TLC'S REAL ESTATE LEGAL CHRONICLE

Condominium Offering Plans go Digital

2011-12-13T12:58:00.000-08:00

After more than a decade of frustration, condominium sponsors can now provide copies of offering plans and amendments to prospective purchasers in digital format. The Attorney General of the State of New York has issued a new cooperative policy statement that allows the distribution of such documents in digital format (CD-ROM, DVD, other other acceptable formats). The catch is, whether the documents be provided in traditional hard copy format or digital format is within the sole discretion of the prospective purchaser. With the new policy statement comes a handful of ancillary certification and filing requirements, and there are specific requirements for the digital copies, their labeling, as well as the manner in which they are distributed. A full copy of the requirements can be found at http://www.ag.ny.gov/bureaus/real_estate_finance/pdfs/CPS-10_FINAL.PDF

The new policy is effective as of November 1, 2011 but will be mandatory starting on January 1, 2012.

HOA Foreclosures Subject to 'Help for Homeowners in Foreclosure' Notices

2011-08-08T07:57:00.000-07:00

Homeowners Associations that are seeking to foreclose on liens arising under the HOA Declaration, for failure to pay assessments for example, should be aware that they are are required to comply with the statutory 'Help for Homeowners in Foreclosure' notices set forth in the Real Property Actions and Proceedings Law. New York courts have held that the provision in RPAPL Section 1303 requiring such notices, is broad in that it applies to all foreclosures of owner-occupied one to four family dwellings, regardless of what the lien pertains to.

Private Transfer Fees on Real Estate May Make it Harder for Purchasers to Find Financing

2011-03-11T08:14:00.000-08:00

The Federal Housing Finance Agency has proposed rules that would prohibit regulated entities (namely, Fannie Mae and Freddie Mac and Federal Home Loan Banks) from dealing in mortgages on properties that are encumbered by private transfer fee covenants. It is not uncommon for condominiums and homeowners association properties, for example, to be subject to a fee, charge or some other payment to be due in connection with the transfer of the property. Many state legislatures have already banned private transfer fees but New York has yet to make them illegal.

If the proposed federal rule becomes final, if any private transfer fee encumbers a property, the regulated entities cannot purchase or invest in a mortgage on the property unless that transfer fee provides a direct benefit exclusively to the property being encumbered. Among other things, this would affect any transfer fee that benefits the property developer or some third party entity, even if such entity is a not-for-profit organization. The lenders will have 120 days following publication of the final rule to come into compliance. The comment period on the proposed rule ends on April 11, 2011.

My Fundraising Page

2010-06-01T08:23:00.000-07:00

My Fundraising Page

Please support the Leukemia & Lymphoma Society as I train for the Adirondack Half Marathon. Visit my fundraising page today!

Cumo named to Women Leaders Panel

2010-03-04T07:32:00.000-08:00

Tammy Cumo of Whiteman Osterman & Hanna LLP was selected to particulate on a panel for the Rensselaer County Regional Chamber of Commerce's program entitled "Women Leaders: Styles, Strategies & Stories" set for Thursday, April 22 at the Hilton Garden Inn in Troy. The panel will include a group of professional women from diverse industries and generations. Each will discuss their accomplishments, experiences and strategies on how they achieved leadership possitions.

For more information and to register for the event, go here:

http://http://www.renscochamber.com/chamber_events/details.cfm?ID=1282

Condominium Associations should be aware of the new form of Power of Attorney in New York

2010-02-24T10:32:00.000-08:00

Much of the legal world was all a buzz last fall when the new New York law went into effect that replaced the old all-purpose statutory short form of power of attorney. Powers of attorney are common in the world of trusts & estates, elder law and in real estate transactions. Most believe that the law that was intended to clarify and streamline powers of attorney has only complicated them. The new law doesn't require that the statutory form is used but does require that in order for any other form to be used, it must be in 12 point font and contain all of the explanations provided by statute to the person giving the power of attorney and to the agent, verbatim, as set forth in the statute. All of the powers of attorney that were executed prior to September 1, 2009 are still valid but any powers signed after that date must comply with the new law.

It is commonplace for a condominium unit owner to be required to sign a unit power of attorney in favor of the condo board of managers at the closing for purchase of their condominium unit and for purchasers to sign one at the closing for the resale of a condominium unit. The form such power of attorney will take is contained in the condominium offering plan and there will be many occasions where that offering plan was accepted and in place prior to September 1, 2009 but unit closings occur after September 1, 2009. Sponsors, condominium associations and the attorneys that represent them need to be aware that the new form of power of attorney should be used in lieu of the form contained in the pre-September 2009 offering plan. There are currently several proposed bills in the legislature that seek to amend some of the scope and provisions of the new law. Until the form, its provisions and the applicability of requirements are clarified, use caution and consult an attorney when preparing or signing a power of attorney.

Proposed Changes In the Way Mortgage Loans Are Closed

2009-12-17T11:37:00.001-08:00

Last week, H.R. 4229 was introduced in Congress to amend the Real Estate Settlement Procedure Act of 1974. The new provisions would be referred to as 'Borrowers' Right to Inspect Closing Documents Act of 2009'. If the Act passes both houses, lenders of federally related mortgage loans would be required to provide the loan documents to the settlement agent at least 4 days prior to the scheduled settlement date. The settlement agent would be required to provide the loan documents and the settlement statement to the borrower at least 3 days prior to the scheduled settlement date. The documents could be transmitted to the borrower by email, fax or by making hard copies available for inspection at the office of the settlement agent.

Shopping Mall Deal a Sign of Hope for the Commercial Real Estate Market?

2009-11-12T11:14:00.000-08:00

The pressure is on federal government to do something to free up credit for commercial real estate projects. Earlier this year, the Federal Reserve announced the Term Asset Backed Securities Loan Facility (TALF), which program was intended to revive commercial real estate by providing a market for commercial mortgage backed securities. A pending deal with Developers Diversified Realty Corp., which owns and operates close to 30 shopping centers around the country, would borrow $400 million, which would be converted into a commercial mortgage backed security offering through the federal TALF program. The Federal Reserve is reviewing the deal now and if it goes through, the deal may unlock the credit market, particularly for properties that have an established and stable cash flow. Read more on the Wall Street Journal at http://http://online.wsj.com/article/SB125729550942326763.html##

Filing Fees for Property Transfers Increase

2009-04-16T12:28:00.001-07:00

Increased filing fees were proposed in last year's State Budget but didn't make the final cut. Not so this time around. New York State's Budget, enacted on April 7, 2009 as Chapter 56 of the Laws of 2009 increases the filing fee for the State Board of Real Property Services Real Property Transfer Report, generally known as the RP-5217 and the RP-5217NYC or as the Equalization and Assessment Form. The increased fees are required for all deeds submitted for recording on and after June 1, 2009. When the property being transferred is a “Qualifying residential property” or a “Qualifying farm property” the filing fee will increase from the current $75.00 to $125.00. The filing fee for the transfer of any other type of property will increase from the $165.00 now being charged to $250.00.

The fee to file the New York City Real Property Transfer Tax Return when the Equalization and Assessment form is not required to be filed, such as on the transfer of a cooperative interest or of a controlling economic interest, will increase from $50.00 to $100.00.

The changes go into effect on June 1, 2009.

FEDERAL STIMULUS LEGISLATION

2009-02-18T10:05:00.000-08:00

Whiteman Osterman & Hanna LLP, together with our Washington, D.C. – based affiliate, WOH Government Solutions LLC, has formed a team of attorneys to address questions regarding the federal stimulus legislation.

The American Recovery and Reinvestment Act of 2009, signed by President Obama on February 17, is a complex spending measure designed to jump start the American economy. The legislation is over 1,000 pages long and contains $787 billion in appropriations.

The Act contains a complex mix of grants, loans, guarantees and tax credits. The process of determining exactly how the grants and loans will be allocated, and who will qualify for the guarantees and tax credits, is already underway. Businesses and communities across America will be vying for a share of the stimulus funds, and to be successful, those parties must be prepared to act with deliberate speed.

In order to help clients and friends of the firm best position themselves with respect to this opportunity, Whiteman Osterman & Hanna LLP and WOH Government Solutions LLC have formed a team of attorneys who are well-versed in the content and structure of the Act. This Stimulus Team will help guide our clients into position to seize the many opportunities presented by this unprecedented piece of legislation.

Should you have any questions regarding the stimulus legislation and the opportunities it presents, please contact Whiteman Osterman & Hanna.

This may be considered ATTORNEY ADVERTISING in some jurisdictions.

Tough Times Require Extra Precaution When Negotiating Lease Terms

2009-02-05T06:23:00.000-08:00

The tough economic times mean that many tenants may face financial difficulties. Landlords need to be wise when negotiating lease extensions or new leases, and protect themselves from their tenant's misfortunes. There are lease provisions that landlords can use to protect themselves before and after a tenant's bankruptcy. These include: (i) using letters of credit rather than cash security, (ii) restricting assignments, and (iii) creating a net worth default trigger. While the use of such provisions must be thoughtfully considered on a case-by-case basis, it is more critical than ever that landlords consult experienced legal counsel to help shield them from their tenant's economic misfortunes.

--Reproduced with permission from Whiteman Osterman & Hanna LLP - Real Estate News Alert

Election Day 2008

2008-11-04T07:01:00.000-08:00

Today is Tuesday November 4, 2008. Don't forget to vote!!!

New Law Requires Landlords to Disclose Environmental Test Results

2008-09-22T18:06:00.000-07:00

As of December 2008, New York requires Landlords to disclose, to existing or prospective tenants, environmental test results that exceed federal OSHA or New York State Department of Helath indoor air guideline standards. New York is the first state to require notification to tenants. The burden is on the property owner to notify tenants, both of residential and commercial properties. The notice requirement is only required when test results have been provided to the property owner by an "issuer", which includes the New York State Department of Environmental Conservation, a municipality that has contracted to undertake an environmental restoration project, a participant under the New York Brownfield Cleanup Program and persons subject to an order under NY's hazardous waste and oil spill cleanup laws. The new law will be codified as Section 27-2405 of the New York Environmental Conservation Law.

Governor signs bill to aide homeowners facing foreclosure

2008-08-05T11:38:00.000-07:00

New York's Governor signed into law legislation that gives troubled homeowners a 90-day grace period to save their homes from foreclosure. New York has the longest foreclosure process in the nation. Read more at:
http://capitalnews9.com/content/top_stories/121411/governor-paterson-signs-foreclosure-bill/Default.aspx

Sweeping Housing Relief Bill Signed

2008-07-31T08:08:00.000-07:00

Yesterday, President Bush signed into law sweeping housing relief legislation. One of the key parts of the bill authorizes the Federal Housing Administration (“FHA”) to help homeowners who, because of falling prices, owe their lenders more than their houses are worth. The law provides that if lenders agree to forgive a portion of the debt and provide new loans worth no more than 90 percent of the home's present value, the FHA will insure the new loans and agree to pay off the lenders if borrowers default. Homeowners also will get an immediate equity stake in their properties, which they would have to share with the government if they sell or refinance. The law is targeting homeowners (perhaps as many as 400,000 nationwide) who are teetering on the edge of foreclosure.

The bill also contains provisions designed to bolster confidence in the Fannie Mae and Freddie Mac mortgage companies. The law provides temporary authority to the administration to offer the struggling mortgage-finance giants Fannie Mae and Freddie Mac an unlimited line of credit, a move designed to calm global concerns about the government-sponsored but investor-owned firms, which guarantee nearly half of all outstanding mortgages in the United States. The law also will establish a new regulator for Freddie and Fannie and overhaul the Federal Housing Administration. The Federal Housing Finance Agency, a new, independent agency created under the new law, will have jurisdiction over Fannie Mae and Freddie Mac.

Brownfield Program Reform Passes

2008-06-25T08:22:00.000-07:00

Just before session ended last night, the NY Legislature passed reform measures to overhaul the State's Brownfield Program. Currently the Program is under a 90-day moratorium while the reforms were being negotiated. The key changes include an increase in tax credits and incentives which will now allow credits and incentives up to 1/2 of a site's cleanup costs; a limit on redevelopment credits for manufacturing projects at the lesser of $45 million or 6 times the cleanup costs; and a cap on redevelopment credits for non-manufacturing projects at $35 million or 3 times the cleanup costs. The reform package also shifted administration of the Program to the Department of State, effective next April.

Condominium Filing Fee Increase Now in Effect

2008-05-27T05:24:00.000-07:00

Effective April 23, 2008, the maximum filing fee for the filing of a cooperative/condominium/homeowners' association/timeshare offering plan has increased. The filing fee is 4/10 of 1% of th total offering price with a minimum of $750 for offerings under $250,000, and a maximum of $30,000 for offerings of $7,500,000 or more. The maximum filing fee prior to April 23, 2008 was $20,000, representing an increase of $10,000. The fee is paid in two installments, the first $15,000 is submitted to the Department of Law with the initial submission of an offering plan. The remaining $15,000 is due once the reviewing personnel at the Attorney General's Office advise that the offering plan is accepted for filing.

Appraisal Fraud

2008-03-31T06:39:00.000-07:00

The mortgage crisis is leading to lenders cracking down on pursuing brokers, real estate agents and appraisers for fraud. Specifically, banks are going after appraisers that artificially inflated the fair market value of homes, inducing lenders to lend more money than they otherwise would be willing to lend. In a recent case in Schenectady County, a lender is seeking approximately $420,000 in damages against an appraiser for mortgage fraud. The appraiser allegedly owned the properties and prepared the appraisal on his own properties, overstating the value and asking a colleague to sign them.

The New York Attorney General's office has been investigating mortgage fraud and recently came to an agreement with Fannie Mae and Freddie Mac whereby they agreed to only buy loans from lenders that adhered to the Home Valuation Protection Code. The Home Valuation Protection Code, among other things, requires lenders to choose appraisers from a list of approved appriasers. A copy of the Code can be found on the New York Attorney General's website at
http://www.oag.state.ny.us/press/2008/mar/Code%20Final%203-2.pdf

Legal Aspects of Condominium and Homeowners' Associations

2008-03-11T07:10:00.000-07:00

The increasing popularity of condominium and homeowners' associations is causing new and challenging legal issues to arise almost daily. Are you prepared to confidently address the questions and concerns associated with developing, marketing and operating these entities? Attend a seminar in Albany, New York and develop an in-depth understanding of the agreements involved and techniques for enforcing covenants. Don't miss this opportunity to get solid advice on how to streamline the association management process and consequently encourage higher property values. The seminiar is May29, 2008. For more information, follow this link http://www.lorman.com/seminars/seminar_details.php?pid=185206 or contact me for more information.

Application Deadline

2008-02-25T12:48:00.000-08:00

Don't forget, the deadline for filing of property tax exemptions in most New York areas is March 1. To learn more, visit the Office of Real Property Services at http://www.orps.state.ny.us/index.cfm

It may get more expensive to transfer property in New York

2008-02-25T12:32:00.000-08:00

Closing costs are on the rise if the current version of the budget bill before the New York Legislature moves forward. The bill (S.6806-a/A.9806-a) increases the costs associated with the filing of the real property transfer reporting form. The current charge for filing of the form is $75 for qualifying residential or farm property and $165 for all other types of property. Unless otherwise agreed to by the parties, this charge is borne by the purchaser and paid when their deed is taken to the county clerk's office for filing. Under the proposed legislation, the fee associated with the reporting form will be linked to the reported purchase price of the property being conveyed. For qualifying residential or farm property, the fee would range from $75 to $400, and for all other property, the fee would range from $165 to $575. These changes will increase closing costs for buyers, both of residential and commercial properties.

New York Legislature Seeks to Raise Maximum Fees for Filing of Condominium Offering Plans

2008-02-06T18:11:00.000-08:00

Anyone that has tried to get a condominium, cooperative or homeowners' association offering plan reviewed and accepted by the New York Attorney General's Office Real Estate Finance Bureau knows that in the past few years, there has been serious backlogs and delays in getting a response from the reviewing paralegals, engineers and attorneys. The market for these types of residential offerings, particularly condominiums, has increased significantly. According to the bill memo accompanying Assembly Bill 09546/Senate Bill 6540, the reason for the delay is a shortage in staffing in the Real Estate Finance Bureau. The proposed fix to this problem is to increase the maximum filing fee a developer must pay to the Department of Law upon filing of a condominium, cooperative or homeowners' association offering plan. Currently, the filing fee is a percentage of the total amount of the offering price or for HOAs, a percentage of the total value of the improved property to be retained by the Association, both of which are capped at a maximum of $20,000. The new bill proposes to raise that cap to $30,000, and earmarks the additional monies for the Real Estate Finance Bureau to ensure adequate staffing for review of offering prospectus and for investigation and enforcement practices. Currently the bill has moved to Ways and Means in the Assembly and on the New York State Senate floor for consideration. Further updates will be provided if action is taken on this measure.

Parties must require full compliance with the terms of a real estate contract prior to the transfer of title

2008-01-27T17:16:00.000-08:00

A claim for breach of a real estate contract can be valid after transfer of title only if the contract explicitly states that the obligation that is the subject of the action would survive transfer of title or if the obligation that is the subject of the action is considered a "collateral" obligation. Any obligation that is an integral part of the conveyance of the real estate will not be considered "collateral" and therefore, unless the contract provides otherwise, once the deed has been delivered, the parties’ opportunity to enforce those obligations has passed. The types of obligations that would be considered "collateral" are those that are not necessarily a part of every real estate contract, such as the obligation to build something on the property or the obligation to pay future expenses of a jointly used portion of the property. Obligations typical to all real estate transactions, however, are not collateral and if these obligations are not enforced prior to closing, the opportunity will be lost. A recent commercial property purchaser learned an expensive lesson when he went through with the purchase of the property even though the seller had not transferred the property in broom clean condition and had not removed its personal property, as required by the contract. After the closing, the purchaser spent approximately $17,000 to remove the seller’s remaining personal property and commenced an action to recover the costs incurred due to seller’s breach. The contract did not contain any survival language and the New York Appellate Division said that the claim could not be maintained. (See Novelty Crystal Corp. v. PSA Institutional Partners L.P.; Appellate Division Second Department, Decided January 15, 2008). The lessen for buyers and sellers of both commercial and residential property is if a particular contract requirement is important to you, make sure your contract provides that the obligation survives the closing and, if the contract does not provide this, do not go through with the closing until you have forced the other party to comply.

NY Governor Calls for Tax Relief

2008-01-13T18:35:00.000-08:00

New York Governor Eliot Spitzer presented his State of the State address this week. Again, the Governor calls for property and school tax relief for New Yorkers. Specifically, he is asking for a bi-partisan commission to examine the reason for skyrocketing taxes, including looking at unfunded mandates and a proposal for getting rising taxes under control. To read the full text of Governor Spitzer's speech, go to:

http://www.state.ny.us/governor/keydocs/2008sos_speech.html

Reminder for Contractors Working on Condominium Units

2008-01-02T10:03:00.000-08:00

While all contractors begin a job believing the property owner will promptly pay invoices for work that has been contracted for, inevitably, some owners fail to pay some, or all, of the charges accrued. As most seasoned contractors know, New York State provides a mechanism by which contractors can leverage property owners to pay outstanding invoices. The filing of a mechanic's lien, if properly filed, creates an encumbrance on the property owner's title to the property. This encumbrance can cause problems for an owner that wants to sell or lease their property, wants to obtain financing for work on their property, and can als be considered a default under any financing documents for loans already in place on the property. The lien holder has the option of foreclosing the lien to force a resolution.

The concept for placing a lien against a condominium unit is no different. Contractors must remember, however, that if an individual unit owner contracts for work and does not pay, the contractor can only place the lien on the unit itself, not on the building, the other units or any of the common elements. The New York Real Property Law expressly prohibits liens against the common elements unless all unit owners have consented to the work. Therefore, as a practical consideration, when filling out the lien form for filing, it is critical that the individual unit number is identified. The lien law requires proper identification of the property to be liened. The New York Courts have allowed the dismissal of liens that would have been proper if against the individual condominium unit but instead named the entire property address, purporting the encumber the building itself. To avoid losing a lien for a techinical error such as this, take care to properly identify what the property and property owner for which the work was performed.

Retirement Investors Turn to Real Estate

2007-12-18T19:16:00.000-08:00

In general, many people invest in stock and mutual funds when saving for retirement or in building personal wealth. With the current volitility of the stock market, investment in commercial real estate is emerging as a strong pull for retirement savvy investors. Investment can be in various forms, including direct ownership and as an investor in a real estate holding company. Before tying up funds, the investor should look at their individual needs in terms of amount of return needed, timing of the return and liquidity of the investment. To learn more, go to: http://www.realestatejournal.com/buysell/tactics/20071218-dunham.html

The New Concept of Condo Reversions

2007-12-09T18:40:00.000-08:00

Slowing real estate sales in some markets are prevoking condominium developers to take poorly selling condo units and turn them, or return them, to luxury apartments. Troubled condo projects are offering bulk sales of units to investors for use as rental properties. Not unlike real estate purchases and projects in general, financing a reversion project may be difficult to come by. Further, the tension and conflict between condominium owners and investors or renters can make the reversion difficult. In New York, additional Attorney General approval and existing unit owner approval may be necessary to revert the project to rental property. Read more at http://www.realestatejournal.com/propertyreport/residential/20071206-frangos.html

Albany Capital Region Rents on the Rise

2007-11-26T19:07:00.000-08:00

While the housing market continues to slow down, the demand for apartment rentals and therefore rental prices is on the rise. This might be evidence of a recent shift in the minds of potential buyers that have either had a hard time obtaining financing to purchase or are afraid to lose money on a purchase and have decided, at least for now, to rent. A 2.4 percent increase in rental prices was reported for the last six months in the Albany Capital Region area. To read more on this story, go to:

http://albany.bizjournals.com/albany/stories/2007/11/26/story2.html?b=1196053200^1553923

Courts Attempt to Limit Use of Eminent Domain

2007-11-25T18:28:00.000-08:00

In 2005, the U.S. Supreme Court, in Kelo v. New London (545 US 469), greatly expanded municipalities' general power to acquire real property by eminent domain. After that decision came down, I summarized the reaction to the decision in "Public and Private Sectors React to the Court’s Allowance of Eminent Domain Seizures for Private Development Projects", Strictly Business, September 2006 at Page 44. The New York update came this summer when New York Courts reacted by handing down a decision that limits what constitutes a "public use" for purposes of eminent domain.
In Matter of 49 Wb, LLC v. Village of Haverstraw, the Village held a public hearing, as required by the eminent domain procedure law. In that hearing, the Village considered several different proposals for the property. The Village determined that a community health center was the best use of the property. Ironically, the then owner of the property presented a proposal at the hearing that included converting a portion of the property to a health center. Nevertheless, the Village decided to condemn the property. The court determined that the true purposes of the condemnation was to help out the developer that had been previously chosen by the Village to develop the local waterfront. Condemning the property and allowing the developer to develop its proposed project, which included affordable housing units, would help the developer meet the affordable housing requirement imposed by the Village when it granted preferred developer status for the waterfront redevelopment project; therefore, the purpose was private not public in nature. The full facts of the second department case can be found at 44 AD3d 226 (2d Dept. 2007).

Buyers Should be Diligent in Title Review

2007-11-18T18:27:00.000-08:00

Often a municipality will require certain covenants and restrictions to be placed on lands as a condition to approving a developer's subdivision plat or site plan. A buyer might expect that if any such restrictions were required and applicable to a property, a declaration of restrictions and covenants or deed restrictions would be recorded by the developer prior to or along with any conveyance of the property to subsequent owners. Even if no such declaration or deed restriction is recorded, so long as the restrictions are noted on the filed subdivision map, they will be enforceable against subsequent owners. The New York Court of Appeals confirmed the state of the law last week when it upheld an open space restriction written on a recorded subdivision plat against a bona fide purchaser for value almost 40 years after the subdivision plat was filed. The only recorded evidence of the restriction was on the subdivision plat. In this case, even the purchaser's title report did not specifically list the restriction as an exception to coverage. The standard survey exception is likely to protect the title insurer for any claims in connection with the restriction because an accurate survey should have noted the restriction, and if it did not, the title insurer would have a claim against the surveyor that certified the survey. To make sure that a buyer has a complete picture of a particular property and what activities will and will not be allowed thereon, the buyer should carefully review and examine all recorded documents relating to the real property at issue, including all filed maps.

Lessors, Condos and Co-ops Can Limit their Liability

2007-11-11T18:05:00.000-08:00

It is not unusual for tenants and owners of condominium units or cooperatives to have access to storage areas or storage units in their buildings for storage of personal items. The storage units or areas may be exclusive in use to a particular tenant or owner or may be common areas shared by many tenants or owners. When the landlord or condo/co-op association takes possession or control of a tenant or owner's peronsal items, a "bailment" is created. The standard of care required of the landlord or condo/co-op association depends on a number of factors, including who has control of the key to the storage area, who has access, and whether storage is provided gratuitously or whether the landlord or association is compensated for use of the storage area. For example, where the "bailment" is for the sole benefit of the tenant or owner (i.e., no fee is paid for storage), the landlord, condominium/co-op association or building manager's liability is limited to gross negligence.

To limit liability, any storage arrangement should enable the tenant or owner to have control over the storage area, and, where possible, should be furnished without compensation. The relevant lease or condominium declaration, bylaws, or rules and regulations should be clear that use of any storage areas are at the risk of the tenant or owner. Tenants and owners should be required to propery lock their storage space and retain control of the key for use of such space. Where storage space is shared and mulitiple tenants or owners have access, landlords and condo/co-op owners should require tenants and owners to formally acknowledge that others will have access to the storage areas and that use of the space is at their own risk. While it is not possible to completely eliminate liability, taking these few precautions can reduce the risk that the landlord or condo/co-op association will be held liabile for loss, damage or destruction of items stored in storage units.

Sponsor's Challenge To Attorney General's Failure to Act on Offering Plan Must be Timely

2007-11-04T17:48:00.000-08:00

This week, the New York Appellate Division ruled in favor of the NY Attorney General's Office on an alleged action by a condominium sponsor for declaratory relief. The plaintiff sought an order directing that an amendment to a condominium offering plan be deemed accepted because the Attorney General's Office had failed to respond within the 30-day period set out in the NY General Business Law. The court, however, determined that the action was not one for declaratory relief but the correct relief to be sought was in the nature of a CPLR Article 78 petition, seeking mandamus to compel the Attorney General to act. Article 78 is goverened by a 4-month statute of limitations. The plaintiffs waited almost a year following the expiration of the 30-day period and therefore the statute of limitations had long since run out. The plaintiffs also tried to claim that actions of the Attorney General, specifically, assurances to the plaintiff's attorney that the amendment would be responded to in the near future, did not amount to affirmative wrongdoing and would not estop the NY Attorney General's Office from asserting the statute of limitations as a defense.

Slight Drop in Mortgage Rates

2007-10-28T17:13:00.000-07:00

Freddie Mac reports that mortgage rates have dropped slightly in the past week. This marks a change from the past several months of steady or raising rates. The drop was small, averaging only about 1/10th of a percentage point or less. The drop is said to be a result of the slowing economy and a reaction to the slowest pace in nearly a deacade of existing single-family home sales. For the full story, go to http://realtytimes.com/rtcpages/20071026_rates.htm

Albany Capital Region Condominium Projects Still Strong

2007-10-22T17:21:00.000-07:00

Amid the overall real estate market decline, the condominium market in the Albany Capital Region continues to grow. While only around 600 condominium units were added to Capital Region cities in the previous 15 years, over 1,200 units are planned to be available in the local urban areas over the next 2 years. For the complete story, go to http://albany.bizjournals.com/albany/stories/2007/08/13/daily26.html

The Real Estate Market Decline Continues to Spell Trouble for Lenders

2007-10-16T10:41:00.000-07:00

Lenders and mortgage companies continue to show heavy losses due to the decline in the real estate market. Much of the trouble comes from subprime lenders or subsidiaries that offered financing on terms attractive at peak market but fatal to mortgagors once rates increased and market values declined. KeyCorp reported a 23 percent decline in income in the 3rd quarter of 2007. For the full story, go to http://albany.bizjournals.com/albany/stories/2007/10/15/daily10.html?jst=b_ln_hl

New Assessment Requirements for NY Condos Proposed

2007-10-06T06:13:00.000-07:00

The New York State Legislature is proposing a bill that would require all newly constructed and/or newly converted condominiums and cooperatives in New York State to be assessed at market value. Under current law, condominiums and cooperatives enjoy a tax advantage due to an artificial ceiling put on assessments for this form of ownership. Currently, assessments of condominiums and cooperatives are limited to the value of the property as a whole regardless of the selling prices of the individual units. In other words, the total assessment of all of the units in the condominium or cooperative cannot exceed what the assessment would be of the property as a whole. The new legislation is being considered by both houses of the State Legislature. If the measure passes, this could mean a slow down in the condominium market, as this tax advantage has long been one of its strongest selling points.

Lenders and Lessor Beware—Certificates Provide Little Comfort

2007-09-23T18:43:00.001-07:00

Tammy L. Cumo-Smith[1]

Almost without exception, any financing agreement or lease agreement contains requirements for the borrower or lessee to obtain and maintain, among other things, general liability coverage to cover their activities or use of property. Typically these insurance provisions require that the lender or lessor be named as an additional insured on the insurance policies. Although the loan documents, lease agreement or other relevant contract documents may contain a contractual requirement for the borrower or lessee to obtain and maintain such insurance, in the event that a loss occurs during a period when no insurance is in place, the lender or lessor is left vulnerable. It is critical, therefore, that lenders and lessors ensure that the relevant insurance provisions are complied with.

Very often, the first evidence of insurance produced by a borrower or lessee is a “certificate” of insurance. Unfortunately, however, production of a certificate of insurance does not guarantee that a policy is in place. Insurance certificates usually contain disclaimers stating that they are for information purposes only. As a result, the courts of this State have held, that even when the insured or additional insured party obtains a certificate of insurance, the insurance company is not bound until and unless a binder is issued or the actual policy has been issued. Moreover, a certificate of insurance is typically prepared and provided by an insurance broker, not the actual insurance company. The broker may be acting as an agent for the insurance company, but New York courts have consistently held that the broker issuing a certificate of insurance does not bind an insurance company to providing coverage. Even if the certificate of insurance is issued by the insurance company itself, the insurer is not bound to provide the coverage.

While the insured may have various contractual claims against brokers or insurance companies based on their representations, additional insureds (such as lenders and lessors) have no contractual relationship with either the broker or the insurance company. Absent a showing of fraud or other facts that would allow a means of recovery, the additional insured has no claim against the broker or the insurance company and is left with only the remedies provided against the borrower or lessee for failure to procure and maintain insurance. The good news is, that, unless the loan documents or the lease limits the damages available for a breach, the borrower or lessee can be found liable for all damages of the breach, including any damages or liability to the lessor or lender for the underlying claim. However, where the lender or lessor has gone out and obtained its own insurance which covers the liability at issue, the loss is mitigated and recovery will be limited to lender or lessor’s out of pocket expenses. One must remember, however, that to pursue these damages, the lender or lessor will need to go to court, expending time and money that could be avoided if competent insurance is in place. Further, there is some authority that suggests that if the lender or lessor is aware of a default of the requirement to obtain insurance and does not mitigate or take action, recovery may be limited. To avoid either of these scenarios, the relevant documents should contain a clause allowing the lender or lessor to cure the default by obtaining the insurance and charging the cost back to the borrower or lessee.

A reliable proof of insurance, as we’ve learned, is not a certificate of insurance. A binder of insurance looks a lot like a certificate, but does not contain any disclaimers and actually forms a contract between the insurance company and the insured for coverage listed on the binder. At a minimum, the lessor or lender should require a binder. Unfortunately, the binder is only going to provide the basics of coverage, and specific inclusions and exclusions will only be found in the full policy—usually a binder will provide a clause stating coverages are subject to the terms and conditions in the policy. The policy will define the scope of coverage and class of persons covered. To ensure coverage for persons other than the primary insured, the additional insured should be named expressly in the policy, should be part of a class of people covered by the policy or coverage should be provided through blanket endorsements. The best and most reliable evidence of coverage is to see the full insurance policy, as issued.

The most reliable means of protection is, of course, to ensure the required insurance policies are actually in place by obtaining a copy of each policy itself. A second line of defense, in addition to requiring the insurance policies, is an independent broad indemnification clause binding on the borrower or lessee. A requirement to procure and maintain insurance is not the same and does not imply an obligation to indemnify. Requiring the borrower or lessee to indemnify for all liabilities and damages will require the borrower or lessee to provide lender or lessor’s defense, instead of relying on its own insurance coverage.

So what then is the best way for a lender or lessor, or anyone entering into a similar contractual relationship, to protect themselves against unforeseen claims and liabilities? The answer is three-fold: (i) first, the relevant contract document should have a contractual requirement to obtain and maintain insurance, and provide the lender or lessor the right to obtain the insurance at borrower or lessee’s costs if they fail to do so; (ii) second, prior to funding the loan or commencing the lease, a copy of the actual policy should be reviewed, or absent access to the actual policy (when the policy is newly issued, for example), review of the insurance binder; and (iii) the relevant contract document should contain a broad indemnification clause in favor of the lender or lessor.

No one enters into a contract expecting to need the insurance, but there is no question that the unexpected happens and the best advice is just to be prepared.

[1] Tammy L. Cumo-Smith is an attorney at the law firm of Whiteman Osterman & Hanna LLP. She is a member of the firm’s Commercial Real Estate, Real Estate Development, Zoning and Land Use practice groups.