Real Estate Law Blog

New York's Martin Act governs the sale of securities including cooperative and condominium apartments. Since the Court of Appeals CPC v McKesson decision in 1987 it has been accepted that individual purchasers do not have a private right of action under the Martin Act. Courts have held, however, that common law fraud actions remain available. The last 20+ years have seen an array of court decisions trying to find the exact line between common law fraud and mere Martin Act violations. Common law fraud is hard to show - you need an act or omission, scienter (bad intent) and reliance. So ...

Retail storefront vacancies in Manhattan seem to be increasing. I was reminded of the recent change in Section 216 of the IRS code making it easier for a co-op to own its own retail space when I looked out of a bus window at a large vacant store on Madison Avenue. If that building is owned as a co-op and the co-op owns its own retail space, the co-op is taking a big monthly hit in revenue. If the co-op's monthly maintenance charges are based in part on rent from that now vacant store, the co-op will have a significant shortfall. I can just imagine being on a co-op board which sends a notice to ...

Ticor Title Insurance Company has turned title insurance on its head. Instead of viewing its product as helping a lender vet and insure deals, it is defending a claim made by a lender by turning the table and saying the lender shouldn't have made the loan in the first place. Unbelievable? You betcha. Now other title industry pundits are defending the actions (New York Law Journal 10/8/08 by Bagwell). Ticor's defense? While the deed in the chain of title was fraudulent (the prior owner was murdered) and Ticor did insure title, Countrywide should have known that fraud was possible since they ...

While walking into Riverside Church today for the convocation celebrating Trinity School’s 300th anniversary I was handed a flyer protesting Trinity’s proposed sale of the apartment building it owns next to its school. I am not supportive of the rent stabilization system that has survived in New York since it is not based on need. There are simply too many stories of actresses keeping pied-a-terres in New York and rent stabilized tenants with expensive summer homes. I am cognizant that the system helps many who could not otherwise afford housing. But the system has outlived both ...

Private lenders who step into the breach when funds are needed to acquire a site or keep a job moving until a construction or permanent loan is closed frequently look for ways to share in the upside of the project. Becoming a member of the borrower is fraught with difficulty – management time is required, definitions of profits are sometimes elusive and if the deal craters, there may be no profits to share. A recent lender in that position creatively asked for a fixed percentage of revenues of the borrower – no fight over profits needed. It was a condo project and the revenues should be easy ...

Update January 2010: The decision I discuss in my original post was overturned. See my update dated January 21, 2010. The proverbial floodgates of litigation in the co-op world appear to have opened. The first case may be Bleecker St Tenants Corp v. Bleecker Jones LLC where the co-op tried to use the Rule Against Perpetuities to defeat a long term commercial lease signed years ago which no doubt limited rent to 20% of income (NYLJ, 9/4/08, pg 27). The Perpetuities Rule has long bedeviled law students and is a famously esoteric mind-bender. At its most simplistic it prohibits options which ...

Question:

We have owned the property as Tenants in Common (“TICs”) for an extended period.  We do not have a written agreement between us.  We are signing a new, very significant lease.  What ownership issues should we address?

Real estate investment LLC and partnership agreements frequently include “shotgun” buy/sell clauses in the event one partner wishes to force a sale of the property or to otherwise resolve a deadlock. (We use “shotgun” to refer to the “You buy us or we buy you at a value of $X” type clauses where a sale of either side is required.) Many clients have asked for guidance on these clauses and we have put together the thoughts of our real estate and litigation lawyers experienced in exercising these provisions:

An unfamiliar and little understood change in New York City Real Property Transfer Tax (“RPT”) which has been in effect since August 1997 assists sellers of homes, cooperatives and condominiums to substantially reduce their transfer taxes and, if done correctly, also helps purchasers reduce their mortgage recording taxes. The complexity of rules (and increased legal fees) generally limit these tax savings to sales of high-end residences where sellers and purchasers can realize a significant benefit.