Late April- Early May REAL ESTATE NEWSLETTER

1. FEDS PROBE REAL ESTATE AGENTS

According to CNN Money, the U.S. Department of Justice is investigating real estate brokers in Tulsa, Oklahoma regarding the stranglehold 6 percent commissions have held over the real estate brokerage business. According to the Justice's Antitrust Division, bully tactics are being used by full-commission brokers in Tulsa. These tactics are used against their discount rivals to discourage commission cutting. This investigation is taking place in order to promote competition in the real estate industry.

The Justice Department is concerned with possible anticompetitive conduct in real estate services and refusal to cooperate on real estate transactions. Many economists believe that the persistence of the 6 percent commission is a result of the anti-competitive behavior among realtors. The investigation is also focusing on a tactic called boycotting. There are full-commission realtors allegedly refusing to show homes listed by discount realtors. This exploits the one major weakness of the multiple listing service. However, this service does centralize all homes for sale in a single electronic marketplace. Therefore, all agents and web-savvy consumers have access. But overall, this service forces realtors to depend on one another to sell homes and under cutting each other's commission is discouraged. Boycotting is not just an antitrust violation; it is also a breach of the buyer's broker's fiduciary duties to clients if undisclosed. However, insiders are well aware that it goes on. (CNN Money 4/22/2005)

2. NYS MORTGAGE TAX INCREASE

Due to the 2005-2006 Budget Bill signed into law by Governor Pataki the mortgage recording tax rate will be increasing by ).05% in New York, Queens, Kings, Bronx, Richmond, Nassau, Suffolk, Westchester, Rockland, Orange, Putnam, and Dutchess counties. Also, the current 0.25% exemption on the first $10,000 of the mortgage principal on 1-2 family dwellings will be increased to 0.30% The NYS Land Title Association has announced that the increase in mortgage tax will not be effective until June 1, 2005. (TitleVest 4/13/2005)

3. REAL ESTATE SALES DRIVE UP CONSUMER PRICES IN REGION

The Federal Department of Labor recently announced that the consumer price index, which measures spending in New York and northern New Jersey, rose 1.7 percent last month. This is the largest increase in 23 years. The increase is the result of rising prices for real estate, apartment rent, food, clothing, travel and mass transit prices. The prices have risen in the region faster than the national average even though there was a decline in energy prices, which led to a decrease by 1.7 percent in electricity charges.

Housing prices rose 5 percent from March 2004 to March 2005, whereas, it was only 3 percent increase nationally. Yet, it was said by Michael L. Dolfman, a regional commissioner of the Bureau of Labor Statistics that "people are continuing to move to the city". He also explained that housing costs that include purchase prices has rose 6.5 percent in March in regards to the same month last year and are up 3.2 percent in the year to date.

With the increase in energy prices the long term rates are still remaining low and have continued to fuel the demand for housing. But when calculating cost of shelter, the index showing how much people spend on out of town lodging the percentage jumped to 27.7 from February to March of this year with the increase of 8 percent nationwide, according to Travel Industry Association of America. Even though the consumer price index has risen 3.1 percent since last year, the prices have risen quicker by 5.6 percent.

4. CLAIM AGAINST CO-OP FOR DISCRIMINATION AGAINST ORTHODOX JEWISH RESIDENTS, SHAREHOLDERS PROCEEDS

Daniel and Malki Cohen have been shareholders of Seward Park Apartments for more than thirteen years. Daniel Cohen served on the board of directors for eight years in the housing complex. They already own three apartments but when they tried to purchase an apartment adjoining theirs, their application was denied. They were suing for breach of contract, fiduciary duty and discrimination based on their religious beliefs.

On April 5, 2001, they first applied for the apartment offering $160,000, but were denied on the basis of "first refusal". Although, the plaintiffs argue that it was the fair market price, the board explained that t he price was too low. In December 2001, Daniel Cohen at a meeting with the board's president Donald West, knowing that the apartment was still vacant and available was advised to submit a written offer.

On January 28, 2002, the plaintiffs offered $190,000, without brokerage fee, a price, which was reasonable for the fair market value, and they were willing to pay more if they were told do so. They were never informed of the decision except when they realized that there was construction work being done next door, meaning that someone else was moving in. Plaintiffs allege that the Board of Directors acted in "bad faith", without a legitimate reason, and in discriminatory manner. Plaintiffs claim that they have "excellent financial qualifications" and they were never late in paying any maintenance fees on their three apartments or any other obligations, so therefore they should be considered in good standing. They also explain that other apartment shareholders have also applied for apartments and were granted the ability to purchase for below or equal prices. Some were even allowed to purchase apartments for below market value because they had personal relationships with one of the Board members without given "the right of first refusal" . One of the Board members also owned four apartments and was recently approved to purchase a fifth apartment .

The plaintiffs also claim that the Board of Directors also hold "personal animosities" and that they "discriminate generally against Orthodox Jewish residents and shareholders".

In general, the plaintiffs are seeking $3,000,000 in damages for the claims of breach of fiduciary duty, breach of contract, and discrimination based on their religion.

5. LANDLORD NOT ENTITLED TO BACK RENT DUE TO UNINHABITABLE BATHROOM, BEDBUGS

Jefferson House Associates, LLC v. Boyle

A landlord brought suit against tenant for the non-payment of rent. The tenant's defense was based on alleged bedbug infestation and dripping sewage from her bedroom ceiling. The Court held that the landlord did not breach its warranty of habitability. As a result, the tenant suffered detriment to her health. She was exposed to the inhalation of unpleasant odors from the dripping sewage. The emanating odors rendered her bathroom uninhabitable for 18 months. She was also bitten by bedbugs for almost two years. Therefore, the tenant was entitled to a 50 percent rent abatement for one year and 20 percent abatement for two years. (N.Y.L.J. 3/9/2005)

6. COURT ORDERS CITY NOT TO FINE HOMEOWNERS

A Staten Island couple has waited four years for a certificate of occupancy for their home. A Civil Court judge has ruled that New York City's Department of buildings can not take any action against them, such as imposing fines or violations. The Judge also barred the Buildings Department from issuing permits to builders who do not obtain occupant certificates in a timely manner. ATP Development Corp., the builder of the home, was ordered by the Judge to compel builders to obtain certificates of occupancy in a timely fashion. ATP was also ordered to obtain the couple's certificate of occupancy no later than March 31.

A spokeswoman for the Department of Buildings said that this opinion was based on erroneous interpretations and will be appealed.

The Staten Island couple bought the home in 2001 with a temporary certificate of occupancy. Since then, they have received two more temporary certificates, the last one expiring in January 2004. They have heard nothing since. Under the original contract with ATP, the builder was obligated to obtain a final certificate of occupancy within one year of the closing.