Real Estate Transactions and Finance

February 11, 2016

Getting Engaged this Valentine’s Day?

Are you planning to get engaged this Valentine’s Day? While legal concerns may not be particularly romantic, our firm offers the following legal advice pertaining to issues that arise upon marriage in this post. Legal issues arise whether it is a first or second marriage and may become more complicated if there are children from a prior marriage.

Estate planning matters should be considered. If you do not have Wills, it is prudent to consult an estate attorney to develop the appropriate estate planning documents. Wills, trusts, and health care directive documents may be drafted on your behalf. Even if you already have estate documents in place, the beneficiaries and fiduciaries could be different now that you’re engaged. The persons that you select to make health care decisions for you are also likely to change.

If you have children from a prior marriage, provisions should be included in your Will to include a testamentary trust . Your new spouse would be afforded the opportunity to use some of the assets during her life, with the balance left to your children from your prior marriage. Without such a trust, your spouse could remarry and leave monies that you intended for your children to someone else. Also, consider how your estate plan should address personal property. If there are family heirlooms that you would want your children to inherit, rather than your spouse, you should have your attorney specify the particular items in your Will.

December 11, 2015

Let’s Adjust: Calculating Amounts Due at New York Real Estate Closings

By Weiss & Weiss

Those people who are new to the real estate closing process in New York may not be aware that the amount delivered by the purchaser at closing is not as simple as the amount of the downpayment as subtracted from the purchase price. Adjustments are to be made for real estate taxes, vendors serving the property, and potentially remediating a seller-caused situation. Our real estate attorneys are experienced in making such calculations and in delivering the information to the parties in a timely fashion in order to prepare for closing.

The first adjustment to be made involves a credit to the purchaser for the amount of the downpayment. Another common adjustment is a $500.00 credit to the purchaser for the property disclosure statement. New York State law mandates that a seller complete a detailed questionnaire and deliver same to the purchaser. In the absence of the completion of such questionnaire, the purchaser is given a credit of $500.00 against the purchase price at closing. Certain sellers, such as estates, are exempt from the requirement to deliver a property disclosure statement and are not required to apply a credit at closing. Interestingly enough, it has become the custom for sellers to complete the disclosure questionnaire in upstate New York, while most sellers in the downstate area served by this firm typically do not produce such a statement. Our attorneys advise sellers concerning whether they should deliver such a disclosure in their specific situation.

Real estate taxes are another common source of adjustments between the parties to a transaction. In Westchester County, New York, the area in which our firm is located, there are two or three different types of real estate taxes, all of which cover different periods of time in the calendar year. For instance, County taxes cover the calendar year, January 1-December 31. School taxes cover the dates July 1-June 30. In those jurisdictions subject to Village taxes, the year is calculated from June 1-May 31. Even though the various real estate taxes cover particular periods of time, the taxes are not necessarily due on these specific dates. County taxes are due on April 1, with penalty for late payment being applied on April 30.

November 12, 2015

The Online Conduct of Cooperative and Condominium Disputes

By Weiss & Weiss

With the prevalent use of the internet, grievances against cooperative and condominium boards can spread like wildfire. The means used may be standard e-mail forwarded to all unit owners, a specifically developed Facebook or Google chat page, a publically accessible website, or another type of private intranet system. The New York Times recently published an article concerning the airing of disagreements online with an audience of all unit owners and the implications. In the past, if a neighbor had a complaint, she would approach one of the board members individually and directly, so that all unit owners would not be aware of the grievance. As an alternative, it is almost expected that a unit owner will raise concerns loudly and perhaps not so politely during the annual meeting. Such concerns will be addressed in front of all unit owners present.

Now it is not uncommon for unit owners to have a day-to-day online community, allowing for constant communication of all matters. Online discussions may concern such matters as whether a neighbor is willing to watch a pet while someone is away, whether someone wants to buy unneeded furniture or more serious matters concerning how the building is being run. The board may be publically attacked for building conditions or for the manner in which a financial transaction was handled. Modern online communities make it almost too easy for unhappy unit owners to gather strength. Some proponents argue that such an online community encourages transparency of the board. The board is continually required to state and justify their actions. Even though the board is legally required to be responsive to all unit owners and must follow the business judgment rule , the current expectation that every action of the board should be known and debated among all unit owners is likely to diminish the authority of a current board.

With the potential reduced authority of a board, the takeover of a board is a potential concern. Opponents of such online communities argue that such communities are developed merely for the purpose of such a takeover. Using the online method as an easily disseminated platform, it is easier than ever for dissident groups to develop allies and arrange for other unit owners to elect them to the board. Once opinions are readily shared, the slate of dissident candidates likewise develops more easily than in the past.

October 15, 2015

Insurance Disputes in New York Concerning Damages to Real Estate

By Weiss & Weiss

As many of us know, insurance carriers are most profitable when they collect premiums and resist paying claims. Some of our clients consult us when they have a legitimate insurance claim that is not being paid, so that we can interpret their insurance policy and pursue the insurance company to properly manage the claim. There may be a casualty event in a cooperative or condominium building where it is not clear whether the building’s or individual owner’s insurance carrier is responsible for the claim. This post will address the legal issues that arise with respect to insurance claims pertaining to real estate.

Our attorneys recommend to individuals purchasing apartment units that they procure their own insurance policies, whether or not the building requires same. Otherwise, damages within the walls of the apartment unit need to be paid out-of-pocket by the unit owner. When a unit owner has her own insurance, such policy will cover damage within the unit, such as water damage to interior finishes and painting and wallpaper that are not covered by the building’s insurance. Further, our firm recommends that contractors engaging in apartment renovations to common areas of the building or to individual units demonstrate adequate insurance coverage for damages that may occur during the renovation.

The following is a typical scenario involving the cooperative and condominium boards or individual unit owners that we represent. A casualty event such as a severe ice and snow storm causes ice dams to appear in the gutters of the building. Such ice dams eventually melt, causing mold within the walls between apartment units and water leaks within specific units. How do the applicable insurance policies manage the resulting insurance claims? The entire building will most likely have insurance coverage. However, most buildings in their proprietary leases or bylaws provide that building insurance only covers common areas and damages within the walls of the building between units. As a general guideline, if the repair necessitates the removal of the wall in order to make the repair, then it is the responsibility of the building, rather than the unit owner. Therefore, the building’s insurance should pay the claim.

October 2, 2015

The Changes Are Here- New Mortgage Disclosure Rules Effective Date Has Finally Arrived

By Weiss & Weiss

As stated in a prior post , we promised to keep you advised of the progress of intended updates to the mortgage disclosure regulations. Due to comments from the loan industry, the effective date of the regulations was pushed back from August 1 to October 3, 2015. The delay in the implementation allowed for certain revisions to the intended regulations and allowed for the loan industry to engage in the task of preparing to close loans consistently with the new regulations.

If you are applying for a residential mortgage after October 3, 2015, these revisions will apply to your loan. Within three business days after your loan application is submitted, a Loan Estimate is to be provided to the borrower. This document will provide the loan amount, interest rate, monthly payment, estimated taxes and insurance and anticipated cash required to close.

The major concept behind the new regulations is that additional charges to the borrower of any type are not to be disclosed for the first time at the closing. Collection and sharing of accurate data concerning charges among those professional partners involved in the closing is crucial. Also, attorneys in New York will need to get accustomed to preparing the final financial details of closings much more in advance than is currently typical. Those attorneys who do not conduct many real estate closings may not be abreast of these developments and may not be prepared to act.

August 20, 2015

Is the House Still for Sale?

By Weiss & Weiss

As we enter the last days of summer, this author can’t help but notice that some houses for sale seem to have languished on the market for months unsold. This post will address the practical and legal ramifications of unsold houses. Because “For Sale” signs from real estate agents cannot be posted on cooperative or condominium apartments, requiring potential purchasers to search real estate listings online or in the newspaper, this post will address houses only.

In the suburbs surrounding New York City, most house sales occur with the school calendar in mind. For instance, a seller usually prepares her house to be listed starting in April, so that her buyer signs a contract by June, closes in August, and the buyer’s children can start school in the selected neighborhood in September. When the seller cannot follow this ideal schedule, she is limited to the buyers who are not concerned with the school calendar, which by its nature develops fewer potential buyers. If the property takes too long to sell, Thanksgiving and the holiday season arrive, along with winter weather, making buyers too busy or too uncomfortable to look at houses.

First, we should discuss when a seller is legally committed to sell a particular property to a buyer. In New York, until both parties have signed the contract and the downpayment has been deposited, the seller may enter a contract with any other buyer of his choosing. Our attorneys who are involved in real estate transactions are prepared to act quickly in response to an accepted offer on a property. When representing the seller, draft contracts are sent to the buyer’s attorney usually within a day. Likewise, when representing a buyer, we negotiate the contract and prepare it for signing in a similar timeframe.

August 13, 2015

Stock Transfers After Death

By Weiss & Weiss

It is not unusual for the estate of a deceased person to hold stock as an asset. Stock can take the form of shares held in a publically traded company, such as Target, or shares in a cooperative corporation. Clients often ask us how such shares can be transferred after a person passes away. This post will answer the question.

First, it needs to be determined whether the person had a Will. If there was a Will, there may have been a specific bequest of the stock. This takes the form as follows: “I give all shares that I may hold at the time of my death in Target to my daughter.” If the stock is not addressed specifically, then the residuary clause of the Will manages its disposition. Anything not specifically addressed is left to the party receiving the residuary.

If the person did not have a Will, then the rules of intestacy would dictate who would receive the stock. In New York, Section 4-1.1 of the Estates Trust and Powers Law governs the situation. For instance, if the closest surviving person to the deceased is a child, then the child would inherit the stock under New York law.

July 23, 2015

Breaking Up is Hard to Do- The End of a Real Estate Transaction in New York

By Weiss & Weiss

Real estate transactions can “break up” prior to closing for a variety of reasons. The purchaser may receive a refund of his downpayment depending upon the circumstances. This post will address the legal issues associated with a deal breaking up.

Most contracts of sale contain a mortgage contingency clause. Such a provision provides that if the purchaser applies in good faith for the loan and supplies all information reasonably requested by the lender within the timeframe required by the contract, but is declined for the loan for any reason, the downpayment will be refunded to the purchaser. Readers should also be aware that the buyer may have a loan commitment, but the lender may not have cleared all closing conditions and ultimately may refuse to fund the loan. This situation may also give rise to the buyer’s right to the refund of the downpayment. In a contract without a mortgage contingency clause, the purchaser may be subject to the loss of his downpayment if he does not obtain the necessary funds to close. A qualified attorney should monitor her client, by entering the pertinent dates in a calendar and to request extensions of applicable deadlines should her client not have the loan commitment in the timeframe required by the contract.

Contracts pertaining to cooperative apartments typically contain a condition that the approval of the cooperative’s board of directors to the transaction must be obtained prior to closing. As in a standard mortgage contingency clause, the contract provides for the delivery of the board application package by a particular date, usually ten business days after the fully executed contract is delivered to the buyer’s attorney or ten days after the loan commitment is obtained. Should the board reject the purchaser, the downpayment must be refunded. However, if the buyer missed deadlines for the submission of the package or intentionally failed his appearance in the board interview, the downpayment may potentially be withheld.

June 17, 2015

Adverse Possession: The Fundamental Elements have Changed in New York

By Weiss & Weiss

One of this author’s first lessons in Property Law class involved the concept of adverse possession. Under this legal principle, one party may acquire title to the property belonging to another. In New York, the elements required to establish adverse possession in the governing statute have been modified after 2008.

Prior to 2008, the following items had to be proven in order to establish the right to acquire title through adverse possession: hostile/adverse with claim of right/title (meaning that the possessor must believe that he owns the property); actual (an act on the part of the possessor must be conducted on the subject property); open/notorious (the possessor must be acting in a manner that an observant property owner would be able to see their activity); exclusive (if a fence, gate or wall is installed it may prevent other parties from entry and make the possession exclusive to the possessor); continuous for ten years (the owner is out-of-possession for at least ten years); and likely to be cultivated or improved (gardening, lawn mowing and the like have been conducted by the possessor or the possessor built a structure such as a shed or other building) or protected by an enclosure (such as a gate or fence). Permissive use does not give rise to an adverse possession claim.

As a result of the New York recent case known as Walling v. Pryzyble , the “hostile” element from the adverse possession standards has been removed. Further, property need not be cultivated or improved to give rise to an adverse possession claim. The updated standard is that there is a reasonable belief that the property belongs to the possessor.

May 14, 2015

“Time of the Essence” Closing Dates in New York State

By Weiss & Weiss

Parties to real estate transactions often ask us whether it is appropriate to include a time of the essence clause in their real estate contract. A time of the essence clause provides that if the parties do not close on the specified date, then the party who is not ready, willing and able to close will be in default of the contract. If the seller is in default, the remedy available to the buyer would be a lawsuit demanding specific performance, requiring the seller to transfer ownership of the property. If the buyer is in default, the seller’s remedy would be to retain the downpayment. In addition, the particular contract between the parties may dictate additional remedies available.

In New York, it is legally assumed that if a contract does not specify time of the essence, then it is not time of the essence, unless the procedure described herein is followed. Typically contracts will have the language “closing on or about x date”. This has been interpreted by Courts to mean that such a date is an approximate target and not necessarily the precise date on which the parties should presume that they are closing. Purchasers often have difficulty with on or about closing dates, as they need to know that they can close before their children are expected to enroll in school and need to arrange for movers and contractors. We advise our clients not the schedule specific moving dates or contractor start dates until the closing is imminent.

Time of the essence closing dates are not standard in residential sales transactions. Customarily, a seller does not want to be liable if unable to perform on a specific date. A purchaser does not want to potentially lose his downpayment for matters outside of his control, such as the lender not clearing the file to close. Time of the essence closing dates are more typical in residential matters where a person is purchasing directly from a developer/sponsor. In this type of transaction, the seller’s time of the essence clause provides that purchaser will pay closing adjustments such as common charges and real estate taxes as of the time of the essence closing date, even if the actual closing takes place at a later date. Further, it is not unusual to see a time of the essence clause in a commercial real estate contract.