LIEB BLOG

Legal Analysts

Sunday, August 28, 2011

Some Good Storm News - Homeowners Insurance

To Start:

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


Something Interesting:

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

Something Good:

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

Friday, August 26, 2011

Lead Disclosure Law is Limited

Residential Lead-Based Paint Hazard Reduction Act


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

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

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

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

Thursday, August 25, 2011

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

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

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

Monday, August 22, 2011

Cell Phone Deposits

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

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

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

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

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

Wednesday, August 17, 2011

Modification Uptick

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

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


Tuesday, August 16, 2011

Opt-Out Deadline Approaching Quickly

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

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

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

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

Monday, August 15, 2011

How to get my commission?

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

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

Regardless of the listing agreement, 2 rights you never have are that:
1) You can't file a Lis Pendens
2) You can't serve a motion for summary judgment in lieu of complaint (CPLR 3213) & must litigate the matter with a Summons and Complaint.

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

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

Thursday, August 11, 2011

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

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

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

(a) General rule

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

(1) a spouse, or

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

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

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

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

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

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

BE WARNED.

Wednesday, August 10, 2011

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

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

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

Lets be clear - the third person is technically the broker of record at your office, but no there is not another agent involved in the transaction nor do you have to further split your commission. Instead, the theory of a dual agent with designated sales agent is this:
  • Both agents (listing & buyers) work for the same company
  • At the company (brokerage house) there is a boss (broker of record)
  • Both agents (listing & buyers) have to report to the boss if the boss so requires
  • While reporting to the boss confidences of the seller or buyer may be required to be shared
  • The seller and buyer should know this limitation on their confidences before retaining the agents and either consent to it or not permit a dual agent with designated sales agent representation
If you have any more questions on this topic I suggest attending our next Conflicts of Interest class where this topic is discussed in more detail.