Question: Does a Legal Two Family in Queens need a rental permit? 

In general, New York City does not have rental permits per se; however, there are registration requirements for "multiple dwelling" buildings.  The New York State Multiple Dwelling Law defines a "multiple dwelling" as a building containing three or more separate units.  All multiple dwelling buildings in New York City are required to be registered with the Department of Housing Preservation and Development (HPD).

A legal two is classified as a private dwelling since it has less than three units.  This means it does not have to automatically register with HPD in the same way a multiple dwelling must.  However, a one or two family private dwelling must register with HPD if the owner of the building does not reside within the boundaries of New York City.  In that situation, not only must the owner register the building, but he must also register an agent with HPD.  While there are no special licensing or professional requirements for this agent, he must reside within the boundaries of New York City.

If a building is not registered with HPD, the owner may be charged with a misdemeanor and/or fined up to $500 for their first violation.  In addition, any person who assists with a violation of the registration requirement may be charged with the same penalties.  As for broker liability, it can be argued that listing a rental that is not registered with HPD qualifies as assisting in violating the registration requirement; however, this is not explicitly stated.

Registration is extremely easy for an owner to perform and can be done online through HPD's website.  For an introduction into the basics of New York City Rentals, check out this packet provided by HPD.  Useful Information About Housing Rules and Regulations.

New York's highest Court, the Court of Appeals, has clarified that an insured need not review its policy if it specifically asks the broker for a particular coverage, and has a right to bring an action against the broker for his failure to obtain such coverage, in its decision in American building Supply Corp. v. Petrocelli Group, Inc., which can be read by clicking here.

This is a scary decision because it will become a he said / she said battle of whether the specific coverage was, in fact, requested, which may be done orally, and it eliminates the duty on members of society (individuals and businesses) to read contracts and be presumed to understand its terms - this is a cleaner way for society to exist where one is responsible for his own contracts.

While the Court places the burden on the insured to prove that he requested the specific coverage, it will be hard to ascertain whether the coverage was specifically requested. In fact, the Court is clear to state that a general request does not create a duty in the broker to obtain the coverage. Yet, how specific must the request be? If you have ever spoken to a lay business owner or property owner you know that it's never as specific as you would like. This will become a ripe area for litigation as to whether the request was made and how specific it was made, which seems to require a trial as it will always be a question of fact.

Additionally, what this author thinks is wrong, an insurance broker does not have a duty to recommend coverage that is not requested, which is also a rule that is reaffirmed in this decision.

The Ability to Repay amendment will only become effective on January 10, 2014 so we have almost a year to prepare. Yet, its time to start studying as the entire mortgage industry has changed as a result of the Ability to Repay amendment to Regulation Z.

The Regulation's Text can be read by clicking here.

The Preamble's Text can be read by clicking here.

The regulation lays out 8 factors for a creditor to consider in making an Ability to Repay analysis, including:

1. Current or reasonably expected income or assets; 
2. Current employment status;
3. The monthly payment on the covered transaction; 
4. The monthly payment on any simultaneous loan; 
5. The monthly payment for mortgage-related obligations; 
6. Current debt obligations, alimony, and child support; 
7. The monthly debt-to-income ratio or residual income; and 
8. Credit history. 

The Consumer Financial Protection Bureau (CFPB) just announced major changes in mortgage lending.

This is MAJOR, read carefully.

The main components of these rules are as follows:

1. Ability to Repay of borrowers burden is placed on lenders who must verify financial information supplied by borrowers and can no longer offer teaser rates to qualify a borrower & charge more in time. This will likely be the end of "no doc" & "interest only" loans.
2. Qualified Mortgages (QM) have been defined & are presumed to be in compliance. These QMs limit upfront points and fees used to compensate loan originators; cannot exceed 30 years; cannot be interest-only; cannot offer negative-amortization payments; and must have debt-to-income ratios <=43%.

The CFPB issued its rules pursuant to the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act.

To read a fact sheet explaining the new rule, click here.
To read the last summary of the proposal while it remained a proposal, click here.

All real estate professions, such as agents; attorneys; architects; title, etc. should become familiar with these rules as they will impact the ability to borrower and therefore your industry.

Mortgage brokers and bankers, start studying.

At Lieb School, our take is that this is what the public wanted following the great recession. Many borrowers  have blamed their lender time and time again for making a loan that the lender new could not be repaid. These rules will greatly limit this problem in the future. However, its always said to be careful what you wish for. Now, you actually need to be able to afford a house you think you deserve.