New York

Buying Your House Does Not Have to Be a Hassle

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A Primer on Considerations for the Buyer.

A buyer of real estate must be aware of a number of issues before entering into a Contract of Sale. These issues can include:

Pre-contract tests and inspections

The buyer may elect to conduct a number of evaluations regarding the quality of the house to be purchased, including: a) termites; b) lead paint; c) engineer’s report; d) radon; e) environmental study; f) appraisal; and g) neighborhood study (e.g., New Jersey now requires disclosure of any sexual offenders in the area). Many of these tests will provide key information regarding the house which may be needed for several reasons, including whether the house should be purchased, what items the seller should repair or cure prior to closing, or what concessions should be made in the purchase price.

Mortgage requirements

The buyer may want to contact a mortgage lender or mortgage broker to see if s/he is qualified for a mortgage. The lender may require a substantial down payment or income qualifications. The lender may offer mortgage loans at different rates, based upon the type of property; income or no-income verification; or payment or “points” up-front.

Title considerations

The buyer will conduct an inspection of the title records concerning the property to ensure that the property is free of all liens and encumbrances, and that the description of the property in the Contract of Sale exactly matches the property as listed on the county’s records. They buyer will retain a title company to conduct the search, and will purchase title insurance to cover any possible claims. Various issues may arise concerning title, including: a) Mechanic’s liens; b) bankruptcy; c) Environmental Control Board violations; d) Fire Department violations; e) Certificate of Occupancy issues; f) issues with the “chain of title” from the seller or prior owners; g) tax arrearages or tax liens; and h) Judgments against prior owners. Many of the various title issues can be resolved prior to, or at closing. In some situations, corrective action will be needed to pass “clear” title.

copyr. 2014 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.comcreate new email with any questions.
Prior results do not guarantee a similar outcome.

R. A. Klass
Your Court Street Lawyer

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Buying a Cooperative Apartment: tips for the prospective owner

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Here are some tips for the prospective purchaser of a cooperative apartment.

Not owning real estate

As owning a cooperative unit really means owning shares of stock in a cooperative corporation with a right to a proprietary lease to a particular apartment, as opposed to actually owning a parcel of land, some people are swayed away from this investment. First, the buyer must decide if this form of property ownership is acceptable.

Documentation

The buyer should review the following documents relating to the cooperative unit:

  1. offering plan and by-laws: this bulky book will discuss the formation of the cooperative corporation and the powers of the board of directors. The buyer can discover the rules regarding subletting an apartment, transferring shares, and other rules;
  2. house rules: this document, which is usually several pages long, lists rules relating to day-to-day living at the building, including pet ownership, access to common areas, and maintenance of the hallways, etc.;
  3. last two years’ financial statements: these statements will provide good snapshots of the financial health of the corporation. The statements will advise as to any mortgages on the property, the assets and income of the corporation, and the expenses of operation of the building.

Unit charges

Charges relating to the purchase of a cooperative unit can be for:

  1. maintenance charges;
  2. building-wide assessments (which may be for a specified term, and which may be signs of a tenuous corporation);
  3. electricity/air-conditioning;
  4. “flip” taxes — charges imposed by a cooperative corporation upon the transfer of a unit, which may be imposed (depending on the by-laws) upon the seller or the buyer of the unit.

Board approval

One should become familiar with the board of directors, who must give approval of the sale. While this is sometimes perceived as one of the drawbacks of cooperative apartment ownership, the board’s basis for denial may be for many reasons, including those that maintain the value of the cooperative corporation.

copyr. 2014 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation in Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.comcreate new email with any questions.
Prior results do not guarantee a similar outcome.

R. A. Klass
Your Court Street Lawyer

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Exempt Assets: ” Wild Card ” (Or How Mad Max Got to Keep His Camaro!)

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It was a really nice car – a 1999 Chevy Camaro with only 51,000 miles. Maybe it wasn’t the most expensive car (like a Chevy Corvette) but Mad Max loved driving it on weekends. Mr. Max also had another vehicle (a truck) that he needed for work during the week. Unfortunately, Max’s business wasn’t doing well and he was forced to file for personal bankruptcy due to his mounting debts. As part of filing for Chapter 7 bankruptcy, Max had to submit to the Bankruptcy Court his Petition.

Chapter 7 Bankruptcy Petition

When a person files for bankruptcy (the “ debtor ”), he has to file a Petition, in which the debtor lists comprehensive financial information, including his (a) assets; (b) liabilities; (c) income; and (d) expenses. In the Petition, the debtor will detail all of his assets, such as real estate, bank accounts, life insurance policies, pensions and all other personal assets. Among the typical assets that are listed in the Petition is a debtor’s car.

Exempt Assets

There is a concept in the law that, even though a person is a debtor and owes debts to creditors, there are certain types of property and income that will be left with the debtor (“ exempt ”) — and, thus, beyond the reach of creditors. These types of “ exempt ” property and income are enumerated under various sections of law. In New York, for instance, those sections of law include various provisions under the Debtor and Creditor Law, Civil Practice Law and Rules (CPLR), Insurance Law and other sections. The usual types of exempt property owned by people filing bankruptcy include clothing, household furnishings, security deposits with a landlord, life insurance and annuity policies, and retirement/pension plans (such as 401(k) plans; Individual Retirement Accounts (IRAs); Roth IRAs; 403(b) plans; and similar qualified plans). The usual types of exempt income of a debtor include social security benefits, disability, unemployment, worker’s compensation, and 90% of wages earned 60 days prior to filing. In fact, over 90% of the bankruptcy cases filed throughout the country are commonly referred to as “ no asset ” cases in which, after taking the debtor’s exempt property off the table, there are no assets to distribute to creditors.*

Specifically as to a debtor’s car, under New York’s Debtor and Creditor Law Section 282(1), a debtor may take 1 exemption as follows: “Bankruptcy exemption of a motor vehicle. One motor vehicle not exceeding four thousand dollars in value above liens and encumbrances of the debtor; provided, however, if such vehicle has been equipped for use by a disabled debtor, then ten thousand dollars in value above liens and encumbrances of the debtor.”

Two Cars; Only One Exemption

In Max’s situation, he owned 2 cars (Truck worth $3,600 and Camaro worth $8,800). Under New York State law, Max had only 1 exemption for a car, and he needed to keep his truck for work purposes. But, Max really wanted to keep his Camaro. He could only keep the truck, using the $4,000 car exemption; the Camaro would have to be turned over to the bankruptcy trustee and sold to pay off creditors’ claims.

Fortunately for the debtor, he came to Richard A. Klass, Your Court Street Lawyer, for help. The first step was trying to figure out how Max could retain both cars even though he was going to file for bankruptcy.

The Federal “ Wild Card ” Exemption

A few years ago, the law was changed to allow New York debtors to opt to take either the New York or federal exemptions. Up until then, debtors who filed for bankruptcy in New York State could only use the New York State exemptions (as opposed to the exemptions afforded to debtors under the federal Bankruptcy Code). Some of the New York exemptions are actually quite generous in some respects, including the “ homestead ” exemption for real estate up to $150,000.

Under the federal exemptions, there is, however, a really good exemption for debtors in the same situation as Max — the “ Wild Card ” one! Under Bankruptcy Code Section 522(d)(5), a debtor is allowed to take an exemption on any property up to $12,725 (“The debtor’s aggregate interest in any property, not to exceed in value $1,225 plus up to $11,500 of any unused amount of the exemption provided under paragraph (1) of this subsection [the homestead exemption].”)**

In preparing the Petition, the federal exemptions were selected for Max. The truck was exempted as the one car permitted ($3,675 exemption) to be taken under federal law. The Chevy Camaro was exempted for its full amount ($8,800) because Max was allowed to use the ” Wild Card ” exemption. Mad Max got to keep both cars!

by Richard A. Klass, Esq.

* Source: National Association of Bankruptcy Trustees (www.nabt.com/faq.cfm)

** (1) The debtor’s aggregate interest, not to exceed $22,975 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor.

Art Credits:
Image on page one: Joker red 02.svg; Author: David Bellot, Berkeley, CA, USA.  Used under the terms of the GNU Lesser General Public License as published by the Free Software Foundation.

copyr. 2014 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation in Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.comcreate new email with any questions.
Prior results do not guarantee a similar outcome.

R. A. Klass
Your Court Street Lawyer

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Lenders “Livin’ la Vida Loca” till HETPA Ended The Fiesta

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In 2006, New York State enacted the Home Equity Theft Prevention Act (“ HETPA ”) for the purpose of affording greater protection to homeowners who face foreclosure proceedings against their homes. HETPA was instrumental in addressing increasingly rampant swindling where con men, proposing to “help” homeowners out of foreclosure, instead, stole homes and home equity from homeowners through deed/equity thefts and other mortgage foreclosure “rescue” scams. HETPA also gave borrowers greater protection from mortgage lenders (by adding extra steps) in those cases where borrowers couldn’t make mortgage payments and fell into default or foreclosure. HETPA changed certain parts of the Banking Law, Real Property Law (“RPL”), and Real Property Actions and Proceedings Law (“ RPAPL ”).

HETPA spoils all the lenders’ fun

Among the changes put into place by HETPA were:
  1. requiring that, at least 90 days before the foreclosure proceedings are brought, a written notice (the RPAPL Section 1304 notice*) be served upon the “borrower” by regular and certified mail;

  2. extending the service of a similar type of “RPAPL Section 1304 notice” or “90-day notice” called a “pre-disposition notice” upon homeowners who own cooperative apartments, as now required by Uniform Commercial Code (UCC) Section 9-611. It is important to note that, unlike houses which are considered “real property,” cooperative apartments are considered “personalty” in some regards — a person who buys a cooperative apartment is actually buying shares of stock in the cooperative housing corporation and a proprietary lease associated with a particular apartment. Before the enactment of HETPA (as amended by the Home Equity Theft Prevention Act of 2009), a co-op unit owner’s shares and proprietary lease could be quickly foreclosed and auctioned off in a matter of a couple of months. Now, the lender has to wait at least 90 days from the pre-disposition notice to exercise its “non-judicial foreclosure” rights and auction off the collateral (the shares of stock in the cooperative housing corporation) for the loan on the cooperative apartment;
  3. requiring the lender or mortgage servicer to file within 3 days of service of the RPAPL Section 1304 notice certain information with the New York State Superintendent of Financial Services and provide proof of filing; and
  4. requiring that a statutorily-specific notice to the homeowner/mortgagor about foreclosure, be served together with the Summons and Complaint (RPAPL Section 1303 notice**) when foreclosure proceedings are commenced.

You’re a “borrower”? Says who?

Who is considered a “borrower” who must be served with the RPAPL Section 1304 notice?
All of the RPAPL noticing requirements under HETPA pertain to residential home loans and are designed to give borrowers notice of default in their mortgage payments or other obligations. Two recent court cases resolved an issue unaddressed in the enactment of HETPA and, more specifically, RPAPL Section 1304, namely: under the statute, what is the definition of a “borrower” who is entitled to the various notices from the lender or mortgage servicer? As you will see from these recent court cases, this is an important issue.
The Second Department held in Aurora Loan Services LLC v. Weisblum, 85 A.D.3d 95, 103 [2 Dept. 2011] that “[P]roper service of the RPAPL Section 1304 notice containing the statutorily-mandated content is a condition precedent to the commencement of the foreclosure action. The plaintiff’s failure to show strict compliance requires dismissal.” From this holding, it is certainly apparent that the failure of the mortgage lender/foreclosing plaintiff to serve the RPAPL Section 1304 notice is fatal to the foreclosure proceedings commenced — before the case can be filed, this first step of serving the notice must be taken.
In Aurora Loan Services LLC v. Weisblum, the mortgaged property was owned by a husband and wife. Only the husband signed the note but both the husband and wife signed the Consolidation, Extension and Modification Agreement (commonly known as a “CEMA”) to secure the note signed by the husband along with a prior mortgage. Before the mortgage lender brought its foreclosure proceeding to foreclose its consolidated mortgage upon the house, it served the RPAPL Section 1304 notice on the husband who signed the note. However, the lender did not serve the notice on the wife, arguing that she was not a signatory on the note, but only the CEMA. In addition, they argued that service upon her was unnecessary because the wife was not defined in the terms of the note as the “borrower” and, therefore, the plaintiff/mortgage lender was not required to serve the 90-day notice upon her pursuant to RPAPL Section 1304.
In Aurora Loan Services LLC v. Weisblum, the Second Department stated that the co-mortgagor wife (who signed the CEMA but not the note) was deemed a “borrower” under RPAPL Section 1304 who was also entitled to receive the 90-day notice prior to the commencement of the foreclosure.

In the follow-up case of Wells Fargo Bank, N.A. v. Miller, [Sup. Ct. Rockland Co. Index No. 4256/2011, Dec. 11, 2013], the issue was whether a co-mortgagor who did not sign the note was also deemed a “borrower,” under RPAPL Section 1304, and, therefore, should have also been served with the requisite 90-day notice. In this case, the mortgage lender (Wells Fargo Bank) provided the court with a copy of the purported notice that it allegedly served upon one of the defendants (the husband) and did not provide any proof of service of the requisite RPAPL Section 1304 notice upon the other defendant (the wife). In response, Wells Fargo Bank argued that the defendant/co-mortgagor wife signed only the mortgage and not the underlying promissory note. The underlying promissory note was signed only by the husband. The bank averred that the wife was not a “borrower” within the meaning of the statute and, therefore, was not entitled to the 90-day notice.

Messing with the wrong borrowers

In response, Richard A. Klass, Esq., Your Court Street Lawyer, successfully argued to the court that both husband and wife were indeed entitled to be served with the 90-day notice required by RPAPL Section 1304. Specifically, the lender’s own documents were put before the court to prove that the co-mortgagor wife was a “borrower” even under the bank’s definition (on the mortgage’s first page, in the section entitled “Words Used Often In This Document,” the word “Borrower” is stated as “ISRAEL MILLER CHAYA B. MILLER”).
In Aurora Loan Services LLC v. Weisblum, the Second Department recognized the provision in the mortgage instrument that the lender had the right to “enforce its right” against the subject property. Similarly, in Wells Fargo Bank, N.A. v. Miller, the mortgage stated: “each of us is fully obligated to keep all of Borrower’s promises and obligations contained in this Security Instrument. Lender may enforce rights under the Security Instrument against each of us individually or against all of us together.”

The court was urged, by the defendants/homeowners in Wells Fargo Bank, N.A. v. Miller, that it should recognize, similar to the co-mortgagor in the Aurora Loan Services LLC v. Weisblum case involving a CEMA, that the co-mortgagor wife who did not sign the underlying note has a significant interest in protecting her home from loss in a foreclosure. The design and purpose of RPAPL Section 1304 is to apprise all owners of residential homes that they risk losing their homes because an obligation was not met (“fair warning”). This initial step of the 90-day notice (which is a “condition precedent” to a foreclosure proceeding) adds an extra layer of support to homeowners who face imminent foreclosure but might find a means to remedy an impending predicament: where their property is in foreclosure; their credit history is damaged; and their lending alternatives have disappeared. Moreover, the non-defaulting property owner who put up her home as collateral for a loan to her spouse deserves to know of her spouse’s default and apprised of her rights prior to the institution of the foreclosure proceeding. Otherwise, the results would be severely harsh and inequitable.

Action Dismissed

In reaching the ultimate decision to dismiss the foreclosure proceeding brought by Wells Fargo Bank, the Supreme Court Justice held: “Therefore, pursuant to the Weisblum case, supra, the Court finds that Defendant Chaya B. Miller is a ‘borrower’ for the purposes of Real Property Actions and Proceedings Law Section 1304, and Plaintiff’s failure to comply with the strict mandates of that statute require dismissal of the action without prejudice.”
by Richard A. Klass, Esq.

*The language of the letter for the RPAPL Section 1304 notice:

The RPAPL Section 1304 notice must be accompanied by a list of at least five housing counseling agencies. The language of the letter for the RPAPL Section 1304 notice is as follows:

YOU COULD LOSE YOUR HOME. PLEASE READ THE FOLLOWING NOTICE CAREFULLY
As of …, your home loan is … days in default. Under New York State Law, we are required to send you this notice to inform you that you are at risk of losing your home. You can cure this default by making the payment of ….. dollars by …..
If you are experiencing financial difficulty, you should know that there are several options available to you that may help you keep your home. Attached to this notice is a list of government approved housing counseling agencies in your area which provide free or very low-cost counseling. You should consider contacting one of these agencies immediately. These agencies specialize in helping homeowners who are facing financial difficulty. Housing counselors can help you assess your financial condition and work with us to explore the possibility of modifying your loan, establishing an easier payment plan for you, or even working out a period of loan forbearance. If you wish, you may also contact us directly at ………. and ask to discuss possible options.
While we cannot assure that a mutually agreeable resolution is possible, we encourage you to take immediate steps to try to achieve a resolution. The longer you wait, the fewer options you may have.
If this matter is not resolved within 90 days from the date this notice was mailed, we may commence legal action against you (or sooner if you cease to live in the dwelling as your primary residence.)

If you need further information, please call the New York State Department of Financial Services’ toll-free helpline at (show number) or visit the Department’s website at (show web address)”.

**The specific notice for RPAPL Section 1303:

The specific notice, to be delivered with the Summons and Complaint, must be printed in big bold letters on colored paper and read as follows:

HELP FOR HOMEOWNERS IN FORECLOSURE

New York State Law requires that we send you this notice about the foreclosure process. Please read it carefully.
Summons and Complaint
You are in danger of losing your home. If you fail to respond to the summons and complaint in this foreclosure action, you may lose your home. Please read the summons and complaint carefully. You should immediately contact an attorney or your local legal aid office to obtain advice on how to protect yourself.
Sources of Information and Assistance
The State encourages you to become informed about your options in foreclosure. In addition to seeking assistance from an attorney or legal aid office, there are government agencies and non-profit organizations that you may contact for information about possible options, including trying to work with your lender during this process.
To locate an entity near you, you may call the toll-free helpline maintained by the New York State Department of Financial Services at (enter number) or visit the Department’s website at (enter web address).
Foreclosure rescue scams
Be careful of people who approach you with offers to “save” your home. There are individuals who watch for notices of foreclosure actions in order to unfairly profit from a homeowner’s distress. You should be extremely careful about any such promises and any suggestions that you pay them a fee or sign over your deed. State law requires anyone offering such services for profit to enter into a contract which fully describes the services they will perform and fees they will charge, and which prohibits them from taking any money from you until they have completed all such promised services.

copyr. 2014 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation in Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.comcreate new email with any questions.
Prior results do not guarantee a similar outcome.

R. A. Klass
Your Court Street Lawyer

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