General Interest

July 21, 2009

Underground Storage Tanks (USTs) and the New York Real Estate Closing.

No matter who your attorney is when buying a parcel of New York State real estate, s/he should ask you whether you have investigated whether there are (or were) Underground Storage Tanks serving the heating needs of the house (or a Phase I search in a commercial transaction).

An underground storage tank is a tank and any underground piping connected to the tank that is at least 10% buried underground. They were very popular during the 1970s as this area increased in population, and oil heat was cheaper than gas. The result, however, is hundreds of USTs rotting and leaking causing much litigation and consternation to buyers and sellers of real estate.

New York State is a “caveat emptor” or “buyer beware” state that requires little by way of disclosure relating to known and unknown problems. USTs are a commonly “unknown” and hard to find because they are literally a ticking time bomb buried under the lawn. If you or your real estate inspector finds an underground oil storage tank (UST) during a real estate purchase, you, as the potential buyer, should take immediate steps to ensure that the tank is sound (through a pressure test) or was legally and properly “abandoned.” If there is any suggestion that the tank is not sound, or that it was not officially “abandoned” you should demand that the Seller immediately abandon the UST before the transaction takes place. “Abandonment” involves licensed contractors sealing the tank and verifying that it was not leaking, or removing the problems if they were leaking. Demand that the Seller provide you with a “spill closure” letter proving that the tank was abandoned.

July 15, 2009

When your Estate Planning Attorney is Not Your Attorney in New York.

by Peter Klose

The New York State Supreme Court (Shafer, J) reiterates that to sue an attorney for malpractice arising out of alleged negligent will preparation there must be an attorney client relationship before the beneficiaries may sue for legal malpractice in New York. That is, there must be “privity” of contract between the attorney and her client before the client has standing to sue for legal malpractice. For a complete copy of the recent decision Leff v Fulbright & Jaworski, LLP.

Beneficiaries of wills who get less than they think they are due often call us to determine if they have any claims against the attorney. The answer in New York State tends to be who, if anyone, may sue for legal malpractice when attorneys make mistakes planning estates.

As upheld by this Court, New York is one of the few states which recognizes the “doctrine of privity,” meaning that, when the decedent died, she may be the only one who could have sued the attorney for screwing up the estate plan. This rule is relaxed in the presence of “fraud,

June 18, 2009

When a Real Estate Closing Attorney is Not an Attorney in New York?

by Peter Klose

Since lawyers have been lawyers, there has always been pressure to release the age old bonds of the attorney client privilege in favor of letting non-professionals practice law. Never more so has this pressure been as intense as in the real estate industry where many states permit non-lawyer participants do all sorts of acts that attorneys did or should do. For example, real estate brokers in some states are permitted to draft and review and prepare the contract of sale in a real estate transaction. Not only does having an attorney present raise the level of the transaction, but it also insulates parties from the self-dealing that can often occur if an attorney is not looking into the matter.

To its credit, New York State has generally avoided the trend to permit non-lawyer quasi professionals invade the traditional attorney client relationship. The reason for this is that we believe in New York that the professional, confidential fiduciary relationship between client and attorney is tantamount to making the system work.

Recently, a New York State appellate court censured an attorney who formed a company using non-lawyers to provide closing services in the sale of foreclosed properties. The attorney contended that the services his law firm (company) provided were “clerical” in nature, and did not amount to the practice of law. Despite his “previously unblemished record,” however, the Court disagreed, finding that he violated ethical cannons by aiding non-attorneys in the unauthorized practice of law. Specifically, the Court held that the services performed by his closing company “were of the character usually performed by lawyers, and were formed pursuant to a contract that required an admitted attorney as a necessary presence.”

May 26, 2009

Do Fewer Layers of Government Mean Fewer Taxes in New York?

by Peter Klose

As the fiscal crisis for government deepens, local leaders are increasingly pressed to re-tool. For years, consolidation of governmental services has been a complex labyrinth of regulation understood by few. New York State Attorney General, Andrew M. Cuomo believes that one way to improve the services and reduce the tax burden, is to remove and consolidate various layers of government– to reduce the tax bills for everyday tax payers who often pay county and town taxes, village taxes, school taxes and taxes for special districts, including water, sewer, and utilities.

Given the current fiscal crisis New York State faces, with declining revenue (taxes) and increasing needs (costs of services), how is the local municipality going to effectively provide the services without increasing taxes or reorganizing governmental entities to efficiently provide the same services.

Just as private businesses re-organize in this global economy, the municipal market place might need re-structuring if we are to retain our middle class, our businesses, and our home rule. Think of the duplicity (redundancy and otherwise) in services provided by an estimated 10,521 overlapping governmental units, sub-divisions, etc. Would private industry permit the same wasteful bureaucracies that exist in local communities.

May 15, 2009

Brooklyn Court Does the Right Thing in Foreclosure Action.

by Peter Klose

It’s not often that our New York City judiciary goes out of its way to investigate, report and do the right thing. But, that’s what the Kings County, Supreme Court, (LAURA L. JACOBSON, J) just did in a mortgage foreclosure matter that crossed her desk.

After noting that the foreclosure papers were served on a “live in” nurse, the Judge took the unprecedented action of requiring the Plaintiff (Argent Mortgage) to provide proof that they were entitled to foreclosure. Even though the Debtor had not responded to the court action, she ordered the mortgage company to supply copies of the loan documents used to secure the mortgage; she required an actual loan officer to appear at a hearing and supply evidence and testimony as to why the Mortgage Company would underwrite a loan in the amount of $315,000, even though there was evidence that the borrower (a taxi driver) earned $69,900 per year, and showed total debts of $91,807, against assets of only $58,119.30. In other words, there was no chance that the Mortgage would be re-paid, and the borrower made no payments toward the Mortgage.

Incensed by the clear fraud, the Judge ordered that the Bank pay for a Special Referee and a Guardian Ad Litem to investigate the situation. It didn’t get any better for the bank. In denying the referral to a Referee and foreclosure she said,

April 29, 2009

What to Expect from your Local (Real Estate or Business) Attorney in New York.

by Peter Klose

In today’s day and age, attorneys, rightly and wrongly, get bad reputations from the public. Often these negative reputations are undeserved, but, as a profession, we lawyers need to do a better job of protecting that status as a profession by acting “professional.” So, what is it that small business people, real estate clients, and the simple estate planning clients need, and what is it that causes such clients to complain to the ethics board?

Ethics in the hometown practice of law can be complex and potentially dangerous for the local attorney who has practiced for years, given of themselves to the community and knows many in the community. What can your personal lawyer do, and what should you expect? When should you make a complaint to the local grievance committee?

Traps for the Unwary

April 22, 2009

New York State Raises Filing Fees on Deed Recording.

by Peter Klose

In a transparent effort to raise fees, the New York State Legislature has instituted a fee hike on real property transfers, by increasing the filing fees for the RP-5217 Property Transfer Report. [See Real Property Law § 333(3), amended by L.2009, c.56, Pt. JJ, approved 4/7/2009].

The new fees increased most deed filing fees from $165 to $250, (for deeds submitted for recording after June 1, 2009). For questions on the new filing fee or other transfer report related matters, contact the Rockland County Clerk’s Office or the ORPS’ Data Management Unit at 518-473-7222.

Bottom Line, they have to make up the budget shortfalls somewhere.

March 23, 2009

Buyer Beware: of Bed Bugs?

by Peter Klose

There are various standard inspections that buyers of New York State real estate customarily order in their inspection process to buying a home. According to the pest control experts, there should be another– an inspection for Climex Lectularius or “common bed bug.”

Everyone’s worst nightmare is a hotel room infected with those tiny nocturnal insects that hide in nooks, crannies, and crevices during the day, but feed on humans (blood) at night. The nightmare scenario of oval flattent and wingless bodies which are a light to reddish-brown and 1/4 to 3/8 inch long (think apple seed). The welts take a day or two to develop and not all bed bug sufferers react to their bites, which delays detection and action.

Buyer beware if you’re buying a house or looking for a new condo or apartment because you may be moving into a home or apartment invaded by bed bugs. New York State law provides you no protection from such pest infestations because most sellers do not complete the Property Disclosure Statements choosing instead to pay a $500 penalty for not completing it before making the sale. Indeed, real estate disclosure laws often don’t apply to co-op and condo owners or lessors.

March 9, 2009

Interstate Land Sales Full Disclosure Act– Compliance in New York

by Peter Klose

As the distress in the real estate market continues in New York, more and more people are turning to their lawyers to carefully review and consider their real estate sales contracts for any “loop holes” available to justify the cancellation of a contract and to win the return of a down payment.

The scenario in a New York City Condo purchase goes something like this. The buyer puts down a boat load of money as a down payment to secure an apartment in the hottest building in Manhattan, or any of the five boroughs. The developer starts having financial difficulties or can’t meet originally intended construction deadlines, and, in the intervening months (or years), the buyer loses interest or a job and can no longer afford the price (which has also declined). As the New York real estate market crumbles, so do these deals, and the buyer wants out.

Recently, some bright and creative New York Real Estate litigators have turned to an ancient, but potentially useful, statute passed in 1968 and known as the Interstate Land Sales Full Disclosure Act, to argue that the down payments should be returned and the contracts voided because the Developer did not comply with the provisions. The Interstate Land Sales Disclosure Act generally applies to developers selling or leasing–through interstate commerce.

February 27, 2009

Sale and Lease Back Options in Distressed New York State Real Estate.

by Peter Klose

In this era of distressed real estate, and even more distressed home owners, there are several life rings being thrown around including “sale-lease back” options. Under a typical “sale and lease back” situation an “investor” buys a person’s home and leases it back to them. The practice is both common and legal in real estate, and is intended to raise cash for short-term needs or to secure tax benefits. Sometimes, the leaseback agreements permit the sellers the right to repurchase the property after some prescribed period and that is often a benefit to the investor in an inclining real estate market.

In residential real estate, the sale-leaseback allows financially strapped homeowners in financial trouble to stay in their homes and pay their debts, but the practice is susceptible to fraud when investors don’t give homeowners the promised money. For example, some “investors” pocket the mortgages they obtain from banks or strip equity from the homes rather than letting owners get back on their feet.

The WSJournal had an interesting article which explained the potential pitfalls of such a relationship.