New York Real Estate Lawyer Blog

October 1, 2008

Legal Malpractice Claims and Real Estate– OOPS-

According to an American Bar Association, real estate lawyers are being sued more often for bad advice arising from real estate transactions According to a recent study of various insurance companies, and their claims between 2004 and 2007, malpractice claims against lawyers related to real estate transactions climbed four percentage points to 20 percent of all such malpractice cases between 2003 and 2007, a four percent jump.

Lawyers are getting sued for errors in real estate transactions with alarming frequency, and were second only to attorneys handling personal injury claims, which also rose in frequency.

Real estate transactions apparently went bad in a variety of ways for the lawyers. Such claims stemmed from conflicts of interest, closing and contract-drafting errors, and problems linked to zoning and escrow issues.

October 1, 2008

Real Estate Brokerage Disputes– New York Law Amended.

by Peter Klose

When commission disputes arise, how do you handle them in New York?

Real Estate brokers, realtors, and other real estate professionals who depend upon a commission to be paid will now have a clearer path to address their commission disputes. Under the recently amended NY Real Property Law (“RPL”), Section 294-b, (“Recording brokers affidavit of entitlement to commission for completed brokerage services”), a duly licensed real estate broker may undertake a special procedure to protect their right to an earned real estate commission. (Effective January 1, 2009).

Under the “Commission Escrow Act,” a licensed real estate professional may claim entitlement to a brokerage commission for sales and leaseholds by filing an affidavit stating the right to such commission with the recording officer of the county in which the real property is located.

September 30, 2008

Housing and Economic Recovery in the Hudson Valley-New York

by Peter Klose

Will the the Housing and Economic Recovery Act of 2008 (July 30, 2008) provide the much needed support for homeowners in the Hudson Valley? Only time will tell as various financial institutions continue to feel the fall out on Wall Street.

The highlights of the new law permit the Federal Housing Administration to guarantee up to $300 billion in new 30-year, fixed-rate mortgages on loans made to borrowers who are facing foreclosure and who may owe more than the home is worth. This is a common problem in Dutchess, Putnam, Ulster and Rockland Counties.

Under the new law, the United States Government offers government insurance to lenders who voluntarily reduce mortgages for at-risk homeowners to 90 percent of the property’s current value. The lender then forgives some of the face value of the mortgage principal, bringing the balance down, but the government would potentially share in the upside when the property appreciates.

September 22, 2008

Manhattan Real Estate Prices Starting to Decline-New York

by Peter Klose

According to the Wall Street Journal, New York City real estate as a whole is down ten (10%) . S&P/Case-Shiller Home Price Index, reported in WSJ today.

Can we expect that trend to continue– probably, for three primary reasons. First, Wall Street executives and traders are taking a financial bath. According to the article, job losses on Wall Street (which employed 15.7% of Manhattan’s workers) will impinge on their average salary ($269,000-2006) causing their stiff down payments to suffer as bonuses are slashed and the subprime mortgages cause the stock options to plunge and the pink slips to issue.

Second, as the mortgage crisis deepens, access to credit is going to tighten.

September 21, 2008

Even the Big Real Estate Deals Have Problems– New York

by Peter Klose

You would think that paying $53.5 million for two separate penthouse apartments in New York’s famed Plaza Hotel would get you what you paid for. Not always! According to published reports about one recent real estate transaction, Andrei Vavilov, hedge fund financier, has sued the hotel developers El-Ad Properties and real estate brokers Stribling & Associates for breach of contract, fraud, deceptive trade practices and negligence, demanding return of his $10.7 million deposit and $30 million in damages because the Penthouse was “attic-like.”

Another story of buyer beware– sometimes very aware. Vavilov reportedly made the luxury purchase after watching a video- shot, produced and directed by the sellers. Apparently, the video didn’t do the small windows, low ceilings, obstructed views and ugly drainage grates justice. According to the lawsuit and published reports, every time the buyer tried to investigate and inspect the apartments (four times), they were “denied access” to the units.

The Sellers have counter-claimed in New York State Supreme Court, accusing the buyer of libel and filing a “sham” lawsuit– seeking $36 million in damages.

September 19, 2008

Elimination of the Justice Courts– Upstate New York?

by Peter Klose

Is the New York State Office of Court Administration going to eliminate many Justice Courts throughout rural and upstate New York? That’s what the commission appointed by Chief Judge Judith S. Kaye recommended. Who amoung us has not been before the local justice court, where judges, sometimes lawyers/ sometimes not, of the local town or village courts dispenses their judgement in a reported 2 million cases a year.

According to the New York Law Journal, the recently released study recommends consolidation of 500 of the 1,250 town and village courts in New York state because of their cost, antiquated facilities or duplication of services with other justice courts.

The consolidation plan was among the recommendations made Wednesday by the Special Commission on the Future of the New York State Courts, a panel originally formed by Kaye to report on ways to streamline the court system.

September 17, 2008

Columbia County, New York– Transfer Tax

by Peter Klose

Sellers of homes in Hudson, Germantown, Chatham and all of the other towns in Columbia County, New York, can expect to pay a transfer tax on the transaction.

Beginning December 1, 2007, title agents will collect the Columbia County Real Estate Transfer Tax of $2.00 for each $1,000.00 of the consideration (money) paid for all conveyances of real property located in Columbia County, New York. That means more transfer forms, and more headaches for “grantors,” who are also known as sellers. [Chapter 556 of the Laws of 2007, Columbia County].

The Columbia County Tax law exempts the first $150,000 of sales price (consideration) in connection with the sale of a one family residence, and is collected in addition to the New York State Real Estate Transfer Tax. Not to over-stress the orderly real estate closing, the County uses a tax return which must accompany the payment of the Columbia County Transfer Tax which is essentially a photocopy or carbon copy of the TP-584 (New York State Transfer Tax Form).

September 16, 2008

New York State Mansion Tax– Buyers Beware

by Peter Klose

If you are lucky enough to afford a home valued at over a million dollars, you should be aware that New York Tax Law, Section 1402-a, imposes a 1% tax upon the buyer in the purchase of residential one, two or three family homes (including condominium or cooperative units).

In the boom years, and in New York City, the “Mansion Tax” as it is popularly known, adds a fixed amount to your closing costs, but almost seems outdated today, where homes routinely change hands for more than a million dollars. Promulgated in 1989 when the average price of a New York City apartment was far less than a million dollars, units are routinely more expensive in today’s market, moving the tax from the rich, to a tax on the average home buyer in New York City, the Hamptons, and Westchester County. As credit gets tight, buyers and sellers of million dollar residential real estate may have to consider creative (and legal) solutions to help facilitate the transaction.

When griping about the Mansion Tax, however, consider that it increases the final “tax basis” in the property, and will reduce your capital gain when you sell. So much for the short term solution or salve. More upsetting is that such “mansion taxes,” whether imposed by New York or by another state, are not deductible on the buyers’ federal income tax returns.

September 14, 2008

Study Predicts (Hints) that Plaintiffs Should Settle, Rather than go to Trial-Even in New York

by Peter Klose

Should we go to trial, or take the money? According to a recent study, the “right” answer generally depends upon whether you are a plaintiff or a defendant in the civil lawsuit.

According to the study, in a full sixty-one (61%) percent of cases analyzed, plaintiffs who failed to settle the case prior to trial often received less at trial (approximately $43,000 less). To the contrary, defendants who refused to settle and made the “wrong” decision, were wrong in only twenty-four (24%) percent of cases analyzed, but paid a much higher price for being wrong ($1.1 million). So, should you listen to your attorney?

The study looked at 2,054 cases that went to trial from 2002 to 2005, and tried to account a number of different factors relating to the lawyers, the case and the court. [See, September 2008 issue of the Journal of Empirical Legal Studies–co-authored by Blakeley B. McShane, a graduate student at the Wharton School of the University of Pennsylvania, Martin A. Asher, an economist at the University of Pennsylvania, and Randall L. Kiser principal analyst at DecisionSet, a consulting firm that advises clients on litigation decisions, found at http://www3.interscience.wiley.com/cgi-bin/fulltext/121400491/HTMLSTART]. While there are many different variables to consider, the study raises provocative questions about legal advice to go to trial, and the debate rages whether the lawyers are giving impartial advice when their pocketbook is part of the equation. While most cases settle, critics of the profession have long argued that lawyers have an incentive to recommend trial to collect fees.because of contingency fees or because they would be paid large fees to ready the case for trial.

September 12, 2008

Dutchess County Executive Vetoes Mandatory Well Testing Law–Upstate New York.

by Peter Klose

Contrary to surrounding counties which require well testing, the Dutchess County executive vetoed recent legislation that would have required the seller of real estate in Dutchess County with a private well to test it before the closing. Under the vetoed law, the test results would have been given to the seller, the buyer and the Health Department. According to published reports, the county executive expressed reservations about requiring individuals to test their particular wells because there are allegedly ongoing ground water tests across the county, and because he has his own plan by which individual homeowners could apply to have their water tested.

The sub-text– competent real estate attorneys, real estate brokers, and inspectors recommend private well testing to buyers, and wells are commonly tested as part of a real estate transactions in Dutchess County.