Articles Posted in Real Estate Transactions and Finance

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auction-300x200Our firm receives many inquiries from parties who intend to bid at a foreclosure sale.  Foreclosure sales most often occur when a party is unable to pay a mortgage encumbering a property, and a foreclosure judgment is obtained by the lender.  What happens next?  A foreclosure sale, or auction, is scheduled by the lender.  This must be properly noticed by having all parties served with the Notice of Sale, as well as having the Notice published in a general circulation publication, which the Court will order, such as the Journal News in Westchester.

Once all notices have been given, the sale is usually held in the lobby of the Courthouse of the Supreme Court in the County in which the foreclosed property is located.  Most courthouses in New York State set aside a specific area or room in their building to hold such auctions, which are open to all members of the public.  Prior to the auction date, it is wise for potential bidders to have experienced counsel review the terms of sale.

The sale is then conducted by the Referee for the foreclosed property.  The Referee is an individual, usually an attorney, who has been appointed by the Court to conduct the auction and transfer the property after a judgment of foreclosure has been obtained by the lender, who is the plaintiff in the foreclosure lawsuit.  The Referee’s role is to prepare all documents, conduct the auction sale, and then prepare the property transfer documents and convey all funds to the lender after the auction.

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Landlords who lease commercial space typically concern themselves with the quality of a proposed tenant so that such character is consistent with that of other tenants occupying the property.  Such concern is reflected in particular provisions found in a commercial lease.  This post will discuss some of the more common tenant “character” provisions.

Signage is important to commercial tenants so that the store’s location is visible and identifiable to potential customers.  Because landlords are concerned that certain signage may look physically unpleasing or be harmful to the reputation of the property, landlords typically specify signage requirements in the lease.  The landlord will reserve the right to approve the signage sought to be used by the tenant and will usually not allow a sign that appears to be too large or has too much neon compared to other signs already used at the property.  Of course, signs containing vulgar words will not be permitted.  When negotiating your lease, your attorney  should also negotiate an exhibit to the lease which will contain a drawing of exactly how your sign will look with specific dimensions referenced.  That way, the parties will have already decided on the approved signage before the lease is signed.

Landlords also want to control store hours.  Many leases have provisions to that effect.  In a shopping mall environment, most leases will require stores to be open for the same number of hours.  Such a provision benefits all tenants, as the mall is more likely to be a thriving place in which to do business if shoppers can visit more than one store.  On the flip side, landlords may demand that a public storefront be closed after a certain hour so that visitors do not “hang out”, impairing the reputation of the property or creating too much noise, impacting neighbors of the property.

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walmart-300x181Recent news in Westchester County is that the Wal-Mart store in downtown White Plains is scheduled to close on August 10 of this year.  Our blog  has recently explored the legal issues relating to a store closing for good, especially where there is an existing lease.

An interesting point regarding the Wal-Mart closing is that it is been suggested that the store be replaced with a residential building or be converted as exists into apartments.  Many area residents who decide to move out of New York City are seeking homes in Westchester County.  However, Westchester has a limited housing stock, and many of the current homes in Westchester date from the immediate post-war period, or are even older, and the lack the amenities many new home buyers are seeking.

In addition, the economics of supply and demand mean that due to the low current supply of housing stock in Westchester, housing prices are quite high and will likely continue to rise over time.  Since demand is unlikely to decease, the only way to lower prices would be to increase the supply of housing.  Other areas in the United States are experiencing similar housing shortages.  Further, recent changes to the federal income tax laws concerning limits on the deduction of real estate taxes have affected the real estate market.

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532Now that many of our clients are participating in the Spring housing market , repair issues have developed in several transactions handled by our attorneys .  This post will address the manner in which such issues should be addressed in a contract.

Most buyers will have a professional engineer inspect the premises prior to signing a contract.  Inspections serve several purposes.  They may illuminate a condition so severe that the buyer decides not to proceed.  An example may be a cracked foundation requiring costly repairs.  Inspections also show conditions that a seller may be willing to address, given the circumstances of the transaction, such as electrical repairs needed for immediate safety concerns.  Also, inspections show conditions that are for the buyer’s information as a potential homeowner, including ongoing maintenance issues such as clearing the gutters on a seasonal basis.  Conditions in this category should not be raised with the seller.  In any event, rest assured that the inspector will find conditions requiring repairs because most homes that are inspected are not newly built and not in perfect condition.

Let’s consider those conditions that should be addressed.  Buyers need to be aware that our current local real estate market is afflicted with low inventory.  This means that many sellers are weighing multiple offers that vary as to terms such as price and whether the buyer needs to obtain a mortgage.  Offers also vary as to whether a particular buyer appears to be pleasant and will easily close the transaction.  With this in mind, a buyer may lose the deal if she asks the seller to repair a large number of items, many of which are relatively simple such as unclogging the hall tub drain.  Unfortunately many first time purchasers  are anxious, desire a house with no issues, and are unfamiliar with the area, so they may not know who to call to repair the tub.  These people are better served by hiring their own plumber after the closing for a few hundred dollars, rather than making it an issue with the seller who may have other options.

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lowSome of our clients have recently inquired as to whether their cooperative board may have been declined their proposed sale because the proposed purchase price is too low.  As we have indicated in previous posts , cooperative boards can decline a purchase for any or no reason so long as such reason does not discriminate against protected classes.  Once a seller hears that their well-qualified purchaser has been declined, sometimes they suspect that it is because they accepted a price that was too low.  Should a cooperative board be willing to disclose this possibility, there are steps that the seller can take to keep the deal alive.

Let’s explore the rationale for a cooperative board declining a sale because the price is too low.  The board is likely concerned that a sale price significantly lower than others in the building may adversely affect valuations of other apartments, so that all units for sale in the future may be potentially valued at a lower price as a result.  The board, as a fiduciary for all shareholders, wishes to maintain elevated apartment prices for the benefit of all shareholders.  As such, declining a purchase because the price is too low is perfectly legal.

However, the seller may be willing to accept what appears to be a low price for the following reasons.  Perhaps he is in financial distress, owes maintenance arrears and cannot cover the past due charges without selling the unit.  In this case, it is better for the cooperative as a whole if this person sells so that a financially secure buyer owns the unit instead and is current in her maintenance payments.  Also, the shareholder may be getting divorced or has been relocated in his job, making it necessary to sell.

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News outlets recently reported on the demise of retailer Toys R Us in bankruptcy.  Initially, it was thought that the famous chain toy store would continue operations under its bankruptcy plan.  Then, those in charge of the company found that it was necessary to close all locations.  Such a decision has profound ramifications on the commercial property and leasing market throughout the United States.  This post will address the legal issues raised by the closure of Toys R Us locations.

Most likely, the locations occupied by the stores were not owned by Toys R Us, but were leased under long term leases. Commercial leases typically are long term arrangements, for about ten years with potential options to renew.  Of course, during such leases, the economy or style of doing business may change, leading to a lease arrangement that is no longer viable or sensible for the tenant.  For instance, with the rise of online shopping in recent years, the need for tenants to have large locations in relative proximity to one another no longer makes sense.  It may become necessary for the tenant to renegotiate a lease when times change and the business model along with it.   Experienced counsel should be involved in any such lease renegotiation for a modification or amendment as the case may be.  In exchange for an amendment or modification, the landlord may ask for concessions from the tenant.

In considering Toys R Us in the area served by our firm , one may be familiar with a location on Central Avenue that was built specifically for the store.  The owner of the property may have issues with the store abandoning the property, as it may be suited only to this tenant.  The landlord may need to become creative in considering the future use of the space, as did the owner of Lord & Taylor’s flagship location.

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reverse-300x206Prior blog posts have discussed the legal ramifications of reverse mortgages, which are becoming more common, and, with this, have become the subject of more court actions, including foreclosure cases.  Reverse mortgages allow a person to borrow against the equity in their home, and are limited to those homeowners older than age 62.  The sums borrowed against a person’s primary residence are usually not legally required to be repaid until after the borrower’s death.

Of course, no one lives forever, and, eventually, all things must pass.  At that point, the legal heirs of the borrower will often receive collection notices from the reverse mortgage lender, demanding repayment of the loan.  This post will discuss the legal options available to the heirs when a reverse mortgage has become due as a result of the borrower’s death.

The first recommendation is that the heirs retain experienced legal counsel to represent their interests.  Counsel should examine the documents underpinning the reverse mortgage, and check to ensure that the borrower actually took out the loan, and understood the ramifications of the transaction.  Unscrupulous lenders may take advantage of our senior citizens, some of whom may not be in top shape physically or mentally.  If a surviving heir suspects this to be the case, the reverse mortgage may be challenged in Court, depending on the overall circumstances of the transaction.

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pondMany of us have recently enjoyed watching the Winter Olympics.  The competitive spirit of the athletes is enhanced by the beauty of the snow and ice and the vistas in South Korea.  Back in our region, snow and ice can be dangerous for homeowners and subject them to damages for injury to person and property.  Of course, young children are most susceptible to injury and tragic consequences are sought to be avoided.  Homeowners should take reasonable measures to avoid dangerous conditions caused by ice and in warmer times, swimming pools.

Let’s imagine that a young couple purchases a lovely home overlooking a lake.  What a wonderful lifestyle to be enjoyed.  Skating on the frozen lake in the winter and swimming in it in the summer.  However, should the lake not be sufficiently frozen, and a person falls in as a result and drowns, the homeowner could be subject to a claim for personal injury if he did not take adequate measures to protect against harm.  Some of these measures are limiting access by fencing or a gate with a key and posting signs in multiple languages advising of the danger.

Swimming pools are also what can be termed as an attractive nuisance.  Using them is appealing to neighbors, even if not invited by the homeowner.  Those who are unable to swim or are impaired by drugs or alcohol can be injured if they have easy access to the swimming pool.  As with the lake, it is essential that a locked gate or fence surround the pool.  Also, potentially a pool alarm should be installed to alert the homeowner to unauthorized use.  These measures are important even if the properties are spaced far apart, as in some areas served by our firm.

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chelsea-300x200A recent article in the New York Times discusses the purchase of the building which currently houses Chelsea Market by Google.  Of course, this raises the issue of what becomes of the tenants in the building, including the all-important food vendors.  Commercial real estate in New York, whether in the New York City area or its surrounding suburbs, often changes hands.  The question then becomes what are the legal responsibilities of the new owner regarding the existing tenants.

In most cases, the property is sold subject to the current tenants’ leases.  This means that if the tenants have valid leases, and most commercial tenants would have such leases, then the new owner “steps into the shoes” of the existing landlord, and takes the property subject to the leases.  It is important for anyone purchasing such commercial real estate to have experienced counsel review the existing leases, and be aware of the rights and responsibilities of both landlord and tenants.  A commercial property such as Chelsea Market may have dozens of commercial tenants, who may have different leases, expiring at different points of time, with potential options to renew.  The new owner must analyze the situation prior to purchasing to ensure that the existing rent obligations create sufficient cash flow for their purposes.  Also, if the new owner wants the space vacated, an evaluation is needed to determine how long the existing tenants may remain.

Assuming the buyer is obtaining financing for its purchase, the institutional lender will require subordination non-disturbance and attornment agreements from the tenant.  This is an acknowledgement from the tenant of the status of the lease, such as term, security deposit held, rent due and whether either party is in default, and that it will pay the lender if the buyer does not make payments on their mortgage loan.  In exchange, the tenant should obtain an estoppel certificate, which is a document confirming their tenancy, and stating that they will not be evicted assuming they continue to meet their obligations under their existing leases.

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retaxes-300x168In December, 2017 a new federal tax bill was enacted.  Such legislation has a profound effect on relatively high tax states such as New York.  This has resulted in a lawsuit filed by the State of New York as well as other regional high tax jurisdictions.  Previously, there was no limitation on deducting real estate taxes and mortgage interest paid.  With the new tax legislation, state and local tax (“SALT”) deductions are limited to $10,000.  Real estate taxes due for properties owned by clients represented by this firm typically exceed this $10,000 limitation.  As such, panic sweep homeowners before the end of 2017.  These people tried to pay their property taxes for 2018 while it was still 2017, so that they could deduct as much as possible.  This post will address if this strategy was effective and discuss the means by which real estate taxes are paid in New York.

Apparently paying taxes in advance may not be effective for the following reasons.  Let’s assume that the property taxes on a home in Scarsdale are $24,000 in 2017.  The homeowner wanted to pay an extra $25,000 in 2017 to cover anticipated 2018 taxes.  Such a strategy is ineffective because taxes are levied as a result of a budget and warrant resulting in a tax bill to the homeowner.  If the taxing authority has not completed this process, paying an estimated amount would not allow such payment to be deducted.

Further, many homeowners with mortgages have a tax escrow associated with their mortgage.  This means that every payment will include mortgage interest and principal, as well as an amount determined by the lender that is sufficient for the lender to pay real estate taxes on behalf of the homeowner once they are due.  The lender sends an annual statement to the homeowner and the IRS stating the taxes paid on the account.  If the homeowner pays taxes on her own, it will not match the amounts reported to the IRS, potentially subjecting her to a tax audit.  Thus, any homeowner who has her taxes escrowed should not pay real estate taxes on her own outside of her ordinary loan payment.

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