New York Real Estate Lawyers Blog

July 19, 2012

The Role of a Receiver in a Foreclosure Action in New York State

Once a plaintiff files a foreclosure action, the next step in the procedure is generally to have a Receiver appointed by the Court. The reason for this is that foreclosure actions can take quite some for a Court to resolve. It would not be unusual for a Court with a busy docket (such as those in Queens, Brooklyn, or Manhattan) to take more than a year to resolve a foreclosure action. During this period of time, it is important that the property be physically maintained, the property’s expenses be paid in a timely fashion, and that the property’s income, if any, be collected by the proper party.

The court-appointed Receiver is the mechanism generally used to achieve these goals. A Receiver is an individual appointed by the Court to manage a property during the foreclosure process. Generally, they are attorneys, but this is not a legal requirement. Retired court personnel, such as judges, also are often appointed as Receivers.

The first step in having a Receiver appointed in a foreclosure action is to consult the legal documents which are the basis of the action, such as the mortgage and note. If the documents have been properly prepared, they will contain a clause permitting a Receiver to be appointed, without notice, in the event of a default on the loan. Once a foreclosure action has been filed, the attorney for the foreclosing party should then file an ex parte (without notice) application with the Court, requesting that a Receiver be appointed for the property in question. This application should contain an Affidavit from the plaintiff stating that the loan is in default, as well as copies of the documents entitling the plaintiff to the appointment of a Receiver in the event of default.

July 12, 2012

Mortgage Disclosure Regulations Promulgated by the Consumer Financial Protection Bureau

By Weiss & Weiss

Our readers should be aware that the financial crisis has spawned at least one new government agency. In this post, we address the Consumer Financial Protection Bureau (“CFPB”), whose central mission is “to make markets for consumer financial products and services work for Americans– whether they are applying for a mortgage, choosing among credit cards, or using any number of other consumer financial products.” With respect to mortgages, the CFPB has recently promulgated proposed regulations pertaining to mortgage disclosure.

Many people believe that the financial crisis and resulting recession were caused by borrowers entering mortgages that they did not understand and becoming financially overwhelmed as a result. The CFPB has recently proposed regulations intended to prevent this problem in the future. Revisions to the Good Faith Estimate document and the preliminary Truth-in-Lending Disclosure form figure prominently in the new regulations, so that borrowers understand the loan terms and the actual cost. For instance, the new document that combines the purposes served by the Good Faith Estimate and the preliminary Truth-in-Lending Disclosure form, now entitled the Loan Estimate, is to be presented within three business days of the mortgage application and purports to be easier to understand than similar documents presented in the past.

Further, another document, entitled the Closing Disclosure, to be presented to the borrower three business days before closing, is intended to replace the form known as the HUD-1 and the revised Truth-in-Lending Disclosure form. The Closing Disclosure is meant to prevent a borrower from being surprised by unexpected closing costs and the amount of cash needed to close. While most consumer mortgages are covered by the regulations proposed by the CFPB, common mortgage transactions such as home-equity lines of credit and reverse mortgages are excluded.

July 5, 2012

Legal Responses to Defaults by New York Cooperative and Condominium Unit Owners- Part II

By Weiss & Weiss

Our readers should be aware that if the default remains uncured and an auction is necessary, that the distinction between cooperatives and condominiums becomes pronounced. The auction procedure in a cooperative is non-judicial, meaning that it does not require the intervention of a Court, unless a party specifically requests judicial intervention. After a lien is filed against a defaulting condominium owner, all proceedings, including the foreclosure proceeding and the oversight of the auction process, require the intervention of a Judge and take place in a Court.

Cooperative clients should understand what is accomplished once the Proprietary Lease is terminated. In order for the cooperative or another party to obtain legal ownership of the cooperative, the legal auction procedure is then commenced. A Notice of Auction is placed in a newspaper of general circulation and delivered to the unit owner in a legally compliant manner. At the auction, the Terms of Sale and a Memorandum of Sale as prepared by our firm are presented and read aloud by the auctioneer. The successful bidder will obtain the transfer of the apartment in the time frame provided by the Terms of Sale.

While the auction process allows for the obtaining of legal ownership, a Landlord-Tenant procedure is then required to obtain physical ownership of the unit. This proceeding is even required if the unit owner does not leave the unit during the default response procedure. Once the auction notice is advertised in the newspaper, it is not uncommon for our attorneys to entertain telephone calls where a person states incredulously that they can get the apartment for “only $18,000.00” (the amount that may be owed for maintenance). We will remind the caller that there are no warranties as to the status of occupancy or unit condition. The “successful” auction bidder may merely be buying what may be a protracted landlord-tenant case.

June 28, 2012

Legal Responses to Defaults by New York Cooperative and Condominium Unit Owners- Part I

By Weiss & Weiss

The efficient operation of a cooperative or condominium building in New York depends upon unit owners respecting and abiding by the rules contained in the governing documents. Unit owners in cooperatives should refer to their Proprietary Lease, while those in condominiums should refer to their By-Laws. In both cases, the building’s House Rules should also be consulted. As described in our website , those who own a cooperative or condominium unit have common legal responsibilities, including the payment of maintenance or common charges, adhering to house rules, compliance with renovation and subleasing restrictions, and the like. In the event that a unit owner fails to abide by the rules and regulations of the building, our firm has extensive experience in responding to defaults and enforcing compliance by the issuance of the proper legal notices as required by the applicable governing documents. Said procedures may lead to litigation or auctioning of the units, depending upon the development of the case.

Our first course of action is usually to discuss the specific breach with our client contact, be it the representative Board Member or managing agent for the building. If monies are owed, we identify the period of time for which the money is due and the type of charges, such as maintenance, common charges or an assessment and any late fees, interest or other penalty charges properly added. If the breach involves “behavior”, rather than money owed, we determine whether same relates to an illegal sublet, an unapproved alteration or even a behavior that may not fall neatly into any particular category, such as being too noisy or permitting “unreasonable” odors to escape from the unit. Our initial discussion will also identify if any prior written notices have been sent to the unit owner.

Following our initial fact gathering, the next step involves insuring that any further legal notices are completely in compliance with the building’s governing documents. Failure to comply with such details could invalidate legal notices and proceedings at a future date. This step is important because clients may become impatient and demand that actions be taken without regard to the requirements of the governing documents and because well-meaning but not legally trained managing agents often send “legal letters” which ignore the legal requirements contained in the governing documents.

June 21, 2012

The Effect of Bankruptcy Filing on Creditor’s Litigation in New York

By Weiss & Weiss

It is not uncommon when our firm is involved in litigation against a debtor, that the debtor files for bankruptcy protection. In the United States, bankruptcy law is federally governed, and a debtor in the New York metropolitan area would file for such protection in the United States District Court for the Southern District of New York or United States District Court for the Eastern District of New York. The Southern District governs filings in Manhattan (New York County), the Bronx, and Westchester County, while the Eastern District covers filings in Brooklyn, Queens, and Long Island.

There are several different types of bankruptcy filings, depending on whether the debtor is an individual or a corporate entity. In addition, a debtor may file for liquidation, under which all eligible debts are discharged, or reorganization, in which the debtor submits a plan to make partial payment of their debts over a scheduled period of time. Not all debts are eligible for discharge under a bankruptcy filing. While this blog is not intended to be a comprehensive bankruptcy primer, debts such as child support obligations and student loan obligations are not dischargable under current bankruptcy law. When necessary, we consult and recommend specialized bankruptcy counsel with whom we work in concert.

By law, when a debtor files for bankruptcy protection, all litigation and collection efforts from the creditor must cease. This is known as the “automatic stay.” The automatic stay provides protection to the debtor from all pending lawsuits, collection of all judgments, and communications with respect to delinquent obligations. For example, one of our clients had an income execution relating to a judgment that we had obtained against the debtor. After several years of collecting a portion of the judgment through the income execution, the debtor filed for bankruptcy protection. Our firm was required to inform the sheriff’s office that the debtor had filed bankruptcy, and the income execution was closed. Once the judgment was discharged by the Court, we were legally prohibited from further collection of the judgment, much to our client’s dismay.

June 13, 2012

Advice to Cooperative Boards: Apply Properly Tailored Rules Evenly to Protected Classes

By Weiss & Weiss

In order to prevent discrimination claims brought by members of legally protected classes (i.e. racial minorities), it is crucial that cooperative boards construct rules with legitimate purposes (beneficial to the cooperative without being a means to exclude) and evenly enforce said rules. Federal Law prohibits the unavailability or denial of a dwelling to any person because of race, color, religion, sex, familial status or national origin. Cooperative boards are most vulnerable to these claims during a proposed resident’s application process.

Habitat Magazine recently contained a discussion of a Federal lawsuit pertaining to the Edgewater Park Owners Cooperative in the Bronx. Seizing upon a description in the New York Times that the cooperative was “not open to anyone,” the Fair Housing Justice Center sent both white and black testers to meet with a well-known real estate broker who frequently showed units in the cooperative. Said cooperative had a policy of requiring three letters of reference from existing shareholders as part of its purchase application. The white testers were advised that the rule could be dispensed with if they did not happen to be acquainted with current residents. The black testers were advised that if they did not know people who could provide the required references, that they should not pursue their purchase application.

The problems faced by the cooperative board in this case are as follows. The rationale behind the “three references” rule was weak in that it may be a pretext for excluding minorities who do not happen to know someone in the mostly white development. Further, as unevenly applied, the rule is detrimental to minorities and has less of an effect on whites. Even though the cooperative board never met with the applicants at issue and the real estate broker who was involved was not an agent, employee or representative of the cooperative, the cooperative was unsuccessful in its motion to dismiss the lawsuit because it promulgated the policy.

June 6, 2012

Credit Card and other Collection Lawsuits

By Weiss & Weiss

As the reader of this blog is probably aware, there has been a large increase in personal debt in the United States over the past decade. As credit cards, credit lines, and other non-secured loans have become more easily available, and the stigma against being in debt greatly diminished, the result is that many more people are in debt, and for larger amounts, than at any time in our country’s history.

This post will explore the general legal issues associated with debt collection in New York State. When a consumer defaults on credit card debt, generally, the credit card company will sell or assign the debt to another company after it has engaged in minimal preliminary collection efforts. The bank which issued the credit card is therefore often not involved in collecting the unpaid balance from the delinquent credit card holder. Instead, the debt is sold or assigned to a collection agency. A collection agency usually attempts to collect the debt in exchange for a percentage of the amount collected. The collection agency may also buy the debt for less than its face value, and then attempt to make a profit on any amount collected.

For example, a consumer incurs a $15,000.00 credit card debt. The credit card company may sell the debt to a collection agency for ten cents on the dollar ($1,500.00). The collection agency now owns the right to collect on the obligation. Any amount that it can collect from the debtor in excess of $1,500.00 will be a profit to the collection agency. The original creditor will then write off the debt and may no longer be involved in its collection.

June 1, 2012

Regulation of Smoking in Cooperative and Condominium Apartments in New York

By Weiss & Weiss

The regulation of smoking by cooperative and condominium owners in New York has become increasingly contentious in recent years. The New York Post recently reported that a condominium owner in New York could not be forbidden from smoking in his apartment. While this particular case was decided based upon the specific facts presented, smokers should not assume that buildings in New York will leave their behavior unregulated. As reported by the New York Times , it is becoming increasingly difficult for a smoker to locate an apartment that explicitly “welcomes” smokers.

Michael Bloomberg, the current Mayor of New York City, has proposed legislation that would require buildings to disclose their smoking policies to potential residents. The policy is meant to encourage people to match their lifestyle to the building in which they intend to live. While most people do not appreciate having their lifestyle policed by the government, people who feel strongly about either side of the issue may find it appealing to reside in a building suiting their lifestyle.

Some residents feel that if they own the apartment that they can smoke in their own home if they so desire. Smokers resent that their behavior is regulated in public and want at the very least to be able to smoke within the confines of their own cooperative or condominium apartment. Other residents, claiming to be disturbed by the smoke and fumes traveling through shared ductwork into their apartment, have demanded that their building enact regulations prohibiting smoking and enhancing their health concerns. In particular, smoky fumes travel readily through the ductwork of newly constructed buildings. In a communal living situation, cooperative and condominium boards are confronted with requests to enact building rules.

April 30, 2012

Property Partition Actions in New York State

By Weiss & Weiss

Often in New York, property is jointly owned by two or more individuals or legal entities, such as corporations. This can happen with both residential property and commercial property. One of the major causes of joint ownership of property can occur when the original owner passes away and leaves the property in their will to their children, or other multiple owners. In addition, there can be situations where two or more individuals buy property jointly, and then one of those individuals transfers their interest in the property to another person.

In the case of residential property, conflicts can arise when there are multiple owners of property. It may be that one of the joint co-owners lives at the property, and the other does not. In that case, the person who lives at the property is usually responsible for the upkeep of the property, including routine maintenance, as well as paying the costs and expenses of the property. These costs and expenses can include property insurance, utilities such as electricity and heating, and property taxes. However, the person living at the property also derives the benefit of living at the property without paying rent. The non-occupying party may not agree to be financially responsible for a property in which he does not live. Having co-owners who do not both live at the property can be an inherent source of conflict.

Where the property is commercial in nature, there can be similar conflicts, although of course no one is living at the premises. If the property was purchased as an investment, the joint owners may not agree on the proper time, if at all, to sell the property. There can also be disagreements as to the type of commercial tenants to seek for rental of the property, the length of the lease to offer to potential tenants, as well as other lease terms.

April 17, 2012

Landlord-Tenant Actions in Westchester County, New York

By Weiss & Weiss

When a tenant fails to pay their rent, or remains in a property after the expiration of their lease, legal action is often required. Smaller landlords, such as individuals owning a few properties, or people renting out a house, will consult our firm in order to use the proper legal procedures for the removal of a tenant.

The first question to be resolved is whether the action against a tenant would be a “holdover” or a “non-payment.” A holdover proceeding is where a tenant has stayed at the premises beyond the expiration date of their lease. If the tenant continues to pay their rent after a lease term has expired, it creates a month-to-month tenancy with the landlord. This means that as long as the tenant continues to pay monthly rent (usually in the same amount as they were paying at the end of the actual lease term) and the landlord chooses to deposit same, the tenancy is extended, one month at a time. If the landlord wishes to end the tenancy, he must reject all additional rent payments, and give the tenant one month’s written notice to vacate the premises. After the month has expired, if the tenant has failed to vacate, then the landlord should commence a holdover proceeding in the appropriate court. This Court is usually the local court of the town where the property is located.

A non-payment proceeding is appropriate when the tenant fails to pay rent due under a lease. When this happens, the lease should be checked for notice provisions. Notice should be given to the tenant in the manner prescribed under the lease. After written notice has been given, if the tenant has still not paid the rent in question, a non-payment proceeding should be brought in the appropriate local Court.