License law doesn't equal company policy

While litigating a brokerage commission dispute this afternoon, it dawned on me that real estate agents just don't know their company policy on many issues that they face in their profession. In fact, when they do know their company policy they fight it saying its not what their license permits.

To be clear, company policy is not the same thing as license law, nor is it Department of State regulations and it certainly isn't ethics opinions. What company policy is instead is your company's rules that are much more restrictive than any of the proceeding categories. You see companies have to manage on the macro and try to minimize risks so they make internal rules that narrow the line of legality to attempt to avoid the line of illegality as much as possible.

So imagine license law, regulations and ethics opinions constituting a large circle and company policy as a smaller circle therein of what you can and cannot do as an aspect of your job. All big companies have policies and most agent's independent contractor agreement incorporates these polices by reference, so agents must know and constantly be updated on their policies.

Go read your manuals.

Lis Pendens for a Brokerage Commission? Not So Fast

A recent article in the Nassau Lawyer argued for the use of the lis pendens to enforce a broker’s right to a commission on the sale of real property.  Before we get our hopes up and start filing notices of pendency on every unpaid commission, let’s take a closer look at the law on this issue.

The lis pendens is a document recorded with the county clerk which warns potential purchasers of real property that litigation is pending which may affect title.  The lis pendens creates constructive notice of the pending lawsuit and renders the property unmarketable.  While this might sound like a great way to enforce your rights to a commission, the lis pendens is available only for actions that affect title, possession, use or enjoyment of real property.  A claim for money due under a contract meets none of these requirements, and it has been consistently held that the lis pendens is not an appropriate remedy. 

One court expressed its utter exasperation that brokers who hold themselves out as real estate professionals could be so ignorant of this “basic tenet of real estate law.” In the Second Department, which includes all of Long Island, it is well settled that this remedy does not apply to brokerage commissions.  See Homespring, LLC v. Lee, 2008 NY Slip Op 7618.

So what is the proper way to enforce your right to a commission?  In residential transactions, the proper remedy is Real Property Law 294-b, which gives a broker the right to record an affidavit of entitlement to a commission with the county clerk who will hold the amount of the commission until the broker’s rights can be determined by a court.  For non-residential transactions, a narrow exception exists which creates a lien when the commission derives from the broker’s negotiation of a lease longer than three years.  Lien Law § 2 (4), 3.

Can They Make That Rule? Co-Op and Condo Boards’ Authority to Promulgate House Rules

Cooperative and Condominium Boards have broad authority when it comes to making House Rules governing the activity within the community.  This authority derives from the governing documents of the cooperative or condominium, such as the by-laws.  House Rules may cover a wide range of topics from noise and odor levels, to the keeping of pets, to the conduct of owners and guests.

Unless there is a specific limitation on the board’s authority to make rules, such as requiring the rules to be “reasonable,” boards are generally given a high degree of deference in the rules they create.  If the board is acting in good faith, courts will tend not to second-guess them. Furthermore, these rules are usually binding without the consent or approval of the owners.

There is, however, one strong limitation on the authority of boards to make House Rules.  The board cannot attempt to modify the contractual rights of apartment owners through the promulgation of rules.  House rules cannot change, amend, or contradict what is contained in the by-laws, proprietary lease of a co-op, or condominium declaration. 

So if you find yourself asking, “Can they make that rule?” The answer is they probably can. 

Appraisal cost / quality prevents deficiency judgments in foreclosure

No the banks are generally not so nice about giving away their money; so one would wonder why they don't always pursue a deficiency judgment after a foreclosure auction.

The reason is that the bank has the primary burden of establishing the fair market value of the property at or about the time of the foreclosure auction pursuant to the RPAPL's section 1371 in order to get a deficiency judgment.

To accomplish this task the bank must hire an appraiser and, still more, a quality appraiser who produces an appraisal report that has evidence beyond a conclusory affidavit.

In such, the appraisal should go into the different appraisal techniques available and explain why a chosen technique is appropriate. Therefore, just getting a comparison analysis does not satisfy the burden so says the Supreme Court in Brooklyn in a recent decision, Flushing Savings Bank FSB v. Bitar.

So there you have it, its not necessarily kindness, but instead a difficult legal burden that motivates a decision not to pursue the deficiency judgment.

Estate Planning - Keep the Home Again

The new expanded definition of "estate", which included jointly held property, retained life estates and interests in trusts for Medicaid recovery purposes was repealed on March 27th, 2012. Also, spousal refusal has been maintained.

These two (2) events are key to individuals maintaining real property while receiving Medicaid benefits. Nonetheless, careful planning is required and all are still advised to find a competent Medicaid planning attorney to facilitate their plan.

Now recovery for Medicaid purposes is again limited to those assets that would have passed by probate (will or intestacy), not testamentary substitutes like jointly owned property as was anticipated this year.

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