APRIL 2004 REAL ESTATE NEWSLETTER

1.   DIVORCE AND YOUR PROPERTY

Divorce is indeed a difficult process; therefore it is essential to address real estate issues to when either owned by one or both parties. There are many real estate and tax issues that can arise before a divorcing couple.  For instance, it is common that spouses remain to be co-owners of a property and only one party remain in the household. Nonetheless, both parties are responsible for paying the mortgage balance. Even though in the divorce it is specified who will be making the payments and fails to comply with the responsibility, the other party will be affected with late charges and credit rating damage. 

Therefore, there should be a consensus between the two divorcing parties as to who is responsible for property maintenance and repairs. Parties must also agree on the division of proceeds; for instance, if one spouse pays for an expensive household repair and it was agreed that that spouse is fully responsible for such household repair, there should be no problem in regards to reimbursement at the closing.

What has been very unproblematic is the transfer of the title to only one spouse.  Many mortgage companies are reluctant to remove the name of the former owner.  A solution to the problem may be that the current owner takes out a loan and pay the remaining mortgage on the property. If that is impossible, then the former owner must ensure the lender to call him/her when there are missed payments in order to avoid late fees and credit damage.

(N.Y. Times 03/25/2004)

2.   A RENTER’S NIGHTMARE

Private screening services are transforming people or potential renters into stigmas. Landlords are paying such services to investigate and review housing court records of prospective renters in order to pinpoint possible problematic renters. Even if the dispute was in favor of an individual over a previous landlord, it may affect the landlord’s decision of granting him/her the apartment. Nonetheless, private screening services have encountered lawsuits since there have been occasions where such services have supplied landlords with insufficient or inaccurate reports.  Screening services are popular among landlords since it supplies them with information such as credit history, criminal history, court appearances and employment history.

(N.Y. Times 04/08/2004)

3.   PARTNERS AND HOME OWNERSHIP

The legal status of the partnership of same sex couples is yet to be disputed in court. However, such couples may solidify their status with real estate and obtain benefits that are granted to heterosexual married couples. Tenancy in common is a title to real personal property held by two or more persons, in which each has an "undivided interest" in the property and all have an equal right to use the property, even if the percentage of interests are not equal or the living spaces are different sizes. Upon the death of a tenant in common there must be a probate of the estate of the deceased to transfer the ownership in the tenancy in common.

Another form of ownership is tenancy by the entirety which is joint ownership of title by husband and wife, in which both have the right to the entire property, and, upon the death of one, the other has the right of survivorship.  When legally married couples buy real property, it is assumed that their ownership will be tenancy by the entirety.  Some couples that do not wish to marry, whether homosexual or heterosexual, and buy real property, they are assumed to purchase under the terms of tenants in common.   

Nonetheless, couples may purchase under the terms of Joint tenancy, which is also a form of ownership by two or more individuals together. It differs from other types of co-ownership in that the surviving joint tenant immediately becomes the owner of the whole property upon the death of the other joint tenant.  Joint ownership has rather rigid legal limitations and consequences that are sometimes not intended. For instance, in order to dissolve the right of survivorship, one partner can simply convey away his/her interest or record and execute a new deed, without any consent of the co-owner. 

(N.Y. Times 03/23/2004)

4.   RECENT CASE LAW DEVELOPMENTS

Early v. Rossback

Alleging malpractice against defendant real estate appraiser, plaintiff claimed that it had overpaid property taxes due to appraiser's overstatement of its property's size and his continued reliance on the overstatement in later appraisals. The court granted summary judgment to plaintiff. Finding that defendant never re-measured plaintiff's property following the first appraisal and never re-inspected the premises for the third and fourth appraisals, the court determined that he negligently departed from good and accepted standard practices for appraisers. The court called for trial on proximate cause and damages. Concluding that the continuous representation doctrine was inapplicable, it held that plaintiff could not recover damages incurred prior to Jan. 19, 1994, the date of the last appraisal.

Friedman v. Nichols

Pursuant to a written agreement, the defendants agreed to sell plaintiff two properties, one of which was solely owned by one defendant. The defendants sought dismissal of plaintiff's contractual breach action, arguing that plaintiff continued price negotiations, the agreement was merely a binder that had never been formalized into an executed contract. They argued that the defendant's mother was a necessary party in order to validate the binder with respect to the solely owned property, which had been owned by her and the defendant's deceased father. The court deemed the agreement unenforceable as violative of the Statute of Frauds. There was no proof that either defendant was authorized to act on behalf of the mother, who was a party to be charged with respect to the solely-owned parcel, but did not sign the binder.

29 Holding Corp v. Diaz

After the tenant renewed her lease twice, she abandoned her apartment. Claiming that it held no duty to mitigate damages, the landlord sought, from a guarantor, rent owed from May 1997 to April 1998. In Holy Properties LP v. Kenneth Cole Productions Inc., the Court held that a commercial landlord has no duty to mitigate damages. Deeming Holy Properties limited to commercial premises, the court required the landlord to show its reasonable, diligent re-rental efforts at an inquest on damages. The court stated that the concept that a landlord can hold a residential tenant hostage to a lease, doing nothing and permitting damages to accrue when the leased premises are readily marketable is clearly contrary to common sense and notions of equity and justice.

5.   CONTRACTORS AND HOME IMPROVEMENT

Good contractors, including architects and engineers are important to anyone who decides to proceed with improving their home. It is important for the consumer to understand the contract and the materials that will be used on the job. Home improvement complaints outnumber other categories in the New York City Department of Consumer Affairs.  It is important for the consumer to acknowledge the following requisites when hiring a contractor and prior to commencing a project: a) Contractors be licensed and hire experienced engineers and architects; b) Have the contract reviewed by an experienced attorney; c) Do not pay a contractor in cash; d) Review the architects’ blueprints and designs for accuracy; e) Have a knowledgeable foreman present to supervise the workers; f) Provide the workers with your home’s engineer’s report so they know the condition of the building and its deficiencies; g) In order to avoid dishonest contractors, contact your local Consumer Affairs Department’s and Consumer Protections agency to review licensing and possible complaints.

(N.Y. Times 03/07/2004)

6.   QUESTIONING THE LEGALITY OF LEAD-PAINT LAW

The Lead-Paint Law, which regulates the removal of lead paint hazards from apartments built before 1960, and requires identification of children younger than 7 who live in those housings, was challenged by the Rent Stabilization Association and the Community Preservation Corp.

The two parties filed a two separate law suits, claiming that the new law assumes that all buildings built prior to 1960 have lead paint, and it therefore shifts liability to owners, which may affect their chances of obtaining financing and insurance.  

The Lead-Paint Law is to go in effect in August 2004, and it is unclear as to whether such litigations may hinder the effective date.  Many landlords and advocates and low income housing highly fear that this new law will become a great financial burden to the building owners and renters.  

(N.Y. Times 04/10/2004)

7.   SPECULATING PROPERTY DISCLOSURE FORMS

In NY and CT, those who are listing their properties for sale are intended to fill out a Property Disclosure Form (PDF) in order to provide potential buyers with information about the property. 

As of March 1, 2002, owners in NY of one to four family complexes must complete a forty-eight disclosure form and provide it to the potential buyer prior to signing the contract. Such law is intended to protect buyers, and if sellers are not careful when filling out the form, since their answers could be used against them.

In CT, since 1995, sellers are to fill out a thirty-six disclosure questionnaire which must be attached to the contract.  The seller must provide an explanation of any physical problem in the premises. Many attorneys claim that many sellers do not know their property enough to fill such forms.

Most attorneys suggest to buyers that they can obtain more information by hiring an experienced home inspection expert than by relying on representations made by the seller.  Whether or not the seller completes a property disclosure form, the seller can be held liable for damages if he/she attempts to conceal a problem or misrepresents the condition of the property to the buyer.

(N.Y. Times 03/14/2004)