LIEB BLOG

Legal Analysts

Tuesday, May 27, 2014

Foreclosure Activity is Down Nationwide

Foreclosure , Foreclosure Defense
Foreclosure Activity is Down Nationwide
Nationwide foreclosure activity is at its lowest point since 2007. The amount of auctions, defaults, and repossessions have substantially decreased across the country. Only 17% of all mortgaged homes are seriously underwater as opposed to 29% in 2012, and negative equity is down overall.

It is anticipated that we will also start to see a decline in short sales in 2014 due to two major reasons:

a. The Mortgage Forgiveness Debt Relief Act has not been passed for 2014. This means that borrowers are liable for the income tax on the forgiven debt in a short sale. In many cases, this kind of tax bill is too high and the borrower must default on his or her tax bill. The IRS can subsequently garnish wages, freeze bank accounts, and place liens on assets without having to first obtain a judgment. Many borrowers are unwilling to put themselves in such a position and would rather let the property go to foreclosure than to have the IRS go after them for money they do not have.

b. Lenders are less likely to approve short sales today because they know they can successfully sell the properties at auction or as an REO (bank-owned property) at a higher price because fair market value for real estate is on the increase.


Please note that the total amount of foreclosures (percentage of units by area) in Suffolk County is higher than the national average and the New York State average, and the amount of Suffolk County homes in pre-foreclosure is on the rise. Overall, however, foreclosure auctions are down in Suffolk County just as the rest of the nation. Keep this in mind, brokers, as you navigate the real estate in Suffolk County.
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Thursday, May 22, 2014

New Tax Laws And Its Impact On Estate Planning

Estate Planning , Legal Updates
New Tax Laws And Its Impact On Estate Planning
Updates to the tax laws of New York are available here and are effective as of April 1, 2014!

New changes in tax laws that affect a person’s estate that you should be aware of:
  1. Changes on estate tax exclusions rising substantially (to eventually match federal estate tax exclusion). See NY Tax Law section 952(c);
  2. Reforms on gifts given prior to death. See NY Tax Law section 954(a); and
  3. Repeal of the New York Generation Skipping Transfer tax. See Part X, Section 8, repealing article 26-b).

On March 31, 2014, Governor Cuomo signed legislation that makes broad changes to the New York State Estate and Gift Tax Laws, as well as some technical changes to certain trust income tax rules. 

Pursuant to New York Tax Law §952(c), estate tax exclusions will be rising dramatically each year from the current New York State amount of One Million Dollars ($1,000,000.00) to Five Million Two Hundred Fifty Thousand Dollars ($5,250,000.00) by 2017, which is the current federal estate tax exemption amount. Estate tax exclusion means the dollar amount a person’s estate can pass free from New York Estate Tax. More specifically, for individuals dying on or after April 1, 2014, and before April 1, 2015, the estate tax exclusion amount will be Two Million Sixty Two Thousand Five Hundred Dollars ($2,062,500.00). For individuals dying on or after April 1, 2015, and before April 1, 2016, the estate tax exclusion amount will be Three Million One Hundred Twenty Five Thousand Dollars ($3,125,000.00). For individuals dying on or after April 1, 2016, and before April 1, 2017, the estate tax exclusion amount will be Four Million One Hundred Eighty Seven Thousand Five Hundred Dollars ($$4,187,500.00). Lastly, for persons dying on or after April 1, 2017, and before January 1, 2019, the estate tax exclusion amount will be Five Million Two Hundred Fifty Thousand Dollars ($5,250,000.00).

Pursuant to New York Tax Law §954(a), gifts made by a New York resident within three (3) years of that person’s death on or after April 1, 2014, and before January 1, 2019, will be added back into that person’s estate. Bringing these gifts back into the deceased person’s estate will now increase that person’s gross estate and this may make those gifts subject to the New York Estate Tax now, depending on the size of the estate, as discussed in the previous paragraph.

Pursuant to Part X, Section 8 of the new tax laws, the New York State Generation Skipping Transfer Tax is repealed. Prior to its repeal, this tax imposed a generation-skipping transfer tax on outright gifts to persons who are two (2) or more generations below the transferor, or on distributions from certain trusts that are held solely for the benefit of said persons.

These are only a few changes to the current New York State laws that are affecting estate planning in the future. To summarize, these new laws will narrow and ultimately eliminate the estate tax exclusion gap between the New York and Federal estate tax exclusion amounts. For the next five years, however, as the tax estate exclusion amount increases and the taxable gift laws apply, estate planning will become more complex.

See all the recent changes in the New York State laws, effective April 1, 2014, on page 488. 
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Friday, May 16, 2014

New Policy to Reduce Foreclosures on Long Island

Foreclosure , Foreclosure Defense
New Policy to Reduce Foreclosures on Long Island
Starting in June 2014, judges on Long Island will take on a substantial role in Foreclosure Settlement Conferences as issues arise in foreclosure litigation. The purpose of this new policy is to solve homeowners’ issues in an efficient way and help more homeowners obtain loan modifications in an area of the country where the percentage of foreclosures is still quite high.

New York requires judicial intervention in the foreclosure process. It is New York State Law that the courts must hold Foreclosure Settlement Conferences for all residential foreclosure actions involving home loans originating between January 1, 2003 and September 1, 2008, or nontraditional home loans. Previously overseen only by Court-appointed referees, these conferences allow borrowers to discuss workout options with their mortgage lenders in order to avoid foreclosure. However, the process has always been flawed, as lenders oftentimes would send representatives who not only did not have knowledge of the cases but also had no authority. This new policy is supposed to address these types of issues quickly, correct the flaws of the Foreclosure Settlement Conferences, and protect borrowers against the wrongful practices of these mortgage lenders. A judge is much more equipped to handle these issues than a referee, allowing for fewer foreclosures on Long Island.
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Friday, April 25, 2014

Is your buyer precluded from buying US Real Estate?

Is your buyer precluded from buying US Real Estate?

As previously posted on February 28, 2014:


Check with the Office of Foreign Assets Control at the US Treasury before you help your client buy.


To use the Office's search features by person and country, click Resources on the page and find the feature that fits your need.

Remember, The Office of Foreign Assets Control administers and enforces economic sanctions programs primarily against countries and groups of individuals, such as terrorists and narcotics traffickers. The sanctions can be either comprehensive or selective, using the blocking of assets and trade restrictions to accomplish foreign policy and national security goals.

So, its important to check the Office's Resources frequently as sanctions change and you need to know what the rules are today when working in real estate brokerage.
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Thursday, April 24, 2014

Guidelines Shifting for the Federal Loan Modification Program

Foreclosure , Foreclosure Defense
Guidelines Shifting for the Federal Loan Modification Program
Updates to the Making Home Affordable Handbook for the federal Home Affordable Modification Program are available here and will be effective July 1, 2014!

Top things you need to know about HAMP:
  1. The Home Affordable Modification Program (HAMP) is a federal program designed to help homeowners obtain affordable loan modifications.
  2. HAMP Tier 1 only applies to loans of principal residences.
  3. A HAMP Tier 1 mortgage payment must reflect 31% of the homeowner's gross monthly income.
  4. HAMP Tier 2 may apply to loans of principal residences or to loans of rental properties.
  5. A HAMP Tier 2 mortgage payment must be within the range of 25% to 42% of the homeowner's gross monthly income.
  6. A HAMP Tier 2 mortgage payment must represent a reduction of at least 10% of the original mortgage payment amount. 
However, Supplemental Directive 14-02 to the Making Home Affordable Handbook is drastically changing the requirements under HAMP Tier 2 to make it easier than ever to get a loan modification on a non-GSE rental property!

In Section 6.3.3 of Chapter II of the MHA Handbook, the post-modification principal and interest payment under HAMP Tier 2 must be at least ten percent less than the pre-modification principal and interest payment. To clarify, if the original monthly principal and interest mortgage payment is $3,000, then the modified monthly principal and interest mortgage payment under HAMP Tier 2 must be $2,700 or less according to the ten percent reduction rule. Under this Supplemental Directive, however, this required percentage is totally erased. Now, it is only required that the post-modification principal and interest payment be less than the pre-modification principal and interest payment, thus expanding the amount of homeowners eligible for HAMP Tier 2. In the past, many homeowners were ineligible because servicers could not reduce the principal and interest amount by the required percentage due to the default amount, monthly real estate taxes, property value, and other similar factors. Without a required percentage, servicers will have a much easier time reducing the post-modification principal and interest payment for more homeowners across the country.

However, it should be noted that servicers may require a minimum reduction as long as that reduction is not greater than ten percent. Servicers must include this minimum reduction in their written policy if they choose to do so.

Another important clarification is the modification of loans prior to the loss of good standing. If a homeowner would like to modify an already HAMP-Tier 1-modified loan and is not in default on that loan, he or she may be eligible for HAMP Tier 2 if it has been more than five years since the HAMP Tier 1 modification. Once a homeowner accepts a HAMP Tier 1 loan modification, he or she cannot obtain another one in the future if that loan goes into default again. HAMP Tier 2, however, would still be available to this homeowner as a loan modification option (even if the property is a primary residence) as long as it has been more than five years since the original HAMP Tier 1 modification date. Since the Home Affordable Modification Program is the federal program to help homeowners cure their default, it always has priority over Lender in-house modifications.

Also included in this Supplemental Directive are updated guidelines regarding post-modification counseling, assistance for homeowners with limited English proficiency, and notice of interest rate step-ups. Although these guidelines are important as well, it is crucial that real estate agents focus on the new HAMP Tier 2 guidelines, especially if their clients own rental properties that are in risk of default or are currently in default. The more knowledgeable you are able these guidelines, the more your clients will trust you in other aspects of real estate.

Again, these updated guidelines will be effective July 1, 2014, and it is important that you understand and prepare for these changes. 
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Friday, April 18, 2014

Brand New Fair Housing CE Course Offered in Southampton

Fair Housing , Hamptons CE Class
Brand New Fair Housing CE Course Offered in Southampton


Property Manager Liability: 

Requirements, Responsibilities and Fair Housing

Maximize your client's investment while minimizing your exposure to great liability. Be cautious, property management is a serious business that has many liability landmines for the weary. Do not just dabble in property management. Do not just help out a landlord brokerage client in dealing with their tenants. Learn why the Department of State considers property management to be a licensed activity in this State. Understand how to mitigate exposure to license law liability, premises liability, and fair housing liability. Get real life examples of what can go wrong. Most importantly, learn what must go into your Property Management Agreement and why a top property manager should get paid.

Credits: 3.0 CE Hours **Satisfies DOS Mandatory Fair Housing Requirement

Date: May 7th, 2014 in Southampton



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Tuesday, April 08, 2014

Fredrik’s Fiduciary Duty – Million Dollar Listing New York

Agency Disclosure , Fredrik Eklund
Fredrik’s Fiduciary Duty – Million Dollar Listing New York
Fredrik Eklund: Photo http://www.bravotv.com/


Spoiler Alert: The below is a legal analysis of Fredrik Eklund's role in the April 2, 2014 Season 3, Episode 1 of Million Dollar Listing New York.

The premier of this season of Million Dollar Listing New York, The City Will Eat You Alive, places Douglas Elliman's Fredrik Eklund, in an ethical quandary and he comes out looking as professional as ever while making the deal for his client and getting a commission along the way.

In the episode, "Fredrik lands his dream listing, only to find out that the seller may be his worst nightmare". The Seller is a micromanager; sound familiar? He knows what he wants, $9.5M, and he makes it clear that he doesn't want to be bothered for anything less. However, Fredrik got an offer of $8M.

What should he do?

As a Licensed Real Estate Salesperson in the State of New York, an agent can have one of five types of agency with differing corresponding Fiduciary Duties dependent on the applicable agency type, to wit:


  1. Seller's Agent
  2. Buyer's Agent
  3. Dual Agent
  4. Dual Agent with Designated Sales Agent
  5. Broker's Agent


An agency relationship means the duties of a licensed individual in representing the interests of its principal in this context. Here, Fredrik was clearly a Seller's Agent, as his interests were aligned with the Seller; he was trying to get the Seller the most possible money in the transaction. In fact, the Agency Disclosure Form in the State of New York, states as to a Seller's Agent, the following: "A seller's agent does this by securing a buyer for the seller's home at a price and on terms acceptable to the seller". Conversely in the situation displayed in the episode, where Fredrik was receiving the $8M offer at the restaurant, Fredrik was meeting with a Buyer's Agent who had previously viewed the property at a Broker's Open House. The Buyer's Agent was clearly aligned with the Buyer's interests, offering a significantly lower number than the Ask. In fact, the Agency Disclosure Form in the State of New York, states as to a Buyer's Agent, the following: "The buyer's agent does this by negotiating the purchase of a home at a price and on terms acceptable to the buyer". As a result, in the episode, the Buyer's Agent owed his Fiduciary Duties to the Buyer and Fredrik, the Seller's Agent, owed his Fiduciary Duties to the Seller.

To clarify, a Buyer's Agent and a Seller's Agent cannot work at the same brokerage company by operation of New York State Law. Instead, where two agents at the same company work an In-House Deal, representing the interests of different parties to the transaction, that type of agency is called a Dual Agent with Designated Sales Agent in New York State. However, where an agent represents the interest of the Seller and a different agent represents the interest of the Buyer there are two possible types of agency that can apply, with the dispositive factor as to the appropriate agency being whether the opposing agents work at the same brokerage company. If the agents work at the same brokerage company, the agency is called a Dual Agent with Designated Sales Agent. If the agents work at different brokerage companies, one agent would be the Seller's Agent and one agent would be the Buyer's Agent, which is the situation Fredrik was engaged in during this episode.

In a Dual Agent with Designated Sales Agent situation the agents have compromised Fiduciary Duties because they both report to the same supervisor. In fact, the New York State Agency Disclosure Form states, as to this conflict, the following: "The designated sales agent must explain that like the dual agent under whose supervision they function, they cannot provide undivided loyalty". Yet, Fredrik was a Seller's Agent, and as such, had the following Fiduciary Duties to his client, the Seller, including: (1) Confidentiality; (2) Obedience; (3) Loyalty; (4) Accountability; (5) Disclosure; and (6) Reasonable Care.

Which Fiduciary Duties were at play in the scenario faced by Fredrik when he received an $8M offer while his client didn't want to hear about anything below $9.5M?

Fredrik had two competing Fiduciary Duties in this scenario, one to be obedient to his Client's instructions and one to give full disclosure to his Client. So, on the one hand Fredrik had to listen to his client's direction to not bother him absent a full Ask offer, but on the other hand, Fredrik lacked the authority to reject the $8M offer without his Client's authority, which first required him to fully disclose the offer to his Client.

So what happened?

Fredrik chose right and advised his client of the offer in the face of knowing all the while that he was going to be lambasted for making the call. To know that Fredrik's decision was correct an agent only needs to do a Cost / Benefit Analysis of the choices. The worst case scenario in telling your client that they received an offer below the Ask is that they are unhappy and give you grief about wasting their time. However, the worst case scenario in not disclosing an offer to your Client is that the Client claims that you breached your Fiduciary Duties and makes a complaint to the Department of State charging you with a License Law Violation. In fact, the Department of State has previously suspended a real estate agent's license for a period of six months for failing to transmit an offer and also failing to provide an agency disclosure form in a matter called Lemcke v. Department of State. So, it seems like a rather simple choice for a real estate agent faced with this predicament.

In Million Dollar Listing the choice was not only the safest, but the best for the agent and the Client as well. You see, by making the call and engaging his principal, the Seller, Fredrik initiated a dialogue that resulted in a deal at $8.8M. A win for the Seller, Buyer and the agents involved.


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Wednesday, April 02, 2014

Title Insurance Reform in NYS Budget

Legal Updates , Title Closer
Title Insurance Reform in NYS Budget
Accordingly to a Press Release entitled, Governor Cuomo and Legislative Leaders Announce Passage of 2014-15 Budget, NYS now has significant changes to our title insurance industry.

Title insurance insures against defects in title to real property and is required if a purchaser obtains an institutional mortgage as part of their purchase of the real property. Some private lenders do not require title insurance. However, its always a good idea to not only get title insurance in the form of a lender's policy, but also to obtain a fee or homeowner's policy as well because purchasing property is quite expensive in this State and insuring that you own what you thought you bought is a great idea.

According to the Press Release, the Title Insurance Reform coming to NYS is as follows:

The Budget includes measures to provide stronger oversight for the title insurance industry, which will help better protect consumers and lower costs for New York homeowners. The Budget provides the Department of Financial Services (DFS) with authority to issue licenses to title insurance agents for the first time, just as it licenses all other insurance agents and brokers. Licensing will require agents to meet qualification standards and undergo regular training. DFS will also have the authority to monitor abuse by agents and to revoke licenses accordingly, as well as help root out conflicts of interest that drive up costs for homeowners. Together with other measures including regulations DFS will soon issue on title insurance, these reforms are expected to result in a 20 percent reduction in title insurance premiums and closing costs for new home purchases and a more than 60 percent reduction in costs on refinancing transactions.

 The 2 keys in this reform is:

  1. Licensing requirements for title closers
  2. Reduced costs of title insurance
As the Department of Financial Services issues the applicable Regulations we will update this blog with more information. 

Stay tuned. 
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Tuesday, April 01, 2014

April is Fair Housing Month

Fair Housing ,
April is Fair Housing Month
Today is the beginning of Fair Housing Month. The Fair Housing Act was enacted on April 11, 1968, making it unlawful to discriminate against any person based on race, color, national origin, religion, sex, familial status, or handicap in the sale or rental of a dwelling. Although brokers must comply with the Fair Housing Act every day, it is in the month of April that the Fair Housing Act should be commemorated. Print out the Fair Housing Declaration and hand it out to your fellow agents. Reread the Fair Housing Act, and do not forget to sign up and attend our Lieb School class on the Fair Housing Act on September 18, 2014 or December 10, 2014. 
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Monday, March 31, 2014

DECISION: The Alleged Effects of Mold on Human Health

Legal Updates , Mold is Money
DECISION: The Alleged Effects of Mold on Human Health
The alleged effects of mold on human health has been addressed by New York’s highest court, the Court of Appeals, on March 27, 2014 in Cornell v. 360 W. 51st St. Realty, LLC.

The facts of the case were that Ms. Cornell resided in an apartment from 1997 to 2003, after which time she vacated the property due to alleged health issues allegedly caused by mold and dampness in her apartment. She claimed to be dizzy, asthmatic and congested and was unable to function or sleep properly while in the apartment.

51st Street Corporation opposed her claim, arguing that Cornell was unable to prove a cause-effect relationship between mold and disease. Relying on a clinical immunologist as an expert, 51st Street Corporation demonstrated that the scientific community generally accepts that mold can cause disease through specific channels; however, none of Cornell’s symptoms can be directly linked to mold exposure.

In dismissing the complaint, the Court held: “Studies that show an association between a damp and moldy indoor environment and the medical conditions that [Plaintiff’s Expert] attributes to Cornell’s exposure to mold…do not establish that the relevant scientific community generally accepts that molds cause these adverse health effects.”

Brokers, keep this case in mind as you work with clients who have fears about the effects of mold on human health when they refuse to enter a property claiming to smell mildew.

As the Court explained, mold exposure is not established by the scientific community to create toxic effects, except for cases of ingestion. It only is shown to cause an immune response in allergic individuals. 
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