New York Real Estate Lawyer Blog

November 11, 2009

Mortgages – Fraud Watch for Homeowners in New York!

You hear the old adage– “if its too good to be true . . . . ” Homeowners in New York and elsewhere should be on the look out for the newest form of fraud on the rise–“house theft.” Under various permutations of the fraud, con men and thieves conspire to to take ‘ownership’ of a home through various scams and false documents. In one version, the group acquires a house then ‘sells’ it to their associates, who obtain a loan from unsuspecting banks. The fictitious ‘seller,’ gets paid the loan proceeds, and then shares the sale proceeds with the fraudulent ‘buyer.’

The FBI estimates that from 2007 to the 2008, the reported cases of house theft have jumped 36% to an estimated 64,000 incidents. House theft, also known as title theft, most frequently occurs in larger urban areas particularly in cities with many vacant properties such as Detroit and Miami.

In reaction, several new online services offer free help to protect homeowners from house theft. Among its free services, www.ePropertyWatch.com provides informal house appraisals, monitors public real estate documents, and alerts homeowners to possible criminal activity. ePropertyWatch will also provide information on recent sales and foreclosures in the user’s neighborhood and observe long-term changes in the median sale prices relative to a ZIP code.

October 28, 2009

Legal Insurer Liable for Loss Despite Notice Issues.

by Peter Klose

Chalk one up for the diligent little guy here. Cite-884 N.Y.S.2d 634 (2009)

In a recent New York State case involving claims for legal malpractice arising from the failure of an attorney to adequately and timely respond to a fire insurance claim loss, the person injured by the malpractice was able to keep the malpractice insurer responsible even after the target attorney failed to notify his insurer of the malpractice claim.

As discussed in this New York Real Estate Lawyer Blog in the past, late notice of a claim defenses have been harder and harder for the insurance industry. In this New York case, the negligent attorney failed to respond to plaintiff’s repeated attempts to obtain insurer information until after the policy notification period had lapsed. The insurer denied coverage for “late notice,” but under an applicable statute the claimant had the right to give notice after policy period had lapsed.

October 19, 2009

Unintended Results of New York’s New Power of Attorney Forms.

by Peter Klose

I get calls every week from family members concerned that another family member might be abusing a power of attorney issued by an elderly or infirm client. We take these concerned calls very seriously, as did the New York State Legislature, who recently amended the General Obligations Law relating to Powers of Attorney. There are some traps for the unwary signer, however.

New York’s new power of attorney law contains language that “automatically” revokes old powers of attorney, unless you specifically state that it does NOT. If you are asked to sign a new Power of Attorney in New York after September 2009, think long and hard about the effect of signing such form. For example, if you are a recording artist, did you sign an agency agreement; a real estate partner, a power to the managing partner; a life insurance recipient, a right to such benefits. If so, you should be careful not to revoke any old powers of attorney.

Bottom Line– You need to be educated to be smart. Ask your attorney what the effect will be if you sign a Power of Attorney.

September 23, 2009

Did You Know that Septic Tanks and Fields Can “Fail?”

by Peter Klose

We recently discussed hidden dangers lurking under the ground with USTs (Underground Storage Tanks-Fuel). A similar problem exists with aging septic tanks and fields in New York State. Who’s responsible for finding the problems? What are the problems? How are the problems with septics fixed?

These are all common questions, especially when you are buying a home without municipal sewer and water.

Problems that can arise with septic tanks include tanks which have not been cleaned, cannot be located, or are buried too far underground to inspect. Failures include inability to absorb and disperse water (with dye); failure to remove the bacteria, or backups. Sometimes the septic field is not even located on the property you are buying.

September 1, 2009

Restraining Notices and New York State Bank Accounts Exempt Income Protection Act (EIPA).

by Peter Klose

You owe some money on a debt, the creditor gets a judgment against you, and suddenly, your checking account is frozen by a restraining notice. That scenario is all too common, especially when we all live in a large metropolitan neighborhood, change addresses often, and sometimes don’t get copies of the lawsuit naming you as a party to the action.

New York State has recently amended its laws relating to when a creditor seeks to restrain a debtor’s bank account. Specifically, New York state law exempts certain types of income from debt collection. These exemptions include veterans’ benefits, Social Security, Social Security disability, pensions, public assistance, workers compensation, unemployment insurance, child support, as well as spousal support and maintenance. Although the New York State exemptions are intended to ensure “at-risk” New Yorkers have the means to buy food, pay rent, and have basic necessities, procedural loopholes have increasingly led creditors to freezing bank accounts containing legally exempt income.

As a result, New York has recently enacted the Exempt Income Protection Act (EIPA). The EIPA limits creditors’ ability to restrain exempt funds stipulating that banks cannot restrain the first $1,716 in a debtor’s account if he or she does not receive government benefits or assistance.

August 21, 2009

Don’t put your head in the sand when you get sued for Foreclosure in New York.

by Peter Klose

Have you been sued for foreclosure in New York State, are you ignoring the certified mail or the papers taped to your door. Well, that’s not the best response to a foreclosure action, where they want to take your home away. Increasingly, as this mortgage foreclosure debacle ripens, courts, litigants, and attorneys are learning that foreclosure is not always the slam dunk, lock the door, win/win case that it might have been when there were fewer foreclosures. Stand up for yourself, ask an attorney about your rights, read the papers and and fight back if the facts warrant. See my prior New York State Real Estate Lawyer Blog Entry.

In past decades, bankers gave millions of mortgages to entice new homeowners to leverage their dreams, and then repackaged that leverage (loans) to sell to investors, taking their cut, nary a worry for the borrowers or the lenders. As a result of the frenzied repackaging of such loans, it turns out that many of these banks and lenders lost papers, misplaced paperwork, forged signatures, and inaccurately dated documents, creating a messy jumble of paperwork, and making it sometimes impossible to decide who owns the right to commence the foreclosure, which bank owns which mortgage. This is where you might have a chance.

As the wave of the foreclosure crisis deepens, courts are increasingly challenged because homeowners rarely show up to court to fight the process, rarely have the money to hire competent lawyers to sort out the problems. So, increasingly, judges end up examining the banks’ papers, and ruling on the affidavits before them.

August 15, 2009

WHAT ARE DECLARATION OF RESTRICTIONS IN A SUB-DIVISION AND WHY SHOULD YOU READ THEM OR ASK YOUR ATTORNEY ABOUT THEM?

by Peter Klose

The “suburbs” mean “sub-divisions,” but do you understand what a “sub-division” is? When you purchase real estate in New York State, you should be sure you understand what it means to be purchasing in a sub-division.

Take the typical scenario– Developer buys a large tract of land with the idea to break it into smaller portions of land, to build houses. Often, the sub-division of that land requires zoning and planning approval from the local village or town. During the process, the planning agencies and the Developer may draft different agreements or requirements into the “sub-division map” where you are buying your house. Generally, in addition to the local laws, you, as the owner of the smaller parcel are going to be required to abide by the terms of those “declarations of restriction,” those “easements,” those statements on the “filed sub-division map.” They could be as mundane as not permitting chickens in the sub-division, to being as complex as requiring specific types of architecture. Regardless of their content, you, as the owner are responsible to live by them.

A declaration of restrictions is a set of limitations placed on the property rights of an owner. A homeowner in a subdivision, for example, agrees to comply with the declaration of restrictions in a signed agreement with a subdivision or condominium developer. These agreements run with the land and bind your future vendees, heirs and assigns.

July 21, 2009

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

by Peter Klose

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.”