Source of Income Discrimination in New York

Source of Income discrimination in housing means not offering rental housing equally to those who wish to pay their rent by way of housing choice vouchers, Social Security, unemployment insurance, veteran's benefits, or other governmental subsidy. 

While neither the Federal Fair Housing Act nor the New York Human Rights Law makes Source of Income a protected class, many municipal laws do. Additionally, S83-2011 proposes to add this protected class to the New York Human Rights Law. To read the bill, click here.

The bill's JUSTIFICATION states as follows:

"Currently, New York State law does not prevent landlords from discrimination based on a person's source of income. As a result, landlords often reject tenants with rental subsidies, such as Section 8 and subsidies tied to the Nursing Facility Transition and Diversion and Traumatic Brain Injury Medicaid Waivers. Many people with disabilities rely on those subsidies and other assistance programs to live independently in the community. This legislation would make discrimination by landlords based on a tenant's source of income illegal under New York State Human Rights Law. Similar laws have already been passed in New York City and Nassau.

This topic recently came to the forefront as New York City’s Human Rights Law does make source of income a protected class and an individual, Keith Short, who believed that he was discriminated against brought a claim thereunder. In pursuing his claim, Keith Short sued MANHATTAN APARTMENTS, INC., ABBA Realty Associates, Inc., Soni Realty LLC, Kimberly Place Realty Corp., and Askarinam Realty, Inc. Mr. Short claimed that the Defendants refused to rent to him because he had acquired immunodeficiency syndrome (AIDS) and received public housing subsidies. Mr. Short’s subsidy was from HIV/AIDS Services Administration (“HASA”). Mr. Short claimed that as a result of the discrimination he experienced several months of homelessness as wells as emotional distress. The Court awarded Mr. Short $20,000 as a result of the discrimination.

Now, we are often asked about discrimination and what is permitted and what isn’t. The rule is you can discriminate against anyone you want for any reason you want unless the discrimination falls into a protected class. Be mindful that while there is a Federal Law, the Fair Housing Act and a New York State Law, the Human Rights Law, both of which have their own set of protected classes, many municipalities such as New York City have far more expansive laws with a multitude of additional classes. It is the duty of a real estate agent to know the laws in the municipality where you work. Be careful not to discriminate. Also, pay attention to the bill to modify the State’s Human Rights Law because one day it is likely that source of income will be a protected class throughout the State as it becomes a more and more visible form of discrimination. 

Mortgage Lender Complaints - The 5 Worst according to Business Insider

Bank of America wins as the worst with 27% of all complaints directed at them. Next in line is Wells Fargo, followed by Chase, then Citi, and rounding out the top 5 is Ocwen.

To read a great article in Business Insider giving the specific statistics and some analysis, click here.

Business Insider based its information from data collected by the Consumer Financial Protection Bureau. To visit CFPB, click here.

Proposed Advertising Regulations for Real Estate Licensees

We continuously field questions about the rules for advertising in brokerage. Our consistent answer is that there is a current proposal that has not yet been adopted, but it can provide some insight on what may be. The proposal states as follows:

175.25 Advertising

(a) Definitions
1. “Advertising" and "advertisement" mean promotion and solicitation related to licensed real estate activity, including but not limited to, advertising via mail telephone, websites, e-mail, electronic bulletin boards, business cards, signs, billboards, and flyers. “Advertising” and “advertisement” shall not include commentary made by a duly licensed real estate salesperson, real estate associate broker or real estate broker that is not related to promoting licensed real estate activity.

2. “Team” means two or more persons, one of whom must be an associate real estate broker or real estate salesperson, associated with the same real estate brokerage who hold themselves out or operate as a team.

3. “Real estate brokerage” means a real estate company represented by a real estate broker.

4. “Logo” means a graphic mark used to identify a real estate broker, associate broker, salesperson or team, but not a photograph of a real estate broker, associate broker, salesperson or team contained in an advertisement.

5. “Property” means real property or shares of stock in a cooperative corporation.

(b) Placement of advertisements
1. Only a real estate broker is permitted to place or cause to be published advertisements related to the sale or lease of property. Advertisements placed or caused to be published by an associate real estate broker, a real estate salesperson or a team for the sale or lease of property listed with or represented by a real estate broker are not permitted except where the property is listed with or represented by the real estate broker with whom the associate real estate broker, real estate salesperson or team placing the ad is associated and said real estate broker approved placement of the advertisement.

2. Authorization
a. No property shall be advertised unless the real estate broker has obtained authorization for such advertisement from the owner of the property or as hereinafter provided.
b. Real estate brokers shall not advertise property that is subject to an exclusive listing held by another real estate broker without the written permission of the listing broker.
c. Proprietary information. Photographs of property that are posted on a real estate broker’s website shall not be used or reproduced without written permission from the copyright holder of such photographs. 

(c) Content of advertisements
1. Name of real estate broker. Advertisements shall indicate that the advertiser is a real estate broker and provide the name of the real estate broker or real estate brokerage and either: (i) the full address of the real estate broker or real estate brokerage or, (ii) the telephone number of the real estate broker or brokerage.

2. Name of associated licensees. The advertisement may include the names of one or more associate real estate brokers or real estate salespersons associated with the real estate broker or brokerage placing the advertisement. Where an advertisement includes the name of an associate broker, real estate salesperson or a team, the name of the real estate broker and/or real estate brokerage must also be printed in the advertisement.

3. Nicknames. Real estate brokers, associate real estate brokers, and real estate salespersons shall advertise using the name under which said real estate broker, associate real estate broker or real estate salesperson is licensed with the Department of State. A nickname may be used in an advertisement provided that the full-licensed name is listed clearly and conspicuously.

4. License type. Except as provided in subsection (d) of this section, advertisements shall correctly and accurately state the type of license held by the real estate broker, associate real estate broker or real estate salesperson named in the advertisement. Licensees may abbreviate the type of license held, provided that such abbreviation is not misleading. The use of the titles, “sales associate”, “licensed sales agent” or simply “broker” is prohibited. Real estate brokers, associate real estate brokers or real estate salespersons who have additional titles or designations are permitted to advertise such titles or designations.

5. Contact information. An associate real estate broker, real estate salesperson or team may provide additional contact information, such as a post office box, in an advertisement.

6. Home offices. A residence may be used as an office provided that it is properly licensed by the Department of State.

7. Telephone numbers. Notwithstanding subdivision (c)(1) of this section, a real estate broker, associate broker, real estate salesperson or team may provide telephone numbers other than that of the brokerage in an advertisement, provided that the advertisement clearly identifies the type of such other telephone number as desk, home, cell phone, or otherwise.

8. Logos. A real estate team, associate real estate broker or real estate salesperson may use a logo different from that of the real estate broker or real estate brokerage with whom they are associated, provided that the name or logo of the real estate broker or real estate brokerage is also printed in the advertisement.

9. Property description. Advertisements shall include an honest and accurate description of the property to be sold or leased. All advertisements that state that the advertised property is in the vicinity of a geographical area or territorial subdivision shall include as part of such advertisement the name of the geographical area or territorial subdivision in which such property is actually located. Use by real estate brokers, associate real estate brokers and real estate salespersons of a name to describe an area that would be misleading to the public is prohibited.

10. Guaranteed Profits. Advertisements shall not guarantee future profits from any real estate activity.

(d) Additional requirements and exceptions
1. Classified Advertisements. Classified and multi-property advertisements may omit the license type of any associate real estate broker or real estate salesperson named in the advertisement.

2. Business Cards. Notwithstanding subdivision (c) of this section, business cards must contain the business address of the licensee and the name of the real estate broker or real estate brokerage with whom the associate real estate broker or real estate salesperson is associated. All business cards must also contain the office telephone number for the associate real estate broker, real estate salesperson or team.

3. Web-based advertising
a. Websites created and maintained by associate real estate brokers, real estate salespersons and teams are permitted, provided that said associate real estate brokers, real estate salespersons and teams are duly authorized by their supervising real estate broker to create and maintain such websites and such websites remain subject to the supervision of the real estate broker with whom the licensees are associated while the website is live. Such websites shall be directly linked to the website of the broker with whom the licensees are associated unless the broker does not have a website.
b. Every page of such a website shall include the information required by these rules and regulations.

4. E-mail. An initial e-mail from a real estate broker, associate real estate broker,
real estate salesperson or team to a client or potential client shall provide the information required by these rules and regulations. Such information may be omitted from subsequent e-mail communications to the same recipient.

5. For-Sale Signs. Notwithstanding subdivision (c)(1) of this section, unless
otherwise prohibited by local law, any property listed through a real estate broker must be advertised as such, and any signage placed upon such property soliciting the sale or lease of the property must identify the representative broker or brokerage and include the office telephone number of the brokerage.

6. Advertisements referencing property not listed with broker. Any advertisement that references or includes information about a property that is not listed with the advertising broker or was not sold by the advertising broker shall prominently display the following disclaimer: “This advertisement does not suggest that the broker has a listing or has done a transaction in this property or properties.” Such advertisement: (i) shall not, absent consent provided pursuant to subdivision (b)(2)(b) of this section, suggest, directly or indirectly that the advertising broker was involved in the transaction and (ii) shall not refer to property currently listed with another broker. 

(e) Teams
1. Team name. Team names shall either: (i) include the full licensed name of the real estate brokers, associate brokers or real estate salespersons who are part of said team, or (ii) if the names are not included, the team name must be immediately followed by “at/of [full name of the broker/brokerage].” Team names may use the term “team.” The use of any other terms besides “team,” such as “associate,” “realty” or “group” is prohibited. The use of the name of a non-licensed individual in a team name is prohibited. For twelve months after the adoption of this regulation, teams that have changed their name to comply with this provision shall be entitled to state in advertisements under their new name that they were ‘formerly known as’ their prior team name.

2. Unlicensed team members. If any unlicensed individuals are named in advertising for a team, the advertisement must clearly and conspicuously state which individuals are real estate licensees and which ones are not. 

At Lieb School we emphasize that a proposal is not a rule and that the purpose of providing this proposal to our readers is so that you can have insight into the thinking of the Department of State. Also, we suggest that you let the Department of State know your thoughts on this proposal by contacting your local representatives as well as your local Boards of real estate.

Making Home Affordable - New Handbook Available - Version 4.1

To access the new Handbook for MHA, inclusive of HAMP and HAFA, click here. While reviewing the Handbook you should be aware of the case of Flagstar Bank v. Walker wherein the Court held that the statutory good faith standard for a CPLR 3408 Foreclosure Settlement Conference is compliance with the Handbook. To review the case, click here.

This Handbook is the rules for banks / servicers to modify mortgages, so pay careful attention to detail and make sure that they comply.

Making Home Affordable Statistics Published through October 2012

Highlights:

• >1.1 million homeowners have received a permanent modification through HAMP.
• 74% of non-GSE borrowers entering HAMP in October, 2012 received a principal reduction
• >78,000 HAFA short sales have been completed

To read the full report, click here. 

The report contains a lot of positive news and those seeking relief from mortgage nightmares should be encouraged. 

NY Real Estate License Requirements: Learn the Facts

Salespersons - Listen Up!

1. Your license is regulated by the Department of State, New York (DOS) and NOT by any real estate school or trade organization.
2. Ethics courses are NOT required to maintain your real estate license with the Department of State, New York (DOS). 

Learn the Facts: Real Estate Continuing Education in NY 

Every 2 years, licensed real estate brokers and salespersons in the State of New York are required to take 22.5 continuing education credits. The ONLY mandatory class requirement is at least 3 hours of instruction pertaining to fair housing and/or discrimination in the sale or rental of real property or an interest of real property, within the 2 - year period immediately preceding a renewal.

Exemptions:  Licensed Real Estate Brokers who are engaged full time in the real estate business and who have been licensed for at least 15 consecutive years immediately preceding license renewal. This exemption must have been met prior to July 1, 2008.  An attorney admitted to the New York State bar is also exempt from the Continuing Education Requirement.

Ethics

Ethics training is NOT a required course for a Real Estate Broker or Salesperson to maintain their license in full force and effect with the Department of State, New York. Ethics courses may be required by your local Board (trade organization), but are not required to maintain your license with the Department of State of New York.

Supplemental Directive 12-09 expands on Debt-to-Income Ratios Required on Rental Home Modifications

To read the Supplemental Directive, click here.

It addresses the following topics:

• HAMP® Modified Loans Repurchased from GSEs
• Debt-to-Income Ratio Eligibility
• Single Point of Contact (SPOC) Clarifications
• Dodd-Frank, Identity and Occupancy Verification Clarifications
• Handbook Mapping Clean-Up and Clarifications

Citi's HomeRun Mortgage Program & Deal Killers: Don't Let your Deal Die

Last evening, we instructed our continuing education course, Deal Killers: Don't let your deal die, at Briarcliffe College in Patchogue. 

During the course we received many questions from students about what alternatives there were to FHA funding to help SAVE a deal for a highly leveraged transaction. Our friends at Citi suggested the HomeRun program.

Here are the details: 

WHAT IS HOMERUN?

HomeRun is Citi’s exclusive portfolio Program that has no mortgage insurance and no price ups. It is designed as a responsible financing solution to meet the needs of the low-and moderate-income (LMI) borrower. It provides the stability of a fixed rate, the flexibility of lower down payment options, and the added borrower protection of a relationship with a nonprofit housing organization committed to helping the borrower stay on track with payments. Fannie Mae Community Lending guidelines apply except as modified by the Mortgage Policy Manual (MPM) Fact Sheet.

• 97% LTV financing
• 3% seller contribution toward closing costs and prepaids on CLTVs greater than 90%, 6% on CLTVs 90% or less
• Minimum FICO score is 640
• Non-traditional credit is allowed with insufficient credit history and no FICO score
• No mortgage insurance
• Available to returning and first time homebuyers as well as existing Citi customers

Additionally, Citi has provided access to the Federal Financial Institutions Examination Council's Geocoding System that they discussed last evening. Click here to learn more. 

The Mortgage Forgiveness Debt Relief Act & National Association of Attorneys General

On May 9, 2012 we blogged about the importance in extending the Mortgage Forgiveness Debt Relief Act of 2007. To read that blog, click here.

On November 20, 2012, the National Association of Attorneys General joined the cause by writing this letter to the Congressional Leadership of our Federal Government.

Additionally, the Real Property Committee of the Suffolk County Bar Association also drafted a similar letter to our local leadership in the region.

Its imperative that this act is extended to protect those vulnerable community members who have underwater homes. Additionally, there are many secondary and tertiary effects on our local economy that will be realized if this act is not extended.

Please contact your representative and stress why this Act should be extended.

Bi-Weekly Mortgage Payment Plan - Its the extra payment that matters!

During this Thanksgiving I was spending time with some good friends who recently purchased a house. They are great people, but not particularly knowledgeable about the real estate industry.

My friend said to me that his wife and him were discussing setting up automatic payments for their mortgage, which I thought was a good idea so they would never miss a payment.

Then, my friend said that once they got situated in their new house that they would switch to paying every other week to cut down their interest and make the mortgage term shorter. My response was simple, "So you are going to make an additional payment a year on your mortgage?". He responded with "No, I am just going to pay every other week and we will save money, everyone does that", as if I was some sort of fool who had no idea how mortgages worked - thanks for the lesson. I thought that I may share with him why he doesn't understand what he is talking about, but on second thought I thought it is Thanksgiving and he didn't ask me for my professional advice, so I should keep my mouth shut.

To be clear, paying every other week as opposed to monthly is not a magic trick. The bank is not happy to merely receive payments in partial amounts more frequently than in full amounts monthly. Instead, paying bi-weekly results in 26 half payments throughout the course of a year. 26 half payments equals 13 full payments. Math not magic is what matters. So, the result is that a bi-weekly payor is making 1 extra payment a year and that is the SOLE reason that a loan's term is accelerated by expeditiously reducing the loan's principal balance. Moreover, as you reduce the principal, the amount of interest paid is reduced. This is actually what my friend was saying; albeit confusedly. In fact, it works the same if you simply make 13 payments a year as opposed to 12.

However, mortgagors (borrowers) should not EVER unilaterally decide to make bi-weekly payments. Instead, they must discuss their desire with their lender first. Many lenders want a one-time setup fee for this service and require online payments as opposed to checks.

Or, instead, mortgagors (borrowers) can simply send an extra payment annually and they are set.

Enjoy the holidays. I've learned that when I keep my mouth shut I enjoy the holidays too.

Federally Declared Disasters - Supplemental Directive (Modifications)

On November 16, 2012, we blogged about the Making Home Affordable Program's forbearance program for victims of Hurricane Sandy.

Today, Treasury issued Supplemental Directive 12-08, which addresses Federally Declared Disasters, such as Hurricane Sandy, and specifically directs Non-GSEs (servicers) with respect to the following topics:

• Flexibility with Borrowers in Federal Emergency Management Agency (FEMA) Designated FDD Areas
• Forbearance Plans
• Borrowers in a Home Affordable Modification Program® (HAMP) or the Second Lien Modification ProgramSM (2MP) Trial Period Plan
• Borrowers in a HAMP or 2MP Permanent Modification
• Handbook Mapping

To read Supplemental Directive 12-08, click here.

Age Discrimination in Housing

At our recent continuing education course, The Fair Housing Act, a student challenged our slideshow, which showed the list of protected classes. Specifically, they adamantly argued for the inclusion of age as a protected class. As explained then and reiterated now, there are multiple fair housing and discrimination laws of which real estate agents must be mindful. The course taught was the federal law, which does not expressly protect age. Nonetheless, New York has a law called the Human Rights Law that makes it unlawful to discriminate on the basis of age, among many other classes. However, the law does not apply the class of age to those under the age of 18, instead the class of familial status applies in those situations. Additionally, the law doesn't apply to housing restricted to those 55 years of age or older. Moreover, publicly assisted housing for the elderly is also exempted.

The message for real estate agents out there is that they need to consider a multitude of laws from Federal to State to Local (County, City, Town or Village) prior to practicing in a particular area.

The FTC is Investigating Deceptive Ads in Real Estate Marketing

According to Ad Age, the leading publication in the advertising industry, the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB) are jointly investigating deceptive ads concerning mortgage modifications, short sales and workouts.

To read the article, click here.

The article expressly states that real estate agents have received warning letters from the FTC. Of specific concern to the FTC & CFPB was the practice of utilizing images of President Barack Obama in ads promoting loan-modification services, which wrongfully communicate to consumers that certain services are affiliated with the government. If you use the President's image on your advertisements, take it down now! 

Real estate agents this is important. When you work in mortgage relief, you must be mindful of the Mortgage Assistance Relief Services (MARS) Rules from the FTC, a summary of which can be found by clicking here.  Also, in New York, Distressed Property Consultants must additionally comply with Real Property Law section 265-B, the text of which can be found by clicking here. 

During each of our continuing education courses to real estate agents on foreclosure, whether its Foreclosure and the Economy: the Short Sale Course; or Foreclosure Filibusters we always stress the importance of these laws and regulations. Unfortunately, we always also get responses from agents that we are being ridiculous. This is very serious and far from ridiculous.

Real estate agents should also be mindful that the FTC's watchful eye is not restricted to mortgage modifications. As stated in our course, To be Green or Not to be Green: That is the Question, the Green Guides are available by the FTC and demonstrate the need to be candid and avoid deception in advertising Green Housing & Buildings. To read the Green Guides, click here. 

As Lieb School always states: You are a real estate Professional; knowing these laws makes you a value-add to your clients and customers. Now go study. 

Landlord Tip - Safety Glass - Is your rental house safe pursuant to statute?

Pursuant to the General Business Law, residential buildings and other dwellings must use safety glass in sliding glass doors, storm doors, shower doors, bathtub enclosures and "fixed glazed panels immediately adjacent to entrance and exit doors which may be mistaken for doors". 

The purpose of this law is to minimize the likelihood of piercing and cutting injuries. 

Landlords, be sure to perform a compliance analysis of your unit before renting. Failure to be in compliance with Statutes and Codes will devastate you if someone is injured in your premises. 

NY Attorney General to Wells Fargo - Modify Mortgages Now

Today, NY's Attorney General, Eric T Schneiderman, warned Wells Fargo to immediately recommence reviewing mortgage relief applications after the servicer / lender suspended its review process until it receives instructions from FEMA. Unfortunately for Wells Fargo, it has a settlement with 49 State Attorney Generals, that its new policy is now likely breaching.

To read the AG's press release, inclusive of his letter to Wells, click here.

While its not clear that Wells Fargo's policy was intended to hurt homeowners seeking a mortgage modification and instead was a response to the storm, it is clear that NY's Attorney General is quite serious about protecting struggling homeowners in his State and helping them to stay in their homes.

This is a good sign for homeowners seeking a modification.

Hurricane Sandy Mortgage Forebearances

Last evening we instructed our continuing education course Foreclosure Filibusters at Newsday's Corporate Headquarters for approximately 100 real estate agents. It was so gratifying to instruct this particular group of professionals as they continuously focused our course on their expressed concern for those who were devastated by Hurricane Sandy. They expressed concern for those presently in foreclosure proceedings and for those who will now likely default on their mortgage. They cared about their community, their friends and relatives. They wanted to help.

We discussed the mortgage modification process under HAMP. We addressed proactive short sales under HAFA. Now, we provide guidance for borrowers who need assistance as a result of Hurricane Sandy, which was a Federally Declared Disaster (FDD) pursuant to the Making Home Affordable (MHA) program. 

Please know that pursuant to MHA - "Any FDD forbearance plan should not impact the status of a homeowner's permanent HAMP modification."

So, if you, your clients or your customers cannot make payments as a result of the Hurricane, contact your servicer / lender and request an FDD forbearance until you can get back to affording life. 

To learn more about Treasury's direction to servicers in how they should make offerings of help to borrowers as a result of Hurricane Sandy, click here. 

Open House = Open for Inspection by Municipal Building Inspectors

Last evening, I hosted our monthly meeting for the Real Property Committee of the Suffolk Bar Association where we discussed municipal zoning violations, among other topics. In our company were some Assistant Town Attorneys who clearly articulated that real estate agents should always be mindful, and advise their clients, that hosting an open house also invites law enforcement into the house for Code Inspection.

Therefore, if you are showing a property with illegal structures or occupants - DO NOT HAVE OPEN HOUSES!!!

VA Loans on Veterans Day

VA loans are available to veterans, active duty personnel, certain reservists and national guard members, surviving spouses of persons who died on active duty or died as a result of service-connected disabilities, and certain spouses of active duty personnel who are missing in action, captured in line of duty by a hostile force or forcibly detained by a foreign government or power.

While VA loans are available through private lenders, the VA guaranties loan payments and thereby provides an incentive to lenders to make loans. The key advantages to a VA loan are as follows:

You can buy a home without a down payment - as long as the sales price doesn’t exceed the appraised value. (Of course, you have to qualify in terms of income and credit.)

You won’t need to buy private mortgage insurance.

VA rules limit the amount you can be charged for closing costs.

Closing costs may be paid by the seller. (You should keep this in mind when negotiating the sales price.)

The lender can’t charge you a penalty fee if you pay the loan off early.

VA may be able to provide you some assistance if you run into difficulty making payments.

To learn about eligibility FAQs, click here.

Lets pay our respect to our veterans on this Veterans Day!!!

Airbnb is Brilliant - NYC Housing

What a brilliant company Airbnb is. A major barrier to their success are local laws that prohibit short term rentals in many municipalities across the Country. They want the biggest markets, like NYC, but NYC prohibits rentals for less than 30 consecutive days based upon the State's Multiple Dwelling Law at section 4.

What a brilliant company Airbnb is. They see NYC's plight in the face of the destruction from Hurricane Sandy and they pounce. Not in a bad way, but instead as a savior of sorts. Yesterday, Mayor Bloomberg announced a partnership with Airbnb to help victims of the hurricane get necessary housing. Click here to read the article. You see, when two (2) political issues are face-to-face at odds, the public will choose the lesser of the two (2) evils. On the one hand, short-term rental housing has been associated with damaging the neighborhood environment, impairing the physical characteristics of a neighborhood and most importantly, creating safety hazards through unregulated units with transient guests. On the other hand, we have people without power, in flooded apartments that need a warm place to stay with the electricity turned on (yes Revolution, the power should be turned on). You guessed it, heat and power wins.

Yes, the partnership is not a home run for Airbnb; they have not repealed the short term rental statute that stands as their barrier to domination. This statute makes their customers' rentals of weekend apartments often illegal. Instead, they have capitalized on an opportunity to gain good will and brand awareness in their continual cause to have the law repealed. Great job Airbnb, you are brilliant.

Loan Modifications & the Federal Housing Finance Authority

A very interesting article in Business Insider for all those who have Fannie and Freddie (GSE) underwater loans. While its true that the current head of the FHFA has blocked any attempts to have Fannie and Freddie write off losses of underwater loans, the article speculates that "He's going to lose his job in the next six weeks" and this will quickly change.

An interesting aside is how this will create huge tax liabilities for homeowners in cancellation of debt income for those who have their underwater loans wrote off because the Mortgage Debt Tax Relief Act of 2007 is set to expire at the end of the year.

Maybe, it would be wise to extend the Act prior to concerning ourselves with whether its prudent to write off underwater loans.

Trump International Realty - Welcome to the Industry

Donald Trump made some waves by starting his own real estate brokerage house this past month. The company appears to have offices in  New York, Las Vegas and Chicago. While Trump is a marque name in the development and property management sectors, its curious how he will fair in the licensed world of managing real estate agents, inclusive of the many ethical hurdles that the Department of State places along his way. Unfortunately for Mr. Trump, the Division of Licensing Services will not care who he is and instead will expect the same level of professionalism that they expect from everyone else. In a smart move, it appears that Trump International Realty is launching with a small group of established agents who can help set the pace for the company as it grows.

To visit Trump International Realty's website, click here.

Good luck Mr. Trump and welcome to the industry.

New Short Sale Rules - Treasury issues Supplemental Directive 12-07

Some of the highlights of the Directive are as follows:

• Use of certain HAFA documents will now be optional rather than mandatory, so long as the servicer communicates essential HAFA terms to the borrower in some written form.
• Borrowers who request HAFA consideration and are ninety (90) days or more delinquent and have a FICO score that is less than 620, will be deemed to have a “pre-determined” hardship. Borrowers with a pre-determined hardship must execute a Hardship Affidavit prior to closing of the HAFA transaction; however, servicers will not be required to further validate the hardship.
• Treasury will now require both the seller (borrower) and purchaser in a HAFA short sale transaction to execute a new HAFA affidavit prior to closing that certifies, among other attestations, that the sale represents an arms-length transaction and that no money is being given or received that is not reflected on the HUD 1 Settlement Statement. 
• The time frame for servicers to make a decision on a borrower’s request for HAFA has generally been shortened to 30 calendar days. 
• Treasury is increasing the incentive it will provide for permitting gross proceeds to be used to pay subordinate mortgage liens.
• The current prohibition against resale of a property for 90 calendar days following a HAFA closing is being changed to prohibit any resale within 30 calendar days and prohibiting a resale for more 120% of the HAFA short sale price between 31 and 90 calendar days of the HAFA closing.

Also, notate that these new rules are effective on 2/1/13, not immediately.

To read the Supplemental Directive in its entirety, click here.

Surviving the rule change is the following:

A statement that if the borrower has a real estate license, he or she cannot earn a commission selling his or her own property and may not have any agreement to receive all or a portion of the commission after closing;


Real Estate Agents - this does not mean to try to creatively earn a commission on your own short sale. You will likely face charges of perjury &/or fraud. Its just not worth it. Instead, simply hire a friend whom you respect at your company to represent you in your short sale.

I just want to make a point of the fact that HAFA offers a proactive short sale. Being proactive with obtaining lender approval is the ONLY sensible way to seek out a short sale these days. Push your clients, attorneys and friends to work under the HAFA program. If you do, you will agree that HAFA is the way to go.

Hey real estate agents, Business Insider says you will find love!

Just a fun article I found at Business Insider, take a read by clicking here.

Although the article has no methodological basis for its prediction, its a good thought that real estate agents have such good fortune.

Remember to vote on this Election Day.

Condo destroyed in hurricane & evacuated, do you have to pay your common charges?

Yes, unlike a cooperative apartment, where the warranty of habitability applies based upon the unit's characteristic of being a leasehold interest, a condominium's unit is owned in fee, as an owner of the land, structures and facilities. Therefore, a condominium owner must pay their common charges and assessments regardless of the hurricane rendering the unit unsafe for occupancy.

Therefore, condominium owners legally have to pay common-charges while cooperative owners don't in the face of Sandy. Nonetheless, when cooperative owners don't pay, they are likely giving the kiss of death to their building, which will likely end up in foreclosure when it doesn't have money to pay its mortgage. So, its suggested that ethically, albeit not legally required, cooperative shareholders should pay and hope that their homes are rebuilt through their building having an adequate insurance policy.

Before paying or not paying your maintenance or common charges, both condominium and cooperative residents should first consult with an attorney and review all applicable legal papers for your building.   

Attorneys and Real Estate Agents: Can they share office space?

During our recent continuing legal education course, Real Estate Business Ethics, held on October 24, 2012, I was asked by an attorney/student whether they could ethically share office space with a real estate brokerage office.

The answer is yes according to the New York County Lawyers' Association Committee on Professional Ethics in Opinion Number 733.

Although the answer is yes, the Committee cautioned as follows in rendering its Opinion: "Joint office sharing arrangements with non-Designated Professionals, while historically permitted, should be entered or continued only when precautions such as sub-dividing space and separating communications are undertaken, and these precautions will be particularly important whenever reciprocal referrals are also contemplated". 

The committee also offered the following suggestions: "If there is a common reception area, the signage and office nomenclature must not create the impression to the public that the lawyer and non-lawyer have a professional relationship. If there is one receptionist the same proscription applies. Existing space can be subdivided such that access to file rooms and computers containing confidential files is restricted."

Lastly, it must be notated that the Opinion is not binding on the Courts in enforcing the ethical rules and furthermore, the opinion referenced to the Lawyers Code of Professional Responsibility, which was replaced by the New York Rules of Professional Conduct on April 1, 2009 and therefore is not dispositive. Nonetheless, it appears that similar rules exist under the new Rules of Professional Conduct and that the Opinion's guidance remains applicable. The practitioner is advised to seek out a new opinion from their local Ethics Committee, pursuant to the new rules, before acting.

Co-op destroyed in hurricane & evacuated, do you have to pay your maintenance?

No said the Appellate Court (1st Dept.) in Granirer v. Bakery, Inc.

In its decision, the Court said that there is an "abatement of their maintenance until the apartment is restored to a habitable condition". Further, the Court stated that there should be a 100% abatement of maintenance, which includes "their contribution to the cooperative's tax and mortgage obligations".

The Appellate Court quoted its prior decision in Suarez v. Rivercross Tenants' Corp for the proposition that "A proprietary lessee is entitled to the statutory protection [of the warranty of habitability] as well as the noninvesting, ordinary tenant".

The Warranty of Habitability is a statutory right embodied in Real Property Law section 235-b that is required in every lease in New York. It provides that the property shall be "fit for human habitation and for the uses reasonably intended by the parties and that the occupants of such premises shall not be subjected to any conditions which would be dangerous, hazardous or detrimental to their life, health or safety".

So, is an act of god, such as a hurricane, an exception to the Warranty of Habitability? No, said the City Court of Yonkers, Westchester County, when faced with this question in Spatz v. Axelrod Management Co., Inc.

Nonetheless, it must be notated that a Co-op shareholder's (unit owner's) refusal to pay their maintenance will likely result in the Co-op becoming insolvent and eventually being foreclosed upon and the shareholder's proprietary lease thereby being rendered void. So, in the end, shareholders refusal to pay maintenance based upon a breach of the proprietary lease's implied Warranty of Habitability is actually attacking them-self.

Its important for a shareholder who is considering not paying their maintenance to first review their proprietary lease and also consult with an attorney before acting and refusing to pay.

Need disaster relief help?

Click here for the government's website to assist those in need of help and resources.

Flood exclusion to homeowners' policy litigation; Is it coming?

Many homeowners' insurance policies exclude coverage from the effects of flood and surface water or natural water below the surface of the ground without exception. 

As reported by Newsday, LIPA is estimating that 100,000 Long Island area homes and businesses have been devastated. Click here to read the article.  

Therefore, many community members will be seeking insurance to cover their loss. While the flood exclusion sounds pretty straight forward, it may not be. In fact, ambiguities in the exclusionary provisions of an insurance policy are resolved in favor of the insured. So, you should carefully read the exclusion and seek the advice of counsel prior to accepting your insurer's position that you do not have coverage. 

There are also unique situations for businesses with flood insurance. To illustrate, some policies require "safe storage" as a condition to obtaining coverage for valuable papers and records. In this situation, is this a strict requirement for coverage or does it instead have to be correlated (related) to the loss? These are questions that you should consider, research and than fight for your rights.  

However, the exclusion may be clear and you may receive a denial. So, can you sue your insurance broker for your experience of flood-related losses because they did not recommend that you obtained flood insurance or flood insurance with suitable policy limits (how much money will be insured)? The rule is that absent a special relationship with your insurance broker (which rarely exists pursuant to law and facts), your broker has no duty to recommend a special type of insurance. Therefore, you likely cannot sue your broker. 

Stay tuned, later we will discuss FEMA's designation of Flood Plain Areas and requirements for the purchase of flood insurance and how that may effect your loss. 

REALTORS® on the East Coast Help Clients Pick Up the Pieces Following Hurricane Sandy

REALTORS® on the East Coast Help Clients Pick Up the Pieces Following Hurricane Sandy

Hurricane Sandy Damages Could Reach $50B

Hurricane Sandy Damages Could Reach $50B

Course Cancelled Tonight - 11/1/12

Our continuing education course, Foreclosure and the Economy, scheduled for this evening has been cancelled and will be rescheduled as a result of Hurricane Sandy. Stay tuned for the announcement of our new date.

Hurricane Deductibles - Great News

New York Governor Cuomo announced yesterday that homeowners will not have to pay hurricane deductibles on their claims.

A hurricane deductible is the amount of money a homeowner is responsible to pay for out-of-pocket before their insurance policy will kick in for hurricane related damage. Moreover, while traditional deductibles are generally flat dollar amounts for fire and theft (i.e. $5,000), with a hurricane deductible its often a percentage of the storm damage, which can be quite high (1% to 15%).

To read the Governor's press release, click here.

Voice of Reason: Insuring Your Home's Coverage for Bad Storms

Some great information on homeowners insurance issues from our friends at Douglas Elliman:

The following includes information regarding damage control immediately following Hurricane Sandy. Erik Braunitzer is a writer for Douglas Elliman, brokers for NYC, Long Island and Westchester Real Estate.

Waking up after Sandy, many people in the Northeast are left with a devastating truth: their homes are gone or flooded beyond repair. Some of these homeowners may not be ready for the awful truth that comes next. They may not get their homes back. The truth is homeowner's insurance usually excludes flooding and hurricane damage. If you don't know the ins and outs of your policy before a destructive storm, it will be too late to change your policy later to cover these gaps. Most often, these following areas cause the most issues after devastating destruction.

1. Replacement Value

Replacement value or cost is listed in your homeowners policy and means the value of the loss at the amount it costs to replace an item. For example, if you have property in your home, such as a home computer, you may think that you will get a brand new computer with same features at the original price. However, unless your policy states this exactly in your insurance policy, losses are valued at what they were worth in the condition before the destruction--in this case, a five-year-old computer may only have a value of $200. Replacement-cost-value clauses should always be included in your policy.

2. Flood Insurance

Homeowners insurance policies usually exclude flood coverage, as well as hurricane cover and earthquake coverage. Whatever the cause, floods happen, particularly because of exploding pipes and the amount of rainfall in a hurricane. Floods are actually the most common reason for damage to the home. Some insurance companies include some types of flood coverage. If you live an area susceptible to flooding or if you want to be sure you are covered, adding flood coverage can save you from a lot of financial stress.

3. Negotiating Valuation of Loss

One of the first things that people do after a damaging hurricane is call the insurance company to file a claim. After you file a claim, an appraiser comes to the property and assesses the damage. These appraisers do not work for you. They work for the insurance company. They are looking for the minimum that the insurance company will have to pay in order to meet its obligations. However, you do not have to take that valuation as final. If you can prove the loss is significantly higher, negotiate a settlement with the company. To prove your claim however, you need to take pictures of damage and loss of valuables, as well as keep receipts for repair costs.

4. Hotel Stay or Rental Coverage

If you have this in your policy, it will be listed as "loss-of-use" coverage. This means that the insurance company pays to place you in a hotel while work is being completed on your home, if it is uninhabitable. Not all policies include these types of provisions and others have limitations, such as a maximum per day amount or a time limit for how long expenses are covered. To avoid the out-of-pocket living expenses after a hurricane, ensure that you have loss-of-use coverage. 

I'm in contract of sale for real estate damaged by Hurricane Sandy, what's the result?

In answering this question, the first issue is if the damage is material to the contract or is instead merely ancillary. To illustrate, lost electric or a few shingle down is likely immaterial, whereas flooding with structural damage is typically material.

If material, the contract is unenforceable at the option of the purchaser (the seller has no option). In this scenario, if the purchaser does not want to pursue the contract and therefore does not want to close on the real estate transaction, the purchaser can have their deposit (Earnest Money) returned.

If immaterial, the contract is enforceable, but the purchaser has a right to an abatement (reduction) of the purchase price reflecting the damage.

Nonetheless, if there is a prepossession agreement and the purchaser is in possession, regardless if the damage is material, the contract is enforceable as is.

These are the default rules embodied in General Obligation Law 5-1311, but a contract of sale can be drafted to amend these rules however the parties agree. Therefore, it is imperative that you review your contract of sale before you act.

Home Repairs & the Law - Homeowners Insurance Policy Tips

First, homeowners policies are all unique and must be read in their entirety. If you have any questions about your policy, you should contact an attorney rather than taking the word of your insurance company because they are not in the business of advocating for you and instead seek to minimize their payments / exposure.

Its important that you don't assume that you do or don't have coverage for a specific loss. There are many gray areas of coverage.

An important item to review in your insurance policy is if it pays Replacement Value or Cash Value for your damaged property.

Replacement Value refers to the cost to replace the property on the same premises with property of comparable material & quality.

Cash Value refers to the cost to replace with new property of like kind & quality, less depreciation.

To be clear, Replacement Value is much better for the insured than Cash Value as there is no depreciation taken into account when evaluating the homeowner's claim.

Next, you should check your deductible, take pictures of your losses, make a list of everything damaged / lost and promptly contact your insurance carrier to provide them with adequate notice (there are generally notice requirements to obtain your insurance coverage, including the way you provide notice and to whom).

Home Repairs & the Law - License Requirement in local Town or Village

While there are statewide laws for home improvement contracts & County / City laws, do not forget to also check your local municipality for their laws as well. Pursuant to General Business Law 775, local laws are permissible regulating home improvement contractors provided their are not inconsistent with State laws. So, a contractor may need to also be licensed on the local level. Additionally, there may be required contract provisions for your job.

While we have substantial damage from the storm throughout the region & need repairs, its important to ensure that these consumer protection statutes are followed by contractors along the way.

Home Repairs & the Law - License Requirement in Westchester County

All home improvement contractors in Westchester County need to be licensed. To read the Laws Governing the Licensing of Home Improvement Contracts in Westchester County, click here.

To look up if a home improvement contractor is licensed in Westchester County, click here.

Remember, if your contractor is unlicensed, they cannot enforce your home improvement contract against you & they are subject to arrest & prosecution.

Home Repairs & the Law - License Requirement in New York City

All home improvement contractors in New York City need to be licensed to perform the following services, among others:

construction, repair, remodeling, or addition to any land or building used as a residence. This includes, but is not limited to, the construction, replacement, or improvement of basements, driveways, fences, garages, landscaping, patios, porches, sidewalks, swimming pools, terraces, and other improvements to structures or upon land that is next to a home or apartment building. 

In New York City, there is also a license requirement called a Home Improvement Salesperson License for those who "solicit, negotiate, or offer to negotiate a home improvement contract with a property owner".

Click here to verify licensing in New York City.

Remember, if your contractor is unlicensed, they cannot enforce your home improvement contract against you & they are subject to arrest & prosecution. 

Home Repairs & the Law - License Requirement in Nassau County

All home improvement contractors in Nassau County need to be licensed to perform the following services, among others:

• air conditioning & heating systems
• carpentry work
• ceramic tile & marble installers
• cesspool builders & cleaners
• chimney/fireplace builders, repairs, cleaners
• doors, windows, awnings
• dry wall contractors
• fences and railings
• fire escape stairs & ladders
• floor installation & refinishing (including sub-floors)
• garage builders
• general contractors
• insulation contractors
• lawn irrigation contractors
• masonry work
• painting contractors
• paving and driveway seal coating
• power washers & sandblasters
• reglazing/porcelain refinishing
• retaining wall contractors
• roofing contractors
• sewer cleaners
• siding installation
• swimming pool (building, installing and maintenance)
• tree surgery
• vacuum cleaner central systems
• waterproofing
• well drilling

Check your contractor's licensing & open complaints by contacting Office of Consumer Affairs at (516) 571-3871.  To view the Nassau County Local Law, click here. Remember  if your contractor is unlicensed, they cannot enforce your home improvement contract against you & they are subject to arrest & prosecution. 

Home Repairs & the Law - License Requirement in Suffolk County

All home improvement contractors in Suffolk County need to be licensed to perform the following services, among others:

Arborists	Awnings
Basements	Cabinet Makers
Carpentry	Driveways
Dormers	Extensions
Excavating	Flag Poles
Exterminating	Fumigation
Flooring	Insulation
Garages	Landscapers
Kitchens	Painting
Masonry	Roofing
Railings	Siding
Storms & Screens	Tree services
Swimming Pools	Tennis Courts
Termite Control	Tile Installers
Weatherproofing	Waterproofing

Check your contractor's licensing & open complaints by contacting Office of Consumer Affairs at (631) 853-4600. There are more than 12,000 licensed vendors, so you can certainly find one for your job. Remember, if your contractor is unlicensed, they cannot enforce your home improvement contract against you & they are subject to arrest & prosecution.

Home Repairs & the Law - New York State Home Improvement Contract Law

If you had damage in the storm & plan to hire a contractor in New York, we will be providing you with some tips & laws to get you on your way.

Lets start with General Business Law 771, which contains the requirements for home improvement contracts as follows:

1. Every home improvement contract subject to the provisions of this article, and all amendments thereto, shall be evidenced by a writing and shall be signed by all the parties to the contract. The writing shall contain the following:

(a) The name, address, telephone number and license number, if applicable, of the contractor.

(b) The approximate dates, or estimated dates, when the work will begin and be substantially completed, including a statement of any contingencies that would materially change the approximate or estimated completion date. In addition to the estimated or approximate dates, the contract shall also specify whether or not the contractor and the owner have determined a definite completion date to be of the essence.

(c) A description of the work to be performed, the materials to be provided to the owner, including make, model number or any other identifying information, and the agreed upon consideration for the work and materials.

(d) A notice to the owner purchasing the home improvement that the contractor or subcontractor who performs on the contract or the materialman who provides home improvement goods or services and is not paid may have a claim against the owner which may be enforced against the property in accordance with the applicable lien laws. Such home improvement contract shall also contain the following notice to the owner in clear and conspicuous bold face type:

“Any contractor, subcontractor, or materialman who provides home improvement goods or services pursuant to your home improvement contract and who is not paid may have a valid legal claim against your property known as a mechanic's lien. Any mechanic's lien filed against your property may be discharged. Payment of the agreed-upon price under the home improvement contract prior to filing of a mechanic's lien may invalidate such lien. The owner may contact an attorney to determine his rights to discharge a mechanic's lien”.

(e) A notice to the owner purchasing the home improvement that, except as otherwise provided in paragraph (g) of this subdivision, the home improvement contractor is legally required to deposit all payments received prior to completion in accordance withsubdivision four of section seventy-one-a of the lien law and that, in lieu of such deposit, the home improvement contractor may post a bond, contract of indemnity or irrevocable letter of credit with the owner guaranteeing the return or proper application of such payments to the purposes of the contract.

(f) If the contract provides for one or more progress payments to be paid to the home improvement contractor by the owner before substantial completion of the work, a schedule of such progress payments showing the amount of each payment, as a sum in dollars and cents, and specifically identifying the state of completion of the work or services to be performed, including any materials to be supplied before each such progress payment is due. The amount of any such progress payments shall bear a reasonable relationship to the amount of work to be performed, materials to be purchased, or expenses for which the contractor would be obligated at the time of payment.

(g) If the contract provides that the home improvement contractor will be paid on a specified hourly or time basis for work that has been performed or charges for materials that have been supplied prior to the time that payment is due, such payments for such work or materials shall not be deemed to be progress payments for the purposes of paragraph (f) of this subdivision, and shall not be required to be deposited in accordance with the provisions of paragraph (e) of this subdivision.

(h) A notice to the owner that, in addition to any right otherwise to revoke an offer, the owner may cancel the home improvement contract until midnight of the third business day after the day on which the owner has signed an agreement or offer to purchase relating to such contract. Cancellation occurs when written notice of cancellation is given to the home improvement contractor. Notice of cancellation, if given by mail, shall be deemed given when deposited in a mailbox properly addressed and postage prepaid. Notice of cancellation shall be sufficient if it indicates the intention of the owner not to be bound. Notwithstanding the foregoing, this paragraph shall not apply to a transaction in which the owner has initiated the contact and the home improvement is needed to meet a bona fide emergency of the owner, and the owner furnishes the home improvement contractor with a separate dated and signed personal statement in the owner's handwriting describing the situation requiring immediate remedy and expressly acknowledging and waiving the right to cancel the home improvement contract within three business days. For the purposes of this paragraph the term “owner” shall mean an owner or any representative of an owner.

2. The writing shall be legible, in plain English, and shall be in such form to describe clearly any other document which is to be incorporated into the contract. Before any work is done, the owner shall be furnished a copy of the written agreement, signed by the contractor. The writing may also contain other matters agreed to by the parties to the contract.

Commercial Landlord Liability - Hurricane Sandy

Commercial landlords secure your property as soon as the storm passes. While a property owner is not liable for injuries occurring on their premises during a storm in progress, the landlord only has an objective reasonable time to remedy the situation or face liability thereafter.

So, landlords, its your job tomorrow, following the storm, to inspect your properties and immediately institute corrective measures. If the dangerous condition existing on your premises will take time to remedy, you are charged with providing adequate warnings and barriers to protect those who are to be rightfully in and on the premises. 

Good luck and be safe. 

Homeowners Insurance Storm Tip

Back on August 28, 2011 I blogged about homeowners insurance in the wake of Hurricane Irene. Click here to read that article as its still applicable.

TIP: If you have an opportunity, take your cell phone out & take pictures of your home before damage occurs, both inside and out. Therefore, if you do have coverage, you can prove the damage.

More legal tips will be posted throughout the day, so stay tuned.

Trees are down - stay safe - Hurricane Sandy

I originally blogged about tree law back in 2010, but will provide you with a refresher in the face of Hurricane Sandy. Here is the law on trees in NY:

• If a property owner has no knowledge that a tree is decaying or unsafe and it simply falls from wind or storm onto his neighbors’ property, he has no liability & the neighbor where it fell is responsible for removal for the portion on his property.
• If a property owner knows of a tree's dangerous condition; that the tree is unsound and/or decaying, regardless if wind contributes to its fall onto his neighbors' property, he is liable. 

The issue is if the tree was sound before it fell. 

• If so, removal is charged to the property owner in which it lies after it falls. 
• If not, removal & liability for damage is charged to the property owner from which it fell.

To be clear, there is no duty to inspect your trees to determine if they are sound, instead only where there are indicia of decay or disease does such a burden fall upon a homeowner. The standard is if a defect in the tree is "readily observable" to an ordinary landowner upon reasonable inspection.

However, if your tree falls on a highway, the law is as follows: (see Highway Law 325)

If any tree shall fall, or be fallen by any person from any inclosed land into any highway, any person may give notice to the occupant of the land from which the tree shall have fallen, to remove the same within two days; if such tree shall not be removed within that time, but shall continue in the highway, the occupant of the land shall forfeit the sum of fifty cents for every day thereafter, until the tree shall be removed. 

Stay safe.