at their disposal- strong negotiating skills. We will explore how these skills are utilized in various legal matters.

Negotiation strategies can take the following course in real estate transactions. We recommend that parties to a proposed deal let their attorneys “do the talking” and thereby prevent themselves from showing emotion or desperation to sign the contract. Otherwise, such a party is vulnerable to agreeing to issues in the contract that may not be beneficial and result in regret. For instance, a seller who needs to sell for financial reasons or who may be facing foreclosure, without other viable offers, may agree to excessive demands from the buyer like making repairs, credits for inspection issues, etc. On the flip side, a buyer “in love” with a particular house that has multiple offers in a strong Spring market may agree to risky decisions such as waiving the mortgage contingency, allowing violations to remain and the like. The more prudent negotiation move is to allow only a qualified attorney to be aware of these factors, not display feelings and allow the attorney to be the only one to negotiate on a party’s behalf.

Commercial lease negotiations contain their own strategy. A tenant may want to be in a particular location and find it necessary to tolerate the unreasonable expectations of a landlord. For instance, a landlord may wrongfully impose snow removal obligations on the tenant. The tenant’s attorney can get more leverage in this negotiation if the tenant is willing to walk away and find another location instead. Such flexibility may help to achieve better results for the client. Perhaps the landlord has an opportunity to rent to a “big box” nationally known tenant. In such a case, the tenant will require that its form of lease be signed and will not be amenable to many landlord requirements. Locating another tenant who is willing to accept landlord demands could be best in some situations.

December 6, 2018

Sold! You’re the Successful Bidder- Auctions Part II

By Weiss & Weiss

We have advised our readers of the process for bidding at a foreclosure auction sale in New York. Perhaps you have attended the auction, participated and made the highest, winning bid. This post will address what happens next.

Upon making the highest bid, the participant will need to make an immediate payment of ten (10%) percent of the bid price. The auctioneer will provide a written receipt and the parties will sign the receipt. The successful bidder should contact an experienced attorney and provide the Notice of Sale, Terms of Sale and Receipt to his attorney. Your attorney should review these documents to ensure compliance by the successful bidder as well as the party auctioning the property.

Typically, Terms of Sale provide for the bidder to close and receive the Referee’s Deed to the property within thirty (30) days of the auction sale. Failure to do so may result in the loss of the deposit and the auctioning party offering the property to the next highest bidder or holding a second auction. Therefore, the successful bidder should be prepared to pay the balance with readily available liquid funds, without the need to apply for a mortgage. The attorney should order a title report, which will be bound in a title policy at closing, so that no other liens will encumber the property and the status of real estate tax payments is known for adjustment purposes. Then, the successful bidder will have the benefit of title insurance.