We would like to congratulate our Managing Attorney, Andrew M. Lieb, on having been re-appointed as the Co-Chair of the Real Property Committee to the Suffolk County Bar Association for the 2013 - 2014 term.
Thursday, December 19, 2013
Lauren and Andrew Lieb are thrilled to introduce their son, Spencer Nate Lieb.
Born December 7th, 2013
Weighing 6 Pounds 14 Ounces
Measuring 20 Inches
Thursday, December 12, 2013
A whole new
world of getting a mortgage is coming in the beginning of 2014. You should get
familiar now!!!
To remind
you, in the years before 2008, financial institutions were subject to little
regulation in the United States. Many lenders did not even bother to verify
income or debt before handing over adjustable-rate mortgages
(ARMs) to consumers who could not afford them. High risk lending was the norm
and mortgage fraud
was rampant. These practices caused the subprime mortgage
crisis and the worst recession that the
country has experienced since the 1930s. Thousands of homes were foreclosed on
and over one
hundred mortgage lenders went bankrupt as more and more people could no
longer afford their monthly mortgage payments.
As a result,
The Consumer Financial Protection
Bureau is issuing a final
rule that prohibits high risk lending and implements the Truth in
Lending Act and sections 1411, 1412, and 1414 of the Dodd-Frank Act.
This rule
will take effect on January 10, 2014, and will require mortgage lenders to
verify consumers’ income and debt. Prepayment
penalties that punish borrowers if they sell or refinance their home within
a certain time frame are now generally prohibited. Qualified mortgages,
which are less likely to end up in default, are defined in great detail and cannot
have terms longer than 30 years or fees exceeding 3% of the total loan
amount. Lender are also encouraged to
refinance adjustable-rate
mortgages (ARMs) and must maintain documentation of compliance for three
years after the loan is given to the consumer.
To remain in
the real estate game, you must understand these rules and what a qualified mortgage is
as that will drive the industry. Please read the rule
for yourself!
The
Mortgage Forgiveness Debt Relief Act of 2007 has provided relief to thousands
of borrowers who have completed short sales or obtained loan modifications with
mortgage principal reductions. Before this law was enacted, any forgiven mortgage
debt was taxable by the government. For example, if a lender reduced a
borrower’s principal balance by $100,000.00, then the borrower would have to
report that forgiven debt as ordinary income and pay taxes on it. This was, of course, impractical and
unreasonable for borrowers who were already experiencing financial hardship and
were relying on modifications or short sales to save them from foreclosure.
Most borrowers could not afford their tax bills and were stuck in the same
situation as they were in before they had requested help from their lenders.
Under The
Mortgage Forgiveness Debt Relief Act of 2007, borrowers do not have to pay
taxes on cancelled mortgage debt as a result of a modification or foreclosure
of their primary residence. This act was originally supposed to end at the end
of 2012, but it was granted an extension
through 2013 on the third day of the new year.
An extension
may be granted through 2014, but it is unlikely. Both H.R. 2788 and H.R. 2994 are
bills that will extend The
Mortgage Forgiveness Debt Relief Act for at least another year, but they
were each referred to committee over the summer and have received no attention
since. There are 44
cosponsors for H.R. 2994, but it is already now the middle of December and
time is running out. In order for this bill to be enacted, it still needs to
pass the House and Senate and it must get signed by the President before
December 31, 2013. It is improbable that an extension will be granted, but not
impossible; especially with the economy rebounding and many forgetting the
plight of those left behind. It’s important to not forget these individuals
that still need relief and who have often spent years trying to get a
modification or a short sale approved only to now be taxed when they finally
get the relief that they have hoped for.
So for them,
please tell your local representative how important it is that these Bills are
passed and The Mortgage Forgiveness Debt Relief Act of 2007 is extended for
another year.
Thank you to Lieb at Law's Assistant Case Manager, Jessica Vogele, for sharing this valuable information.
Tuesday, November 26, 2013
Last week, the Court of Appeals, NY's highest court, ruled that
"Local Law 43, a hotel room occupancy tax applicable to online travel
companies", is constitutional.
At issue before the Court was the legality of the City's
"authority to tax the fees they collect from their customers" in Expedia
v. City of NY Dept. of Finance where this fee represents an amount, which
is larger than the amount actually paid the hotel for the actual occupancy of
the room.
So the question before the Court was whether the brokerage fee, on
hotel occupancy, was taxable?
This decision is most interesting to real
estate professionals because they always wonder why there are rules for
transient (short-term) rentals of housing. As they can see from this decision,
there are rules for establishments that offer transient housing such as hotels,
motels & inns in the form of the imposition of a tax, among other rules.
Further there are rules for companies that "broker" those deals
whereas those "brokers" have to pay a tax on their commission, among
other rules. Aren’t these websites, called “room remarketers” in the applicable
tax, analogous to real estate brokerage companies for landlord / tenant rentals
that aren’t transient? At the least, aren’t they analogous to Airbnb in the
transient setting?
In opposition, the online travel
companies argued that the City was taxing “a service fee under the guise of a
tax on hotel rent” and therefore the tax was improper. The Court explained that
the online travel companies were incorrect. The Court stated: “[u]nder the
statute, the City may tax a ‘rent or charge,’ and it may collect the tax from a
hotel ‘owner . . . or . . . person entitled to be paid the rent or charge’".
Further, “the City may tax any service fee that is a ‘condition of occupancy.’”
Aren’t brokerage fees on landlord / tenant a condition of occupancy? Maybe, but maybe not. Doesn’t a condition mean that its failure prevents the result? Can a broker prevent the result? No, therein is the difference between brokerage companies and travel sites. Real estate brokers often are cut out of deals and cannot prevent occupancy in order to get paid, but instead have a claim for commission that is separate from occupancy. In fact, no Lis Pendens is available to brokers and a mechanic’s lien is only available for a lease with a term of more than 3 years for non-residential property.
However, doesn’t Airbnb do just the same as Expedia? So, will companies like Expedia try to level the playing field next by lobbying that this tax is imposed on Airbnb as well? Right now, the cost of doing business for Airbnb just got cheaper and they now have a strategic financial advantage in the City of New York. What happens next is tantalizing.
