LATE OCTOBER – EARLY NOVEMBER 2004 REAL ESTATE NEWSLETTER

1.   DOWNTOWN REAL ESTATE PRICES SOARS

If you have a million dollars to spare, Downtown is the place to move. In the past year, co-ops and condos have surged 64%. Two bedroom apartments below 14th street are now going for around $1.063 million. Downtown lofts also continue to bring in plum prices as the median price hits $773 per square foot. This is up to 26% over the past year.

There have been a number of new listings in the Downtown area. However, this surge is due mostly to new developments in the area such as one building, 15 Broad Street, alone accounting for 227 new listings. There area also new developments along the river and on Wall Street, which have not even closed yet. The are has undoubtedly recovered from the 9/11 terrorist attacks. There have been contracts signed for Wall Street condos that are over $1,500 per square foot. These figures were unheard of pre-9/11.

On the West Side, co-ops and condos have had an impressive 25% rise. Prewar units have gained 41% in the last year. By contrast, prices for post-war co-ops have only gone up by 25%.

Prices in the East Side for smaller two or one bedroom apartments only show an 8% gain. However, the larger East Side apartments with three or more bedrooms went up 20%. More families are moving back to the City contributing to this boost in larger apartments.

(N.Y. Post 9/14/2004)

2.   DANGERS OF CARBON MONOXIDE

Mayor Bloomberg today urged New Yorkers to be aware of the dangers of carbon monoxide, and to heed a new law that goes into effect November 1 requiring carbon monoxide detectors to be installed in all multiple and private dwellings as well as in institutional and educational facilities throughout the City.

The new law (Local Law 7 of 2004) requires at least one carbon monoxide detecting device within 15 feet of sleeping rooms in Class A multiple dwellings and private dwellings; buildings which are within occupancy groups J-1, J-2, or J-3; and buildings classified in occupancy group G and H-2. Owners would also be entitled to a reimbursement of $25 per device from tenants.

Type J-1 refers to Hotels, Motels, Lodging Houses, and Rooming Houses. Type J-2 refers to Apartment Houses, Apartment Hotels, School Dormitories, and Single Room Occupancy/Welfare Houses. Type J-3 refers to Single Family Homes, Two-Family Homes, Rectories/Convents, and Group Homes. Group H-2 refers to Hospitals/Clinics, Nursing Homes/Homes for the Old Age, and Nurseries. Lastly, Group G refers to Educational Schools, Academies, Libraries, and Colleges.

“This law is critical to ensuring that all New Yorkers protect themselves and their loved ones against carbon monoxide,” said Mayor Bloomberg. “Carbon monoxide detectors are your best line of defense against this odorless, colorless silent killer. I urge all homeowners, building owners and landlords to comply with this law quickly as the weather is getting colder and these dangers increase during the winter season.”

This warning was given due to the tragic carbon monoxide poisoning deaths of two women and a seven year-old girl on Staten Island on October 19, 2004. “The victims were overcome by carbon monoxide poisoning when the flue pipe to the home’s boiler was obstructed allowing the gas to permeate the home. The home was not equipped with a carbon monoxide detector.”

(www.nyc.gov 10/20/04)

3.   FATHER’S MENTAL CAPACITY DURING EXECUTION OF WILL QUESTIONED

Coleman Connelly and Kathleen Donohue were married and had two children, a son and a daughter. They lived together in a house located in Brooklyn, New York. During this time Coleman executed a will, leaving his property to his wife. In the event that his wife passed before him, he directed that all his property be divided between his son and daughter evenly. Kathleen did in fact end up passing before Coleman.

Coleman’s son and daughter both married and moved out of the home. At her father’s request, Coleman’s daughter moved back into the home with her husband and child. She lived there rent free in exchange for helping her father. He had diabetes, high blood pressure and wore a hearing aid. She drove him regularly to doctor visits and handled his financial transactions.

In 1999 Coleman decided to make a new will. He discussed his intentions privately with his attorney. He informed his attorney that he now wished the subject real property to be given to his daughter only. The will was duly executed by Coleman and witnessed by subscribing witnesses.

In 2001, Coleman died. When his daughter petitioned to probate the will his son filed objections to the probate. Coleman’s daughter sold the real property for $338,000. Coleman’s son brought this action seeking that the deed from Coleman to his daughter be held null and void or the proceeds from the house be divided evenly among him and his sister. His complaint alleges that his sister had a confidential and fiduciary relationship with Coleman and the execution of the will was procured by undue influence, duress and constructive fraud, due to Coleman’s illness.

After investigation of the claims the Court held that since there is no real issue as to the mental capacity of Coleman at the time he executed the will and no supportable inference of fraud, duress or undue influence his daughter is entitled to the subject property.

(N.Y.L.J. 9/15/2004)

4.   ATTORNEY, BROKER CAN’T RECOVER COMMISSION

Rokosz v. Belmont Watkins Realty Corp.

Belmont Watkins Realty Corp. was owned by Israel Israel and Phyllis Rokosz and located at 73-33 Belmont Avenue in Brooklyn, NY. Shrage Rokosz, Phyllis’s son, is an attorney and a licensed real estate broker. The two families were friends and did business together for many years.

Harry Shapiro is an attorney and licensed real estate broker who incorporated Belmont in 1998 and was its designated agent for service of process. In 1999 Phyllis Rokosz sold her interest in Belmont to Israel Israel and his wife. Her son, Shrage was the attorney for the closing.

In August 2000 Rent-A-Car lease contacted a salesperson, Steven Lorenzo, looking for a site. Lorenzo identified Belmont Avenue as a potential site and contacted Harry Shapiro believing he was the owner. Shapiro informed him that he was not the owner, but that he would like to take part in the transaction and in the commission. Shapiro and Lorenzo put together a lease proposal, which identified the two of them as co-brokers receiving a 6% commission. The lease proposal originally had an annual rental amount of $100,000, which was changed by Lorenzo to $107,500.

After receiving the proposal, Shapiro faxed it to Shrage Rokosz at “Belmont Watkins Realty.” Shapiro was unaware at this time that Phyllis Rokosz had sold her property interest to the Israels. By faxing the proposal to Shrage Rokosz he had a good faith belief that he was faxing it to Belmont.

Rokosz held himself out as Belmont’s exclusive broker without first formalizing the relationship with Israel. He intercepted an offer that was intended for Belmont. He lied about his relationship to the corporation. He tried to claim credit for negotiating the rental price from $100,000 to $107,500. He tried to hide crucial information from Belmont in order to receive a 10% commission when he was not even listed as a broker and the listed commission was only 6%.

Because Israel did not know of Rokosz’s disloyalty and trickery, he signed a contract containing these terms. The contract was the product of trickery and deceit and shall not be enforced. All compensation was forfeited by Rokosz’s disloyalty.

(N.Y.L.J. 10/27/2004)

5.   APARTMENT RENT SCAM

Frederick Forino gathered addresses of available West Village apartments on particularly trendy streets and listed them on Craigslist.com posing as a broker to possible renters. Although he had no authority to do so, he began showing the apartments to prospective rentersHe scammed these apartment seekers out of thousands of dollars in fees. He requested application fees, security deposits and first month’s rent. When the police busted him, he had uncashed checks totaling $2,800 and more than$4,000 in cash.

One resident from a Christopher Street apartment which was shown, recalls buzzing in someone claiming to be a broker on several occasions. At another building on Cornelia Street, a resident says the super helped the phony broker gain access. The resident also commented that. “Fake brokers do it all the time.” A broker was quoted as saying, “It’s rampant… There’s really no system of checks and balances unless someone asks you to see your real estate license.”

(N.Y.L.J. 9/27/2004)

6.   CONTRACTUAL WARRANTY PROVISION

The defendant in this case entered into a contract with plaintiff to build and sell him a new house. Plaintiff is now seeking damages for defects in the house which are covered by the limited warranty’s First Year Basic Coverage Provision. However, the defendant is arguing that since the plaintiff commenced the action 2 days late under the “First Year Basic Coverage” the claim must be barred and dismissed.

The Limited Warranty provided coverage for such claims for up to “one year from the effective date.” which in this case is September 7, 2000. It also states that a lawsuit cannot be commenced more than 30 days of expiration, in other words, no later than October 7, 2001. Plaintiff commenced this lawsuit on October 9, 2001.

However, the Limited Warranty also provides two other options which state that no lawsuit against the seller may be commenced more than thirty days after the seller’s written notice of rejection of claim or thirty days after substantial completion of repairs. So, although plaintiff missed the October 7, 2001, deadline, the deadline under option two never began to accrue and the seller has not in this case substantially completed corrective action of the defects.

The plaintiff had sent a “Notice of Warranty Claim Form” to the defendant in June, 2001. Some repairs were made in June and July. Plaintiff then called defendant several times. In September 7, 2001, plaintiff’s attorney wrote a letter to defendant putting him on notice that he must make a choice. The letter said, “If we do not hear from you, I will assume that your failure to respond is deemed a rejection of the claims and I will pursue this matter through litigation.” The defendant did not respond.

Therefore, the Court awarded the requested damages to plaintiff.

(N.Y.L.J. 9/29/2004)

7.   BROKER MAY HOLD ON TO FEE

Marco Srour sought the assistance of Dwelling Quest Corp., a brokerage firm, when searching for a Manhattan apartment. A broker from this company assisted Mr. Srour in finding an $11,000 per month apartment on the Upper East Side. Mr. Srour signed the lease to this habitable apartment. At the time of lease signing there was no mention of roof repairs, scaffolding or work being performed at a later time.

After lease signing, Mr. Srour paid Dwelling Quest Corp. their commission of $13,000 cash. However, a week before Mr. Srour planned to move into the apartment, many changes occurred. The windows were covered and scaffolding was in place. A water leak caused the master bedroom ceiling to cave in, the roof was being ripped up, and he could not access the wrap-around terrace. Constant drilling and renovation was set to take from six to eight months.

The landlord returned Mr. Srour’s first month rent and agreed to cancel the lease. However, the broker refused to refund the commission. Mr. Srour sought his refund in Court.

The Court held that since the broker’s job was fully performed its commission was irrevocably earned upon the signing of the lease, The broker’s agreement is unaffected by events that occurred after the signing which prevented the landlord from fulfilling the obligations of the lease.

A broker is entitled to payment even if no contract was ever signed. The broker’s obligation is to produce a ready and willing person to enter into the proposed contract. The broker in this case fulfilled this obligation. The parties here agreed that the broker’s role in this transaction was to assist in the location and renting of a suitable apartment. The apartment was suitable at the time it was located and rented. The contract also specified that the broker earned its commission at the time of lease signing.

There was no showing that the broker had knowledge of any latent or concealed defects that would make the apartment unsuitable at a later time. There was no showing of fraud or misrepresentation. The parties in this case could have protected themselves by including preconditions for the broker’s commission in the agreement.

(N.Y.L.J. 9/10/2004)

8.   ORAL MODIFICATIONS OF WRITTEN LEASE ADMISSIBLE

BEWAY REALTY LLC V. C.N. FULTON DELI, INC.

Beway Realty sent a construction worker to Fulton Deli, their tenant, on November 18, 2003. While there, the construction worker negligently severed the gas line to the premises, leaving Fulton Deli without gas and unable to serve food. Therefore, on December 9, 2003, one of the five managers of Beway Realty met with Jinah Han from Fulton Deli and orally forgave December’s rent on behalf of Beway.

On January 7, 2004, the two men met again. Beway’s representative advised Han that the premises ventilation system would be disabled for building renovations in the near future. Han questioned his ability to do business under these circumstances. Therefore, Beway’s representative, on behalf of Beway, agreed that Han could wait to pay the January 2004 rent until the end of the month while they discussed a lease extension.

In March 2004, Han paid the rent on time, including the rent increase, which went into effect that month. Beway rejected this payment because prior rent remained outstanding. Therefore, on March 24, 2004 and again on April 7, 2004, Han tendered the rent for January through March, but Beway would not accept it.

Beway’s rejection of the rent was in connection with the fact that the parties’ written lease contains the standard provision prohibiting oral modifications. According to the contract, any changes made to the agreement must be done in writing. Therefore, Beway is seeking $24,229.00 in rent for December 2003 through March 2004. Fulton Deli is only disputing December 2003 rent of $5,915.00.

The Court held that, “Written contract provisions that the contract may not be modified orally are enforceable.” However, “This bar to an oral modification may be avoided.” The Court here looked towards Equitable Estoppel. When Beway’s representative orally agreed to forgive December’s rent he induced Fulton Deli’s “significant and substantial” detrimental reliance on the oral modification. This reliance stops Beway from using the writing requirement in the contract to bar the enforcement of the oral agreement.

Therefore, Fulton Deli is only responsible for rent payments for January, February and March 2004 plus interest. December 2003 rent is forgiven.

(N.Y.L.J. 10/20/2004)