When it's Family, Choose Your Tenants Wisely

Think before you let a family member stay at a house you rely on for rental income. Read Andrew Lieb's latest article featured in Dan's Papers.

http://danspapers.com/2014/07/when-its-family-choose-your-tenants-wisely/

Real Estate Broker Record Retention - Proposed Regulatory Change

Did you know that there are laws about keeping real estate brokerage records?

Currently, the applicable law reads:

§175.23 Records of transactions to be maintained 

(a) Each licensed broker shall keep and maintain for a period of three years, records of each transaction effected through his office concerning the sale or mortgage of one- to four-family dwellings. Such

records shall contain the names and addresses of the seller, the buyer, mortgagee, if any, the purchase price and resale price, if any, amount of deposit paid on contract, amount of commission paid to broker or gross 

profit realized by the broker if purchased by him for resale, expenses of procuring the mortgage loan, if any, the net commission or net profit realized by the broker showing the disposition of all payments made by 

the broker. In lieu thereof each broker shall keep and maintain, in connection with each such transaction a copy of (1) contract of sale, (2) commission agreement, (3) closing statement, (4) statement showing 

disposition of proceeds of mortgage loan.  

(b) Each licensed broker engaged in the business of soliciting and granting mortgage loans to purchasers of one to four family dwellings shall keep and maintain for a period of three years, a record of the name 

of the applicant, the amount of the mortgage loan, the closing statement with the disposition of the mortgage proceeds, a copy of the verification of employment and financial status of the applicant, a copy of the inspection and compliance report with the Baker Law requirements of FHA with the name of the inspector. Such records shall be available to the Department of State at all times upon request.

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However, much of the currently applicable law makes no sense as often a broker does not have a contract of sale in his / her possession and often the broker keeps all records electronically. 

Now, there is a proposal to change the law to reflect reality and the new law would read as follows (underlines being additions to the law):

§175.23 Records of transactions to be maintained 
(a) Each licensed broker shall keep and maintain for a period of three years, paper and/or electronic records of each transaction effected through his or her office concerning the sale [or mortgage] of one- to four-family dwellings. In some transactions, the broker may not be provided a copy of the document required.  In such instances, the broker will not be found to have violated this regulation if said document is not kept and maintained. Records to be kept and maintained shall contain:

 (1) the names and addresses of the seller[,] and the buyer, [mortgagee, if any,] (2) the broker prepared purchase contract or binder, or if the purchase contract is not prepared by the broker, then the purchase price [and resale price, if any,] and the amount of deposit (if collected by broker) [paid on contract], (3) the amount of commission paid to broker, (4) [or g]the gross profit realized by the broker if purchased by him or her for resale, [expenses of procuring the mortgage loan, if any, the net commission or net profit realized by the broker showing the disposition of all payments made by the broker. In lieu thereof each broker shall keep and maintain, in connection with each such transaction a copy of (1) contract of sale, (2) commission agreement, (3) closing statement, (4) statement showing disposition of proceeds of mortgage loan.] (5) any document required under Article 12-A of the Real Property Law and (6) the listing agreement or commission agreement or buyer-broker agreement.  

[(b) Each licensed broker engaged in the business of soliciting and granting mortgage loans to purchasers of one to four family dwellings shall keep and maintain for a period of three years, a record of the name of the applicant, the amount of the mortgage loan, the closing statement with the disposition of the mortgage proceeds, a copy of the verification of employment and financial status of the applicant, a copy of the inspection and compliance report with the Baker Law requirements of FHA with the name of the inspector. Such records shall be available to the Department of State at all times upon request.]

Notate the addition of the sentence "any document required under Article 12-A of the Real Property Law" at the end of the second paragraph. This is a catchall that includes such items as an Agency Disclosure Form and any other document later added to the law.

So, keep an eye on the DOS's Regulatory Activity page to determine when this Recent Proposal will become a Recent Adoption and hence, applicable law, or just keep an eye on the Lieb Blog for simple updates when real estate events happen. 

2014 College Graduates - Take a Year Off Before Law School

Join a thriving law firm that leads our profession through advocacy and advice supported by cutting-edge technology and know-how. This exciting opportunity is for a 2014 college graduate looking for valuable office and legal experience before heading to law school. You will be exposed to real estate litigation, learn the court system and assist in cases from real estate brokerage through landlord / tenant, premises liability, personal injury and more. You will manage the firm's foreclosure defense practice by pursuing loss mitigation alternatives for our clients and by preparing attorneys for upcoming court appearances. The foundation and knowledge obtained in this position will not only get you ready for law school, but will give you an essential competitive edge before starting your legal career.

Those that succeed in this position can earn a Law Clerk position throughout Law School and potential Associate Attorney position once licensed.

Requirements:  Bachelor's Degree, GPA of 3.8 or higher, Can Do Attitude, Self-Starter, Detail-Oriented

This is a full time position out of our Center Moriches Office.

To apply: Email cover letter, resume and writing sample to careers@liebatlaw.com 

Copyright Infringement Risks When Building Custom Homes

Sometimes it's tempting to purchase a plot of land and build a custom home. However, understanding the risks associated can help you avoid costly mistakes. One risk particularly is called copyright infringement.  Brokers, keep this in mind as you work with clients who are buying to retrofit or develop real estate. 

Copyright infringement on architectural designs has recently been addressed by the Second Circuit United States Court of Appeals on June 5, 2014 in the case James E. Zalewski, Draftics, LTD. v. Cicero Builder Dev., Inc., et al.

Mr. Zalewski is an architect who licensed several builders to use his architectural designs. He claims that these builders infringed on his copyright by customizing his designs and building homes based on his designs without his consent.

Mr. Zalewski points to the vast similarities between his designs and the Defendants’ designs, arguing that these similarities prove that the Defendants knowingly took from his work and infringed on his copyright.

However, the Court explains that copying in itself is not grounds for copyright infringement. Mr. Zalewski must not only prove that his work is copyrighted and that it has been copied, but that it was wrongfully copied as well. The Court held in this case that the Defendants’ designs, although similar, did not wrongfully copy from Mr. Zalewski’s original designs. The designs were for a colonial home and colonial homes can only be arranged in so many ways.

Ruling in favor of the Defendant, Circuit Judge Wesley claimed, “Plaintiff can get no credit for putting a closet in every bedroom, a fireplace in the middle of an exterior wall, and kitchen counters against the kitchen walls. Furthermore, the overall footprint of the house and the size of the rooms are ‘design parameters’ dictated by consumer preferences and the lot the house will occupy, not the architect.”

Based upon this ruling, a builder can use general designs without having to hire an architect.

Nonetheless, builders should always consult with an attorney prior to using a design to ensure that no copyright infringement is occurring.

What You Need to Know About the HAMP Loan Modification Process

Before you apply for a loan modification, it is wise to understand and have realistic expectations about the process. The Home Affordable Modification Program, now in its fifth year, is the federal modification program that has, to date, successfully provided for over 1.3 million permanent loan modifications nationwide. Many homeowners, however, do not know the steps in the HAMP modification process and feel frustrated or upset if they receive a modification with terms that are not what they expected. What homeowners must realize is that a HAMP Tier 1 loan modification requires a 31% debt-to-income ratio and must be reviewed in a ‘waterfall’ process, meaning that the Lender must modify the loan by specific means in a specific order.

The waterfall process is as follows:

1. Capitalization: When the Lender adds unpaid interest and unpaid tax and insurance payments to the principal balance. Late fees may not be capitalized for HAMP modifications.

2. Interest rate reduction: When the Lender reduces the original interest rate of the loan. Oftentimes, the Lender reduces the interest rate to 2% for the first five years and then gradually increases the interest rate on the loan every year until it reaches the current market value.

3. Term extension: When the Lender extends the life of the loan. The cap on a term extension for HAMP is 480 months or 40 years.

4. Principal forbearance: When the Lender forbears a portion of the principal balance. This portion of the principal balance becomes a “balloon payment,” which must be paid in full at the loan’s maturity or when there is a transfer of the property. It does not accrue interest.

If the debt-to-income ratio is not 31% after the Lender capitalizes the loan, then the Lender must then try to reduce the interest rate and so on until it achieves the desired ratio. If the ratio is still not 31% after the Lender has gone through the entire waterfall process, then the homeowner will be deemed ineligible for HAMP Tier 1 and then will be reviewed for other loan modifications, if available.

New Foreclosure Prevention Program launched in New York State

Yesterday, the New York Attorney General, Eric Schneiderman, announced the New York State Mortgage Assistance Program to help homeowners avoid foreclosure. 

Long Island, with its beautiful, expensive real estate, was devastated by the economic crisis in 2008 and is still struggling to recover six years later. It currently has the highest rate of defaulted mortgage loans and some of the highest foreclosure rates in New York State. In order to speed up the recovery process, Mr. Schneiderman launched this program yesterday to help struggling homeowners borrow up to $40,000 to stave off foreclosure. This program will become effective in September and will be available to Long Island before the rest of New York State, using the money from the National Mortgage Settlement of 2013 to fund these loans.  Many homeowners have been denied for loan modifications in the past because they were unable to pay off their arrears or because there were liens against their property. These loans, which are interest-free and not due until the mortgage is paid off in full, will help struggling homeowners pay off the obstacles to their loan modification approval and allow them to keep their homes.