New York Real Estate Lawyers Blog

October 21, 2013

Rent Stablization and Bankruptcy in New York State

An article in today’s New York Times discussed a case currently pending before the United States Court of Appeals for the Second Circuit. The litigation discussed involves a rent stabilized tenant who filed for Chapter 7 personal bankruptcy. Although the details of bankruptcy law are beyond the scope of this post, Chapter 7 bankruptcy involves a liquidation of the debtor’s assets, and will extinguish most debts of the debtor, making them uncollectible by the creditors.

In this case, the debtor filing bankruptcy was a tenant in a rent stabilized apartment. Rent stabilization is a type of rent regulation in larger cities in New York State that fixes the rent which a landlord may charge to tenants. It is most prevalent in New York City, but not every apartment will qualify for rent stabilization protection. For example, when one rents a cooperative apartment from the owner, rent stabilization will not apply. In addition, tenants whose income level exceeds a certain threshold may be disqualified from rent stabilization protection.

Rent stabilization protects the tenant in several ways. First, it limits the annual amount by which a landlord may increase the rent for the apartment. This amount is set each year by the Rent Guidelines Board, and their decisions are subject to annual predictable controversy as tenant groups lobby for smaller or no increases, and landlord groups request larger increases. Secondly, a tenant in a rent stabilized apartment is legally entitled to a lease renewal when their current lease expires.

October 9, 2013

Where’s the Bellhop?

By Weiss & Weiss

Regional news outlets in the New York metropolitan area recently reported on Airbnb, an online search engine used to locate short term rentals for those wishing to occupy an apartment in New York City. The Environmental Control Board of the City of New York evaluated whether an Airbnb rental of a room in an apartment, while one of the permanent residents remained in the apartment, constituted illegal use of a residential apartment. The Administrative Law Judge who heard the matter found that “temporary occupancy of the apartment by a paying boarder with a permanent occupant present was consistent with the occupancy of the apartment for permanent residence purposes.” New York State’s Multiple Dwelling Law permits occupancy for fewer than thirty days if the permanent occupant is also present OR incidental occupancy for fewer than thirty days without the presence of the permanent occupant so long as no monetary compensation is paid. Notwithstanding the case at issue, State Senator Krueger maintained that “short-term rentals of apartments in residential buildings without any permanent residents present remains unambiguously illegal.”

The Airbnb case reminds this author of a case that she litigated several years ago entitled Hoffman v. 345 East 73rd Street Owners Corp. (New York Law Journal 10/2/1992 p. 26 col. 4). The Hoffman case involved a shareholder in a cooperative building who was renting out his apartment as a “bed and breakfast” accommodation, without his presence, in order to cover his expenses in maintaining the apartment. The cooperative board discovered his illegal arrangement when one of his guests, with suitcase in hand, asked the doorman “where’s the bellhop?” Mr. Hoffman sued the cooperative for interfering with his right to use his apartment as he wished, but did not prevail in the lawsuit.

The focus of the recent press concerning this issue is whether apartment owners or renters are illegally maintaining a hotel business and, in doing so, failing to pay the hotel occupancy tax to the authorities that collect same. While these are important topics, they are outside of the scope of this blog post. We wish to discuss occupancy rules and restrictions contained in documents to which apartment owners and renters are subject. The proprietary lease at issue in the Hoffman case is very similar to most proprietary leases in New York City. It allows occupancy as a personal residence by the shareholder and (emphasis added) persons of particular relationship to the shareholder, as well as guests for no more than one month if (emphasis added) the shareholder is in residence at the same time. Standard proprietary lease language does not contemplate commercial use in this manner, being paid by someone to use the apartment while the owner is not also present.

September 27, 2013

Weiss & Weiss Blog- Case Updates

By Weiss & Weiss

From time to time, our attorneys become aware of updates relating to matters that we have discussed in our blog posts. This week, we have three such cases in which there have been new developments.

The Huguette Clark estate litigation has been the subject of a previous blog post . Our readers may be aware that the case was in the process of jury selection for a trial to be held. As is common, pre-trial procedures (and perhaps the Judge’s attitude that was displayed throughout the process) led the parties to believe that it may be more fruitful to settle the matter. Some of the details of the settlement were reported this week in the New York Times . The settlement distributed the estate as a “hybrid” of the two disputed wills. According to the settlement, distant relatives will receive a large portion of the estate (consistent with the first will) while various arts charities and a foundation will receive another large portion (consistent with the second will). The bequest to the caretaking nurse was nullified and she was ordered to return gifts received during Ms. Clark’s lifetime to the Estate. The attorney and accountant who were to benefit from the second will also had their bequests nullified. The arts charities will undoubtedly share the artwork with the general public, so that the settlement benefits the public interest. The lesson to be learned from the Clark Estate case is that those who inappropriately influence the elderly will not ultimately benefit from their acts.

Prior blog posts have discussed a federal lawsuit against Westchester County regarding grants from the U.S. Department of Housing and Urban Development (HUD). The lawsuit claimed that Westchester’s local zoning laws acted in a discriminatory manner towards those seeking to provide low-income housing.

September 20, 2013

Islamic Compliant Real Estate Mortgages and Loans in New York State

By Weiss & Weiss

Observant Muslims in New York State who seek financing for the purchase of residential or commercial real estate may have issues with traditional mortgage loans. The reason for this is that, under traditional interpretations of Koranic law, the payment or receiving of interest is considered forbidden (“haram”). While a thorough theological explanation is beyond the scope of this article, the main principal involved is that, under strict Islamic law, the exchange of capital alone for debt is not balanced by any significant advantage to the borrower, because it is not associated with the type of risk that a business venture would entail. Therefore, a loan of funds which generates interest for the lender, to be paid by the borrower, is considered profiteering and contrary to the laws of Islam.

Therefore, a traditional mortgage loan, in which funds are lent for the purchase of a property, either residential or commercial, and the funds are paid back over time to the lender with interest, would be considered non-compliant with Islamic law. This prohibition would apply both to the borrower as well as to the lender.

This raises a dilemma for an individual who wishes to purchase real property. The first solution which comes to mind is simply to pay the full purchase price for the property, and not obtain any type of loan. However, most people do not have the funds to pay for a property “up front,” and therefore require a loan of some type in order to complete the transaction. Most home purchases in New York State require a 10% downpayment of the purchase price. For example, if the purchase price is $500,000.00, the purchaser would pay $50,000.00 prior to closing, and the remainder at closing. At closing, most purchasers would then use funds loaned to them by a bank or other institutional lender to complete the transaction. The lender would record the mortgage on the property to secure the loaned funds. The purchaser would repay these funds over time, paying annual interest on the amount borrowed.

September 13, 2013

The Fluctuating Legal Rights of Same-Sex Couples

By Weiss & Weiss

gay israelis.jpg The fiftieth anniversary of the March on Washington was recently acknowledged, celebrating the great civil rights battle for equality for our African-American citizens. More recently, same-sex couples have also been engaged in their own battle for equal treatment in issues such as the right to marry, taxation, health and pension benefits, and similar property and economic matters.

In June, 2013, the United States Supreme Court struck down the Defense of Marriage Act of 1996 (“DOMA”). DOMA specified that “…the word “marriage” means only a legal union between one man and one woman…and the word “spouse” refers only to a person of the opposite sex who is a husband or a wife”. The case at issue involved a lesbian couple who were married in Canada. One of the parties died and left her estate to her partner. The surviving widow filed the federal estate tax return that was due. Because the federal government did not consider the couple married for estate tax purposes, the estate was not qualified to apply the marital deduction available to heterosexual married couples, increasing the estate tax bill by several hundred thousand dollars. The Supreme Court ruled that it is a violation of equal protection principles and an infringement on state sovereignty for the federal government to maintain such a position. In Windsor, the Court determined that same-sex married couples are to be treated as married heterosexual couples and ordered the refund of the excessive tax payment.

In late August, 2013, the Internal Revenue Service issued a subsequent ruling that legally married same-sex couples will be recognized as married, even if the state in which they live does not recognize same-sex marriages. Our readers should know that two legal standards are at play. The “place of celebration” standard mandates that a couple will receive benefits as long as they are legally married, regardless of whether the state in which they now live recognizes the union. The “place of residence” standard mandates that if the state in which the couple lives does not recognize their union, then the couple will not receive benefits.

August 23, 2013

Albert Pujols and Defamation Law

By Weiss & Weiss

Recent blog posts have discussed the legal ramifications of the use of performance enhancing drugs (“PED’s”) by baseball players, especially as it relates to Yankees slugger Alex Rodriguez. Several recent developments regarding these issues have raised a new legal point, a discussion of which may be helpful to our blog readers.

More specifically, former player Jack Clark, who has been retired from baseball since 1992, stated during his radio show that he believes that current Angel player Albert Pujols has used PED’s throughout his career. Reaction to this statement was immediate, with Pujols denying he had ever used PED’s, and stating that he would sue Clark for libel. In addition, the radio station employing Clark as a talk show host promptly fired Clark and distanced themselves from his comments.

The legal issues that we will discuss here are whether Pujols should sue for libel, and the likelihood of success of such a lawsuit. Legal claims for libel (written statements) and slander (spoken statements) are commonly called defamation actions. Broadly, they are claims that someone either spoke or wrote an untrue statement that harmed one’s reputation in the community. In order to prove such a claim, one would first have to prove that the statement was made, that such statement was untrue, and that one’s reputation was harmed as a result of the untrue statement.

August 16, 2013

Appraisal Results: An Important Threshold in the Loan Process

By Weiss & Weiss

An appraisal is an objective determination of valuation of an object or property. Lenders require an appraisal before the loan is funded at closing. If a purchaser is obtaining a loan for $400,000.00 and the purchase price is $500,000.00, then the lender will not fund the loan unless the appraiser determines that the property is worth at least $500,000.00. If the property appraises for less than $500,000.00, the parties have various options.

Typically, contracts to purchase real estate contain mortgage contingency clauses, which essentially provide that if the purchaser does not obtain a commitment from an institutional lender within a certain period of time after having applied for such financing according to the contract, then the purchaser can cancel the contract and obtain the refund of his downpayment. In New York contracts, a portion of this standard loan contingency provision states that if the commitment is conditioned on the lender’s approval of an appraisal, then the purchaser is not bound until and unless the lender has approved the appraisal.

Prior to the “Great Recession”, it was not uncommon for loan officers to interact directly with appraisers by engaging their services and suggesting the amount needed for the property valuation by “prompts”. If the purchase price in the contract or the loan amount applied for in a refinancing was $350,000.00, the property must be “worth” at least $350,000.00. However, as learned in recent years, property values were inflated in some instances to justify the transactions and the homeowner was left with an “underwater” property, with the loan amount exceeding the property value. As a result, lenders reacted and became more conservative. Appraisers are now more independent and objective. A loan officer is now strictly forbidden from contacting the appraiser. Another result is that appraisers from Long Island may be evaluating properties in Westchester, making them unfamiliar with the nuances of a locality that may enhance value.

August 9, 2013

A-Rod and Arbitration

By Weiss & Weiss

New York Yankees slugger Alex Rodriguez (hereinafter “A-Rod”) was recently suspended for 211 games by Major League Baseball for his involvement with performance-enhancing drugs. However, as of this writing, A-Rod is currently playing third base for the Yankees. Why is this? The reason is that the collective bargaining agreement between the Major League Baseball Players Association (MLBPA) and Major League Baseball (MLB) allows any player suspended for this reason to appeal his penalty to a neutral, third-party arbitrator, and to continue to play until the arbitration appeal is resolved.

The existence of a neutral arbitrator in these situations is quite common in most labor – management agreements. In fact, the first executive director of the MLBPA, Marvin Miller, had a background working for the United Steelworker’s Union prior to taking the MLBPA position. Because of his prior experience negotiating with U.S. Steel, he recognized the importance of a neutral, third party arbitrator to resolve disputes. In the 1968 Basic Agreement between MLB and the MLBPA, the parties agreed to the appointment of such an arbitrator.

In 1976, Peter Seitz, as arbitrator, resolved a dispute involving whether a player could “play out his option” and become a free agent after his existing contract expired and was renewed for one year by his team. Seitz ruled that the team’s renewal option was for one year only, and, after that renewal or “option” year, a player would become a free agent, free to negotiate with any team. The team owners were quite chagrined at this outcome, and immediately fired Seitz, but the ruling stood, giving players the leverage to negotiate a new labor agreement allowing them to become free agents after a certain period of major league service time.

July 26, 2013

Proving Damages in Intellectual Property Litigation

By Weiss & Weiss

Our firm recently litigated a case in which another company admitted to infringing on the trade name of our client. A trademark is a name, symbol or other design used to identify goods or services used in commerce. An example would be “Coca-Cola” for soft drinks. To legally protect a trade name, the first requirement is generally registration with the United States Patent and Trademark Office. Registering a trademark will enable a trademark owner to legally prevent other businesses from using said name for similar goods and services. There are many requirements for registration, and our firm is experienced in registering trade names and designs on behalf of our clients, many of whom own small businesses in Westchester County and the surrounding geographic area.

Once a name has been formally registered with the United States Patent and Trademark Office (“USPTO”), it is generally the job of the trademark owner (and their attorneys) to insure that another company is not infringing on that mark. Unfortunately, the USPTO is not a enforcement agency for trademark owners. Once it allows a mark to be registered, the trademark owner is generally responsible for commencing litigation against any other companies who may be infringing on the registered mark. For example, if our firm registers a trademark for “Debbie’s Deli” for restaurant services, and another deli opens in the immediate vicinity called “Debby’s Deli,” our firm would bring a trademark infringement action in the appropriate forum (usually United States District Court in White Plains), seeking an injunction against the infringing company, as well as money damages.

The general legal standard for infringement is whether an average customer would be likely to be confused into thinking the infringing name is the original protected company. If a Court finds infringement, there are several remedies that it can award. Most common would be an injunction (a Court order) against the infringing party forbidding it from continuing to use the infringing name. If the party violates the injunction, it can be held in contempt of Court.

July 19, 2013

Reverse Mortgages: A Risky Opportunity for Seniors

By Weiss & Weiss

reverse mortgage.jpg Many of us have seen the slick advertisements on television for reverse mortgages. An actor who is popular with our seniors will advocate the advertiser’s reverse mortgage program as a way to tap home equity and enjoy the “good life”, the long awaited vacation or purchase of a new car or boat. However, the reality of reverse mortgages can be quite contrary to these advertisements.

A reverse mortgage is a home equity mortgage program only available to homeowners over the age of 62. These mortgages are insured by the Federal Housing Administration, a division of the Department of Housing and Urban Development. A portion of the home equity is made available for the loan, which proceeds are distributed in several ways. The homeowner can receive the proceeds in (1) monthly installments for so long as he lives in the house, (2) monthly installments for a set period of years or (3) as a line of credit that can be used as needed. Unlike a conventional mortgage, a reverse mortgage does not need to be paid until the borrower dies or no longer occupies the home as his primary residence. Not needing to make a monthly payment while having funds available for home improvements, medical expenses or other retirement needs is obviously highly attractive to seniors.

However, this author wishes to demonstrate particular concerns with respect to reverse mortgages that have actually been experienced by some of her clients. A reverse mortgage borrower must be at least 62 years of age. Let us consider a married couple that jointly owns their home, the wife is 57 and the husband is 63, meaning that only the husband can become the borrower. If the husband dies first, the surviving widow will be unlikely to repay the loan which is now due in full (without selling the house in which she may wish to continue living). The primary residence requirement may also cause difficulties. If the borrower needs to live in a residential care facility indefinitely due to medical issues, the loan will be due in full and the borrower will be unlikely to have the funds to repay. Of course, once the borrower dies, triggering the due in full provision, the lender may not patiently await receipt of the house sale proceeds needed to repay the loan and may commence a foreclosure or other legal proceeding. After the financial crisis of 2008, homes have not sold as readily as in the past, making it more difficult for survivors to sell homes to satisfy the reverse mortgage lender’s schedule. Further, with home values having dropped in recent years, there may be insufficient proceeds from the house sale to pay the loan, making the balance due from the estate.