FEBRUARY 2004 REAL ESTATE NEWSLETTER

1.   APARTMENT PRICES ARE INCREASING WHILE INVENTORY DECREASES

According to Douglas Elliman Real Estate, the average price of a condominium or cooperative apartment has increased to $580,000; it has increased $5,000 since the last quarter. In fact, the median price per square foot of an apartment hit the record of $706.

Nonetheless, the number of available apartments have decreased, appraisers at Miller Samuel, Inc. find it ironic that while the price per square feet is increasing, the amount of available feet is decreasing.  The CEO of the Corcoran Group stated that in the beginning of last year, buyers sought low interest rates; by the end of the year, it lead to lack of inventory and bidding wars.

The Corcoran Group affirmed that while in January 2003, over 13,000 homes were being sold, in December 2003, only about 6,000 were sold. As illustrated, the sales have been cut in half. It is the lowest in five years. The dwindling supply of apartments has prompted prices to skyrocket.

 The record low interest rates and the return this year of bonuses are responsible of the lack of inventory, as eager home purchasers want to buy before interest rates increase.

According to the Corcoran Group, over thirty five percent of the apartments sold in December went above the asking prices.  The low inventory is sparking fierce bidding wars.

2.   HOW EFFECTIVE IS THE GENERAL BUSINESS LAW §352-EEE

The landlord petitioner claimed that tenant, Ms. Shannon Estavillo, illegally occupied premises after her lease expired. The premises are located at 207 Schrade Road, Briarcliff Manor.  Tenant argues that she was a non-purchasing tenant of premises converted to cooperative ownership.

The tenant in addition claims that she was not properly notified of her alleged violation. The notice of petition was either mailed or slipped under her door.  According to RPAPL 735, the notice of petition must be delivered personally or given to a person of suitable age with discretion.

Nonetheless, the court ordered that she cannot be evicted since General Business Law §352-eee doesn't authorize eviction of non purchasing tenants who stay over expiration of lease. The court found that respondent was not a non-purchasing tenant under §352-eee.

According to GBL 352-eee, which governs rights of non-purchasing tenants of premises converted to cooperative ownership, “no eviction proceedings will be commenced at any time against non-purchasing tenants for failure to purchase or any other reason applicable to expiration of tenancy; provided that such proceedings may be commenced for nonpayment of rent, illegal use or occupancy of the premises, refusal of reasonable access to the owner or a similar breach by the non-purchasing tenant of his obligations to the owner of the dwelling unit or the shares allocated thereto may not commence an action to recover possession of a dwelling unit from a non-purchasing tenant on the grounds that he seeks the dwelling unit for the use and occupancy of himself or his family.”

She occupied the apartment beyond the building conversions plan’s effectiveness. Since respondent’s tenancy commenced after conversion, under a lease provided by an offering plan sponsor’s estate, the petitioner provided no evidence supporting its claim that respondent did not rent from the sponsor. The court found a fact issue whether respondent’s apartment was rented from the sponsor or his successor.

(NYLJ 1/15/2004 )

3.   HOW TO IDENTIFY LETHAL GAS IN HOME

Underwriters Laboratories stated that every year more than five hundred people in the United States die from carbon monoxide poisoning.  About 20% are killed from carbon monoxide released from water heaters and stoves.

Carbon Monoxide is produced by the incomplete combustion of the fossil fuels--  gas, oil, coal and wood — used in boilers, engines, oil burners, gas fires, water heaters, solid fuel appliances and open fires.  Dangerous amounts of CO can accumulate when, as a result of poor installation, poor maintenance, failure or damage to an appliance in service, the fuel is not burned properly; accumulation also occurs when rooms are poorly ventilated and the carbon monoxide is unable to escape.

In today’s world of improved insulation and double glazing it has become increasingly important to have good ventilation, maintain all appliances regularly and to have absolutely reliable detector alarms installed giving both a visual and audible warning immediately when there is a build up of CO to dangerous levels.  This is especially important since CO has no smell, taste or color.

Carbon monoxide poisoning can not only kill you, it can cause permanent neurological damage in the longer term. In the short term, it can make you feel ill and inhibit you life potential. Here is what you can do to protect yourself:

A. Check the flame color of your appliances, if it is orange, you do have a problem. However, blue does not necessarily mean it is safe. Get your appliances checked annually and get a detector if unsure.  Make sure to check all your appliances every year, including grills and boilers.

B. Avoid the flue from being blocked — remove all obstructions from the flue area.

C.  Make sure to have adequate ventilation. If the appliances in your home do not have enough air, they will produce carbon monoxide.

D. If you suffer from unexplained illnesses, fatigue, muscle pains, upset stomach, lethargy, dizziness, headaches, go to your doctor and get a CohB test. Go directly from your house, as the CO in your blood will deplete and may not be picked up.

E. By law, all landlords must annually check the appliances in your accommodation and all tenants must have a CO detector. Make sure to get the most recent version detector.  Older versions would detect atmospheric carbon monoxide and generate a false alarm.

(NY Times 01/18/2004)

4.   RECENT CASE LAW DEVELOPMENTS

American Medical Utilization Mgmt. Corp. v. 1725 St,. Marks Owners Corp

Landlord sought plaintiff tenant’s eviction and termination of tenant’s option to purchase. But plaintiff argued that it had invested heavily in renovations and that landlord accepted arrears. Defendant argued that its acceptance of arrears was to satisfy judgments, not a waiver of any other breach; plaintiff’s failure to pay rent was not a detrimental breach; and that investment in leased premises did not warrant protection from forfeiture. The court granted defendant landlord’s motion, finding the parties’ intentions expressed in a lease rider that specified that plaintiff tenant forfeited its purchase option if it was in arrears. Additionally, a “no waiver” provision specified that defendant’s receipt of rent with knowledge of the breach of any lease covenant did not constitute a waiver of such breach.

178 East 80 Street Owners Inc. v. Jenkins

Plaintiff cooperative corporation claimed that defendant, who owned two units in a cooperative apartment building, violated her proprietary lease. The dispute arose out of a settlement agreement. The defendant agreed that in any 6 month period, she would not have overnight guests in her apartments for more than two weeks; guests could be present only when she was contemporaneously physically there. According to Plaintiff, the defendant violated the agreement by having an individual stay in her apartment for a period over 2 weeks, during which she was not present. The court ordered that defendant is required to show cause why she should not be adjudicated in contempt for violating the agreement. The court directed a fine against defendant for plaintiff’s legal fees in the amount of $32,916.

 129 E. 69th St. Corp v. Estate of Louise M. Anderson

Petitioner claimed respondents continued to live in a cooperative apartment after the lease expired. Respondents argued that petitioner’s notices were defective, the termination notice was addressed to the “Estate of Louise M. Anderson (Lessee)” and “Estate of Louise M. Anderson c/o Nadine L. Liebhardt, Esq.” Respondents claimed that neither entity was a recognizable party.  According to NY statutes, any proceeding against an estate must be brought in the name of the administrator in his/her representative capacity as respondent. Petitioner’s failure to name Liebhardt in her representative capacity as executor and to serve petition and notices on Estate of Louise Anderston constituted a technical pleading defect.  It was unamendable, thus the court dismissed the petition.

5.   NEW PROPRIETOR NOT RESPONSIBLE FOR PREVIOUS OVERCHARGES

The Court of Appeals reversed a decision made in the Lower Courts and held that, according to a Rent Stabilization law, tenants were not able to collect from their current landlord $95,158 in overcharges made by previous owner.

The plaintiffs, Mr. Fullan and Ms. Bates, had originally leased the apartment in 1985 for $775 per month from Dobro Corp.  They filed a Fair Market Rent Appeal (FMRA) with the state Division of Housing and Community Renewal (DHCR) in 1991 claiming that the rent they had originally paid was more than the fair market value.

In 1993, DHCR clarified that the fair market value would have been $434; therefore the  tenants deserved a considerable refund. The appeal brought by Dobro lasted four years until it was denied.  However, during the four years, Dobro transferred the property to 142 East 27th Street Associates; then it was given to its present owner, 27 Realty LLC. The lower courts held that although there was no lien filed, 27 Realty would have avoided responsibility if it would have followed up with due diligence. It needed to understand that the plaintiffs were entitled to collect the previous overcharges and fees.

However, the Court of Appeals reversed the decision; it stated that 27 Realty cannot be held responsible since “a purchaser does not have a statutory obligation of due diligence to investigate the potential existence of FMRA awards.”   Thus, there is no basis under the Rent Stabilization Code that the current owner be responsible for liabilities of previous owners.

(NYLJ 01/02/2004)

6.   FEDERAL HOUSING ADMINISTRATION LOANS

Most loan officers have been suggesting for people with credit problems and low income to apply for the Federal Housing Administration loan.  

The process is a lot of paper work; but the outcome is nonetheless beneficial.  For example, if one is interested in buying a $220,000 home, one would require a $44,000 down payment with a conventional mortgage. However, the FHA loan is different.  One would require a three percent down payment, and permits closing costs to be included into the mortgage, which end up at $234,000. Therefore, monthly payments of $1,718 can be made.

The reason why the FHA loan can help is because it emphasizes on the recent couple of years of an applicants credit history.  Applicants can show latest higher paying job to prove that he or she can pay the mortgage, or credit letters from utility companies or proof of timely rent payments.

Nonetheless, there is a monthly insurance premium of 1.5 percent and the loan approval process can take weeks longer than a standard loan.

(NY Post 01/31/2004)

7.   MORTGAGE REGULATION PROPOSAL FR-4722

The Department of Housing and Urban Development believe that, often when sellers and appraisers work together, home purchasers have often become victims of unsafe lending. The unsuspecting home buyers either purchase homes with sales prices far in excess of the fair market value, or are substantially overcharged with costs associated with obtaining a mortgage.

According to the proposed rule, FR-4722 Lender Accountability for Appraisals makes lenders accountable for the quality of appraisals performed by the appraisers the lender hires.

The rule would attempt to strengthen HUD's regulations concerning the responsibilities of lenders in the selection of appraisers to perform appraisal on properties that will be security for FHA insured mortgages.

The rule makes lenders strictly accountable for the quality of the appraisals and specifies that lenders that submit appraisals to HUD that do not meet FHA requirements are subject to the imposition of sanctions by HUD's Mortgagee Review Board.

(NY Times 01/07/2004)