Friday, January 27, 2012

New York State Bar Association - Annual Meeting - Real Property

Hi all,

I just got back from the Real Property Meetings in New York City and wanted to report on the great experience had by all. We discussed why New York Real Estate is different, Current real estate development issues, Rebuilding the World Trade Center, Current real estate financing issues, Current real estate leasing issues, Residential mortgages, Real estate issues facing not-for-profits, and NYC skyscrapers. The meeting was very positive and their was an air that the market is improving in NY. Also, I learned that the foreclosure woes are estimated to be 1/2 done in NY where they are only 1/3 through the crisis in the rest of the Country.

Personally, the discussion about the stages of building up the World Trade Center's buildings to achieve market rentals as opposed to building them all at the same time when they would compete for tenants and the discussion about the German influence on NYC's skyline were the most interesting aspects of the meetings.

Yet, I would say that Suffolk County's real estate issues were not addressed and the focus was on NYC. Therefore, I wrote the Chair of the Committee asking how we can get more localized into the future. Hopefully, we can learn from other counties and share with them the lessons we learn from having the best residential community in the State, the Hamptons / North Fork.

Sunday, January 15, 2012

Case of Interest - Douglas Elliman v. Tretter - Agency Disclosure

Summary: Appellate Division, 1st Department Case, discussing whether the absence of an agency disclosure from precludes a real estate agent from receiving her commission. The issue was side-stepped by the Court, which holds that a dual agency relationship didn't exist so we are left to speculate whether a commission could be earned if such a relationship had existed.

Advice: Get your agency disclosure forms signed on the first point of substantive contact because the question remains open whether you can collect a commission if you fail to get the disclosure completed. Additionally, its required by real estate license law to get an agency disclosure form completed; so to keep your license in good standing, you must get this done.

Case Analysis:

Issue: Did real estate agent act as a dual agent and consequently was she required to disclose her divided loyalties and obtain the sellers' consent thereto on an agency disclosure form?

Claim: Real estate brokerage sought $70K brokerage commission.

Facts: Tretters, Mr. Tretter being an attorney, retained Douglas Elliman to sell their cooperative apartment. Douglas Elliman's agent, Lockwood, met prospective purchaser Zeitzer at an open house and showed approximately 5 other apartments to Zeitzer, her "customers". Zeitzer contracted to purchase Tretter's property. Contract price was $1.4 million with a 5% commission to the brokerage company. Sellers were solely responsible for the brokerage commission pursuant to the contract.

Finding of Fact: Lockwood did not act as a dual agent. While she had a signed exclusive agency agreement with the Tretters, she did not with the purchasers and she received no monies from them.

Dissent: There is an issue of fact whether Lockwood was a dual agent because Lockwood acknowledged in depositions that the was the "buyers' agent" among other facts such as their attorney referring to her as a dual agent.

As the Department of State says: Be Wary of Dual Agency

Thursday, January 12, 2012

Thanks to our students for a great CLE in Bridgehampton last evening

I had a great time presenting our CLE Course: Property Wars last evening and wanted to thank all those who attended for being a great audience.

Tuesday, January 10, 2012

Cooperatives Apartments Be Careful

2 recent decisions speak to the duties Boards have in Cooperative apartments.

Fair Housing Act: Not only can a Cooperative violate the Fair Housing Act regardless of the Business Judgment Rule, but specifically you can't keep the single guys out so says the Federal District Court in Lax v. 29 Woodmere Blvd. Owners, Inc. While the Court did not yet decide for the Plaintiff, the Court did say that the allegations if proven can constitute a cause of action.

Price Floors: While there appears to be a trend that Cooperatives can set floors that apartments cannot be sold under based upon the Business Judgment Rule, be careful that the floor is reasonable (whatever that means) and that the Board has authority to set such a floor in the Cooperatives governing documents.

To be clear, the Business Judgment Rule says that Corporate Officers are not liable for their decisions and actions when they are made under authority and in a good faith furtherance of Corporate purposes.

Top 11 Real Estate Laws of 2011

Now that 2012 is here it is important to be aware of changes in the law in order to properly represent our clients. This is not a list about the best events from 2011, but, instead, a list that highlights the new legal landscape that you face as real estate practitioners. Being familiar with these laws, regulations and opinions may help you to better address your clients’ matters, save your license and make you money.

Property Tax Caps
Local government is now prohibited from raising property tax levies by more than the lesser of 2% or the rate of inflation (excluding New York City). An exception to this cap occurs if local government enacts a law or resolution explicitly overriding the cap by a 2/3rds vote. Currently, New York property taxes are the 2nd highest in the country and are 96% higher than the national median.

Marriage Equality
Same-sex couples may now marry and as an incident thereto may now be deeded title as tenants by the entirety. Yet, while New York now provides same-sex couples with many new rights, the practitioner must be mindful that the Defense of Marriage Act prevents same-sex married couples from realizing the full extent of rights enjoyed by opposite-sex married couples because it prohibits the availability of federally recognized rights.

Mortgage Modifications
Mortgagees / servicers who participate in the federal Home Affordability Modification Program (HAMP) and accept a borrower’s application for a loan modification under that program must fully abide by the rules of the program in New York. Specifically, the Appellate Division held in Aames Funding Corp. v. Houston that a foreclosure sale would be stayed until the borrower was fully evaluated under the HAMP program. Practitioners should therefore familiarize themselves with all HAMP rules, which can be learned by accessing the Making Home Affordable Handbook.

Electronic Recording
Real estate recordings are going digital. County clerks will begin accepting documents in electronic format on September 22, 2012. Don’t fret; you can still bring the Clerk your paper versions if you please. Yet, the justification for the bill argues that “owners of real property, real estate professionals and local government taxpayers would benefit from the more accurate and efficient land records system that this bill would facilitate” so you should consider the upside of going digital.

MERS’ Foreclosure Obstacle
Where Mortgage Electronic Registration Systems, Inc. (MERS) is nominee and mortgagee for purposes of recording, it cannot assign the right to foreclose upon a mortgage to a plaintiff in a foreclosure action absent MERS's right to, or possession of, the actual underlying promissory note. So says the Appellate Division in Bank of New York v. Silverberg where a foreclosure was dismissed for lack of standing as a result of MERS’ involvement. The decision coupled with the introduction of governmental electronic recording seems to signal the end of mortgagees’ practice of outsourcing their recordings to MERS in New York.

Ethical Seller’s Concession Rules Reinforced
The New York State Bar Association is at it again by clarifying its Opinion #817 which addressed the duty to disclose in a transaction involving a Seller’s Concession and a corresponding Gross-Up. Opinion #822 states that “all transaction documents containing the grossed-up sales price must disclose that the sales price has been increased by a sum equal to the seller’s concession” in order for the practitioner to comply with Ethics Rule 8.4(c).

Expanded Hardship Criteria for Real Property Redemptions
The Suffolk County Code has been amended to expand the definition of “immediate family” to include grandchildren residing with the applicant where an applicant seeks to enlarge its time period to redeem its tax foreclosed property past 6 months based upon an illness to a member of its “immediate family”.

Elimination of Recommended Attorney Lists by Title Agencies
In analyzing Insurance Law §6409(d), the New York State Insurance Department opinioned that a residential real estate broker may not refer its clients to attorneys on an “approved” or “recommended” list if the attorneys, in turn, refer those clients to the broker’s affiliate title agent. Yet, the opinion clearly states that it is premised upon the assumption that “attorneys that do not make the referral quota are removed from the list”, so a list is likely permissible so long as membership within the list is objectively independent from referral. Nonetheless, affiliated real estate brokerage and title companies are now eliminating their use of these recommended attorney lists.

On-Bill Recovery Loan Program
As part of the Power NY Act of 2011 and beginning January 30, 2012 homeowners can take out low-interest loans from NYSERDA for energy efficiency measures, to be paid back on their utility bills. Moreover, the payments may be tax deductible and are transferable if the property is sold. A great aspect of this program is that homeowners can watch their savings offset the cost of their energy efficiency measures on the very same bill.

Home Improvement Contractors can’t act on Behalf of Mortgage Brokers
Unnecessary repairs are thwarted as home improvement contractors and their agents are prohibited from promoting or arranging for the services of a mortgage broker or its affiliate. Also, referral fees are strictly prohibited under this legislation as are contractors acting as co-signers or guarantors of a loan for home improvements.

Private Transfer Fees are Eliminated
In furthering the public policy of the marketability of real property, new legislation prohibits private transfer fee obligations from running with title to property or otherwise binding subsequent owners of property. Also, the legislation provides a procedure to remedy existing obligations. Private transfer fees have traditionally been utilized as a creative means for developers to realize an income stream long after the finalizing of their projects.

This list only provides a small blurb on each new law, regulation and opinion. There may be further discussion on these topics going forward as they get fleshed out in the Courts. So stay tuned.