You may have read in the news about attorneys who stole their clients’ money, lost their license and went to jail. Yes, managing escrow money gets attorneys in trouble the most often. However, there are many other red flags that you should watch out for when selecting legal representation for your real estate transaction. Here is a list of the top five real estate attorney no-no’s that go beyond theft, and which every client should be mindful of when seeking representation.
Friday, September 25, 2015
Tuesday, September 15, 2015
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Estate Deals
Instructor: Andrew Lieb, Esq., MPH
Credits: 3
Price: Free
Sponsors: Behind the Hedges, Citizens Bank, Douglas Elliman
Course Summary: Estate sales offer a unique opportunity to help the grieving by doing your job professionally. Starting with speaking the language of the Surrogate’s Court, this course will empower the real estate broker / salesperson to assist the Executor / Administrator in liquidating real property in order to satisfy debts of the estate. Additionally, disputes between beneficiaries and with the fiduciary, sales forced by the court, and foreclosures incident to the probate process will be discussed. Lastly, the student will be exposed to the overlay of brokerage and executor’s commissions where an Executor / Administrator is expressly exempt from the Real Estate License Law for Brokerage.
Register Online Here
Instructor: Andrew Lieb, Esq., MPH
Credits: 3
Price: Free
Sponsors: Behind the Hedges, Citizens Bank, Douglas Elliman
Course Summary: Estate sales offer a unique opportunity to help the grieving by doing your job professionally. Starting with speaking the language of the Surrogate’s Court, this course will empower the real estate broker / salesperson to assist the Executor / Administrator in liquidating real property in order to satisfy debts of the estate. Additionally, disputes between beneficiaries and with the fiduciary, sales forced by the court, and foreclosures incident to the probate process will be discussed. Lastly, the student will be exposed to the overlay of brokerage and executor’s commissions where an Executor / Administrator is expressly exempt from the Real Estate License Law for Brokerage.
Register Online Here
Monday, September 07, 2015
On 8/26/15 the NYS Board of Real Estate continued its mission of optimizing the regulation of real estate brokers in our state by holding its meeting in NYC, Buffalo and Albany. To remind real estate brokers and salespersons, the public is welcome at these meetings where the public can bring comments from the floor. Its encouraged that Lieb School students attend these meetings to have your voices heard.
"[T]he Board has general authority to promulgate rules and regulations affecting real estate brokers and salespersons in order to administer and effectuate the purposes of Article 12-A of the Real Property Law."
A complete video of the meeting is available on youtube.
In summary, the following was discussed:
"[T]he Board has general authority to promulgate rules and regulations affecting real estate brokers and salespersons in order to administer and effectuate the purposes of Article 12-A of the Real Property Law."
A complete video of the meeting is available on youtube.
In summary, the following was discussed:
- Enforcement:
- 5 new investigators are on the enforcement staff;
- Approximately 70% of DOS enforcement is related to real estate brokerage;
- The majority of enforcement has recently addressed client funds (a/k/a, escrow) - it was suggested that a brokerage creates a job of escrow accounts supervisor to minimize organizational confusion and it was suggested that such individual needn't be licensed in brokerage;
- Secondarily enforcement has mostly addressed brokers failing to immediately terminate their salespersons upon request by the salesperson;
- Enforcement contacts respondents often through the email address provided to DOS, so brokers need to check their email (not just physical mail);
- Curriculum:
- Changes to the broker's curriculum are in the works:
- Curriculum will maintain 45 hour requirement;
- Curriculum is expanding the topic of broker's operations to 16 hours, which includes license law and agency;
- The Real Estate License Law updates from 5/2015 address changes to part 19 NYCRR sections:
- 175.12 - key change of duplicate original to only require a copy (strangely the title stayed at "Delivering duplicate original of instrument")
- 175.20
- 175.24(a)
- 177.2
- 179.1
- 179.2(b)
- 179.3(a)
At the end of the meeting there was public comment addressing 19 NYCRR 177.2, which states, in pertinent part, as follows "[n]o real estate course of study seeking approval may be affiliated with or
controlled by a real estate broker, salesperson, firm or company or real estate franchise, or controlled by a subsidiary of any real estate broker or real estate franchise."
Specifically, it was alleged that online schools are giving referral fees to brokerage offices that recommend such schools on the brokerage's website. The Board suggested that a complaint be made to enforcement and/or an opinion letter be requested from the Department of State to clarify the applicable regulation to the alleged facts.
The next meeting will be scheduled in November or December 2015.
Tuesday, September 01, 2015
It may seem homeowners have a money tree at their house. It’s easy, just rent your house for the weekend and the dollars will shake into your bank account. Better yet, companies like Airbnb can facilitate the process and get landlords timely and secure payments, right? Making money is never so easy. Here are five risks of using Airbnb. In each, you need to decide if an Airbnb host is a residential property landlord or instead a hotel operator, in order to understand your exposure.
Read the full article by Andrew Lieb, Esq. here.
Read the full article by Andrew Lieb, Esq. here.
Monday, August 31, 2015
Landlords have an incredible number of issues to deal with, not the least of which is considering to whom they will open their doors as tenants. Landlords and their agents are restricted by civil rights laws from privately discriminating against prospective and current tenants. In fact, the seminal U.S. Supreme Court case of Reitman v. Mulkey expressly found that a private right to discriminate was unconstitutional. Yet, what does it mean for a landlord to discriminate? Here are the five ways a landlord can get sued under discrimination laws.
Read the full article written by Andrew Lieb, Esq. here.
Read the full article written by Andrew Lieb, Esq. here.
Thursday, August 27, 2015
Yesterday, Chris Matthews’ article “Real estate
agents may be colluding to rip you off” was published by Fortune while citing to a paper published by the National Bureau of Economic Research and
authored by Panle Jia
Barwick, Parag A. Pathak,
and Maisy Wong.
As an industry, we need to make sellers capable of gauging the quality of what they’re buying; to make informed decisions as to commission payments.
The article claims that “brokers who charge lower
commissions are punished in the marketplace” and that sellers are “uniquely
incapable to gauge the quality of what they’re buying”.
According to the authors of the cited article, Conflicts of Interest and the Realtor
Commission Puzzle, “[t]hese adverse outcomes reflect decreased willingness of buyers' agents to intermediate low commission properties (steering) rather than heterogeneous seller preferences or reduced effort of listing agents.”So, in English, it’s not that seller’s agents’ efforts are adversely affected by lower commissions, but instead, that buyer’s agents, who are generally compensated by seller’s agents, are less likely to bring buyers to properties where they are offered a lower percentage for procuring.
As an industry, we need to make sellers capable of gauging the quality of what they’re buying; to make informed decisions as to commission payments.
To accomplish this, brokers need to explain to sellers that
they offer a split of their commission to other brokerage companies in the area
(i.e., cooperative brokerage) in order to induce such other brokers to act as buyer’s
agents and/or broker’s agents in procuring their purchaser to buy the property
(i.e., this practice increases demand and consequently the price for real estate).
Seller’s agents need to explain that buyer’s agents and/or
broker’s agents are money driven and will steer their buyers to the properties
where they are compensated at a higher level (as stated in the study).
Consequently, the amount of the commission that is to be
paid to the cooperating brokers must be discussed when a seller’s agent initially
takes the listing and such percentage should be included within the brokerage
contract (i.e., exclusive right to sell agreement).
In Long Island, the local REALTOR© Board, LIBOR, permits the seller’s agent to
control the commission percentage offered to cooperating brokers in each
individual deal.
To illustrate, if a seller is paying a broker 6% one cannot
deduce that the cooperating broker, who procures, will always get 3% for their
efforts. Instead, the cooperating broker will get whatever percentage that is
listed on the cooperating brokerage listing (i.e., Stratus) agreement
by the seller’s agent (each region in New York has a different cooperating
brokerage agreement and therefore this blog’s suggestion does not hold true
everywhere).
As a result, sellers need to be educated that they have 5
points of negotiating commissions when hiring their real estate agent, as
follows:
- The commission percentage to pay the seller’s agent for merely listing the property and negotiating for the seller;
- The commission percentage to pay the seller’s agent if such agent individually lists and procures the purchaser (i.e., direct deal);
- The commission percentage to pay the seller’s agent if such agent lists, and the commission percentage to pay a colleague within the same brokerage if such colleague procures the buyer (i.e., in-house deal; this will be one total commission number for both the listing and procuring because the brokerage and not the salespersons is paid the commission);
- The commission percentage to pay the cooperating broker where the seller’s agent lists only, but another brokerage procures the buyer while such cooperating broker is negotiating for the interests of the seller (i.e., broker’s agent);
- The commission percentage to pay the cooperating broker where the seller’s agent lists only, but another brokerage procures the buyer while such cooperating broker is negotiating for the interests of the buyer (i.e., buyer’s agent)
The article’s title attacks an industry (“colluding to rip
you off”). Yet, this blogger theorizes that sellers care more about themselves
and getting the job done (i.e., selling) than fixing an industry. Without
commenting as to whether the authors have a point about collusion, its
submitted that simply having our brokerage industry inform and educate our buyers
of the statistical effects of their commission offerings will make meaningful
change. Let’s give our clients the tools to make smart choices. Let’s educate
the vulnerable consumers that we serve. It’s the job of a seller’s agent to
explain to their seller the 5 points of negotiating commissions.
A New York
Appellate Court, in Stathis v. Estate
of Karas,
recently addressed a lawsuit against an estate to enforce a real estate contract
of sale that was entered into by the decedent pre-death. However, the Plaintiff
could not produce the original contract of sale so he submitted a copy to the Court.
The Court refused to accept the copy as evidence when hearing the case.
The Court
explained that when a plaintiff wants to submit a copy, pursuant to the Best
Evidence Rule of CPLR Rule 4539, they must
establish:
- Why the original document could not be produced;
- That person’s attempts to find the original contract; and
- That the copy was a reliable and accurate depiction of the original contract.
In Stathis v. Estate
of Karas,
the Plaintiff failed to show why he could not produce the original contract,
and what efforts he undertook to try and find such original contract. Also and
most importantly, the Plaintiff failed to show that the copied contract of sale
was a reliable and accurate portrayal of the original contract. As a result,
the Plaintiff was not allowed to produce the copied contract of sale, the
Appellate Court reversed a verdict in the Plaintiff’s favor, and a new trial
was ordered.
It is always safe to
keep your original real estate contracts of sale because the burden of proof to
submit a copy is hard to satisfy.
As an attorney that regularly practices commercial
litigation, I read a lot of contracts. Some good, most bad. One disturbing
trend that I have noticed is the willingness of businesses – both small and
large – to use form contracts or contracts created for other companies. The
justification I hear is the belief that the contract must be good enough
because a larger or older company is using it. The thinking is simple – “if it works
for them, why wouldn’t it work for me?”
This isn’t a knock on Blumberg forms or other form
contracts. They have their purpose and may work for some people. I do, however,
take exception to the thought that because it’s good enough for someone else,
it is good enough for your business. It’s not, and the fact that I just
finished a trial on a ten year old breach of contract litigation confirms that
every business needs its own tailored contract.
Form contracts and contracts written for other businesses do
not take into account the traits that make your business unique. Every business
has a differentiator, especially in highly regulated fields. When you use a
form contract, you are failing to include language that accounts for and takes
advantage of the differentiator that makes your business successful.
Form contracts typically are overbroad and are not
sufficiently specific. Blumberg doesn’t know the nuances of the agreement
between your business and your clients, so their contracts are intentionally
drafted using vague, ambiguous and broad terms and topics. In a breach of
contract litigation, ambiguities are the death of your contract. Not only are
ambiguities construed against the drafter of the contract (yes, you are
considered the drafter of the contract if you choose a form contract[1]),
but once a court finds an ambiguity, the door is open to parole (extrinsic)
evidence which can potentially modify the written contract.[2]
If you are fighting about what the parties “thought” the contract meant, you have
already lost the battle.
My ten year old breach of contract case likely never would
have gone to trial if the business had used a contract tailored to their
specific business instead of using a generic contract used for their industry
in general. Because the form contract included services and methods of payment
that were inapplicable to the business, following a motion for Summary Judgment
(asking for a pre-trial decision by the Court as a matter of law), the Court
held that the contract was ambiguous. Once it was determined that the contract
was ambiguous, the defendant was allowed to introduce a slew of evidence of
oral representations allegedly made by the business which made the defendant
misunderstand the written terms of the contract. If the business had retained
an attorney to draft a contract specifically for the services that they
provided instead of using a form contract shared between multiple businesses in
the industry, there likely would have never been a lawsuit in the first place,
let alone a trial.
If you have the ability to control the contents of your
contract and you take a shortcut or the cheap way out, you are being penny-wise
but pound-foolish. A rock solid contract decreases litigation costs and
increases the chances that you will be compensated for your goods or services.
A defaulting party is less likely to challenge a contract in Court if the
language is straightforward and tailored specifically to address the dispute in
question. Finally, in the event that you are forced to go to Court to enforce
your contract, a tailored agreement decreases the chances that there will be a trial[3]
to resolve what the parties were really agreeing to when they entered into a
written contract that was supposed to memorialize their understanding and
agreement.
Be wary of forms.
[1]
Interested Underwriters at Lloyds v. Ducor’s Inc., 103 A.D.2d 76 (1st
Dept. 1984)
[2]
Hartford Accident & Indemnity Co. v. Wesolwski, 33 N.Y.2d 169
(1973).
[3]
The interpretation and application of an unambiguous contract is a matter of
law that may be disposed of in a motion for Summary Judgment, obviating the
need for a trial. Hartford Accident & Indemnity Co. v. Wesolwski, 33
N.Y.2d 169 (1973).
Monday, August 24, 2015
Location, Location, Location. Have you ever driven by a property and questioned why THEY don't just put XYZ (i.e., Coffee Shop, Apartments, Offices, Gym) in over there? Then, you thought to yourself: "I can do it, I'm going to be rich!!!" The problem with your get rich plan is that what you see is not what you get when you solely focus on the visual of a given property (i.e., Location, Location, Location). Before becoming a first-time developer of residential or commercial real estate you need to understand these five invisible location issues.
Wednesday, August 19, 2015
The Governor signed a new law this month that provides tax relief to homeowners who renovated or repaired their homes after Superstorm Sandy (Sandy), or are in the process of or are considering doing the same.
While driving through the coastal neighborhoods of Long Island, Queens and Brooklyn, it’s a very common sight to see homes being raised, abandoned, for sale or completely renovated and looking brand new; all of these events generally being caused by Sandy.
When the renovations were made, homeowners likely were worried about being able to live in their homes again, not about minimizing the resulting property value increase, so this law creates welcomed relief for those who are going to be shocked to find a significantly higher property tax bill for their renovated homes (i.e., the renovation increased the home’s value and hence the home’s allocation for real estate taxes).
Some fine print that is important for assessing eligibility for this exemption:
- Applications are to be made to your local Town Assessor;
- The home must be used and occupied for residential purposes (1-3 family homes are eligible);
- The current owner must have owned the home prior to October 29, 2012;
- Renovations must have been made to portions of the home that existed before October 29, 2012 and a new Certificate(s) of Occupancy showing the improvements must be obtained on or before March 1, 2018;
- You can apply for the exemption beginning March 1, 2016, but no later than March 1, 2018;
- If you are thinking of selling or buying a home that may be eligible for this exemption, be aware that the exemption terminates if the title to the home is transferred (except for those who inherit and then occupy the home); and
- The exemption can last 8 years if homeowner complies with the conditions described herein.
It is important for those who recently completed or are in the middle of renovations to make sure that they obtain their final Certificate(s) of Occupancy before March 1, 2018 to remain eligible for this exemption, as this process can be frustratingly long depending on the work done to the home.
Homeowners who are interested in applying for this exemption should consult with their contractors and real estate attorneys to make sure their Certificate(s) of Occupancy are in order and that important deadlines are not overlooked.
Tuesday, August 18, 2015
The applicable law is RPL 443-a(1)(b).
If you are a seller's agent in this situation dealing with a buyer that you don't represent, which appears to be the case by way of your terms client and customer, then there is no affirmative obligation to inform the buyer about the suicide. More so, you would be breaching your duty of confidentiality to the seller if you gave this information. Instead, you can only answer the question if the buyer asks in writing and you inform your client and your client approves of you answering.
Tuesday, August 11, 2015
The U.S. supreme court ruled that victims of discrimination under the Fair Housing Act can sue based upon a legal theory called disparate impact discrimination, which addresses conduct that appears neutral on its face, but which nonetheless has a discriminatory effect.
Read the full article in New York Real Estate Journal, written by Andrew Lieb, Esq., and Dennis Valet, Esq. here.
Read the full article in New York Real Estate Journal, written by Andrew Lieb, Esq., and Dennis Valet, Esq. here.
Wednesday, August 05, 2015
Long Island is developing its rental inventory in droves with mixed-use downtowns and multi-family construction. We saw development first boom in the emergence of Patchogue. Now it’s Riverhead, with the recent sale of the Sears building and the prospective redevelopment of the site to include 160 apartments in a revitalized downtown. Yet, this is nothing new to the East End, where our summer rental community has supported the economy for decades. While rentals offer a great housing option that supports the community, they also involve many disputes that find their way into our courts.
Read the full article in Dan's Papers, written by Andrew Lieb, Esq. here.
Read the full article in Dan's Papers, written by Andrew Lieb, Esq. here.