Real Estate Transactions and Finance

May 19, 2017

Up on the Roof

Now that the weather has finally improved in the New York metropolitan area and Memorial Day weekend is fast approaching, many of our readers may want to consider whether their cooperative building provides access to their rooftop. Carole King and Gerry Goffin , and later James Taylor , have sung these words while imagining their roof decks: “I climb way up to the top of the stairs and all my cares just drift right into space.” Our readers must wonder is such a “…paradise…trouble proof?” This post will examine the legal issues to consider when converting an ordinary roof of a cooperative building into a recreational roof deck.

First, we will examine this situation assuming that the roof deck amenity is to be shared by all residents of the cooperative. A qualified attorney should review the cooperative’s governing documents to determine whether the Board of Directors or all shareholders are required to approve this project. If a building-wide assessment needs to be implemented to fund the project, the governing documents may also advise your attorney whether a Board resolution or a vote of the shareholders at an annual or special shareholders meeting is required to authorize the assessment.

Next, let’s consider another situation, where the roof deck amenity is to be used exclusively by only one shareholder, usually the resident on the top floor. The shareholder has agreed to buy this common area space, thus enhancing the cooperative’s coffers. Prior to the project, the roof is common space owned by the cooperative. For any particular shareholder to purchase this space, shares of stock need to be allocated to the space. Unissued stock is called treasury stock. Hopefully, the cooperative at issue has not already issued all of its stock. A specialized real estate broker needs to determine that the number of shares to be issued to this area bear a reasonable relationship to the proportion of shares already issued for apartments in the building. For instance, the broker will consider that 100 shares are issued for apartment 5A with 1,000 square feet and likewise for other apartments. From that data, the broker will determine how many shares should be issued for the roof deck and the resulting purchase price. Also, the cooperative attorney will need to obtain a “no-action letter’ from the Attorney General of the State of New York authorizing that a certain number of shares be issued for the space and that the cooperative is legally authorized to sell it to the shareholder.

May 11, 2017

Commercial Lease Guaranties- Legal Issues to Consider

By Weiss & Weiss

Many landlords of commercial property require that the obligations of the tenant be guaranteed by an individual or affiliated entity. Most tenants of commercial leases are an entity, such as a corporation or limited liability company, whose only asset is the business engaged in the leased premises. If the entity tenant cannot perform its lease obligations or leaves before the end of the lease, the landlord has no remedy besides renting the premises to a new tenant. For this reason, most landlords require that an individual or entity closely affiliated with the tenant guaranty the tenant’s requirements. That way, other assets of the guarantor may be available to the landlord if the tenant defaults under the lease. This post will examine the various types of guaranties that may be requested by a landlord.

A full guaranty is the most broad, wherein the guarantor covers all of the tenant’s obligations under the lease. Such obligations would include paying rent, real estate tax escalations, utility payments, common area maintenance payments, maintaining proper insurance, repair obligations and the like. Landlords prefer this type of guaranty because there is no limit on the amount or extent of the obligation covered. Also, the landlord does not need to meet any condition before enforcing the guaranty against the guarantor.

A partial guaranty is more limited. Perhaps the obligations covered are only those that are monetary in nature or up to a certain amount. Other limited guaranties may cover lease obligations such as keeping up with maintenance and repair obligations. Partial guaranties could also “burn down” or “sunset” over time. For instance, after a certain period of perfect performance by the tenant, the amount guaranteed reduces or the partial guaranty terminates entirely. In partial guaranties, the landlord may need to meet certain conditions before it is enforced against the guarantor.

May 3, 2017

Coming of Age- Do You Know Someone Turning 18?

By Weiss & Weiss

If you are like this author , someone close to you may be about to turn eighteen years of age. This post will discuss the legal ramifications of turning eighteen. Additional rights and privileges as well as legal responsibilities occur once a “child” becomes eighteen. Such a person can now vote, run for office, legally support oneself, and be employed full-time. An eighteen year old male will be penalized if he does not register for the military draft. All eighteen year olds are treated as adults if they commit a crime. Since we practice particular areas of law, this author will address the implications of turning eighteen as they apply to those areas of law. Also, rights and obligations vary by state, so this post will only address these matters as they relate to New York.

Eighteen year olds have the right to enter a contract and to apply for credit. Therefore, our soon-to-be eighteen year old can apply for a mortgage and sign a contract to buy a house. Contracts involving real estate, whether for sale or for a lease of more than one year must be in writing.

Once a person is eighteen, he can make a Will and other estate documents. While we do not want to consider that someone so young may pass away, without a Will, his assets will be distributed according to New York’s intestacy law. Also, an eighteen year old can inherit from someone who named him in a Will or in an Administration proceeding if he is of the proper degree of relation according to the New York statute. Since many eighteen year olds may not be sophisticated enough to inherit substantial assets, those drafting Wills may decide to leave such assets to the child in trust until such age as they anticipate that the child will be mature enough to manage the assets.

March 30, 2017

Real Estate Contracts- Significant Issues for Buyers and Sellers

By Weiss & Weiss

Now that we’re entering the Spring real estate market , we should anticipate that our real estate clientele will be entering into new real estate contracts for their real estate purchases. Certain clauses of such contracts should be negotiated in a particular manner, depending upon whether your attorney is representing a buyer or a seller.

A seller may have decided to forego the services of a professional real estate agent or the property may have been on the market for an extended period of time. In these situations, the seller may be more amenable to certain requests of the buyer, such as making certain repairs before closing. The seller may not know that some of the requests are not customary or may need to move the property, which may result in more flexibility on such matters.

Your attorneys should pay particular attention to personal property issues , whether representing a buyer or a seller. The seller will be disappointed to find that a treasured chandelier was not excluded from the personal property to be sold with the house. A buyer may not approve of the removal of wall scones, without repairs being made to the wall after removal.

March 9, 2017

Commercial Leases and the “Give and Take” between Landlords and Tenants

By Weiss & Weiss

Our firm is routinely involved in commercial lease negotiations. This post will address the “give and take” that takes place in such negotiations, while discussing the legal issues that commonly arise. For convenience sake, let’s assume that our attorney is negotiating on behalf of a retail store tenant engaged in a food business in a suburban strip center.

Commercial leases typically span several decades and are not rent-regulated. Both landlord and tenant cannot envision business conditions or pricing over such a timeframe. Most leases will run for an initial term, potentially for ten years. The parties may wish to include a renewal provision, potentially for another five years. Is such a renewal term to be a requirement for the landlord to offer or an option to renew on behalf of the landlord or tenant? If the option to renew is for the tenant, one may find provisions as to the timeframe in which to exercise the option, so that the landlord can make the space available to another tenant without a vacant period of time.

The determination of rent to be charged during the renewal period is tricky. The parties could state in the current lease that the renewal period rent will be a certain percentage above that charged in the last year of the lease. This provides certainty but may be too high or too low for market conditions at the time of renewal. The other option is for the renewal rent to be determined by an appraiser to be mutually selected by the landlord and tenant. The inherent problems in this formula are that there may be a disagreement on the selection of the appraiser and the rent to be charged would be uncertain.

March 2, 2017

Mortgaging of Church Owned Property under New York Religious Corporations Law

By Weiss & Weiss

News reports have recently discussed the Archdiocese of New York and their seeking Court approval to mortgage church-owned property. The purpose behind such action is for the Church to obtain a loan of $100,000,000.00 from JP Morgan, Chase, N.A., backed by a mortgage on Church-owned property located at 457 Madison Avenue in midtown Manhattan. The loan proceeds will apparently be used to pay monetary settlements to the victims of the Church child abuse scandal.

Laymen may be asking why Court approval is necessary for such a transaction. If an individual owns property, and seeks to obtain a mortgage on the property in order to raise funds, generally, Court approval is not needed. The difference in this situation is that the Archdiocese of New York is a Religious Corporation, and, as such, is subject to the New York Religious Corporations Law.

As prior blog posts have discussed, any New York Religious Corporation seeking to buy property, sell or lease 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 reason behind this statute is to make sure that a religious institution is not “sold out” from under its members by unscrupulous individuals or leaders. Most religious institutions, of course, do not own the large real estate portfolio that the Archdiocese of New York does, and may own a single building which is used for its offices and place of worship. The Religious Corporation Law protects all such institutions by requiring Court approval for such important real estate transactions, in order to insure that loan proceeds are used for purposes that congregants will believe will advance the legitimate interests of the church.

February 10, 2017

Untimely Deaths- The Legal Aspects

By Weiss & Weiss

The timing of death is never particularly welcome. Some families are prepared, in that the deceased was elderly, maybe ill, and living in a nursing home. Perhaps such a person also had the foresight to have their attorney prepare her Will and other estate documents. Others may pass away at a relatively young age, in the prime of life, with ongoing financial and personal activities. This post will examine the legal ramifications of passing away while a legal matter is pending.

Imagine that the deceased was a party to a contract concerning the sale of a house which has not yet closed. The first step that the survivors would need to undertake is to review the contract and determine if it addresses the potential death of one of the parties before the closing. In most cases, the seller is bound to the terms of the contract through her successors. This means that the survivors cannot decide to nullify the contract and move into the house. However, the seller is not available to conclude the transaction. The attorney for the seller would need to apply to the Surrogate’s Court to apply for Letters Testamentary or Letters of Administration , which appoints the appropriate fiduciary to act for the Estate in order to complete the closing. Should circumstances warrant, it may be prudent to apply for Preliminary Letters Testamentary or Preliminary Letters of Administration, to permit the sale to conclude if it is jeopardized by a continued delay.

If the deceased was the potential purchaser of the house, the contract is likely to allow the purchaser’s survivors to cancel the contract. This is a logical result, as the transaction is inherently dependent upon the purchaser maintaining a job in order to pay the mortgage and other carrying costs of the house. Forcing this transaction to conclusion is a cruel result. In most cases, the downpayment is refundable. However, some contracts only provide that half or none of the downpayment would be refunded. It is advisable to have your attorney negotiate a favorable disposition for the downpayment in this instance when representing a purchaser, even if he is a young person.

December 8, 2016

Due Diligence and Real Estate Purchases

By Weiss & Weiss

You have found the perfect house, cooperative or condominium apartment after a long search. It has the ideal updated kitchen to show off your culinary skills and a beautiful bathroom that rivals a spa-like retreat. Is there anything that should delay the signing of the contract and procession to closing? Yes, there is. A prudent purchaser needs to conduct the appropriate due diligence to make sure that the property and surrounding neighborhood is financially and physically sound. Otherwise, the purchaser may acquire a property that is a long-term headache and difficult to sell when desired.

First, an inspection should be conducted by a professional engineer when buying a house. Some condominium and cooperative purchasers also find it appropriate to conduct an inspection. For a house, such an inspection may reveal a serious condition, such as a crack in the foundation. In this case, the buyer may want to search for another property. An inspection may also show items that the buyer will want to monitor once she is a homeowner. For instance, if the inspection predicts that the remaining useful life of the roof or the hot water heater is going to be five years, the homeowner may want to budget for such replacement and should not be surprised if these elements need replacement at such time. The inspection may also list items that your attorney may wish to request for inclusion while negotiating your contract. The seller may agree to repair the dishwasher, replace a broken smoke detector and the like prior to closing.

Inspections when purchasing a foreclosed property serve another purpose. Although properties offered for sale after foreclosure are generally strictly “as is”, inspection results that are unsatisfactory to the buyer may allow the buyer to cancel the contract or present the opportunity to ask the seller to remedy a particular condition or offer a price reduction. In any case, the buyer will have knowledge as to the condition and the expectations going forward.

November 3, 2016

Pitfalls Arising from the Purchase of Foreclosed Properties

By Weiss & Weiss

From time to time, we are approached by a client who says that she is getting a bargain on a real estate purchase of a foreclosed property. Such a property is being sold by the lender or its subsidiary at a price that the client believes to be well below market. The client may wish to flip the property or use it for his own occupancy. It is important at this stage to hire an attorney with an expertise in this area to protect your interests.

Like other properties, foreclosed properties are usually marketed by a real estate broker. However, most accepted offers for foreclosed properties are without some conditions that are favorable to the buyer. It is not unusual for the buyer to be pressured to sign the first draft of the contract immediately, provide proof of funds and a bank check for the downpayment. Once our firm is engaged in such a transaction , we evaluate the contract and negotiate it as appropriate for this type of sale.

Buying a foreclosed property does not afford the purchaser some of the standard contract terms as in a transaction with a seller who lives in the property. For instance, the property is sold “as is”, without representation that the appliances and major building systems are in working order. Contracts for foreclosed properties often contain time of the essence closing dates and may require the buyer to pay all adjustments for real estate taxes as of the time of the essence closing date, even if such date is not the actual closing date. Also, offers are often accepted in a bidding process, without the buyer having the opportunity to go inside the house or have a formal professional inspection performed. A buyer may not even receive keys at the closing, much less go inside prior to closing, in some of the tougher transactions.

September 22, 2016

Inheritance of Real Property and Partition Actions

By Weiss & Weiss

Our firm is often consulted in situations where a number of individuals have inherited real property. For example, a parent passes away, and leaves a house to her three children. Many legal issues can arise from this type of situation, which will be discussed in this blog post.

The first question when a property owner dies is whether they have a written will. If they do, then their Last Will and Testament should direct the disposition of the said property. For example, the Will may state “I leave my property located at (address) to my three children (names of children). Another possibility is that the property is not specifically addressed, but the testator (the person making the Will), simply leaves all of their property owned at time of death jointly to their children.

If the person dies without a Will (intestate), then the disposition of their property, including any real property, is made pursuant to New York Estate Law. For example, if a person passes away without a Will, and has no living spouse or parents, then their property would be inherited by her living children.