Articles Posted in Real Estate Litigation

Surrogate Courts in New York may require a probate bond – also called an “executor bond,” an “administrator bond,” or a “trustee bond” – when an individual is appointed to handle the distribution of a deceased person’s estate. The bond acts as a guarantee that the estate’s debts will be paid and the assets will be distributed properly. Before a bond will be issued, bond companies will review the credit history of the person administering the estate to assess their risk in issuing the bond.

Depending upon the facts and circumstances, the Surrogate Court sitting in Rockland, Dutchess, or Westchester County, New York, may require a bond if the gross value of the probate assets for the estate is $30,000 or more. N.Y. Surrogate’s Court Procedure, § 801-1(a) and § 1301-1. The amount of the bond required is determined by the court, but is generally equal to the value of the property in the estate, including rents on real property for 18 months and the “probable recovery” of any lawsuit being prosecuted by the fiduciary of the estate. N.Y. Surrogate’s Court Procedure, § 801-1(a). The size of the bond will depend upon the number of “creditors” and the claimed amount due.

The premiums on the bond are paid from the deceased person’s estate. Bond premiums are generally paid annually until the estate is settled, i.e. all of the property has been distributed. In your will, you may direct that the court not require a bond. By doing this, you will save your estate money on bond premiums, but there will no longer be a third-party guarantee ensuring that your estate is properly distributed.

In February 2011, the Court of Appeals for the Second Circuit (including New York) handed down a decision that should have every attorney dotting their “I’s” and crossing their “T’s.” In Fischer & Mandell LLP v. Citibank, 632 F.3d 793 (2d Cir. 2001), the court affirmed summary judgment against a law firm who deposited a client’s check into a bank, and disbursed the funds as requested by the client before the check cleared the account.

The facts were as follows: in January 2009, plaintiff-appellant, Fischer & Mandell LLP, received from a new client what appeared to be an official Wachovia Bank check. Id. at 795. The check was made payable to the firm, and the firm was advised that it represented partial payment of a debt owed by another entity to the client. The firm then deposited this check for $225,351 into its account at defendant-appellee, Citibank. In the usual case, if there is enough money in the account to cover the check, the bank will make the funds available immediately, before the check clears-that is what happened here. Id.

The client then requested two wire transfers of a portion of the funds-one to South Korea, and then next to Canada. After both transfers were complete, the Federal Reserve Bank returned the check as dishonored and unpaid. Id. at 796. A Citibank representative then telephoned the firm to advise them of the counterfeit check. Citibank then charged back to the trust account the amount of the check and a $10 returned check fee, resulting in an overdraft. Id. Next, Citibank debited an amount necessary to satisfy the overdraft from a money market account the firm had at Citibank.

One of the most stressful, but enjoyable moments in your life is when you purchase a house. Most would describe it as an experience like no other. Most would also agree that just going out and finding a plot or house you like and immediately buying it is ill advised. Since there are many things that could be wrong, getting a land survey before you purchase the land is the best bet.

Land surveys serve many purposes. The survey shows the boundary measurements of the land to make sure that the plot you think you are buying is actually what you are buying. The survey can tell you what lies on your property and what falls out of your property line. It also shows features of the property such as trees, buildings, fences, sidewalks, driveways, and the like.

A land surveyor can also be very helpful when purchasing a piece of real estate that you hope to eventually build on, as they are often familiar with zoning and building regulations. Further, if you plan to subdivide the land, a survey will provide the necessary measurements to determine whether that is possible for you to do. Essentially, the surveyor is able to take into consideration what your objective is with the land, and reach conclusions that will either make you want to go forward with the transaction or realize that you almost just entered into a very bad deal.

So you have finally updated your home by addition, new kitchen or other improvement. You tried doing it by the book, went through the normal channels; obtained estimates, interviewed contractors, investigated their references and made that home improvement using your hard earned dollars. The work commences, is substantially complete and your contractor suddenly disappears, starts showing up sporadically, or starts pressuring you for more money. Ultimately, you dispute the contractor’s view of the costs, his final project or some of the final punch list items and make the decision to withhold payment. What happens next? The Contractor likely files a mechanic’s lien with the county clerk.

New York

Since the home improvement was done to your “real property”, the contractor has the legal right to file a lien, without legal process or litigation. In New York, a contractor who has not been paid for services rendered or materials furnished for the improvement of real property can file a mechanic’s lien against your home. See N.Y. Lien L., Art. 3, § 40 (2010). In other words, the unpaid contractor has the power to get in the way your ability to transfer or finance your real property (i.e. sell or refinance your home) until it is paid.

In New York, mechanic’s liens are filed in the office of the county clerk where the property is situated, and can be filed without first commencing a law suit. Once properly filed, the mechanic’s lien-like an outstanding mortgage-is an impediment to clear title. New York allows a contractor to file a mechanic’s lien against your home even if the underlying “contract” was oral (not in writing). Cynically, even though the work conducted may not have been what you wanted or you do not accept the work, the contractor may seek to “enforce” their right to payment through a lien without intervention of a court. This turns the normal idea of “due process” on its head, giving the contractor (and others) significant power.

This seemingly unfettered right to encumber real property without process does not come without a a responsibility. The law has several safeguards to protect homeowners. First, although a contractor does not need a homeowner’s permission to file the lien (and in New York, does not even need to first notify the homeowner about filing) there are stringent requirements that must be met in order for such lien to be valid.

For example, the home improvement contractor must file the lien in the county clerk’s office, then notify the homeowner of the filing by sending a copy of the lien by both regular and certified mail within thirty (30) days of the filing date, and then finally must provide the clerk with an “affidavit of service” advising the clerk that the homeowner has been properly notified of the lien’s filing. More importantly, if the contractor wilfully exaggerates the amount or nature of the lien, the law permits a counter-claim for treble damages and attorneys fees. Also, the encumbrance on your title does not last indefinitely. The contractor must file an action to “foreclose” the lien within one year, or seek court intervention to extend its duration.
Generally, the liens expire on their face after one year (unless extended), and after three (3) years in the eyes of most title companies.

The Bottom Line

Be careful. When contracting with the home improvement contractor protect yourself by requiring “lien releases” at each stage of the construction. When a dispute is inevitable, be sure that you have the paperwork to show how much you have paid and how much you agreed to pay. If it’s a really big job, pay an attorney a flat rate to advise you on the contract.

We at Klose & Associates help contractors and home owners realize clear agreements as to what improvements are going to cost, and how to handle the disputes that arise.
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When I bought my house I saw some unexplained pipes in the wall. The owners said that the house was heated by natural gas, they had never used oil. The inspector made no mention of the potential that there might have been an underground tank. I wasn’t taking any chances. I called a tank investigation company.

Under the Navigation Law of New York, the owner is absolutely and unconditionally responsible for oil contamination. In fact, the Department of Environmental Protection is entitled to clean up the site and bill the owner for the costs associated with cleanup.

Luckily, the tank inspection company found the tank (1000) gallons, and we refused to close unless the Sellers cleaned up, which they did at a cost of more than $30,000 (often not covered by home owners insurance). That would not have been a happy day for a new home owner. I learned my lesson, and I try to impart that knowledge to my clients.

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.

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.

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.

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.

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