How current events impact business & real estate

Wednesday, April 03, 2013

How will the new amendment to divorce law affect real estate?

On January 30, 2013 22 NYCRR 202.16a was amended. What does this mean? How will this affect your divorce? And why am I writing about this? The answers are: Keep reading, keep reading, and this is important. In that order.

22 NYCRR 202.16a is the counterpart to DRL §236(B)(2)(b) and it requires the plaintiff in a matrimonial action to cause the defendant to be served with a “notice of automatic orders” which informs the parties, inter alia, that neither party may in any way dispose of any property without written consent of the other party or by order of the court, except in the regular course of business, for customary household expenses, or in order to pay reasonable counsel fees in the divorce. We’ll refer to these prohibitions as “automatic orders”.

This is a terrific directive as it ensures that your soon to be ex-spouse will not sell your vacation home without your written consent during your divorce. You love that home, it has the biggest pool on the block, your kids learned to swim in the pool and your friends are openly jealous of what you modestly call your “vacation home” (truth: it’s a castle). You are not ready to part with it. So what happens if your unloved one (we’ll kindly refer to the unloved one as your “soon to be ex”) during your divorce sneakily sells the house for half its value (possibly accepting the other half of the payment as a promissory note, transfer of stocks, benefit to his/her business, or cash, as this is just the type of transaction a sneaky person will undertake)? Your soon to be ex will earnestly explain to the court that this is really his separate property, he purchased it with his own money, his name is solely on the deed, and besides, the real estate market is terrible and he sold it for the best price he could, the proceeds were used to pay off debts, and there is simply no money from the sale proceeds to share with you. But you know in your heart that your soon to be ex is doing what he best does-suavely talking his way out of yet another questionable and downright unethical act. What is your remedy?

Until the recent amendment of the law, your remedy was unclear, as the courts were divided on the appropriate remedy for a violation of the automatic orders. Some courts ruled that the violation of the automatic orders is not subject to a punishment of contempt of the Court (see Buoniello v. Buoniello, No. 35948/09 [Sup. Ct. Suff. Co., May 7, 2010]), while other courts held that the automatic orders are in fact orders of the court and a violation of the automatic orders may be subject to contempt of the court (see Sykes v. Sykes, 2012 N.Y. Slip. Op. 22049 [Sup. Ct. N.Y. Co. February 29, 2012]).

As of January 30, 2013 the following provisions have been added to the body of the automatic orders:
1.      “Upon service of the summons in every matrimonial action, it is hereby ordered that…” (body of the automatic orders follows, see 22 NYCRR 202.16a) (This clearly designates the directive prohibiting transfers during the divorce as “Orders”).
2.      “These automatic orders shall remain in full force and effect during the pendency of the action unless terminated, modified or amended by further order of the court or upon written agreement between the parties.” (This clearly sets forth the timeframe of the applicability of the orders).
3.      “The failure to obey these automatic orders may be deemed a contempt of the court.” (Our favorite new provision in the automatic orders.)

The recent amendment will serve to resolve the courts’ division on the appropriate remedy for a violation of the automatic orders.  Now all the courts will have contempt of court at their disposal to punish violators of the automatic orders. Now your soon to be ex will think twice before sneakily selling your vacation home during the divorce. And if he doesn’t, then jail may be his new home. Thank you Administrative Board of the Court for your recent amendment to 22 NYCRR 202.16a. We love it! May justice reign uniformly in the Matrimonial Parts of the Supreme Courts of the State of New York.