Our readers may be aware of the recent death of fashion icon Gloria Vanderbilt. Having died at the ripe old age of 95, Ms. Vanderbilt’s life had many interesting dimensions. From a legal perspective, Vanderbilt experienced a Court proceeding as a young child that is instructive to our clientele. The Vanderbilt family is one of the historically ultra wealthy families in the United States. Gloria’s father died when she was an infant, leaving her substantial share of his Estate in trust to be managed by her mother as trustee. Instead of using the trust as intended, for the care and support of Gloria, the trust was used for her mother’s lavish excursions to Europe and the like. Fortunately, Gloria’s Aunt observed her mother’s behavior and brought a successful Court action, known as “the trial of the century”, to remove her mother as trustee and obtain custody of Gloria.
The Vanderbilt matter demonstrates that the Surrogate’s Court will certainly intervene when trustee abuse occurs and when the trustee is not managing the trust assets for the benefit of the beneficiary. There are additional reasons why a petition to remove or replace a trustee will be entertained by the Surrogate’s Court. For instance, a trustee was named in a document drafted thirty-five years ago when the intended trustee was fifty years old. Now the trustee expected to serve is eighty-five years old and is not enjoying good health. An expert draftsman will anticipate this potential issue when drafting a will or trust and will suggest that the named trustee may not be practical. Also, a will or trust can be subsequently amended by codicil or trust amendment should the client note changes in the named trustee that make such person unfit to serve. Codicils and trust amendments are less time consuming than engaging in Court intervention at a future time. Another potential safeguard is to name a corporate trustee (such as a bank) to serve, in order to avoid trustee abuse as well as the possible aging or death of the proposed trustee.
As in the case of Whitney Houston’s executor , there are certain roles that are appropriate for a trustee. A trustee should be financially savvy and is required to invest assets prudently. Income and principal of the trust is to be distributed for the purposes named in the trust. Such purposes may be to maintain the lifestyle to which the beneficiary is accustomed, pay for education, fund enriching travel, cover healthcare costs, and the like. Your attorney will ask you to consider a responsible and honest person to serve as your trustee. It is also preferable to consider a trustee who has a good relationship with the beneficiary, as there will be significant interaction between them in the future.
Recently in the news is that state representatives in Albany are considering sweeping changes to New York State’s regulations for rental units. Prior blog posts have discussed past revisions to the rent regulations. While some of the changes only affect apartments in New York City, others may apply to apartments statewide. As of this writing, Governor Cuomo has stated that he will sign any bill that the lawmakers pass.
As most New Yorkers are aware, rental prices in New York City are among the highest in the nation. Whether having the government attempt to control the prices of rental units will result in lower rents overall remains to be seen. Rent regulation by the government has existed in some form since the World War II years, and keeping rental prices low has not been achieved. While some regulated tenants benefit, others, whose units are unregulated, may see larger increases. In addition, forcing landlords to charge regulated rents may discourage both the building of new units and investment by landlords in improving existing apartments. Why spend money on repairs or renovations if rent rates remain fixed by regulation? Obviously, our representatives do not think that this is a factor.
Of course, not all apartments are subject to rent stabilization. In Westchester County, where our offices are located, each municipality has the option of adopting the Emergency Tenant Protection Act (ETPA). A list of these villages, cities, and towns can be found here. If the units are in a village, city or town which has not adopted the ETPA, then the units are not rent regulated. In addition, the law only applies to buildings of six or more units. Therefore, if one owns a three unit apartment building in Westchester, it would not be subject to rent regulations.
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.
Our readers may be aware of the business activities recently announced by the Executor of the Estate of deceased pop icon Whitney Houston. After having rejected prior business opportunities, the Executor has decided to enter an arrangement with a music and marketing company to have a touring hologram of Ms. Houston’s image, a possible Broadway musical, branding deals, and issue an album of unreleased music tracks. This activity gives rise to the question; “[h]ow will I know” if promoting business activity is legally proper for an executor in New York? We suggest that you “don’t trust your feelings” and that you consult an experienced attorney who “know[s] about these things”.
By way of background, if a person dies with a Will, the Surrogate’s Court appoints the executor named in the Will. The deceased, in “racing with destiny” has “laid the plans” and named her chosen executor in the Will. The executor’s role is to collect and preserve assets, determine and pay just debts and distribute funds remaining after these activities to the beneficiaries named in the Will. When drafting a Will , your attorney will include a “powers clause” for the executor. It could be an extensive list of activities that the executor may conduct, such as making investments, selling property, borrowing money, employing professionals such as accountants and attorneys , making tax elections and the like. In the alternative, the powers clause may instead be general in nature, such as the full power and authority in all matters as if the deceased is still living. Of course, the executor is forbidden from self-dealing and transferring assets for the benefit of anyone besides estate beneficiaries.
The activities of Whitney Houston’s executor could be evaluated in multiple ways. As reported in the news story, she is pursuing new business opportunities rather than winding down the estate, distributing the assets to the beneficiaries and closing the estate. On the other hand, it may be considered wrong in the Houston estate matter if an executor declines business opportunities that could be lucrative for the beneficiaries and enlarge estate assets. Certainly, the Houston Estate matter provides an executor unique opportunities to generate additional estate income. However, most people are not famous. It is unlikely that the typical executor can legitimately promote additional business activities for reasons besides increasing his own commission. The executor does personally benefit by increasing potential executor commissions that can be collected, as such commissions are calculated based upon the value of the estate. We would recommend that the executor confer with the beneficiaries to determine if they would rather have the estate maximize its future assets or if they would prefer to have the estate distribute and close without delay. Although such a discussion is not legally required, it could prevent the beneficiaries from making a claim against the executor for delay in closing the estate if they all agree that such business activity be conducted.
Prior blog posts have discussed the difference between the two types of landlord-tenant eviction proceedings. To summarize, non-payment proceedings occur when a tenant fails to pay rent or other charges due to the landlord. Holdover proceedings, which will be discussed in this post, happen when a tenant’s lease term has expired, or, in certain situations, when a tenant does not have a written lease.
First, let’s discuss situations when a tenant’s lease term has expired. Most, if not all, written leases, contain a specific lease term. It may be expressed in terms of a set period, such as one year, and can also give the specific date that the lease will expire. What happens when the lease term expires, but the tenant remains in possession? Under New York law, the tenant now becomes a month-to-month tenant. This means that the lease terms remain in effect, but the lease has been extended for an additional monthly period, assuming that the tenant continues to pay the rent due, and continues to comply with the other lease terms.
By accepting the rent for an additional month, the landlord is agreeing to an extension of the lease for that additional month. Let’s say the lease expires on March 31. On April 1, the tenant pays an additional month’s rent check to his landlord, and the landlord accepts the rent, by depositing the check. Under the law, the parties now have a month-to-month tenancy, which either party can terminate on thirty day’s notice.
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.
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.
The New York Times recently published an article concerning the beloved business Tea & Sympathy, a British-themed store and restaurant located in Manhattan’s Greenwich Village, and the difficulty that it has encountered meeting its lease obligations. Closure of this business may occur unless the landlord is willing to amend the lease terms. Loyal customers of Tea & Sympathy have rallied in support of the business by contributing to a “Go Fund Me” page to assist the business in meeting its expenses. This post will examine legal strategies to be employed when a tenant foresees difficulty in meeting its lease obligations.
Some of our clients with commercial leases have contacted us when they have encountered difficulty in meeting their lease obligations. The cause of such inability can arise from various factors. Perhaps the tenant did not engage the services of an experienced attorney when the lease was negotiated and inadvertently agreed to terms that were not advisable for a tenant. Unanticipated factors may have come into play that increased tenant obligations beyond those that may be comfortable, such as increased fees and real estate tax escalations of the municipality where the leased premises is located, or a major capital improvement conducted by the landlord for which the tenant agreed to pay a percentage of the cost. Although the tenant agreed to the rent increases when the lease was signed, the tenant may have eventually become unable to sustain the rent increases once other business expenses also increased. The business climate may have changed since the lease was signed. For instance, the product or service offered by the tenant may also no longer be desired or is now being offered online at a lower price. Given that most commercial leases are long-term arrangements, many of these factors can cause a tenant to be unable to meet its lease obligations.
Your attorney should first determine whether the tenant wishes to continue to conduct business at the leased premises. If not, a lease surrender should be negotiated prior to “going dark”. Should the tenant wish to continue at the premises and even be fortunate enough to have sympathetic customers (like those of Tea & Sympathy) who would be disappointed if the business closes, attorneys for the tenant should conduct a negotiation with the landlord towards the goal of modifying the lease so that the current terms are consistent with the tenant’s current abilities and the landlord’s current needs to cover property expenses. Negotiation of a lease modification avoids yet another vacancy for the landlord and maintains the landlord’s cash flow.