New York Real Estate Lawyer Blog

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 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."

After winning the contract to conduct the closing, the attorney used a non-attorney paid by the attorney to serve as general manager (she also owned a majority share in the company), and then performed all of the closings scheduling, prepared closing figures and attended closings. The attorney shared profits and losses with the non-attorney, who also happened to be a joint signatory on a non-interest-bearing trust account, used to disburse sale proceeds. [This attorney must not have taken Ethics 101 in law school].

At the same time, the attorney had only minimal involvement reviewing deeds and title searches which were also conducted by closing company. He did not exercise supervisory authority over [the non-attorney], who administered all of the closing services.

Although the complaint initiated from an attorney competitor, the respective ethics panels confirmed that the practices of the closing company violated basic tenets of ethics laws found in the Disciplinary Rules of the Code of Professional Conduct. Such violations included aiding a non-lawyer in the unauthorized practice of law and sharing legal fees with a non-attorney.

Judiciary Law §§484 and 495 bar non-attorneys and voluntary associations or corporations from requesting or receiving compensation for "preparing deeds, mortgage, assignments, discharges, leases or any other instruments affecting real estate," the panel wrote.

"We thus find that respondent has committed professional misconduct by forming a corporation with a non-lawyer for the provision of those services, failing to exercise oversight of its activities or employees and failing to safeguard sale proceeds in an adequate manner."

The Bottom Line-- while not always understood by non-attorneys, the rules governing the unauthorized practice of law by non-attorneys is designed to protect the consumer and clients using the services. While attorneys may be more expensive, they are charged with fiduciary obligations that are closely regulated and controlled by other attorneys and the State of New York. Because of this confidential relationship, clients can expect to have their confidences protected by a professional New York real estate attorney, who is also duty bound to know what she is doing.

Hire an attorney, don't be "penny wise, pound foolish."

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Posted In: General Interest , Lawyers and Legal Malpractice

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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.

Under the current law, the consolidation and re-organization solution that can be executed by private industry is hampered by inconsistent, often nonsensical legal barriers, and complexities that make operational reform virtually impossible.

The New York State Attorney General proposed legislation that streamlines existing processes, eliminates inane inconsistencies, and strikes from the law offensive anachronisms such as requiring property ownership in order to vote in a special town election on a proposition to consolidate water districts.

The antiquated system (understood by almost no one) permits New York State real property owners the "privilege" of the highest local tax burden in the country, dwarfing other states, and far exceeding the national average. The theory, eliminate governments by consolidating services, saving millions of dollars.

The newly proposed legislation empowers governments across New York State to study, and then streamline, the complex rules and regulations surrounding the reorganization process.

The impact could be significant, but will local governments and their tax payers have the stamina to address the problem? Read more here.

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Posted In: General Interest , Legislation-Regulation

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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 thought 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,

The Courts have a responsibility to society as a whole to not allow the perpetuation of a fraud. If this Court grants the application of the plaintiff, it will be giving the imprimatur of approval to a scenario as fraught with fraud as any of the worst Ponzi schemes. . . . .

Perhaps if more of the people charged with overseeing our financial institutions had focused on the improprieties being performed in the financial arenas, our economy might not have imploded as ferociously as it did.

In this matter, plaintiff as the mortgagee was initially in a position to ascertain the credit status of defendant Mentesana.FN3Plaintiff abrogated that responsibility. Defendant Mentesana acknowledged his part in the fraudulent transaction in which several people appear to have participated. Accordingly, I am not only denying the relief sought, I am referring this matter to the Office of the District Attorney; to the Attorney General's office, Fraud Division and to the Banking Department, Criminal Investigation Bureau.

Bottom Line-- Thank you Madam Justice Jacobson for taking a stand (however small) to assign the blame where it is due. . . . Make your own conclusions, but why should any bank making these "type" of loans be entitled to take taxpayer dollars to "bail them out."

May the Brooklyn District Attorneys' office secure the appropriate resolutions.

If you would like to read the entire decision, click Download file here.

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Posted In: General Interest , Real Estate Litigation

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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 complaint to the ethics board?

Ethics in the hometown practice of law can be a 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

Ethics grievances are most commonly filed against solo practitioners and lawyers at small law firms, because these are the lawyers on the "front line," for many clients who have never dealt with the legal system, are often at wits end, or stressed by a major financial hardship (divorce) or transaction (purchase of real estate). With increased stress and unfamiliarity with the process, friction often arises between the attorney and the client. When the dispute arises, clients often dispute the fees, and are generally surprised by the amount of time and care it takes to resolve even the most mundane problems.

Obviously, many ethics cases arise from fee disputes, matrimonial law, and real estate transactions because people are emotionally attached to the proceedings or transactions. In residential real estate transactions the real estate closing is the first and only time people deal with attorneys, who often know the issues inside and out, but fail to explain such transactions which are often the biggest and most important investment for these clients, making the relationship even more difficult.

The same stress, sense of loss, and tension is created when attorneys are draft wills and then handle the probate process, which can be cumbersome and painfully slower than expected.

Needless to say, there are often common themes to attorney grievances which can be resolved by confident clients and communicative attorneys. For example, many ethics complaints emanate from the turbulence, delays and erratic nature of certain legal matters, especially real estate, probate, and litigation. When the client doesn't know what to expect in terms of money, time, or process, the attorney is the one who can expect a disgruntled client, who might file an ethics complaint.

The failure of communication is cause of the breakdown of the attorney client relationship. When the client and the attorney understand the process, communicate the pitfalls, and understand the potential problems, then both the attorney and the client win.

As professionals attorneys have to understand that the small town practice of law is a service business where results matter, but if a client understands the process and the pitfalls through communication, both parties exit the relationship with the attorney's reputation in tact. The first step to such communication is taking the clients call or returning it promptly.

What to Expect from your Attorney!

1. Expect to be educated about the process.

2. Expect to understand the attorney's role in resolving the matter. We don't make business or personal decisions for you, we explain the ramifications of each course of conduct.

3. Don't expect to win everything there are limitations to what an attorney can do.

4. Expect realistic even conservative estimates as to what result can be accomplished, and in what time frame.

5. Expect to speak to your attorney personally and expect a return telephone call or email.

6. Call or contact and expect updates.

7. Consider and get honest appraisals or estimates of the positive and negative results and occurrences in your matter.

8. Don't expect the sugar coating on the situation.

Credibility, cooperation and communication are hallmarks of a good relationship. I strongly believe that attorneys "bad reputations" are fostered by the utter inability to communicate with their clients and the public at large. If we are going to improve the relationships it is going to come through communication and education.

Bottom line.

For all of you real estate, matrimonial, probate, and litigation clients out there, remember, you deserve full communication, dignity, and respect. If you are not getting it, you can move to another attorney, or demand it from your attorney.

That respect, however, is mutual. When your attorney tells you that a certain course of conduct MAY result in a negative outcome, you have to respect the fact that you chose that course of conduct. Stated differently, it's not your attorneys fault you just lost your real estate down payment because you failed to apply for a mortgage in accordance with the contract.

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Posted In: General Interest , Lawyers and Legal Malpractice

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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.

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Posted In: General Interest , Real Estate Hints and Help

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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 Lectaularius 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 feeds 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.

Bottom line-- before you buy or rent under the doctrine of caveat emptor — let the buyer beware — the seller has no affirmative obligation to reveal circumstances about the apartment to the buyer. That means buyers must rely on the integrity of sellers and landlords anxious to make a sale.

Many people are now hiring a pest control company to check termites, carpenter ants, and bed bugs. For more on this interesting phenomenon, read this bed bug and real estate article.

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Posted In: General Interest , Real Estate Hints and Help

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As the distress in the real estate market continues in New York, more an 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 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.

Under the Act, if the Developer is marketing in interstate commerce (generally the case with these fancy luxury buildings and the Internet), then they must register the project on a national scale with HUD, and give consumers (buyers) a summary of that registration in a disclosure statement called a Property Report BEFORE THE CONTRACT or agreement is signed. Hence the utility in a litigation situation if the Developer did not follow the regulations.

BEWARE: The Act does not apply to all transactions, or all buildings, so buyers looking to cancel their New York State real estate contract with a developer had better seek counsel versed in the actual contract and the Interstate Land Sales Disclosure Act.

Bottom line-- it's always best to hire local New York State real estate attorneys.

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Posted In: General Interest , Real Estate Hints and Help

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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.

Bottom Line-- contact your New York Real Estate Attorney before entering or considering a sale and lease back option for your home in Dutchess, Rockland, Westchester, Putnam, Ulster or any other County.

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Posted In: General Interest , Real Estate Hints and Help

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How much litigation is spawned by incomplete or suspicious powers of attorney issued to people in confidential or, at least, close personal relationships to the person giving the power to the agent. The opportunities for undue influence are unbelievable, and have lead to sweeping changes in the New York State laws.

By signature on January 27, 2009, New York's Governor Paterson signed into law revisions to sections of the NYS General Obligations Law which governs short form of powers of attorney. Although it is unclear whether the enactment date of March 1, 2009 will be extended, the comprehensive revisions will result in a completely new form, and, in some cases, along with a separate formal rider required when the the Agent makes significant gifts using the Power of Attorney.

One change will require the agent to have his signature "acknowledged" (with the formality of a deed) on the power of attorney giving the agent the right to do the transaction. The power will not be effective unless the acknowledged (and notarized) signature of both the Agent and the person giving the power appears on the form. For further safeguarding, statutorily defined "major gifts" will have to be separately executed as a rider (SMGR rider), with two disinterested witnesses attesting to the signature. New York title companies may refuse to write title if the form is not followed particularly.

The bills (A4392 and S1728) were referred to the Judiciary Committees of the Assembly, and are expected to move quickly through the legislature. The delay has been requested to give additional time for the legal community to become fully educated about the required changes.

Perhaps now we can avoid the familial conflicts that often arise as our older generation needs the assistance of sometimes unscrupulous caregivers.

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Posted In: General Interest , Legislation-Regulation , Real Estate Hints and Help

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Did you know that New York State has in the past, and continues to, sell, give, and transfer portions of navigable waters to interested upland owners. What does that mean?

Ever wonder who owns the lands under the Hudson River? In river communities where water front property is valuable for its view, the land can also be valuable for land you cannot see-- the land under water.

“Land under water”' is land submerged by water, and includes that land below the high water mark in navicable waters (rivers), tidal water (estuaries), lakes and ponds, and, at times, can appear to be dry land (perhaps it was previously filled naturally by development). The owner of property on “dry land” is referred to as the “Upland Owner,” and is often benefited by actually owning the rights to the land under water. Generally speaking, New York State owns the land under all navigable lakes, streams, and rivers.

The State, however, does sell, give, transfer and alienate certain parcels of the mud under the Hudson River, Long Island Sound, and other larger fresh water lakes, ponds, etc. Often the ownership of this land underwater helps the upland owner install wharfs, docks, piers, and to fill the land where other owners (with no rights to the land under water) could not so improve their land.

The Public Lands Law contains a number of factors affecting who may apply for and receive interests in such lands. A distinction is made between an application for a beneficial grant for private use and a commerce grant for the public benefit.

Generally, grants for "purpose of commerce" are of limited character and subject to legislative control. The grant for commerce purposes specifies the nature of the use and is conditioned on the completion of the proposed improvements. Grants for purposes of commerce are strictly construed meaning that the owner of such right owns nothing more than what is specified in the grant as necessary to the purposes of it. Because it is limited, the State has the right to regulate the use of the granted property in the interest of the public and for the protection of commerce and navigation.

The type which grants "beneficial enjoyment" means that the owner has unencumbered fee ownership, and the land granted was not otherwise necessary for purposes of commerce. Once a grantee acquires title to the land under the water (e.g., Hudson River) soil, New York State cannot take away the grant, and the owner may exclude any other person from the land granted.

Obviously, the grant for "beneficial enjoyment" is broader and therefore more valuable to the upland owner.

The bottom line-- if you are considering the purchase of a waterfront home in Long Island, the Hudson River Valley, and particularly the river towns of Sparkill, Sneden's Landing, Piermont, Nyack, Stony Point, Haverstraw, Irvington, Tarrytown, Newburgh, Poughkeepsie, Saugerties, Hudson or anywhere else in New York State, including along any of the Finger Lakes; you should consult with your title company and real estate lawyer to understand whether and to what extent the property may come with underwater land.

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Posted In: General Interest , Real Estate Hints and Help

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The Appellate Division, Second Department, has issued a recent ruling dismissing claims for adverse possession in a case involving neighboring residential lots in Brooklyn.

Klose & Associates' clients purchased several lots in Kings County and commenced construction on a multifamily dwelling. As construction proceeded, the clients had to litigate over an eight inch strip of land lying on the other side of a fence which had, for more than 10 years, separated the driveways between their parcel and the adjoining neighbor (claimant).

According to the claimant's own testimony, the fence was installed (2001) jointly by the claimants and our clients' predecessors in title, and was positioned in the same place as the old fence. In dismissing the claims, the Court recognized that

A party seeking to obtain title by adverse possession must prove by clear and convincing evidence the following common-law requirements of adverse possession: (1) that the possession was hostile and under claim of right; (2) that it was actual; (3) that it was open and notorious, (4) that it was exclusive; (5) and that it was continuous for the statutory period of 10 years

Here, after close of discovery, we presented evidence establishing that the claimants cold not prevail on their adverse possession claims because they admitted cooperating with their former neighbor in constructing and maintaining the fence separating the driveway. Thus, the "possession" of the strip of land was not "hostile," because the consensual use of the area in question did not constitute an actual invasion of or infringement on our client's right to the strip of land on the other side of the fence. The court cited a long line of cases holding that, "When permission can be implied from the beginning, adverse possession will not arise until there is a distinct assertion of a right hostile to the owner."

Bottom line-- the term "adverse possession" is not simply-- I own the strip of land because I drive on it. The party claiming possession must show acts divesting the other of ownership rights. Do you homework, don't capitulate.Download file">View Case Here

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Posted In: General Interest , Real Estate Hints and Help , Real Estate Litigation

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When you are buying your house did you consider whether you can have a professional office, whether you can add an addition to the north side, whether you can live in the third floor attic? These are all questions relating to the building and zoning laws both of New York State and the local town, county or village where you are buying. So what questions should you ask your real estate broker, your building inspector, your lawyer.

Here’s a quick list of some of the issues you should consider when you look at the property, whether it is residential real estate or a New York City building.

Does the property have a certificate of occupancy?

If it does have a certificate of occupancy, can you use the property for the current purpose, or can you use it for the use you intend? If the answer is that the current use does not fit the current certificate of occupancy, the issue is what does local zoning say about the past use, and any intended future use?

For example, there is an old cottage on the property, which houses a tenant, but the house and cottage pre-date the zoning code. What happens when you buy the property? Is the tenancy “grand-fathered” as a non-conforming use under the zoning code? What happens if you seek to change the use, will it require some sort of variance? These are intensive factual questions which require significant inquiry.

Generally, as towns and villages develop into zoning districts, the various uses are separated into commercial, residential and mixed uses. Often parking requirements limit or change the scope or use of a property. Sometimes individual communities or owners seek “landmark” or “agricultural” or other special designation and require special approval by architectural, agricultural, or other landmark preservation commissions.

If you are consider a sub-division of the lot, the right to sub-divide is often dictated by local law, prior sub-division restrictions on the maps, and other state or local rules, which must be followed. You must know these before you buy because ignorance of the laws or rules or restrictions is not a defense (excuse).

Sometimes, in New York City there are unused “air rights” or “ development rights,” which can be bought and sold just like property. In various agricultural areas and rural zones of New York there are laws which permit owners to transfer unused development rights to adjacent properties.

The bottom line– all towns, counties, villages and other city government planning rules and regulations dictate, through zoning, how a property can be used. Your local land use attorney should be familiar with the codes and should be able to advise you as to the use of your property. Be warned and ask the questions.

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Posted In: General Interest , Real Estate Hints and Help

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