Thursday, May 31, 2012

Foreclosure - Early Certification - Eliminating the Shadow Docket

This past week a proposal was made to change the process of foreclosure litigation in NYS. Lets learn about it now:

Currently, the process for a lender / servicer to foreclose a residential mortgage is as follows:

Currently:
Plaintiff's attorney will file the foreclosure action (summons and complaint), get an index number and serve process, but before the matter is assigned to a Judge or put into the mandatory Foreclosure Settlement Conferences where the parties are instructed to work towards a modification, the lender's / servicer's attorney will be required to swear to the truth of the documents submitted by way of an affidavit. Yet, many attorneys first learn at this stage that they have insufficient facts to permit them to swear to these facts and the matter stays in limbo without assignment to a Judge or access to the Foreclosure Settlement Conferences. As a result, many foreclosure actions exist, but are not moving forward towards resolution - this is called the Shadow Docket.

Amendment:
Recently, the Office of Court Administration has proposed the following amendment to the Civil Practice Law and Rules (CPLR) to eliminate this Shadow Docket & expedite the foreclosure process. Under the amendment, if adopted, the residential mortgage foreclosure process will become as follows:

Proposed Process:
A lender's / servicer's attorney will execute a certificate of merit coupled with their summons and complaint at the time that they first get an index number. This certificate of merit will certify that the attorney has reviewed the facts of the case and that, based on consultation with authorized representatives of the plaintiff and the attorney's review of pertinent documents, including the mortgage, security agreement and note or bond underlying the mortgage executed by the residential defendant and all instruments of assignment, if any, or any other instrument of indebtedness, there is a reasonable basis for the commencement of such action.

Analysis:
If approved, this amendment will result in the elimination of the shadow docket and greatly minimize foreclosure defense tactics by attorneys. The entire effect of the amendment is to place the certification requirement earlier in time as opposed to what currently happens - instead of during the action, the certification will occur as an incident of commencement. Yet, this is a good thing for homeowners because they will not be dragged into foreclosures until the lender / servicer has a reasonable basis to commence the action. Moreover, this will result in more homeowners having access to the Foreclosure Settlement Conferences early in the process avoiding the unnecessary accumulation of excess interest & penalties following default while they remain existing in the shadow dockets.

Lieb School and the Long Island Education Board support this proposed amendment.

Wednesday, May 30, 2012

Do I need permission to photograph a building or a home?


The answer is maybe and the law on the topic can be found at 17 USCA 120(a), which states: 

Pictorial representations permitted.--The copyright in an architectural work that has been constructed does not include the right to prevent the making, distributing, or public display of pictures, paintings, photographs, or other pictorial representations of the work, if the building in which the work is embodied is located in or ordinarily visible from a public place.

So the question now becomes:
First if the building or the home is an architectural work? &
Second if the building or the home is located in or ordinarily visible from a public place? 

To address the first question, one must analyze the Architectural Works Copyright Protection Act (AWCPA).

To address the second question, one must analyze the facts on how & from where the Architectural work was photographed inclusive of the location and topography surrounding the structure.

With respect to the first question, the term architectural work is defined at 17 USCA 101 as "is the design of a building as embodied in any tangible medium of expression, including a building, architectural plans, or drawings. The work includes the overall form as well as the arrangement and composition of spaces and elements in the design, but does not include individual standard features."

Moreover, the AWCPA does not extend protection to architectural works constructed before 12/1/1990. So, these buildings or homes can be photographed, without authority from the owner / architect, regardless if the picture is taken from a public place.

In a nutshell, it is likely that one can take pictures of a building or a home from the street anytime without permission, but be wary about going behind hedges or gates to get your best angle. 

If you have a particular scenario that is unique, you should always consult an attorney and obtain tailored legal advice.

Happy Photographing!!!

Tuesday, May 29, 2012

I love real estate - my Shelter Island visit

For Memorial Day weekend my wife and I stayed at The Ram's Head Inn on Shelter Island and I was reminded of why I work in this field of law in the first place.

As we disembarked from North Ferry, leaving Greenport, our eyes hit the artwork that is Shelter Island real estate. Modern, contemporary, stately, each home called to me with a challenge to understand its story. Some were the places of artists; others corporate tycoons; still more were the homes of retirees who had stumbled upon the Island years ago while on vacation and promised it a more permanent return. There were also the farms, which remain in full function amidst the compounds and retreats that have been claimed by New York City's elite. Also, one cannot think of Shelter Island without discussing its dedication to nature which is embodied by the Mashomack Preserve, a landmass that comprises roughly one-third of the entire Island.

There were old homes, hundreds of years past their prime; new mansions on the sides of cliffs; and bungalows reminding you that you were at the beach. Yet, what is truly miraculous about Shelter Island real estate is how the homes exist in harmony with the natural topography. You see Shelter Island real estate exists on the land, in the land and with the land; not on a flat surface of plowed forest that unfortunately has become much of suburban realty. The trees, from the time of the Native Americans sprawled, the creeks glistened with sunshine and the mirror of the homes standing at its shores. A look in the water reviewed a Gothic Revival, than in the pond around the bend you would see a Victorian in its luster. Everywhere, it felt like there was candy for your eyes.

Yes, real estate is not merely this beauty. It is also reviewing the Town Code, construction contracts, and memorandums of sale. Often times we focus on the sanitation systems or the Wetland Permits. In so doing its easy to forget the bigger picture. Real estate is lasting. It is defining. The results are uplifting. Its energy is alive. Once and a while we need to stop reading the rules and just enjoy the fruits of our labors. Go visit Shelter Island and become rejuvenated and find your passion for why you work in this field in the first place. Take a drive, rent a bike or moped and just peek your head into each and every driveway. Shelter Island is a real estate museum. Enjoy the sites.

Wednesday, May 23, 2012

LIEB SCHOOL OFFERS FREE CE on Friday 6/1 at LIREBR (Long Island Real Estate & Business Renaissance)


LIEB SCHOOL OFFERS FREE CE
on Friday 6/1 at LIREBR
(LONG ISLAND REAL ESTATE & BUSINESS RENAISSANCE)
 



LIEB SCHOOL
presents...
on
Friday June 1st, 2012 at 10:00am
in Melville NY.

 Advanced Online Registration Only: http://www.liebatlaw.com/realestateschool

This FREE 3 Credit Real Estate Continuing Education Class is sponsored by
  
The LIREBR is a Real Estate Industry Convention taking place on Friday June 1st and Saturday June 2nd 2012. The convention includes over 70 hours of seminars, panel discussions and credit earning classes with over 200 exhibitors of real estate related products and services. This event will bring together companies from the real estate industry:

Residential Real Estate, Commercial Real Estate, Construction & Development, Franchising & Business


LIREBR EVENT DETAILS:
   
Friday June 1ST  8:00AM-5:00PM
Saturday June 2ND 8:00AM-3:00PM

 LOCATION

Hilton Long Island
598 Broad hollow Road 
Melville, NY 11747

LIREBR ATTENDEE ADMISSION $ 10*
Registration: www.lirebr.com


LIEB's real estate continuing education course entitled
is FREE for pre-registered students.


Admission to any other seminar or the LIREBR expo itself requires a $10.00 fee paid in advance or a $20.00 at the door. To register for the expo go to http://www.lirebr.com


Is paying a landlord's mortgage the same thing as rent?

The Nassau District Court answered this question with a strong no unless "the parties specifically agree otherwise". In this situation, a landlord would be wise to embody this agreement in a lease otherwise they will not be able to look to a Summary Proceeding for an eviction.

The lesson is to always write every aspect of a landlord / tenant understanding in a lease prepared by an attorney.

Thursday, May 17, 2012

Emerging Federal and State Fair Housing Issues - Watch the Video

NYS Division of Human Rights presented a great talk by Bryan Greene, General Deputy Assistant Secretary, Office of Fair Housing and Equal Opportunity at the US Department of Housing and Urban Development on 4/25 & 4/26 of this year concerning Emerging Fair Housing Issues.

To watch the video, click here.

Monday, May 14, 2012

Crowdfunding Your Real Estate Project

Under the JOBS Act (Jumpstart Our Business Startups Act), crowdfunding is alive and will be available for equity investors in the coming months.

Crowdfunding is a means for start-ups to obtain capital without all of the SEC red-tape that typically accompanies offerings to accredited investors.

Under the JOBS Act, funds will be available through intermediaries operating funding portals. An intermediary for real estate professionals to keep their eyes on is PropertyPeers. Visit their site by clicking here.

To learn more about crowdfunding in the JOBS Act, click here.

Now start thinking about how you can raise capital to become the next real estate tycoon.

Wednesday, May 9, 2012

Real Estate Agents with Graduate Degrees?

At Long Island Education Board we have always believed in Education and we offer many continuing education courses to help raise the knowledge base of our local agents. Yet, we can't do it all and we point agents who really want to differentiate themselves to NYU's Schack Institute of Real Estate. Currently, NYU offers an M.S. in Real Estate that educates "from initiating and analyzing to negotiating, financing, and closing the transaction". Take a look by clicking here and see if this Masters Degree is right for you.

We believe in Education and strongly recommend that agents take the initiative to become further educated in real estate.

Why Should the Mortgage Forgiveness Debt Relief Act and Debt Cancellation NOT be extended past 2012?


In short, I don’t know. According to a study released by CNN.COM in early March, the number of homeowners who owe more on their mortgage(s) than their properties are worth – more commonly referred to as being “underwater” - increased by 3.7% during the last three (3) months of 2011. My contention is that this trend will continue, and the Act provides relief for, among others, homeowners who must resort to short-sales in order to get out from under this mess. Consequently, these homeowners who sell their properties for less than what they owe on their mortgage(s) are saddled with substantial tax ramifications unless they fall under one of the exemptions of the Act. Should the homeowner not qualify under the principal residence or insolvency exemptions (the two exemptions germane to the sale of real property), he or she will have to report the difference in price between the sale of the property and the amount owed as income.

Please see the following link to the IRS for more information concerning the above and let’s hope the Act is extended past 2012; not only for those who may benefit from it, but also for the benefit of the overall economy.

Unauthorized Practice of Brokerage

Its often said that real estate agents are engaging in the unauthorized practice of law, but what about CPAs, Financial Planners, Property Managers and the like engaging in the unauthorized practice of real estate brokerage. Better yet, what is real estate brokerage in the first place?

Lets start with the Department of State's take on the matter. On their website, the Department of State has a FAQ section for Real Estate Salespersons that reads as follows:


If I am a real estate management company, do I need a real estate broker's license?
That depends on what services you provide. If you collect rent or place tenants in vacant spaces on behalf of your landlord client, the answer is yes. If, on the other hand, your services are strictly maintenance, the answer is no. you are not acting as a fiduciary (not handling another person's money).

So, does this provide the answer? Some may think yes, but when you dig a little deeper you should think about the words utilized in the answer as they actually present more questions than just simple answers. The key word that comes to attention is the term "tenants". After all what is a tenant and what isn't?


To illustrate with some questions:

  • Is the NYC Park Commission granting a private corporation the right to operate an enterprise on a percentage rental basis for 20 years a tenancy? 
  • What about a business broker affecting a lease of an operating hotel premises?
  • How about renting a cooperative unit on an hourly basis?
Are these tenancies?

To learn the answer to these illustrations and more, click here and read a decision by the State of New York, Department of State, Office of Administrative Hearings. This is the best guidance available on this topic. 

It appears that the test is if a transaction concerns "an estate or interest in real property" it requires a brokerage license where providing accommodations to transient guests does not require such a license. 

Now, it is suggested to check your local Town or Village Code, which often has a definition of transient to see if the specific activity you are engaging in is transient or "an estate or interest in real property". Moreover, you will not want to rest on that definition and instead do further research if the interest provided is a license (not brokerage) or a tenancy (brokerage). Yet, the easiest solution for property owners is to hire a licensed broker when dealing with real estate negotiations, sales or leases. This way it is unnecessary to analyze whether the activity in question is viable or instead constitutes the unauthorized practice of real estate brokerage. 

Home Sale Can't Stop Divorce


A most fascinating case was just decided in Manhattan Supreme Court where the parties had agreed (stipulated) that until their residence was sold "neither party shall file any papers to obtain a judgment of divorce". 

So the question before the Court was: "whether the parties can condition their divorce upon the mercurial nature of the New York City real estate market."

The Court would have none of that and deemed this clause unenforceable because the Court felt that public policy was to make a divorce less burdensome and to remove as many roadblocks to its conclusion as possible. 

What is interesting from this case is how people utilize economic coercion as negotiation leverage in a divorce. Had the clause remained, the parties would have either had to accept a lower sales price or remained married. This would have allowed the party less motivated to sell to get concessions from the other party in other aspects of the divorce in order to permit the sale. 

For real estate professionals, you now know that in Manhattan a divorce should not block a sale of the property as the Court doesn't see the sale of real estate as a reason to stop a divorce. Instead, the divorce should go forward and as the Court says: " If the parties are unable to accomplish the sale themselves, then the court can force a sale (CPLR § 5103), appoint a receiver (CPLR § 5106), or order a conveyance by a sheriff (CPLR § 5107)"

To read the case in full, click here

Great class last night - Property Management

I just want to send a special thank you to the Mattituck-Laurel Historical Society for donating their fabulous school house for our continuing education course last evening. It was an experience that I will remember for a lifetime. What a thrill to each in an 1840s working school. I only wish that they had left the rulers to smack the naughty students with.

If you don't know about the Society, click here to learn more. While I loved the experience, the Society needs your help to stay erect and safe. In fact, we discussed the need for a walkway from the parking lot to the school in order to make visiting the site safer. Please do your part and donate to this worthy cause by becoming a member. Just click on this form to join.

Friday, May 4, 2012

Cooperative House Rules Illustrated


A case decided yesterday, 5/3/12, perfectly illustrates the power of cooperative boards. The case addresses whether the board, under the Business Judgment Rule, may create a house rule that restricts subletting. In the situation in the case the restriction imposed was as follows:

 "no [l]essee shall be permitted to sublet the whole or any part of an apartment or renew or extend any previously authorized sublease for more than two years during any four consecutive year period unless consent thereto has first been duly authorized by a resolution of the Directors or . . . by [l]essees owning at least 66⅔% of the then issued and outstanding shares of the Corporation."

The Appellate Court held that the board did have the power to enact such a rule under the Business Judgment Rule. Even going further, the Court rejected a prior decision to the contrary stating cooperative boards have “the authority to freely adopt a new policy in the legitimate interest of the cooperative”.

To read the decision, click here

Thursday, May 3, 2012

Co-Op House Rules & the Proprietary Lease

When purchasing a cooperative apartment you should always read the house rules as they set the standards for living in this environment. For example, the house rules may require that a percentage of an apartment be covered with carpeting to prevent noise or a house rule may not permit swimming in the pool after a certain hour or the rules may contain a no pet policy. Nonetheless, house rules should not be read in a vacuum and its quite important for prospective purchasers to not only study the house rules, but also the proprietary lease, which sets the outer limits of a Board's authority to set the rules. So, when a rule exists in the house rules that is contrary to the proprietary lease, the lease typically holds the day.

Yet, if you are planning to move into a building where the proprietary lease authorizes the Board to set rules for something like carpeting and the house rules do in fact set such a rule, you will be blown away to know that a Board needn't enforce this rule and no one can force them to do so. Why is this you may ask? The answer is called the Business Judgment Rule whereby a Board acting in good faith is shielded from suit when making decisions. So a rule is only enforceable rule when the Board elects to enforce it.

Nonetheless, Boards should act reasonably and their rules are much more likely to be enforced when the rule not only is embodied in a house rule, but also exists in a proprietary lease. Moreover, Boards should uniformly apply their rules or be mindful of both Fair Housing Act violations for discrimination or claims of waiver when they do choose to enforce the rule randomly.

So, perspective purchasers should review the rules and proprietary lease prior to purchasing, but realize that its also important to get to know the members of the Board because their personalities may dictate your living environment.

Know Your Terms


A recent legal malpractice case finds a client suing its former attorneys for failure to include terms in a lease addressing their landlord’s ongoing construction.  As a result of this construction, the client was unable to occupy its office space for nearly four years and claims to have suffered lost profits and consequential damages amounting to millions of dollars. 

Attorneys must be aware of potentially disruptive issues like construction when they negotiate a lease and be sure to address them all in the contract. These attorneys failed to include a single lease term, and now they find themselves defending a multi-million dollar lawsuit arising from a simple commercial transaction. 

There is a lesson here for non-attorneys as well.  Oftentimes real estate brokers will rely on form contracts or draft provisions themselves.  Don’t.  A missing or improperly drafted term in an agreement can have significant financial consequences.  If even skilled attorneys, trained to anticipate litigation around every corner, may miss these issues, how confident are you that a Blumberg form will cover them?

Wednesday, May 2, 2012

License law doesn't equal company policy

While litigating a brokerage commission dispute this afternoon, it dawned on me that real estate agents just don't know their company policy on many issues that they face in their profession. In fact, when they do know their company policy they fight it saying its not what their license permits.

To be clear, company policy is not the same thing as license law, nor is it Department of State regulations and it certainly isn't ethics opinions. What company policy is instead is your company's rules that are much more restrictive than any of the proceeding categories. You see companies have to manage on the macro and try to minimize risks so they make internal rules that narrow the line of legality to attempt to avoid the line of illegality as much as possible.

So imagine license law, regulations and ethics opinions constituting a large circle and company policy as a smaller circle therein of what you can and cannot do as an aspect of your job. All big companies have policies and most agent's independent contractor agreement incorporates these polices by reference, so agents must know and constantly be updated on their policies.

Go read your manuals.