Merry Christmas & Happy Hanukkah to the 112,761 licensed real estate agents in NYS

Sources for statistic:
http://www.labor.ny.gov/stats/olcny/real-estate-salesperson.shtm
http://www.labor.ny.gov/stats/olcny/real-estate-broker.shtm

Currently there are 57,599 real estate salespersons in NY & 55,162 real estate brokers.

Fannie / Freddie Ex-Execs Charged

Six former execs, including two former CEOs, were recently charged by the SEC with misleading investors about sub prime loans. In essence, the suit charges that the group greatly underestimated the amount of sub prime loans it had on its books in 2007.

Yet, to be clear, this is not about misleading borrowers, but instead investors. So, all those homeowners out there cannot point to these charges as justice for their personal foreclosures. Instead, this suit is about selling the loans on the secondary market to investors who believed those homeowners / mortgagors / borrowers were more credit worthy than they actually were in the macro.

Its likely that this is not the end of these types of suits and no criminal charges have yet been filed.

Expedited Permits for Solar Panels in Brookhaven

Recently, the Town of Brookhaven Town Code was amended to allow for the adoption of the Residential Solar Energy System Fast Track Permit Application Process. This will allow residents installing electric or hot water solar energy systems to use the universal forms which allow for an expedited permit application process. As a result, residents taking advantage of these amendments will benefit from a faster process, less paperwork, reduced expenses, and expedited approval from the Town.

To learn more:

Click here for the meeting minutes.

Specifically, Chapter 85 of the Code of the Town of Brookhaven, “Zoning” and Chapter 29 of the Code “Fees” were amended. Click here to view the amended changes.

Click here to review the press release.

Click here to access the Town of Brookhaven Forms.

Fannie Mae Eviction Moratorium - Happy Holidays

From December 19th, 2011 to January 2nd, 2012 you won't be evicted if you have been foreclosed upon in a Fannie Mae loan. The mortgage empire has spoken and you can read its words by clicking here. To be clear, this will not stop judicial eviction proceedings, just the actual act of eviction.

A good PR move by the mortgage empire, but not much substantively there. Yet, if you are facing eviction, Santa coming down the chimney one more time would be good for the kids.

Tax Foreclosure Hardship Exemptions Broadened

The Suffolk County Legislature has approved a law amending the allowable tax foreclosure hardship exemptions within the county. The additional exemption is for those grandparents providing monetary support for a grandchild currently residing with them in the household affected by the tax sale.

Context is needed to provide more of a background of what this actually means, and how it impacts the local community. Pursuant to the Suffolk County Tax Act, the county is “authorized to take real property for unpaid taxes”, though the homeowner has a chance to keep his or her home through a redemption process. If the property is not redeemed within a six month window after the county tax deed is recorded, a homeowner’s only recourse is to apply for a hardship exemption extending that window.

Before this new law was passed, only an illness to the applicant, the applicant’s spouse, parent, or child (including one that is adopted) was an acceptable hardship. By adding grandchildren to this list, the legislature has shown both a surprising awareness of its community’s changing familial structure, as well as the ability to efficiently address and correct an issue with current statute.

Current economics dictate that more and more families need to help each other out, generally resulting in the family unit containing multiple generations under one roof. Grandparents let their children move back into the family home, this time bringing along grandchildren in the process. Other times, a parent may not be in the picture at all. The grandparent then becomes the de facto parent, but does not qualify for the same exemption a biological parent would under the old law.

While it should be noted that only new applications for hardship under the law include the provision for grandparents, the Suffolk County Legislature made a simple and logical change to an existing law that stands to benefit many in the community.

HEAP - Energy grants to get the heat on

As its starting to get cold outside, Suffolk residents should be mindful of the Home Energy Assistance Program. This program offers financial assistance to help pay energy bills. Notate, this is not a loan, but assistance, so if you are in need permanently or on an emergency basis, check out this program by clicking here.

Qualification for the program is based upon your monthly income with reference to the number of household occupants. So first check out your paycheck and than see if you qualify.

Also, you can qualify regardless if your energy bill is in your name or part of your rent. Don't be ashamed if you need help, instead get the heat on because with a good night's rest you will be more productive and perform better at work. Thereafter, you can help someone else in need in the future.

Gov's CFPB offers centralized reporting for mortgage complaints

If you weren't aware, the Fed Gov launched the Consumer Financial Protection Bureau this year and its starting to take names. Beyond a positive attempt to reframe the HUD-1, which all NY real estate professionals should take an interest in, the CFPB just launched a mortgage complaint hotline and web portal. Go check out the website at http://www.consumerfinance.gov/ to learn more.

While its still unclear what the extent of involvement in mortgage problems the CFPB will have, at the least, this new project provides a centralized place to submit complaints under the scary auspices of the government. Additionally, it is hoped that this new project will bring more attention to what has been this generation's epidemic, the housing bubble bursting. Maybe this project can help to light a fire under loan servicers to throw out their fax shredders and actually acknowledge receipt of workout documents and requests for information instead of blankedly claiming that the borrower has failed to comply.

Upcoming Free CLE - Property Wars: Real Estate Issues Incident to Divorce

The Long Island Education Board is excited to offer a brand new Free CLE course entitled Property Wars: Real Estate Issues Incident to Divorce.

Thanks to our event sponsor - PDE Title Services, LLC, this course will be offered on the following dates:

• 1/11/12 - Bridgehampton
• 2/29/12 - Manhattan
• 3/28/12 - Melville 

Registration for this free Continuing Legal Education course in Bridgehampton on Long Island is now available. Click here to register. 

Property Wars: Real Estate Issues Incident to Divorce

While every divorce isn't the War of the Roses, no one likes to part with their home or commercial property and very often they are motivated to fight for what they believe to be theirs. In fact, many times divorcing parties will shop lawyers until they hear what they want to hear. Yet, this isn't limited to divorce lawyers. Often, the parties will seek real estate attorneys to move their property around before, during or after a divorce in order to circumvent the law. In the alternative, many divorces are settled amicably where a real estate transaction remains necessary incident to the divorce.

This 2 credit CLE course is designed to educate practitioners about the overlap between these 2 differing fields of law: matrimonial and real estate. In each field attorneys are often called upon to engage incident to the other. Following your attendance you will gain insight into both fields and become more familiarized with the statutes, cases and rules in the one that you don't typically engage. After all, clients like the Roses will go all the way to the end. You need to learn how to get out of the way of the falling chandelier. Credits: 2*

*Application for accreditation of this course or program in New York is currently pending*

Mortgage Delinquencies to Rise & Fall in 2012

According to TransUnion, click here, borrowers who are 60 or more days past due on their mortgages will decline from approximately 6% of all borrowers at the end of 2011 to 5% by the end of 2012.

This is fantastic news and shows that we are slowly emerging from the ever present effects recession.

Lets hope that this is a precursor to increased home sales. With less people talking foreclosure, consumer confidence should raise and people will feel safer making the large purchase of a new home. Here comes a better tomorrow.

Tax Cap on STAR savings

NYS Government is capping the increases in savings experienced by School Tax Relief Program (STAR) and Enhanced STAR recipients at 2%. Therefore, during 2012, recipients will still save more than last year, but less than they otherwise would have saved. It appears to be a compromise by legislators in a troubled economy where tax dollars are necessary to found governmental programs. To learn more about this cap, click here.

To learn more about the STAR program overall and legislation concerning this topic, click here.

Savings is better than spending and in this economy any increases in savings is a good thing.

Lease Renewal Notice Provision not to be Strictly Construed

In a recent controversial case in Manhattan, 135 East 57th street v. Daffy's Inc., the Appellate Division ruled that a tenant's failure to provide their landlord with a timely notice that they wished to renew their lease did not foreclose the tenant's ability to renew nonetheless in the face of the landlord's desire to evict.

The Court ruled that regardless of the terms in a lease, equity or fairness could trump the parties agreement. Specifically, the Court stated a test for the tenant to exercise the option even where it failed to notice the landlord pursuant to the terms of the lease. The test is: (1) The landlord was not prejudiced by the delay in notice; (2) The delay was excusable; and (3) The tenant created value (which can only be for the tenant's behalf) in the premises or had made improvements to the premises

This is a scary decision for landlords who rely on the terms of their agreements to make proper business decisions. In the wake of this decision, landlords should assume that a tenant's failure to renew by notice is not grounds to evict. Instead, the landlord must now go the extra step of getting confirmation that the tenant wishes to vacate in order to have a reliable working premises for their property. Basically, the Court puts the burden on the landlord for determining the tenant's intent to not renew regardless of the agreement of the parties. While its always been a residential tenant's world, it appears that the commercial tenant is not falling far behind in default rules in its favor. Landlords beware.

A Teaching Law Firm - Pace and the Long Island Education Board

For the past 4 years, Lieb at Law, P.C. has continuously pushed the advantages of a teaching law firm, where attorneys are teaching at a New York State Licensed Real Estate School as they develop their careers. The belief has always been that teaching is the best way to learn and it forces attorney educators to know exactly what is happening on the cutting edge of our field. The model isn't original, but instead it is a replica of the medical model.

It seems law schools are catching on as Pace Law School has just launched a "Legal Residency Program" for entry level attorneys.

While the Pace Law School program is geared towards training new attorneys while they provide low cost legal services to the public, as their public statements represent, the Long Island Education Board, a division of Lieb at Law, P.C., is focused on Lieb at Law, P.C. attorneys becoming teachers themselves to achieve the highest level of client services. Therefore, two different aspects of the medical model are being replicated. Its theorized that a combination of the both; whats done in medical school, will be what ultimately results in the best results.

Congrats to Pace and their innovative approach. Your friends at the Long Island Education Board support this endeavor and will monitor your success. Best of luck.

The Empire has Fallen - Baum to Close

In a remarkable piece of news, foreclosure powerhouse, Steven J. Baum P.C. is closing. They have had a tough month first with their photographs mocking homelessness at their Halloween party to being kicked out of the Fannie / Freddie inner circle. Yet, this is a striking day in the history of the foreclosure crisis. Even the king of foreclosure is now homeless, Steven J. Baum P.C. is no more.

To read a NY Times Article, click here.

New York Supreme Court rules Court can continue to sell case information

The New York City Housing Court (“NYCHC”) maintains a database of every matter that passes through its court. “Okay…so what’s the problem with that?” you may ask. Well, a Landlord may obtain this information for a fee from one of the various organizations who purchase this information from the Court. This practice may result in prospective tenants being rejected and/or blacklisted for a housing application due to the Landlord’s perception that the prospective tenant is a “problem tenant” due to the tenant’s name surfacing in a search. However, an attorney has challenged this operation as it paints an incomplete and unfair picture with respect to prospective tenants.

For example, the information obtained does not include a tenant’s reasons behind filing or their ultimate disposition of the case. Meaning, even if the tenants were “in the right” for bringing and/or defending an action, the Landlord is not privy to this information. Instead, the Landlord merely ascertains that the prospective tenant has been a party (it does not even specify whether the tenant brought the action or is defending it) to a NYCHC action and may subsequently unfairly dismiss this tenant as problematic.

As of yesterday, the tenant in Whelan v. Lippman lost the bid to bar the Court System from selling this potentially harmful information to third-party companies by denying the tenant’s motion for a preliminary injunction. The underlying case concerning the “blacklisting” of tenants, however, was not dismissed. We will continue to monitor both the underlying case and any potential appeal of the related case. In the interim, be wary that your potential Landlord may utilize these services when reviewing your application.

Nassau DA faces eviction from Co-Op

The Nassau District Attorney is being evicted from her Co-Op for violating the Co-Op's house rules.

Apparently the Co-Op adopted a new house rule that requires "no new pet without prior approval policy". Well, the District Attorney got a new pet without prior approval. Yet, she thinks she should be able to keep the pet.

The District Attorney appears to be fighting the eviction by saying she only bought the Co-Op because it permitted pets, she wasn't properly notified about the new policy and that by allowing other inhabitants who had a pet prior to the policy to be grandfathered in without prior approval, the rule is improper.

Yet, the District Attorney should realize that when you purchase a Co-Op, you purchase an apartment subject to ever changing rules. If you don't like rules, get a house. While Co-Ops offer ease of living, it does not afford autonomy or privacy. Instead, its communal living with community rules.

Can an advertisement describe the property's walkability?

At a recent course entitled "To be Green or not to be Green, that is the question...", an agent suggested that discussing walkability in a listing was a violation of the Fair Housing Act because it discriminates based upon disability.

While I did not believe this to be true as the term walkability is utilized in common parlance to discuss distance, I acknowledged its potential to offend and thereafter decided to check the Department of State's Administrative Hearing Decisions for such a licensing decision. Thereafter, I checked Westlaw for case law decisions on the topic. After an exhaustive search, I found nothing. Does this mean someone can't claim a violation? No. It just means no violation has been recorded concerning the term walkability in an advertisement for property.

As we always teach, opinions are not really relevant, only facts, laws, and prior decisions should dictate our behavior. Therefore, real estate agents are always directed to check prior licensing decisions by clicking here if they have a question about the propriety of their proposed actions.

Sellers Concession without disclosed Gross-up = Subterfuge

So says the Committee on Professional Ethics to the New York State Bar Association in Opinion 882 (10/14/11). This Opinion is a follow-up and clarification of Opinion 817 (2007), which has been the subject of great discussion in the real estate world since its issuance.

In essence, these Opinions discuss the ethics of increasing a purchase price, to in effect, increase a mortgage, to thereafter pay the buyer's closings costs (which is traditionally a sellers concession), but now a seller's concession without a concession on the part of the seller. The issue is this: A seller's concession with a gross-up changes the Loan to Value ratio and consequently the risk of the investment for the mortgagee. Further, this risk is shared with whomever later purchases the mortgage coupled with tax assessors and the like. Yet, without full disclosure in all of the closing documents, future mortgage purchasers / property assessors will not be placed on appropriate notice of the increased risk, consequently paying more for the purchase than the value; hence, the Subterfuge.

In essence, the closing parties circumvent the Banking Law's restrictions on closing costs to mortgage ratios & manipulate public records on closing prices.

The Opinion goes on to state a lawyer, whether the seller's, buyer's and lender's, who participates in a transaction with a sellers concession and gross-up without full disclosure in all closing papers is violating Rule 8.4(c) of his ethic's rules.

Lastly, the Opinion states that a lawyer is not discharged from this obligation by the suggestion of the mortgage broker, loan officer or other employee of the bank. Therefore, its a non-waivable requirement to disclose a sellers concession and gross-up.

The disclosure required is that: "The sales prices has been increased by a sum equal to the seller's concession". Write it in all your real estate papers and your are in the clear. Now lets go close some deals.

Limits on the Roommate Law

Just about a week ago, I was co-instructing our Real Estate School’s course, the Long Island Landlord. We were presented with a thought provoking question about the ability of a landlord to limit the occupants in a rental premises. The buzz and chatter in the room that commenced when we mentioned the roommate law made it clear that this was a hot topic.

If you don’t know about the roommate law, you can read it by clicking here. This law has been around since 1983 for the protection of tenants and occupants, not landlords. So it's about time to know this law.

It is essential for a landlord to know and understand the roommate law because it enables a tenant to prevent an eviction regardless of the terms of the lease. Yet, it is further important for tenants to know and understand what their rights are with relation to occupancy so that they can exercise those rights in preventing such an eviction. This is true particularly with regard to family members who are afforded the greatest rights under the law.

While the rights of immediate family members of the leasing tenant, as defined in the Real Property Law, are great, other roommates are not afforded such broad protection. Nonetheless, and as a matter of illustration, Section 8 landlords can impose occupancy restrictions regardless of the roommate law. This is because the law states: “Nothing in this section shall be construed as invalidating or impairing the operation of, or the right of a landlord to restrict occupancy in order to comply with federal, state or local laws, regulations, ordinances or codes”.

Consequently, we always advise landlords to be familiar with all the laws applicable to their rentals as some lease provisions are void as a matter of public policy according to the tenant-friendly New York State laws.

Free Foreclosure Seminar - Suffolk Bar

Yes, tenants must pay rent during foreclosure

While case law was established over a year ago, we consistently get

The Question: If I am in foreclosure, how can I make my tenants pay their rent?

The Answer: Bring a summary proceeding pursuant to RPAPL Article 7.

Yet, if a receiver is appointed in a foreclosure action, the receiver & not the owner should bring the action.

In General Elec. Capital Corp. v. Loretto-Utica Residential Health Care Facility, the Court held that landlord's default does not relieve tenants responsibility to pay rents.

It should be noted that some Counties, like Suffolk, require the landlord to provide notice to the tenants if they are in foreclosure. Yet, this has nothing to do with the requirement to pay rent.

Real Estate Conveyances Now Digitally Recorded, or at least soon...

On September 23, 2011, the Governor signed a new law affecting the recording of real property conveyances.

Pursuant to the law, a digital or electronic record should be accepted by the recording office as originals, including a digital copy of a notarization.

This is a great law and should be viewed as a sign that government is becoming more efficient and effective. As records become completely electronic, transaction and storage costs will be reduced while access and organization will be enhanced. Hopefully, this law is a trend and only the start to government embracing technology. Next up, lets get Court conferences by web to reduce unnecessary costs on clients for attorneys to wait 3 hours for a 5 minute scheduling meeting. The technology is there, lets start to use it.

Interestingly, the law doesn't apply to leases for a term of 3 years or less, Wills, and Powers to Convey.

WARNING - This new law doesn't take effect until 365 days after its enactment and it requires regulations prior to its use.

Right to always Assign or Sublet a Lease

At last night's class, Long Island Landlord, a real estate agent inquired whether a landlord could draft a lease to a single family residence, which flat out precluded assignments or sublets. While indicating that a landlord may not, I could not recall the statute or the wording, which was the foundation for this rule and therefore agreed to provide it on the blog today.

Real Property Law §226-b(1) states: Unless a greater right to assign is conferred by the lease, a tenant renting a residence may not assign his lease without the written consent of the owner, which consent may be unconditionally withheld without cause provided that the owner shall release the tenant from the lease upon request of the tenant upon thirty days notice if the owner unreasonably withholds consent which release shall be the sole remedy of the tenant. If the owner reasonably withholds consent, there shall be no assignment and the tenant shall not be released from the lease.

Therefore, a landlord cannot fully prevent a tenant from a right to assign or sublease by unconditionally withholding consent unless the landlord is willing to release the tenant from the lease (in a 4 or more residential unit apartment, a landlord can never unreasonably withhold consent). A landlord should be mindful that releasing the tenant from the lease would result in the tenant being free and clear of all responsibilities, but allowing the assignment or sublease would result in the tenant plus an additional tenant being liable to the landlord, unless there is a novation accompanying the assignment or sublease, which is not required. Therefore, it would seem that except in special circumstances a landlord should only object to an assignment or sublease if they have good cause.

Real Property Law §226-b(6) states: Any provision of a lease or rental agreement purporting to waive a provision of this section is null and void.

Therefore, you cannot draft around this provision. Yet, there are certain properties the statue does not apply to such as a rent stabilized apartments. To be clear, the statute does apply to single-family residences.

WARNING - Read the statute prior to relying on this blog to be sure its applicable to your specific situation and to comply with its notice requirements.

HUD's RESPA Settlement Agreements

We are often asked at the Long Island Education Board how we know HUD's position with respect to potential RESPA violations. We know from reading their previous settlements & decisions.

Here is a great link to see how HUD has previously settled RESPA issues. Learning from the past is a great way to enhance the future. Click here to see the settlements.

Sleeping Epiphany of Last Night's Course

As discussed at last night's course - Conflicts of Interest - us attorneys often wake in the middle of the night and fear we gave inaccurate advice or need to revisit a topic with a client. Well, I realized while sleeping, awaking at 3am to email myself a note that I may have discussed the wrong term of art concerning HUD's Regulation X & RESPA. The proper term at issue is "required use". Although alluding to the term in the class, I awoke to realize I may have said something otherwise, while nonetheless addressing the very same topic.

This topic was originally blogged about on July 26, 2010 & addressed HUD's request for comments. The request can be found at this link, but has long since expired.

Currently, the regulation reads as follows, but as you can tell the regulation greatly impacts the job of a real estate agent & you should not only remain informed, but have your voice heard on any future changes to the definition.

Required use means a situation in which a person must use a particular provider of a settlement service in order to have access to some distinct service or property, and the person will pay for the settlement service of the particular provider or will pay a charge attributable, in whole or in part, to the settlement service. However, the offering of a package (or combination of settlement services) or the offering of discounts or rebates to consumers for the purchase of multiple settlement services does not constitute a required use. Any package or discount must be optional to the purchaser. The discount must be a true discount below the prices that are otherwise generally available, and must not be made up by higher costs elsewhere in the settlement process.

Obtaining a Certified Copy of your Deed in Suffolk County

An important warning about companies defrauding consumers with between $50 to $100 of unnecessary fees for a document you may not need right now.

The letter has been redacted to protect the privacy of its recipients.

All should know that the letter comes with a slip to fill-out and to enclose $5 in order to receive a certified copy of your deed. Its that easy. If you didn't receive the letter, simply utilize the secure online site, discussed in the letter, to order a copy of your deed.

An excerpt from our continuing educational classes - register now!

Foreclosure & the Economy: The Short Sale Class

9/13/11

The Biggest Title Company or the BEST

While at BB Kings this week I got into a heated discussion about the largest title companies & it got me thinking is bigger always better?

Before we get to that thought, a great resource to learn about title companies & their respective market shares is the American Land Title Association's website - http://www.alta.org/industry/financial.cfm. There you will learn that many of the title companies are just subsidiaries of larger parent companies. For example, during my conversation someone argued that Chicago Title is the largest and therefore the best. Well it turns out that Chicago is only the largest when its included with Fidelity, Commonwealth and Alamo within the Fidelity Family of Companies. Nonetheless, First American Title Insurance Company has 24.6% market share standing alone while Chicago only has 16.9%. This renders First Am the largest. So, the numbers can be skewed to your liking.

Yet, is bigger better? In a way it is. You see in title companies, which are insurance companies size does matter. Except we are not concerned with market share, but instead assets. The reason is the company with the largest assets has the greatest ability to meet its insured's needs. Although this may also be skewed to your liking because assets may be compromised by risk. Therefore, one should really look at a company's Best's Capital Adequacy Ratio (BCAR), which evaluates and qualifies the adequacy of a company's risk-adjusted capital position. To learn more about rating title insurance companies see information about Best's Rating Methodology by clicking here.

Real Estate Opportunities from Natural Disasters

While reading a study out of the University of Chicago entitled "Payday Lenders: Heroes or Villains?", I was struck by the following statistical fact - foreclosures rise in communities faced by a natural disaster by 4.5 per 1,000 homes. Now this is obviously a bad thing, people getting foreclosed upon, but its also a fantastic opportunity for real estate investors. If you recall the TV pictures of the ski towns in Vermont and upstate New York following Hurricane Irene, its clear a natural disaster struck these areas very hard.

Now, I wonder would if this statistic for foreclosures after a natural disaster would be even higher if the community affected relied upon seasonal rental income to sustain. Meaning, in a ski town without a ski lodge wouldn't less people rent a ski house, causing even more foreclosures or distressed homeowners than the 4.5 per 1,000.

Regardless, the team at Lieb at Law always lives by the motto "don't dwell on the past but enhance the future". So, speaking of enhancing, all of you real estate investors out there should be focusing on seizing the opportunity of the Hurricane Irene natural disaster. Yes, no one wants a storm, a fire or a flood, but we cannot control these occurrences. Yet, we can control how we respond. I suggest responding with investment in the hardest hit towns. Seize the opportunity. Now go make a fortune.

Surveys are expensive!

Whenever a Seller does not have a copy of a survey, the Buyer runs into the situation of having to order a new survey. Surveys are costly and sometimes time consuming, especially during certain times of the year. If the premises is located in the Town of Brookhaven an owner of real property or a purchaser in contract to buy real property, may obtain a copy of a survey from the Town of Brookhaven Assessor's Office at no cost. While there is no guarantee that they will have a survey on file, nor that the survey will be guaranteed to a Title Company (required to insure the boundary lines of the premises), nonetheless it is well worth the attempt. A third party can also request a copy of a survey for a fee. The catch is that the fee is paid upfront and not returned should they not have a survey on file. Either way if a survey is on file it will cost the Buyer much less than ordering a new one.

New Requirements for FHA Loan Modifications

Effective, October 1, 2011, HUD has issued new requirements for borrowers to successfully complete a trial payment plan prior to being approved for a loan modification. To read the requirements embodied in Mortgagee Letter 2011-28, click on the attached link.

Interestingly, the letter indicates an incentive fee for lenders who give the modification after a successful trial plan pursuant to the Letter's rules. Its important for borrowers to understand the requirements put on lenders in order to get those incentives because lenders are going to want the money and therefore mandate compliance with the trial plan rules.

Some Good Storm News - Homeowners Insurance

To Start:

Take a look at your insurance policy before you do anything about your claims. Read the policy, review your deductibles, determine the procedure, but act quickly so that the insurance company can't disclaim coverage for untimely notice. Yet, read your policy and learn your rights. Remember, insurance companies are not excited to pay claims and you need to be a great advocate for your own rights, you may even want to hire a lawyer if you get into a dispute with your insurance company about coverage. If you believe that they should pay based upon what your policy says, don't just take their denial as being correct, fight it. Be clear, each policy is different, so you have to read your policy before you act.

Something Interesting:

It's likely you have a Hurricane Deductible in your policy. New York is one of many States that have Hurricane Deductibles in homeowners' policies. These deductibles are a charge of a percentage of the claim, instead of a flat fee, prior to the policy paying. Some are in the neighborhood of 4% of a claim. So, it can get quite pricey. The States (territories) that have these deductibles are Washington DC, Alabama, Connecticut, Delaware, Florida, Georgia, Hawaii, Louisiana, Maine, Maryland, Massachusetts, Mississippi, New Jersey, New York, North Carolina, Rhode Island, South Carolina, Texas, and Virginia.

Something Good:

The reason it's a good idea to look at your policy is that this deductible may not be triggered by a tropical storm. Each policy is different, but the downgrade in the storm may have saved you thousands of dollars in your deductible. Good luck.

Lead Disclosure Law is Limited

Residential Lead-Based Paint Hazard Reduction Act

In a landlord-friendly decision, the Appellate Division, Second Department (with jurisdiction over Long Island, among other places) just ruled that minor children of tenants cannot sue landlords for injuries resulting from exposure to lead paint under this Act even if they take possession with the tenant at the beginning of the tenancy.

To be clear, we are talking about the law that requires disclosure of known information on lead-based paint and lead-based paint hazards to a purchaser or lessee. A law that real estate agents should be very familiar with.

The Court held that the purpose of the act was to establish disclosure obligations triggered upon the lease or sale of property. The case is Brown v. Maple3, LLC and can be found by clicking here and the applicable law, RLPHRA, is 42 USC 4851. The clear rule is that infants residing with lessors are not within the zone of interest protected by the statute. The statute is about disclosure, not about strict liability for injuries.

Nonetheless, the Court did note that the door is not closed on the minor children and suggested that they instead pursue a claim under common law negligence. This means if you are injured in a residence as a result of lead exposure, your rights may be limited, but that you still do have rights and you should pursue them.

There's a storm front coming - what if the house is destroyed pre-closing?

Buyers: The general rule is that if you have not taken possession or closed the deal, you can cancel the contract because of a mutual impossibility of performance. Nonetheless, you are in a great position because you may also demand performance with a price reduction. The price reduction would be the fair market value of what was lost in the storm as determined by an appraisal (this would likely be litigated as I'm sure the seller's appraisal would differ with yours). Yet, should you wish to cancel the contract, you can get your deposit back and that is the direction you will likely go. Anyway, lets hope the storm changes course and you can close on a fabulous property that's now in contract.

Sellers: You may have to take a price reduction as stated above, but hopefully your homeowners policy covers your loss. Nonetheless, its likely the deal will just be cancelled and you will have to rebuild.

Disclaimer: This advice assumes material damage to the premises and is based upon NY General Obligations Law 5-1311(1)(a)

Cell Phone Deposits

Recently, there have been developments in technology, notably, smart phone applications which allow persons who bank at large franchises to take snapshots of the front and back of a check in order to immediately send it for deposit. This can be useful-or detrimental-when it is done by a Seller at a real estate closing.

Cell phone applications now make available the option of taking a photograph of the front and back of check for immediate deposit.

Beware of this as the Buyer because Sellers should not be depositing checks without Buyer's awareness or consent, or until such time has passed that it is acceptable to do so.

This can be an extremely efficient way to deposit funds and move forward in a deal in the best case scenario-when everything goes smoothly. In fact, this can help where Seller is going to turn around and purchase a house after selling their former residence.

However, it does not always work out where that is appropriate. Checks should be monitored because there may be situations where they are initially presented (and deposited unbeknownst to the Buyer). If Seller immediately deposits, then the deal goes bad by bickering, which we all know is possible, by the end of the closing Seller now has money they are not entitled to.

Modification Uptick

Just a matter of anecdotal evidence, for whatever that is worth - this firm has seen a drastic rise in the amount of modifications & short sales approved this month.

This confirms our thoughts that workouts come in waves & to keep reapplying even after a denial, until you get closer to what you want.

Opt-Out Deadline Approaching Quickly

The IRS released Notice 2011-66 on August 5, 2011 which requires form 8939 to be filed by November 15, 2011 in order for executors to opt-out of estate taxes on 2010 decedents. Exemptions for extending the deadline are extremely limited so this should be viewed as a hard-fast rule.

If no executor was named for decedent's estate, for example, if the entire estate was part of a living trust, then the person in actual/constructive possession may also use this form.

This is important to note as opting out of estate taxes is no longer automatic. If the election is made by filing 8939, the carry over provisions of Section 1022 are then applicable.

Keep an eye out for the form as the deadline is approaching and the new form is not yet available on the IRS website.

How to get my commission?

So you find a purchaser who is ready, willing & able, but the seller (your client) nonetheless refuses to pay. What do you do?

You look to your listing agreement and see what rights you have.

Regardless of the listing agreement, 2 rights you never have are that:

1) You can't file a Lis Pendens

2) You can't serve a motion for summary judgment in lieu of complaint (CPLR 3213) & must litigate the matter with a Summons and Complaint.

You may have to arbitrate pursuant to your listing agreement and you certainly should be mindful of Real Property Law 294-b, which permits you to file an affidavit of entitlement with the County Clerk and demand that your client deposits your claimed commission in the Clerk's office. Moreover, your client's failure to so deposit your commission will entitle you to costs and attorneys' fees in your subsequent litigation with the client.

Yet, no matter what you do, unfortunately, the Courts have uniformly stated that a real estate commission isn't entitled to a lien on real property pre-judgment. Maybe, its time to increase that lobbying.

Its time to get paid.

Divorcing couples not subject to capital gains tax on their real estate

In contrast to the rule on transfer tax, just discussed, Federal Law provides that such a transfer of property incident to divorce does not work a gain or loss concerning capital gains tax; hence no stepped-up in basis results.

§ 1041. Transfers of property between spouses or incident to divorce

(a) General rule

No gain or loss shall be recognized on a transfer of property from an individual to (or in trust for the benefit of)—

(1) a spouse, or

(2) a former spouse, but only if the transfer is incident to the divorce.

Divorcing couples subject to real estate transfer tax on their real estate

Recently, I attended a meeting of divorce attorneys in a group called the Collaborative Lawyers Association of New York (alternative dispute resolution for divorce). At the meeting, our group had mixed feelings if a transfer of real property between spouses at divorce was for no consideration (no tax) or for fair market value (tax). Ethically, the attorneys agreed that this matter required further research.

As it turns out there is a taxable event according to the New York Code of Rules and Regulations.

20 NYCRR 575.11(a)(10): A conveyance from one spouse to the other pursuant to the terms fo a divorce or separation agreement is subject to tax. (There is a rebuttable presumption in such case, that the consideration for the conveyance, which includes the relinquishment of marital rights, is equal to the fair market value of the interest in the real property conveyed.).

The takeaway is that even though you and your spouse own a piece of property already, when you transfer it to each other as part of a divorce settlement, you will be taxed or you are committing tax fraud.

BE WARNED.

Dual Agent with Designated Sales Agent - Who is the Dual Agent?

The benefits of being a teaching law firm is that we get to learn from students in their respective industries what issues they are actually having in practice before we litigate disputes.

The question I got today was this: Who is the third person in a real estate deal with a dual agent with designated sales agent? Do we have to split our commission with this third person? I just don't get it. Must we pick another person in the office to serve as this third person.

Lets be clear - the third person is technically the broker of record at your office, but no there is not another agent involved in the transaction nor do you have to further split your commission. Instead, the theory of a dual agent with designated sales agent is this:

• Both agents (listing & buyers) work for the same company
• At the company (brokerage house) there is a boss (broker of record)
• Both agents (listing & buyers) have to report to the boss if the boss so requires
• While reporting to the boss confidences of the seller or buyer may be required to be shared
• The seller and buyer should know this limitation on their confidences before retaining the agents and either consent to it or not permit a dual agent with designated sales agent representation

If you have any more questions on this topic I suggest attending our next Conflicts of Interest class where this topic is discussed in more detail.

Estate Gift Tax Rates to Change

The President's 2012 budget, released in mid-February seeks to return the Federal Gift tax exemption to $3.5 million, which was temporarily increased to $5 million, and the gift and generation skipping to $1 million, with a 45% transfer tax rate. The senate is divided. Republicans would like to remove the estate tax all together, while both would agree on $5 million exemption, however disagreeing on the tax rate (45% or 35%).

Further, it seeks to make portability permanent, meaning, a spouse can use their spouse's unused exemption permanently, whereas now it is set within specific time limits.

Also sought is a 10 year minimum and remainder value greater than zero for grantor retained annuity trusts (GRAT). GRATs allow transfer of wealth between family members at a reduced gift tax cost if the grantor survives the term. Dynasty trusts will also be limited (used in jurisdictions that do not follow the common law rule against perpetuities) with a 90 year maximum on new trusts or new monies to existing trusts.

Additionally, the new budget seeks restrictions by way of a new class of tax restrictions on valuation discounts which allow discounts in the valuation of family owned businesses.

Look out for changes nearing 2012.