LIEB BLOG

Legal Analysts

Wednesday, May 09, 2012

Home Sale Can't Stop Divorce

Home Sale Can't Stop Divorce

A most fascinating case was just decided in Manhattan Supreme Court where the parties had agreed (stipulated) that until their residence was sold "neither party shall file any papers to obtain a judgment of divorce". 

So the question before the Court was: "whether the parties can condition their divorce upon the mercurial nature of the New York City real estate market."

The Court would have none of that and deemed this clause unenforceable because the Court felt that public policy was to make a divorce less burdensome and to remove as many roadblocks to its conclusion as possible. 

What is interesting from this case is how people utilize economic coercion as negotiation leverage in a divorce. Had the clause remained, the parties would have either had to accept a lower sales price or remained married. This would have allowed the party less motivated to sell to get concessions from the other party in other aspects of the divorce in order to permit the sale. 

For real estate professionals, you now know that in Manhattan a divorce should not block a sale of the property as the Court doesn't see the sale of real estate as a reason to stop a divorce. Instead, the divorce should go forward and as the Court says: " If the parties are unable to accomplish the sale themselves, then the court can force a sale (CPLR § 5103), appoint a receiver (CPLR § 5106), or order a conveyance by a sheriff (CPLR § 5107)"

To read the case in full, click here. 
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Great class last night - Property Management

Great class last night - Property Management
I just want to send a special thank you to the Mattituck-Laurel Historical Society for donating their fabulous school house for our continuing education course last evening. It was an experience that I will remember for a lifetime. What a thrill to each in an 1840s working school. I only wish that they had left the rulers to smack the naughty students with.

If you don't know about the Society, click here to learn more. While I loved the experience, the Society needs your help to stay erect and safe. In fact, we discussed the need for a walkway from the parking lot to the school in order to make visiting the site safer. Please do your part and donate to this worthy cause by becoming a member. Just click on this form to join.
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Friday, May 04, 2012

Cooperative House Rules Illustrated

Cooperative House Rules Illustrated

A case decided yesterday, 5/3/12, perfectly illustrates the power of cooperative boards. The case addresses whether the board, under the Business Judgment Rule, may create a house rule that restricts subletting. In the situation in the case the restriction imposed was as follows:

 "no [l]essee shall be permitted to sublet the whole or any part of an apartment or renew or extend any previously authorized sublease for more than two years during any four consecutive year period unless consent thereto has first been duly authorized by a resolution of the Directors or . . . by [l]essees owning at least 66⅔% of the then issued and outstanding shares of the Corporation."

The Appellate Court held that the board did have the power to enact such a rule under the Business Judgment Rule. Even going further, the Court rejected a prior decision to the contrary stating cooperative boards have “the authority to freely adopt a new policy in the legitimate interest of the cooperative”.

To read the decision, click here. 
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Thursday, May 03, 2012

Co-Op House Rules & the Proprietary Lease

Co-Op House Rules & the Proprietary Lease
When purchasing a cooperative apartment you should always read the house rules as they set the standards for living in this environment. For example, the house rules may require that a percentage of an apartment be covered with carpeting to prevent noise or a house rule may not permit swimming in the pool after a certain hour or the rules may contain a no pet policy. Nonetheless, house rules should not be read in a vacuum and its quite important for prospective purchasers to not only study the house rules, but also the proprietary lease, which sets the outer limits of a Board's authority to set the rules. So, when a rule exists in the house rules that is contrary to the proprietary lease, the lease typically holds the day.

Yet, if you are planning to move into a building where the proprietary lease authorizes the Board to set rules for something like carpeting and the house rules do in fact set such a rule, you will be blown away to know that a Board needn't enforce this rule and no one can force them to do so. Why is this you may ask? The answer is called the Business Judgment Rule whereby a Board acting in good faith is shielded from suit when making decisions. So a rule is only enforceable rule when the Board elects to enforce it.

Nonetheless, Boards should act reasonably and their rules are much more likely to be enforced when the rule not only is embodied in a house rule, but also exists in a proprietary lease. Moreover, Boards should uniformly apply their rules or be mindful of both Fair Housing Act violations for discrimination or claims of waiver when they do choose to enforce the rule randomly.

So, perspective purchasers should review the rules and proprietary lease prior to purchasing, but realize that its also important to get to know the members of the Board because their personalities may dictate your living environment.
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Know Your Terms

Know Your Terms

A recent legal malpractice case finds a client suing its former attorneys for failure to include terms in a lease addressing their landlord’s ongoing construction.  As a result of this construction, the client was unable to occupy its office space for nearly four years and claims to have suffered lost profits and consequential damages amounting to millions of dollars. 

Attorneys must be aware of potentially disruptive issues like construction when they negotiate a lease and be sure to address them all in the contract. These attorneys failed to include a single lease term, and now they find themselves defending a multi-million dollar lawsuit arising from a simple commercial transaction. 

There is a lesson here for non-attorneys as well.  Oftentimes real estate brokers will rely on form contracts or draft provisions themselves.  Don’t.  A missing or improperly drafted term in an agreement can have significant financial consequences.  If even skilled attorneys, trained to anticipate litigation around every corner, may miss these issues, how confident are you that a Blumberg form will cover them?
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