General Interest

January 3, 2018

The hidden costs behind title insurance: How title companies used to pay “inducements” (kickbacks) to encourage lawyers and realtors to use them and the 2018 New York State regulations designed to stop them.

Title insurance is a must for all home buyers in New York. A title company searches the public record to identify potential issues with the title. Common problems include things like old liens, judgments, encroachments, survey overlaps, outstanding mortgages or unpaid taxes against the property being purchased. Title companies play an important role in real estate transactions because they act as a “risk mitigater” because they verify that the piece of property is unburdened by title issues and “indemnify” the owner and lender for such problems.

There are two types of title insurance; owner title insurance and lender title insurance, both of which you pay for at the closing if you are mortgaging your home. If a person emerged to claim that they were the rightful owner of the house, or had a judgment or lien against the house, then there might be title “claim” to the applicable insurer. Assuming the title insurance company agreed, and had not excepted coverage in the original policy, lender title insurance would reimburse the lender the amount they lent to purchase the home (or your title was damaged), or might hire title attorneys to repair the problem. If you had owner title insurance policy, you would be paid for the value of the loss, or the title insurance company would work to sort out the title claim (indemnify you for your losses, including attorneys fees to repair the title issue).

Either way, title companies are integral to the home buying process protecting consumers from purchasing a home that could present headaches down the road. But how do we choose a title company and how much will the buyer and seller pay at the time of closing?

December 14, 2016

Black Ops versus Tactical Ops-Beer Naming Becomes a Trademark Battle.

by Peter Klose

By the time the 1970s rolled around, there were about fifty breweries in the United States, according to The Economist. A slew of new laws promoting tax breaks for small microbreweries spurred an era of innovation and explosion of smaller, craft breweries. Today, there are over 3,000 breweries, making the industry both crowded and competitive.

One of the prominent issues that arises, according to this article from NPR.org, is the challenge of finding a name that is not already taken by another brewery. There is a dearth of names that have not already been trademarked by others that connote a positive association with beer. Consequently, there have been more legal issues popping up with name trademarks because so many designs and names infringe on others’ similar ideas.

With so many breweries around the country, people do not have malicious intention to copy others’ names and designs, but there is inevitable overlap with so much market saturation. Frequent legal issues emerge because there are public misconceptions about the fact that merely providing state registrations and ownership of domain names ensure ownership of the copyright/trademark; but that is not always the case. A trademark attorney navigates murky waters where there is no national database of beer brands/trademarks, and conducts common law and internet searches – to see if there are overlapping images or names of other breweries. Intellectual property is vital to creating a strong business, and this web of legal issues associated with craft breweries’ trademarks illustrates that.

October 31, 2016

Will a Defamation Action Lie if you Call your Neighbor a Witch?

by Peter Klose

That is the question posed in a wonderfully entertaining and historically interesting article written by Dave Kluft from Boston’s firm Foley Hoag.

As his article points out, accusations of being a “witch doctor” and the use of “witchcraft” have served as a basis for defamation and slander suits around the country, and still percolate through various courts. In New York, witchcraft is no longer considered a crime, so it is unlikely to be considered slander per se, however, you should still mind what you say.

In defamation per se cases, New York law doesn’t require a plaintiff to prove that they were “damaged” by the offending words, but a jury will decide how much or how little injury occurred. Damages are assumed only where the person defaming someone alleges that the injured person:

October 27, 2016

Avoid Misunderstandings Over Fixtures and Furnishings.

by Peter Klose

The Closing is scheduled for 1 PM at the office of the Bank Attorney, you arrive at your dream home, ready to sign all of the mortgage documents, and close; when you realize that the sellers have moved out, taking all of the covers to all of the electrical outlets, light switch plates, architectural stained glass windows in the bathroom and mail box. Fact or fantasy? That’s a real example from everyday real estate practice in upstate New York, and lead to a very unpleasant closing.

Among the standard details of a real estate contract is a paragraph innocuously labeled “personalty” or “personal property.” First time home buyers sometimes pay close attention to the details in the contract, but not always:

Personal Property: Included in this sale: (a) The sale includes all of Seller’s right, title and interest, if any, in and to:

October 27, 2016

Condominium Insurance is Often Mis-Understood.

by Peter Klose

Over the years I have received various telephone calls from prospective purchasers, and handled many cases involving condominium insurance claims. Condo owners are often laboring under the misconception that the Condominium Owners Association insurance policy covers them in the case of disaster. This article from the Washington Post helps explain some of the differences between home owners coverage for the interior of the Condominium and the Home Owner’s Association coverage that covers damage to existing for already constructed portions of the unit.

Let’s take the example of a water valve break in an upstairs condominium unit. The water line breaks, flooding the upstairs apartment, and running down into, and ruining, interior walls, existing floors, and plaster ceilings of the unit below. In the case Klose & Associates handled, the water valve was originally installed by the condominium association when the unit was built, and there was a faulty water pressure regulator on the main water line coming into the stand alone building containing the five (5) units. The failure to regulate the pressure of the water caused the water filter to rupture many years later.

The condominium association had insurance coverage (but refused to pay) for the lines coming into the building (faulty regulator), and that insurance policy should have responded to the damage to the existing walls, floors and ceilings in the downstairs unit. The owner of the upstairs unit received payment from her insurance company of items damaged inside her apartment, and the owner of the downstairs unit received some coverage for items that she had installed in her unit, but the “master” insurance policy owned by Condominium Association should have paid for the damage caused by the failure of the pressure regulator to originally existing items in both Units. The condominium association refused to permit its insurance carrier to pay for any of the damage. [Whether that was appropriate or not should be the topic of another blog entry].

October 17, 2013

Thinking About Restructuring Your Mortgage? Why Now is the Time.

by Peter Klose

When thinking about restructuring a mortgage or even going through the foreclosure process, most homeowners are motivated by the bottom line-lower monthly mortgage payments or relief from burdening debt.

What most homeowners do not consider is that along with lower mortgage payments, they may receive an income tax bill from the Internal Revenue Service (IRS). The Internal Revenue Code, which embodies the federal tax laws, classifies some discharge or forgiveness of debt as taxable income.

In other words, if the bank agrees to foregive or reduce your principal on the mortgage you signed, then you may owe income tax on the foregiven portion of the mortgage. For example, say you restructure the mortgage on your New York State home and you consequently owe $30,000 less, that $30,000 is considered “income” and is potentially taxed. The idea is that if you borrow money, which is then not paid back, it is a debt that is not being paid back and is akin to receiving “free” money. The taxing authorities consider such foregiveness “income,” because you got the value, but are now not paying it back.

September 30, 2013

Attention New York Property Owners – Reduce Your Property Tax Bill.

by Peter Klose

In New York, grieving your property taxes means more than just complaining when your bill and assessment arrives. Each year the tax assessor for hundreds of municipalities sets a base line “assessment” for how much your they believe your real estate property is worth. Then, based upon formulas adopted by the State, they determineshow much you pay in taxes. You have the right to “grieve” your taxes by filing the correct form with your local “assessor,” in a formal review of the assessment, called a “tax grievance.”

As the property values escalated during the last decade, municipalities gleefully re-assessed the properties at higher and higher values so they could increase the amounts of revenue they collected from the real estate taxes. Homeowners are traditionally skitish about filing a tax grievance for various reasons– maybe they benefitted from such increased assessments because they took out home equity loans, or mortgages. That said, others refrained from filing a grievance fearing that the Town would reassess their property, find the various improvements made to the property, and then tax you more? While you may not file objections every year, the municipality is not permitted to raise your assessment because you grieved your taxes.

What does it mean for New York homeowners to “grieve” your property taxes. To begin with, you must file an RP-524 Form. This process is supposed to be simple, and is well explained here.

September 20, 2013

What if the Mortgage Company Revokes my Mortgage after a Commitment was Issued in New York.

by Peter Klose

Yesterday’s Blog dealt with what happens if you don’t diligently apply for your mortgage while attempting to buy a house. But, what happens if you got your commitment and the bank thereafter revokes it?

According to the case law, a purchaser should be entitled to return of the down payment. Kapur v. Stiefel (1999) 695 N.Y.S.2d 330, 264 A.D.2d 602 (1999). In that case, the purchaser obtained a refund where the mortgage commitment was revoked, makeing the mortgage contingency clause (generally relied upon to cancel the contract)unavailable. This is not automatic, and the question becomes whether the purchaser acted in “bad faith,” or intentionally caused the bank to withdraw the commitment. Although litigation might errupt over whether the purchaser acted in bad faith, if a court finds that they did not (based upon documentary evidence), then the purcahser should be able to get the money back from the seller.

Specifically, the Court held:

September 19, 2013

How protecting your downpayment begins with your mortgage application in New York Real Estate Contracts.

by Peter Klose

One of the must mis-understood concepts is the “Mortgage Contingency Clause,” and how you, as a home buyer, must diligently protect your right to cancel a real estate contract if you are unable to secure a mortgage. This blog is not about the situation where your Bank issues you a mortgage commitment, and then pulls out of the deal for some reason. By then, you have likely waived your mortgage contingency.

In New York State, signing a contract to purchase real estate is usually accompanied by a “downpayment,” which is held in escrow by the seller’s attorney. The downpayment is sometimes called an “earnest money” deposit. (I always thought that such term appropriately described the deposit because you are “excited” to be purchacing a house, but you must earnestly apply for a mortgage. Many times, it is traditional to put as much as ten percent of the cost of the house up as a “downpayment,” and that is the amount at risk if you do not properly apply for your mortgage.

In New York, the downpayment also represents a seller’s damages if the buyer breaches the contract and refuses to purchase the house without justification. A downpayment can represent up to ten percent, or more, of the purchase price depending on negotiations between buyer and seller.

September 5, 2013

New Yorkers– Keep your STAR benefits: Everything you need to know.

by Peter Klose

Is there ever any tax relief? Property Taxes in New York are ever escalating. As a result, many tax payers claimed that their real estate was eligible for School Tax Relief (STAR), when many of such properties were not actually eligble. Asssessors around the State were missing out on millions of dollars. As a result, the New York State Legislature amended the law to require many New York homeowners to re-apply.

To qualify for STAR, you must occupy your home and your income plus your spouse’s income cannot exceed $500,000 per year. STAR then exempts the first $30,000 of the full value of a home from school taxes. Until now, homeowners signed up once for STAR and enjoyed the benefits year after year. However, the New York Department of Taxation and Finance is changing the rules for 2014. To continue receiving STAR benefits in 2014, a new law requires homeowners to re-affirm their eligibility. Registration started on August 19 and will end on December 31, 2013.

Homeowners currently receiving Basic Star should watch their mail. The State Taxation Department is mailing STAR codes to STAR recipients. The code is required to register. Letters were already sent to homeowners in Western New York in the following counties: Allegany, Cattaraugus, Chautauqua, Chemung, Erie, Genesee, Livingston, Monroe, Niagara, Ontario, Orleans, Schuyler, Seneca, Steuben, Wayne, Wyoming and Yates. The remainder of New York State will receive letters containing the codes by early October.