New York Real Estate Lawyer Blog

So, your next door neighbor wants to "legalize," install, or expand an airport in New York, what do you do? Hire a lawyer, participate in the process and call your legislators because any installation of an "airport" in New York requires legislative approval from the legislative body of the municipality. That approval, together with the "positive declaration" of the New York State Department of Transportation might just mean that you are dealing with an airport in your back yard.

Specifically, the Gen Bus. L, Section 249, states:

(3). Approval of privately-owned airports. No person shall hereafter establish a privately-owned airport or make an airport improvement to an existing privately-owned airport except by authorization of the governing body of the city, village or town in which such airport or any part thereof is proposed to be established or improved. The governing body of a city, village or town shall not authorize the establishment of such an airport or an airport improvement at a requested location unless in accordance with the standards prescribed by the commissioner of transportation. The local governing body of a city, village or town shall, prior to granting such authorization, request the commissioner of transportation to determine whether or not the establishment of such a privately-owned airport improvement complies with his standards.

GBL, Section 249 (Emphasis supplied).

When considering that issue, the Town Board must look to its Comprehensive Master Plan to consider whether that use is appropriate for that particular location. After positive declarations are issued by the Town Board and the Aviation Department of the New York State Department of Transporation, the applicant must then go through site plan review, and all other land use boards.

Bottom line-- vigilence is mandatory.

The NYTimes reported that a legendary sports figure being investigated as part of an ever widening criminal investigation transferred his house just four (4) months prior to the scandal hitting the national press. Forbes.com wrote an interesting article that discusses the reasons for such a transfer.

As reported in the article, the question of whether a real estate transfer is fraudulent or designed to divest creditors of assets will be a fact intensive review. In this case, the elderly embattled figure may have transferred the home to effect an estate plan, may have just learned that he is ill, or could have done it to avoid personal liabilty for the alleged coverup.

In New York, the creditors will have a long battle ahead. They need to prove a case, win a judgment, and then chase after the debtor.

The plaintiff in McColgan v. Brewer owned a part of what was a larger parcel of property owned by M. Kelley. During construction of the New York State Thruway, the state of New York acquired the middle part of the original Kelley parcel.

As a result, Kelley owned two separate parcels, one west of the Thruway and the other east of the Thruway. The physical layout required Kelley, and now the plaintiff, to use Albert's Lane to reach Route 32. Kelley's southern neighbors entered into a series of right-of-way agreements with the owners of the northern parcels to secure access to Route 21 via Alberts Lane in 1953. Kelley was never a party to these right-of-way agreements granting an easement between her property and Route 32.

The plaintiff purchased the Kelley parcels. Prior to purchasing the subject property, the plaintiff (1) hired the defendants Rothe Engineering & Construction and Donald Brewer to conduct a survey of the subject property, (2) hired the Attorney defendant Philip Kirschner to determine if the easterly portion of the property had access to Route 32 via Alberts Lane, and (3) obtained insurance from the defendant Chicago Title Insurance Company through a local agent, Abbacy Abstract, to insure against any losses that he would incur if the landlocked portion of the property did not have access to Route 21.

The plaintiff then amended the zoning of the subject property to develop and use it as a pipe yard. Thereafter, he was informed that the right-of-way agreement over Albert's Lane did not benefit the landlocked portion of the property. The plaintiff then filed a claim under his insurance policy, which Chicago Title Insurance rejected.

Here, the plaintiff has filed claims (1) against Rothe Engineering & Construction and Donald Brewer for negligence and breach of contract, (2) against Kirschner for legal malpractice, and (3) against Chicago Title for fraud and breach of contract.

At the trial level, (1) Chicago Title moved for summary judgment arguing Kelley's southern neighbor's right-of-way agreement benefited the Kelley parcels, (2) the plaintiff moved for partial summary judgment to hold that his landlocked property was not benefited by the right-of-way agreement, and (3) Kirschner moved to preclude certain expert testimony in the plaintiff's expert disclosure, and the plaintiff cross-moved for costs and sanctions based on filing a frivolous motion.

The trial court denied Chicago Title's motion for summary judgment, granted the plaintiff's cross motion for partial summary judgment, and denied the cross motions relating to the expert disclosure. Kirschner appealed on the grounds that the right-of-way agreement established a benefit to the plaintiff's property.

The court, ruled that Kelley's neighbors were the only grantees of the agreement stating, "As neither Kelley nor her successors in interest were grantees with respect to the right-of-way agreements with the other landowners, such agreements do not benefit the landlocked portion of plaintiff's property as a matter of law."

Regarding the Attorney Kirschner's motion on precluding expert testimony, the court held that Kirschner failed to demonstrate the plaintiff's actions were willful or that he was prejudiced as a result.

Bottom Line-- the case is going to trial against the attorney and the title company.

In today's real estate market of short sales, mortgages underwater, depressed prices and a buyer's market, where financing can be a tricky and arduous journey there is one contingency that may protect the buyer-- the appraisal contingency, often negotiated by attorneys for real estate buyers.

Stated simply, the appraisal contingency is designed to give a buyer the right to cancel the contract if the home does not appraise for the price the buyer agreed to pay. Take the case of a Florida couple who contracted to buy a house from for $620,000. The purchase and sale contract provided that the sale was "contingent upon this property appraising for no less than $620,000." The purchasers commissioned an appraisal which apparently came in at $560,000, and refused to close.

In response, the Sellers secured an appraisal which valued the real estate at $635,000. The sellers sued for breach of contract, arguing that any appraisal of $620,000 or more obligated the purchasers to buy the house. The purchasers argued that since it appraised for less (by their appraiser) they could terminate. The Florida appellate court favored the buyers, ruling: "In our view, 'appraising for no less than $620,000' means that no appraisal may be less than $620,000," the court ruled.

The Bottom Line-- contingencies should be written in full sentences. For example, this is a common contingency in a New York Residential Real Estate purchase:

Purchaser's obligations hereunder are contingent upon the appraisal of the premises conducted on the behalf of the Purchaser, being in an amount equal to or greater than the purchase price set forth herein. In the event the appraised value is lower than the said purchase price, purchaser shall have the option of canceling this contract on written notice to seller’s attorney.

So, you want to buy a house, condominium, cooperative apartment or vacant land with your significant other in New York. You have been serious about this life partner for years, but you aren't bound by the typical bonds of legal matrimony.

Did you consult with your real estate attorney, did you ask that attorney about a partnership or "co-habitation" agreement? What are you going to do if you are no longer interested in "cohabiting?" Too many times, people don't ask these questions, and get burned later. Take for instance the common predicament of this individual.

As a real estate lawyer, I always ask unmarried couples whether they want a basic partnership agreement about what happens when they dissolve their relationship from a real estate perspective. In addition to a real estate partnership agreement, non-married couples should consider a cohabitation agreement, which is a contract that includes provisions about each partner's separate property, debts and financial responsibilities and spells out the division of goods, property and responsibilities should the relationship dissolve.

Bottom Line-- as a lawyer, we get paid to think about the solutions to common problems that might arise from your legal status. You should not ignore the advice of your attorney, and you should proactively seek this information. Which you did by reading this blog.

Do you remember the 1990 release of Pacific Heights where the young couple renovates their home and takes a nightmare tenant who refuses to leave. Whether you are a tenant or a homeowner, these river village towns in suburban New York incubate potential problems between unrelated families living under the same roof, sharing utilities, driveways, even entrances. What a complex relationship.

At the core is the landlord’s ownership interest in the land, which may be devised, lent or leased to a tenant. In exchange for paying rent, the tenant is supposed to be able to “quietly enjoy” the “demised space” without interference from the landlord, but subject to certain basic written or unwritten rules. Sometimes the tenant fails to pay rent, or the landlord fails to provide a clean, safe, warm place to live. Both parties jealously guard their rights (their castle), and feel indignant when the other fails to live up to their end of the “bargain.”

That bargain generally comes in two forms, either with a written lease or a “month to month” tenancy. Generally, a written lease has well developed language setting forth in plain language the rent, security, term, location, and the nuances of daily living by which the landlord expects the tenant to abide. Two rules of thumb for landlords: the security should be sequestered in a separate bank account even for a two family house; and the right to retain it at the end of the lease is not a given, meaning you have to follow the rules if there is damage.

The tenant is assured the right to live at the location so long as (s)he pays rent. Two rules of thumb for the tenant: respect the property you live in; and the security is NOT the last month’s rent. Note: while written leases often obligate the tenant to pay the entire term of the lease in the even she has defaulted in paying the rent; the landlord has a responsibility to “mitigate” her losses by finding and re-letting the apartment.

When the rent goes missing, the landlord has a problem: how to get the tenant (now interloper) out from under the same roof through an “eviction.” There are two main points in any eviction– the right to recover and secure the property; and the right for a money judgment for past due (and sometimes future or “accelerated”) rent. In New York, if the tenant fails to pay rent, the landlord may evict by sending a three (3) day notice of non-payment, and commencing a non-payment proceeding in the local Justice Court (Nyack, Upper Nyack, South Nyack), or the Town of Clarkstown. The Justice Court has the power to hear any amount of damages and consider the eviction issues. A tenant may be entitled to cure the default by paying the rent and stopping the eviction.

Alternatively, assuming non-payment, or other material breach of the lease, the landlord could send a thirty (30) day notice to surrender the apartment, and may commence an eviction within very specific time frames. Assuming that the tenant has been personally served (process server) with notice (summoned) to the court, the court may issue two types of relief: a warrant of eviction; and a money judgment, plus attorneys fees and other court costs. The charges add up quickly especially if the lease permits attorneys fees, and a sheriff actually has to perform the eviction. At the end of the eviction there are two separate documents, one, a warrant, demands that the sheriff evict; and a money judgment which is subject to collection.

Sometimes tenants counter-claim or defend their obligation to pay by arguing that the landlord “constructively” evicted them by interfering with the “habitability” or quiet enjoyment of the apartment– i.e., the roof leaks, mold exists, floods prevented safe and habitable space. Generally, these issues do not rise to the level where the tenant avoids the entire lease (or obligation to pay).

The Bottom Line–pay your rent, live in harmony; avoid your rent, cause problems. The nuances of the battle become more piqued if you are also living under the same roof. Good luck.

Almost universally as a house closing or refinance closing approaches, I am asked why the itemized cost for “title insurance” is so high. Sometimes, clients even tell me that they do not have to pay for “title insurance” because they are putting more than twenty percent down, but have confused Private Mortgage Insurance (PMI) with “title insurance.” So, what is title insurance and why do you need it?

To begin with, PMI is insurance designed to protect lenders against losses should the borrower default, and is required by lenders for virtually all borrowers who put less than twenty percent (20%) down. It has nothing to do with who owns or has “title” to the property, and who insures that no one is going to claim against it.

Title insurance is a contract where an insurer guarantees a lender or a home owner that there are no known claims or defects in title caused by past events such as mortgages, liens, or possession of property by another person not the owner. Title insurance companies search public records to develop and document the chain of title and to detect known claims (defects) in the title. For example, the title search may identify an old home equity loan that is still outstanding or that a contracting firm filed a mechanics lien against the owner years before. If they missed those defects, then the title insurance company would pay to have them fixed, even if it meant litigation.

Attorneys universally recommend that their clients get title insurance (“owners policies”), and banks require owners to pay for insurance (“mortgage policies”) to prevent prior owners from interfering with their ownership and lien rights in the property. In most purchase situations in New York the attorney will order the title insurance policy, while banks will likely order the search in a refinance. These one time fees are really insurance premiums paid at the closing.

The importance of title insurance is often maligned but is becoming increasingly clear in this era of post-foreclosure investments in previously “foreclosed” properties. As the media reports lenders halting their foreclosure proceedings in the wake of sloppy foreclosure paperwork, the issue for the new owners becomes– what would happen if people who lost their homes to foreclosure somehow persuaded a judge to overturn the proceeding after the bank turned around and sold some of those foreclosed homes to new families. Title insurance is designed to protect the new owner from this sort of claim. Obviously, its importance cannot be understated. After accepting that premise, the next is to hire a local real estate attorney who can review that title insurance policy to determine whether there might be hidden exclusions in such title policies that might create problems after you close.

The Bottom Line– if you are purchasing a home, and sinking all that you have into your “investment,” whether that is for your own residence or because it is a “hot deal” in foreclosure, purchase title insurance. In some cases, especially if you expect to see immediate gains in the market value, you may want to purchase an additional “market value rider,” which insures the title to the property above and beyond the price you paid to purchase.

Do you hire a doctor or a lawyer without checking their licenses, their pedigree, and their referrals? So, why is it that when it comes to investing in their greatest asset (the home), so many people become victims of dishonest contractors who demand large advance payments for projects, and then fail to complete the work fully or competently. What are your rights.

In Rockland County, there are several resources designed to protect us from unscrupulous home improvement contractors. The first, Rockland County Code, Section 286, empowers the Office of Consumer Protection to license and regulate nearly all home improvement contractors and transactions. [Rockland County Law can be found at http://www.ecode360.com/?custId=RO1021, Chapter 286].

The comprehensive law covers everything from licensing individual contractors; (286-7) the contents of home improvement contracts (286-12); the prohibited acts (286-10); the penalties for not complying with the law (286-21); and the powers of the Board. While the nuances of such law are complex, the goal is to provide minimum standards to avoid the main problems that homeowners have with contractors.

Among various prohibited activities, the law prohibits the “willful failure to perform;” “misrepresentation;” fraud in the execution of or in the material alteration of any contract; failure to pay any owner, supplier, vendor, subcontractor, independent contractor, employee, or other person arising out of any home improvement contract. While all of these activities cause problems, the failure to pay others exposes the home owner to liens from others, including a mechanic’s lien. The failure to comply with the law exposes the errant home improvement contractor to loss of their license, civil and criminal fines, criminal prosecution, and various other stiff penalties.

To avoid these problems, Section 286-12, requires a panoply of provisions to be incorporated into the home improvement contract, including: approximate dates when the work will begin and on which all construction is to be completed; a description of all work to be done, the materials or material allowances and equipment to be used; limitation on the size of the down payment (shall not exceed $1,000 or 15% of the contract price); a schedule of payments showing the amount of each payment (contractor not permitted to receive more than 100% of the value of the work performed on the project at any time); a full and unconditional release from any claim of a mechanic's lien by the contractor upon completion of any payment or stage; a required one-year warranty guaranteeing the quality of workmanship and a three (3) day right of rescission.

Not all counties in New York have such comprehensive consumer protection laws. As a result, New York’s Attorney General set up a second comprehensive location to assist homeowners and contractors wend their way to a successful relationship– www.nyknowyourcontractor.com.

Among the common sense, but oft overlooked tips: know what work you want done; know what permits are needed, look at multiple contractors; figure a proposed time line for when each phase of work will be done and paid for; get references, and check them; get proof of insurance (including builders risk and workers compensation); check licenses; pay incremental payments until the work is completed; and withhold final payment until all the work is completed and certificates of occupancy are finalized. Like attorneys, contractors are required to put your incremental payments into an escrow account and use it only for your job until it is substantially complete. Ask whether the Contractor is bonded.

Bottom line– While not every home improvement contract and project warrants such careful analysis, our government has enacted laws protect homeowners from themselves. If a contractor is unwilling to abide by the minimum protections set forth in the law, or is on the list of “bad” contractors on line, have the sense to move on. Check the Attorney General’s web site for a listing of contractors with judgments or substantiated complaints against them.

[Dutchess County, New York]. When is a television monitor a "sign," under Rhinebeck Zoning Enforcement Regulations. That is a battle being waged between our client and the Village of Rhinebeck, New York. Since this is a pending matter, we will permit the Poughkeepsie Journal newspaper account to speak for itself.

Bottom Line-- The First Amendment of the US Constitution is a powerful tool, supported by the New York State Constitution which provides even broader protection to freedom of speech.

Judge for Yourself

Village of Rhinebeck Code 12-63 (Definitions)

SIGN
Any material, structure or device, including awnings, composed of letters, pictures or symbols designed or used for the purpose of attracting, or which does attract, the attention of the public to the subject matter thereof and located out-of-doors, on the exterior of a building, or inside the building within two feet of the window or in a manner to be viewed primarily by passersby. Any striping, lighting, corporate color schemes and other graphic design intended to serve as an attraction or to call attention to the site will be defined as a "sign."

In what should be an interesting trial in Rockland County, New York, the Second Department, (appellate court) recently sent a case to trial over parking in a State Right of Way. Here are the facts.

Plaintiff commenced action seeking "damages" arising from an alleged "nuisance",and a judgment declaring that she had the "exclusive right" to use a certain parking area located in a New York State owned right of way. The homeowner (an attorney) alleged that she purchased a parcel of land on NYS Route 9W in Piermont, Rockland County. The parcel had approximately 45 feet of road frontage along the (River Side) of Route 9W. A non-party neighbor owned a parcel with approximately fifty (50) feet of road frontage, and the target Defendants own a parcel to the east of the non-party, but had no direct access the public roadway (Rt. 9W), except for a "right-of-way" over the Plaintiff's parcel via a common stairway and walkway shared by all three. Rt 9W has no parking restrictions, and the Defendants have been parking one of their vehicles in the parking area in front of the Plaintiff’s parcel because they have two small children, and crossing the road is exceedingly dangerous.

The trial court concluded that the Plaintiff had no right to enjoin the Defendants from parking on the State right-of-way, but the Appellate Division disagreed and sent the matter to a full blown trial. Finding the situation to be "unique," the Court held that there are issues of fact as to whether the Defendants' continual parking of one of their vehicles in the parking area in front of the Plaintiff's parcel unreasonably interference with the plaintiff's right of ingress and egress, and whether there might be a safe alternative place for the Defendants to park.

But wait, how can that be? Why should the Plaintiff have any greater right to park on the public highway than either of the other two people who share the common right to use the stairs. What happened to that age old rule-- The early bird gets the worm . . . or in this case, the parking space along a PUBLIC Highway.

Bottom line-- Seems like the Plaintiff has a heavy burden to prove that she has some sort of superior right to the parking on a public highway. These issues in our suburban neighborhood require careful analysis and good lawyering. Apparently it doesn't hurt if you are a lawyer too (here the Plaintiff herself is a lawyer).

Real Property Taxes are at the front of everyone's mind these days because property values in New York have declined so dramatically. Did you know that the tools to grieve your taxes are often right at your finger tips.

For example, in Dutchess County, the Real Property Tax Service Agency’s Parcel Access system provides tax assessment information for your parcel and your neighbor's parcel, including development plans, property tax estimates and other information supplied by local municipal governments. Updated twice a year to coincide with the submission of Tentative Assessment Rolls every May and every July of each year, the Parcel Access allows Search Tools by type of property, name of debtor, and by map.

The website’s main objective is to function as a tool for real estate buyers and sellers to have access to and view assessment information. If a seller disagrees with a listed assessment, however, value the home owner may "grieve" those taxes by seeking a review first by the assessor and then by a formal review with the Board of Assessment Review.

The Dutchess County, New York, GIS, Parcel Access system can be accessed here.

As a result of recent Court of Appeals and Statutory Changes in New York, litigation and law suits relating to adverse possession are wending their way through trial and appellate courts throughout the state.

Adverse possession is a method of gaining title to property. Although not the favored means to procure land, a person may acquire title to land by adverse possession if she holds the property in a manner that conflicts with the rights of the true owner for a period of time.

There are five elements that establish a claim of adverse possession. Possession must be 1) hostile and under claim of right, 2) actual, 3) open and notorious, 4) exclusive, and 5) continue for the specified period as determined by jurisdiction. Adverse possession is generally a question of fact to be decided by a court. Recent decisions in New York have included:

In Walling v. Przybylo, the plaintiffs deposited fill and topsoil, dug a trench, installed drainage pipes, and an underground dog fence and a bird house on a disputed parcel of land. The court ruled that the plaintiffs were adverse possessors because they had actually, openly and notoriously, exclusively and continuously possessed and ‘cultivated’ the disputed parcel for the ten year required period. Notably, the court held that the plaintiff’s potential knowledge that the parcel was owned by the defendants was inconsequential because adverse possession is fundamentally the defendants’ compliance to the plaintiffs’ open ownership. (2006).

Application of the Walling Decision:

1. First Department: In United Pickle Products v. Prayer Temple Community Church, 843 N.Y.S.2d 1 (N.Y.App. Div. 1st Dept. 2007), the defendant leased the disputed property to the plaintiff since 1979. The plaintiff brought suit to quiet title under the doctrine of adverse possession arguing the defendant had made no claim to be the rightful owner during which the plaintiff’s use of the property was actual, exclusive, open notorious, and continuous for at least ten years. Applying an interpretative analysis of Walling, the court articulated the exclusive access to the disputed lot by the plaintiff amounted to hostile possession, or ‘cultivation.’ This type of ruling applies in New York City and the Bronx Counties.

2. Second Department: In Merget v. Westbury Props., LLC, 885 N.Y.S.2d 347 (N.Y. App. Div. 2nd Dept. 2009), the plaintiffs brought an action to quiet title based on adverse possession alleging they cleared debris to use the disputed parcel of land as duel yard and parking lot as well as maintaining the property by planting trees and shrubbery for the requisite ten year period. As in Walling, the court ruled in favor of the plaintiffs reasoning that there was not only clear and convincing evidence that the plaintiffs’ possession of the property satisfied the elements of adverse possession by being actual, open, notorious, and exclusive, but more importantly, the plaintiff’s had ‘usually cultivated or improved’ the disputed lot during the ten years. This judicial department handles Nassau, Suffolk, Dutchess, Westchester, Rockland Counties.

3. Third Department: In Robinson v. Robsinson,825 N.Y.S.2d 277 (N.Y.App.Div 3rd Dept. 2006), the plaintiff sought title to the property by virtue of adverse possession. The plaintiff stated he had operated a seasonal canoe rental and camping business since 1987, and in doing so he had placed signs on the property, mowed the grass, cleared debris, maintained shrubbery, and blocked the use of the property by trespassers. Similar to Walling, the court articulated that the plaintiff’s cultivation and improvement on the property through maintenance satisfied the elements of adverse possession. This judicial department rules in upstate New York and includes Ulster County.

The bottom line-- you must hire a competent New York State trial and real estate attorney to assess the situation in your specific case. Documents, testimony and actions may change the course of the claim and your right to claim or your defense to adverse possession in New York. At Klose & Associates, we carefully investigate these situations.

Last month, the New York Court of Appeals ruled that the state of New York may legally seize private land for private developers use. In the 6-1 decision, the court allowed the seizure of a 22-acre plot located in downtown Brooklyn – effectively allowing the Atlantic Yards Project to proceed – reasoning it would allow for improvements on the “blighted conditions” of the property. The recent ruling falls in line with the 2005 decision by the Supreme Court in Kelo v. City of New London that similarly allowed a corporation to seize private homes and businesses to build a research campus.

The New York court’s ruling has raised arguments from opponents that ownership rights amount to being worthless if a government deems private land for the ‘public good.’ The Atlantic Yards Project, headed by Forest City Ratner Cos., seeks to develop office towers, apartments, and most notably an $900 million arena for the NBA’s New Jersey Nets. The only dissenter on the court’s bench stated, “It might be possible to debate whether a sport stadium open to the public is a ‘public use’ in the traditional sense, but the renting of commercial and residential space by a private developer clearly is not.” The New York Court of Appeals, however, ultimately ruled that the definition of ‘blight’ is a matter for the legislature, not the courts, to change.

This blog has identified recent legislation in the State of New York discussing adverse possession. Adverse possession is a method of gaining title to property based upon use of the property (not written). Although not a favored means to procure land, depending upon the facts a person may acquire title to land by adverse possession if she holds the property in a manner that conflicts with the rights of the true owner for a period of time.

There are five elements that establish a claim of adverse possession in New York. Possession must be 1) hostile and under claim of right, 2) actual, 3) open and notorious, 4) exclusive, and 5) continue for the specified period as determined by jurisdiction. Adverse possession is generally a question of fact to be decided by a court. Since the enactment of the statute and recent decisions by the Court of Appeals in New York, it is important to consider what judicial department you might be located.

For example, in the First Department, in the case entitled Eller Media Co. v. Bruckner Outdoor Signs, the plaintiffs constructed a billboard on a disputed parcel and surrounded that billboard with a chain-link fence. The defendants appealed the trial court’s summary judgment in favor of the plaintiffs arguing that the disputed parcel was held by a city for a public purpose. The court disagreed and determined that the plaintiffs or claimants had not only satisfied the elements of adverse possession because its use was hostile, open and notorious, exclusive, and continuous for more than the ten year statutory period, but that the parcel was not held for a public purpose and therefore not immune to the plaintiff’s adverse possession claim.

At Klose & Associates, we handle real estate litigation including adverse possession claims in the first department. You should always contact a specialized New York real estate litigation attorney if you have concerns about adverse possession.

Continue reading "Recent Highlights in the Neighbor Wars-Adverse Possession" »

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.

Bottom line, you can never be too careful in today's world of sophisticated criminals. At Klose & Associates, we take care to assist our clients to thoroughly investigate every real estate transaction.

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.

Enter Judge M. Schack, 64, of New York City. Increasingly gaining respect for his no-nonsense approach to dealing with foreclosure motions, he has arguably become an exemplar of holding banks to the simple rule, “If you cannot prove ownership, you cannot foreclose.” Schack has tossed out 46 out of 102 foreclosure suits that have come before him in the past two years chastising banks for their sloppy and mistake ridden paperwork. Although a few protests from bank officials who assert Schack is unfairly acting as judge and jury are acknowledged, positive reactions from the legal community for his activism may prove to ring more loudly in the long run if more federal and state judges follow his example.

Bottom Line-- Just because the bank says it wants your house, doesn't mean it is entitled to it. You should hire competent New York legal assistance to sort out the complex and tangled web of ownership. For more on Judge Schack, read here.

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.

Common provisions may include a minimum house size or that a minimum percentage of housing exterior must be brick, or that no home business or occupation be operated out of the house (especially noise producing occupations). If applicable, the owners within the sub-division have legal standing to bring a complaint against you if you fail to comply with any provision of the agreement.

To avoid violating your declaration of restrictions, it’s in your best interest to understand the meaning and scope of the terms by reading all the hard to read attachments to the title inspection provided by your attorney. As a buyer, demand to read the nuances of the title policy, read the "notes" on the map, read the declarations of restriction, understand the easements. Ask your attorney to review them and discuss them with you if you’re unclear or confused.

The Bottom Line-- If you are not careful, you may be buying a house that requires you to fix the road, stop a leak in a dam, or trim your trees. Read the agreements that impact your life in a sub-division.

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,

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.

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

Eastchester, New York, homeonwers are at the end of their proverbial rope. When the Town of Eastchester failed to address the flooding and sewer backups in their Westchester County home, they took the only possible next step-- they filed suit.

Here's the link to the article.

We cannot comment on this pending litigation, but it is one example of how homeowners can take some control over their own destiny by commencing litigation in New York.

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.

The study results are based on a survey of insurance companies that provide legal malpractice coverage in the United States and Canada, with 18 U.S. and six Canadian companies responding to the investigation.

Finding lawyers willing to take New York State legal malpractice claims against other lawyers can often be difficult.

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.

While the filing of the affidavit does not invalidate the transfer or lease of real property, and does not create a lien, it requires the Seller to establish an escrow of monies to "protect" the brokerage commission.

Under the amendment, the so called "Notice of Entitlement" to the commission has been expanded to include claims for transfers of cooperative units; and will be now be recorded upon the "lien docket."

If the property is a one-to-four family dwelling, condominium unit or cooperative apartment, used as a residence and there is a brokerage dispute where the Notice of Entitlement has been filed; the seller shall establish an escrow fund, as follows,

"the lesser of the net proceeds of the sale or the amount of the unpaid portion of the compensation agreed to in such written contract [the brokerage agreement] shall be deposited by the seller… with the recording officer in whose office the affidavit was recorded…until the rights of the seller and broker to such monies has been determined by order of a court of competent jurisdiction…",

Real estate professionals should understand that there are very specific procedures that must be provided, including (i) the brokerage contract includes a notice, as required by the law, (ii) the Notice of Entitlement and affidavit has been recorded, and (iii) the broker serves a copy of the affidavit on the seller prior to closing.

Because the law is still new, it is unclear what will occur if the seller fails to deposit monies into the escrow account since the law does not "create a lien or encumbrance against any real property" and does not invalidate "any transfer of real property".

The term escrow generally means a pool of money held by a third party until the matter can be adjudged by some court or other tribunal. Here, the idea is that buyers and sellers of real estate can deposit the money into a fund and fight over it knowing that there is a pool of money at the end of the dispute. The measure does not pre-judge who is guilty and who is innocent, but provides the outline of a process for keeping the funds available in New York State.

The bottom line-- how often does your attorney tell you,"the cost of fighting is going to be more than the cost of recovery, just settle or give up?" Now, the money will be tied up, offering more of an incentive to capture that money. Call your new york state real estate litigation lawyer if you are uncertain.

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.

Apparently the advertised penthouses are not the "one of a kind" oases, perched on top of one of the city's most magnificent addresses, which originally induced Vavilov to risk $10.3 million down.

The bottom line-- be sure you have your house inspected before you plunk down your life savings to buy that fixer-upper, even if it does cost $55 million.

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.

Critics of the study note that cold hard statistics mean nothing when contemplating settlement of a particular case because each case rises and falls on specific facts, under laws which are decided by different judges. The study tried to account for those possibilities, however, finding that factors such as years of experience, the lawyer’s law school, and the size of the firm did not really impact whether the parties made the right decision to go to trial.

The bottom line– A good lawyer has to be able to tell clients that a judge or jury might see the case differently, and they might lose at trial– settle, don’t gamble. For the client and the attorney making the decision-- remember, there are many factors -- fees included.

Remember the old adage-- good fences make good neighbors? Well that's not always the case, especially as neighbors get closer and closer to each other.

In this litigagion, the Defendants owned three residential parcels which adjoined property owned by the Plaintiffs. The offending fence was located three (3) feet within the boundary lines of the Plaintiffs’ parcel and extended the length of the Defendants’ property.

The Plaintiffs notified the Defendants that the Plaintiffs were going to replace the fence with a new fence and were going to re-locate it to their property line. That should clarify things for each of the parties-- or so they thought.

The Defendants did not want to see the fence moved so they objected, and the Plaintiffs commenced action to quiet title and "eject" the Defendants from the use of the land lying between the fence and the actual property line. The Defendants counterclaimed that they owned the three foot sliver of land by "adverse possession."

The Supreme Court, Nassau County, granted the Plaintiffs’ motion for summary judgment and dismissed the adverse possession claim because there was no proof that the land between the fence and the property line was “usually cultivated or improved” by the Defendants or “protected by a substantial inclosure”, as required by Real Property Actions and Proceedings Law, Section 522 (“Essentials of adverse possession under claim of title not written”). Contrary to the Defendants' arguments, the fence was not theirs.

According to the Court,

“substantial and obvious alteration is required” to establish that the land was “usually cultivated or improved … Even the placement of a structure, such as a garage, is not enough to establish hostile possession by improvement if that structure lies mainly on the claiming party’s land and the encroachment on the disputed property is slight”. In addition, “the mere presence of a fence is insufficient [to show a ‘substantial inclosure’].

The morale of the story according to the Court was that there must be a showing that it was a substantial barrier erected by the party claiming adverse possession, without the consent of the owner”. RSVL Inc. v. Portillo, decided September 11, 2007, is reported at 16 Misc.3d 1137 and 2007 WL 2669463.

In any adverse possession claim, as with any factual dispute that reachs the level of litigation, minute and often overlooked facts play a role in the court's determination. You, as a good neighbor, should contact experienced real estate litigation counsel to consider how the facts of your case might change the outcome.

Bottom line: hire a surveyor to place your fence properly, and get competent legal advice from a New York real estate litigator or civil trial attorney.

Mortgages/Predatory Lending. A New York court recently denied foreclosure and stayed the proceeding seeking to take back the home finding that the original lender violated New York ’s “predatory lending” statue, Banking Law, Section 6-L (“High-cost home loans”).

The Court scheduled a hearing to determine damages incurred by the homeowner and indicated that the relief may actually include the voiding of the mortgage, return of all mortgage payments, return of the expenses of obtaining the loans and attorneys’ fees.

While it is still early in this mortgage crises, and the effects remain to be seen, the lender's conduct in question included (i) lending in excess of the purchase price to enable payment of
points and closing fees, leaving the borrowers with negative equity in the property; (ii) financing
of fees and points in excess of three per cent of the principal amount of the loan; (iii) the failure
to undertake the “due diligence” required regarding the borrower’s ability to pay a “high cost
home loan”; and (iv) not issuing to the borrower a required “Consumer Caution and Home Ownership Counseling Notice”.

Continue reading "Predatory Lending Practices May Defeat Your Foreclosure in New York" »

That is the question in a recent lawsuit filed in Rockland County Supreme Court.

Most real estate attorneys would say that closing with out a certificate of occupancy on a newly constructed house is not a good idea, even a departure from accepted standards.

A certificate of occupancy is the legal notice by the municipality that the house is habitable and constructed in accordance with the building permit. Accordingly, when purchasing a residential piece of real property to be occupied as a dwelling, the attorney should recommend a certificate of occupancy. The failure to have a c/o means that occupancy of the premises "illegal," and the failure to have that document means that any occupancy violates the law.

Although we cannot comment on pending lawsuits, here are the contentions of the parties.

As we reference on our web-site (above), the New York State Property Condition Disclosure Act requires sellers to complete the state mandated form or offer the buyers a $500.00 credit at closing for failure to complete and provide such form in the real estate transaction. Many sellers attorneys recommend that sellers simply provide the credit because you risk litigation over "latent defects" after the real esate closing.

For example, in one recent case the Seller-Defendants answered “No” to certain questions on the New York State Form, and the Plaintiff-Buyer’s home inspector did not report that the property had any material defects. After closing, however, the Buyer allegedly discovered material defects in the property, and commenced suit against the old sellers. The litigation asserted causes of action in fraud and for breach of contract stemming from the allegedly defective conditions

The Supreme Court (trial court) permitted the suit to proceed on the issue of breach of contract and fraud. The Appellate Division, Second Department (appeals court) reversed in part, and dismissed the cause of action for breach of contract because the contract provided that the premises had been inspected and was being sold “as is”.

The appeals court, however, permitted the cause of action alleging fraudulent concealment to proceed against the sellers,

the alleged false representations in the Disclosure Statement support a cause of action alleging fraudulent misrepresentation in that such false representations may be proof of active concealment”.

See Simone v. Homecheck Real Estate Services, Inc., decided July 24, 2007, is reported at 2007 WL2127261.Real

The attorney representing you in the sale will have an opinion as to the property disclosure statement, ask the attorney.