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Legal line question of the week rebny

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In this section I have uploaded some questions and answers from The Real Estate Board of New York (REBNY) for your edification

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Legal line question of the week rebny

  1. 1. [Type here] Legal Line Question of the Week Security Deposit “Burn Down” Provision I am a licensed real estate agent representing a commercial tenant in lease negotiations and the landlord is requesting a larger security deposit than my client is willing to pay. The landlord will not lower the initial security deposit requested, but has offered to provide my client with a security deposit “burn down.” What is a “burn down” provision? Generally, as applied to security deposits in commercial leases, a “burn down” clause provides that after a certain period of time, if a tenant is not in default of the lease, the landlord will return a portion of the security deposit to the tenant. For example, if a tenant enters into a lease for a term of ten years, the lease may provide that if the tenant is not in default of the lease after the commencement of the third year of the lease, the tenant can request that the landlord return a portion of the security deposit (i.e. an amount equal to one month’s rent) back to the tenant or the tenant can request that the landlord apply a portion of the security deposit to the payment of the rent under the lease. The “burn down” provision may further state that at certain other future dates (i.e. each additional year) the Tenant can then request the return of an additional portion of the security deposit. Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP 11 12 15 Legal Line Question of the Week
  2. 2. [Type here] Flip Taxes I am representing the owner of a co-op apartment that is in the process of selling her apartment. The co-op board has just implemented a flip tax (the "Flip Tax") and the seller is concerned that the Flip Tax is going to decrease the value of her apartment. What are the steps that a co-op board must follow in order to implement a Flip Tax? Will the seller have to pay the Flip Tax when she sells her apartment? A Flip Tax is a fee that a co-op charges (usually to the seller) upon the sale of the apartment. The general purpose of the Flip Tax is to increase revenue for the co-op without raising monthly maintenance fees. The origin of the Flip Tax dates back to the early days of co-op conversions when investors were buying co-ops (with no intention of living in the co-op) and then "flipping" the apartment for a profit. The Flip Tax was a way for the co-op to "share" in the investor's profits. In some cases, condominiums have also instituted Flip Taxes. To implement a Flip Tax the co-op board must amend the co- op’s proprietary lease or the co-op’s by-laws. In order to amend either the proprietary lease or the by-laws, there must be an affirmative vote of the co-op’s shareholders (a change of this nature would typically require two-thirds of all shareholders to approve). Gathering this type of support can be difficult depending on the makeup of the co-op. Implementing a Flip Tax is predictably supported by those shareholders who are planning on living in the co-op for a long term and opposed by those shareholders who intend to sell in the near future. Whether the seller is going to be required to pay the Flip Tax will depend on the terms and conditions of the co-op’s Flip Tax provision. For example, the co-op’s Flip Tax provision might state that it does not apply to shareholders who enter into contracts of sale within 60 days of the adoption of the Flip tax. Alternatively, the Flip Tax may apply to all sales closed after the implementation of the Flip tax. Thus, in order to determine whether the Flip Tax applies to the seller, you must look to the terms of the relevant provision in the co-op’s by- laws or proprietary lease. Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  3. 3. [Type here] Important Tip: Co-ops may use a variety of formulas to calculate a Flip Tax. Generally, this calculation is based on either a set percentage of the sales price, a set number of dollars per shares sold, or a percentage of the profit netted from the sale. Some co-ops have also tied the Flip Tax percentage to the seller’s length of ownership of the co-op. For example, a shareholder who has lived in the co-op for a longer period of time (i.e. ten years) may pay a smaller Flip Tax than a shareholder who has lived in the co-op for a shorter period of time (i.e. one year). Legal Line Question of the Week LLC Purchasing a Co-op I am a licensed real estate salesperson and I represent a purchaser who would like to purchase a co-op apartment in the name of a limited liability company ("LLC"). Do any co-ops allow the purchase of a co-op by a LLC? Yes, although rare, some co-ops may allow the purchase of a co-op by a LLC. Historically, co-ops have not permitted the purchase of a co-op apartment by a LLC because of the difficulties in dealing with an entity as opposed to an individual shareholder. Specifically, co-ops have been concerned with: (i) occupancy issues, such as limiting who may live in the apartment and (ii) the co-op’s ability to sue the LLC if the LLC or the occupants of the co-op do not comply with the co-op’s rules or if the LLC fails to make maintenance payments. In order to avoid the problems articulated above, a co-op will generally require a purchaser that is an LLC to: (i) enter into an Occupancy Agreement that limits the occupancy of the co-op to specific individuals, (ii) provide a Personal Guaranty from an individual who will be personally responsible for all of the LLC’s Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  4. 4. [Type here] obligations associated with owning the co-op, including the payment of maintenance fees, and (iii) designate a person that can act as an "agent for service of process" in the event that the co-op sues the LLC (the designated person can receive court documents on behalf of the LLC). Important Tip: As previously mentioned, most co-ops do not permit a LLC to own a co-op. Accordingly, your purchaser should consult with an attorney who can ascertain whether the co-op will permit an LLC to own a co-op and what documents will be required in connection with such a purchase. Legal Line Question of the Week Representing Multiple Purchasers I am a licensed real estate agent and I am representing two purchasers who are considering making offers on the same property. Am I allowed to represent two different purchasers who are both interested in bidding on the same listed property? In Rivkin v. Century 21 Teran Realty LLC, et al., the New York Court of Appeals held that an individual real estate agent may not represent multiple purchasers bidding on the same property without: (i) the full disclosure by the real estate agent to the purchasers and (ii) the purchasers consenting to such representation. The Court stated that representing multiple purchasers, without full disclosure and consent, would be a conflict of interest and a breach of fiduciary duty because the real estate agent could not properly negotiate a favorable purchase price for each of the bidders. The Court further ruled, however, that different real estate agents affiliated with the same real estate brokerage firm could represent different purchasers bidding on the same property. In Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  5. 5. [Type here] such a case, each real estate agent’s fiduciary duty to the purchaser, as well as each real estate agent’s individual incentive to earn a commission, reduces the risk of each real estate agent not negotiating in the best interest of their respective purchaser. Therefore two different real estate agents, who are associated with the same real estate brokerage firm and who are representing separate purchasers bidding on the same property, may do so without the need to disclose, or obtain consent, to such representation. 1 14 16 Legal Line Question of the Week REBNY Member Representing an Immediate Family Member in a Transaction I am a REBNY member and I am currently representing my mother in purchasing a condominium. Must a REBNY member disclose that he or she is representing a family member in a real estate transaction? Yes, under Section II (B)(7) of the REBNY Code of Ethics and Professional Practices, a REBNY member must provide written disclosure to all parties involved in the transaction informing them of the nature of the REBNY member’s relationship with the party they are representing. Section II (B)(7) states: "Members shall not engage in any transaction related to their real estate brokerage activities for themselves, any member of their immediate families, their firms or any member thereof or any entities in which they have any ownership interest, without making their true position known in writing to any party to the transaction;" Important Tip: As indicated above, Section II (B)(7) also requires that REBNY members disclose when they are Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  6. 6. [Type here] participating in a real estate transaction for themselves, their firms, or any entity in which they have an ownership interest. 12116 n of the Week s to FIRPTA broker and I am representing a seller who is not a citizen of the United States. The seller and I would like to know w it affects the sale. Additionally, I have heard that "FIRPTA" was recently amended. Can you clarify that as well? for the Foreign Investment in Real Property Tax Act of 1980, is a federal law enacted to ensure that "foreign persons es generally pay the same amount of federal taxes on the sale as a United States person would. For purposes of FIR rson is anyone who is neither a resident alien (i.e. a holder of a green card) nor a United States citizen. quires that upon the disposition of any real property interest in the United States by a foreign person (a "United State PI") the purchaser of the USRPI must withhold a certain percentage of the gross sales proceeds (which is generally ) and submit the withholding to the IRS. This ensures that federal taxes are actually paid on the sale by the foreign s n imposed at a rate of 10% of the gross sales proceeds of a USRPI, notwithstanding the fact the actual amount of tax exceed (or be less than) the amount withheld. mericans from Tax Hikes Act of 2015 ("PATH") was passed which, among other things, made changes to the withhold e specifically, for the sale of a USPRI exceeding $1 Million Dollars, PATH raises the withholding amount from 10% to PRI that are (i) personal residences and (ii) have gross sales proceeds of $1 Million Dollars or less are not affected by % withholding rate set forth in FIRPTA (note that FIRPTA still does not require the 10% withholding under certain con proceeds are $300,000 or less and the buyer is an individual acquiring the property as a personal residence). new provisions under PATH affect the disposition of USPRI taking place after February 16, 2016. deral tax liability on the sale of a USPRI is less than the amount withheld, a foreign seller may be entitled to receive a ral tax return. Alternatively, a foreign seller may seek to apply for a Withholding Certificate from the IRS prior to the c chaser to withhold an amount less than the required withholding amount of 10% or 15% (depending on the gross sal se see our previous Legal Line Question of the Week on FIRPTA Certificates for further analysis of this topic. o provides for several other detailed modifications to FIRPTA relating to real estate investment trusts ("REITs"). The modifications were previously reported by REBNY and can be found by clicking this link.
  7. 7. [Type here] 2 11 16 uestion of the Week 31 Exchanges d real estate salesperson and I am representing a seller who is selling a three family . She is interested in reinvesting the proceeds from the sale in a 1031 Exchange. What is ge? Will the seller be able to avoid paying capital gains tax by participating in a 1031 Exchange? Exchange" refers to Section 1031 of the Internal Revenue Code (the "Code"). A 1031 s the seller of an investment property (the "Original Property") the opportunity to defer on the Original Property if the seller reinvests the proceeds of the sale in the purchase of a "Like Kind" replacement property (the "Replacement Property"). te that the seller does not avoid paying capital gains on the sale of the Original Property. ains taxes on the sale of the Original Property are deferred until such time as the seller is o complete a 1031 Exchange, at which time the capital gains will be payable. members in further understanding 1031 Exchanges, we have provided answers to the following frequently asked questions: any significant time frames that a seller must keep in mind when participating in a 1031 Exchange? e are two significant time frames that a seller must comply with when executing a 1031 e seller must identify the Replacement Property within 45 days of the closing date of the y. This 45 day window is known as the "Identification Period." Second, the seller must the acquisition of the Replacement Property within 180 days from the closing date of the This is known as the "Exchange Period." The Identification Period and the Exchange Period begin on the same day and run concurrently. Q2. What is "Like Kind" Property? Kind Property is defined broadly under the Code. Any real property held either as an use in trade or business is considered to be of "Like Kind" with any other real property as an investment or for use in trade or business. For example, a condominium unit would Neil B. Garfinkel, REBNY Broker Coun Partner-in-charge of real and banking practices Abrams Garfinkel Marg Bergson, LLP
  8. 8. [Type here] ke Kind" with a house provided both properties are used as an investment or for use in . Real property held primarily for personal use does not qualify as "Like Kind" property. e United States is not considered "Like Kind" with property outside of the United States. sible to execute a partial deferment of capital gains taxes rather than a full deferment of capital gains taxes? seller is not required to invest the full sales proceeds from the Original Property in the erty. Rather, the portion of the proceeds from the sale of the Original Property that is not Replacement Property will not qualify for the deferment of capital gains taxes and will be taxed at the normal tax rate. 4: Is it possible to purchase more than one Replacement Property? ler may exchange the Original Property into (or out of) as many Replacement Properties he 180 day Exchange Period. However, the maximum possible deferment of capital gains es is capped at the amount of the sale proceeds of the Original Property. s a Qualified Intermediary ("QI") and what role does a QI serve in the 1031 Exchange process? metimes known as a "facilitator," is a third party hired by the seller to hold the proceeds e Original Property so that the seller never takes actual or constructive possession of the ecessary because, as a requirement for receiving a deferment of capital gains, the Code om ever taking possession of the proceeds from the sale of the Original Property. Once fied the Replacement Property, the QI will use the proceeds of the sale being held by the r to complete the purchase of the Replacement Property on behalf of the seller. cause the seller must comply with very specific rules in order to utilize a 1031 Exchange, ant or attorney should always be consulted in connection with such transactions. ne Question of the Week
  9. 9. [Type here] for Victims of Domestic Violence in Rental Housing erstand that New York State recently altered its fair ng laws to protect victims of domestic violence from ination in rental housing. Can you please explain the protections provided under the new law. e as of January 2016, Section 227-d of the New York eal Property Law ("the Law") expressly prohibits any , firm or corporation owning or managing any building dwelling purposes, or the agent of such person, firm or on" from discriminating against individuals based upon atus as a "domestic violence victim." Please note that Law does not apply "to buildings used for dwelling ses that are owner occupied and have two or fewer residential units." ally, it is a violation of the Law to discriminate against a "domestic violence victim" by: ) refusing to rent a residential unit, when, but for such status, the rental would not have been refused, 2) discriminating in the terms, conditions, or privileges of any such rental, when, but for such status, such discrimination would not have occurred, or (3) printing or circulating, or causing to be printed or rculated, any statement, advertisement or publication which expresses, directly or indirectly, any limitation, specification, or discrimination. w defines a "domestic violence victim" as an individual or has been, or is a parent accompanied by a minor … who is or has been," a victim of an act that would ute a violent felony or family offense under New York w. Examples of felonies or offenses that qualify under Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  10. 10. [Type here] include, but are not limited to, assault, sexual abuse, reckless endangerment and kidnapping. nt Tip: Also effective as of January 2016, Section 744 ew York Real Property Actions and Proceedings Law landlords from evicting tenants based on the tenant’s status as a "domestic violence victim." 1 9 17 Legal Line Question of the Week Federal Law Protecting Real Estate Broker's Trade Secrets (from Independent Contractors) Can you please provide a brief explanation of the new federal law, which protects trade secrets from misappropriation by independent contractors? The Defend Trade Secrets Act of 2016 (the "DTSA") provides employers, including real estate brokers, with a federal civil remedy for the "misappropriation" of the real estate broker's proprietary information ("Trade Secrets") protected in employment or independent contractor agreements ("ICAs"). Misappropriation refers to both the improper acquisition and the improper disclosure or use of Trade Secrets. Pursuant to the DTSA, federal courts have the authority to hear claims of misappropriation of Trade Secrets, which were previously left to state courts. For example, an ICA signed between a real estate broker and its real estate salespeople or associate real estate brokers (collectively, a "Real Estate Agent") may require that the Real Estate Agent keep the real estate broker's client list confidential. If the Real Estate Agent discloses the real estate broker’s client list to a third party without permission, pursuant to the DTSA, the real estate broker may be able to recover certain damages and attorneys' fees in federal civil court from the Real Estate Agent. Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  11. 11. [Type here] Important Tip: Real estate brokers and Real Estate Agents should consult with an attorney to discuss how the DTSA affects the provisions of their ICAs. 1 19 17 Legal Line Question of the Week Credit Reports I am a licensed real estate salesperson and I am representing an individual seeking to rent an apartment. The prospective tenant has requested a copy of her credit report. May I show her the credit report? Yes, you may show a prospective renter or purchaser a copy of their own credit report. The New York State Fair Credit Reporting Act ("FCRA") permits sharing a credit report with the individual to whom the report relates (although the FCRA does not allow dissemination of credit reports to individuals other than the individual to whom it relates without a legitimate business need or the written permission of that individual). In fact, whenever an adverse action is taken against an individual on the basis of their credit report, the user of the report must advise the prospective tenant or purchaser of the reason the adverse action was taken. Additionally, New York City Local Law requires that people who are renting out a property and request information from applicants for the purposes of obtaining a tenant screening report, disclose the name of the agency they use to the applicant and post signage outlining the tenant’s rights regarding the credit report. For more information on credit reports please refer to the following article found on the Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  12. 12. [Type here] REBNY website: Rule Regarding Signs Required to be Posted about Tenant Screening Reports. Important Tip: Real estate brokers should consult with their credit report company in order to ascertain the company’s policy regarding distribution of credit reports. All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY This email and any files transmitted with it are confidential and intended solely for the use of the individual or entity to whom they are addressed. If you have received this email in error, you are directed not to read, disclose, reproduce, distribute, disseminate or otherwise use this transmission, and we also request that you immediately delete this message and its attachments, if any. Delivery of this message to any person other than the intended recipient(s) is not intended in any way to waive privilege or confidentiality. Finally, the recipient should check this email and any attachments for the presence of viruses; REBNY accepts no liability for any damage caused by any virus transmitted by this email. 11 17 16 Legal Line Question of the Week
  13. 13. [Type here] Cost of Due Diligence Materials in Co-op and Condominium Transactions In the re-sale of co-ops and condominiums in New York, is the buyer or the seller responsible for the cost of obtaining due diligence materials? There is no rule mandating that one party pay the cost of obtaining particular due diligence materials. However, there is an established custom that is followed in most re-sales of co- ops and condominiums in New York. Out of the several different documents included in the term "due diligence materials," some are customarily expected to be provided by the seller and others are customarily expected to be provided by the buyer. According to custom, it is the responsibility of the seller’s broker to obtain the offering plan, amendments and financial statements from the seller and deliver them to the buyer or the buyer’s attorney. If any of those due diligence items are missing, the seller is usually expected to obtain a copy, at his or her own expense, from the managing agent. On the other hand, the buyer is expected to pay for any "building questionnaires" that the buyer’s attorney or the buyer’s lender requests from the managing agent. In the event that one party refuses to follow the customs set forth above, the parties will have to negotiate an appropriate resolution. Whether it is a seller’s market or a buyer’s market will likely dictate whether the cost of obtaining any missing due diligence items is shifted from one party to the other. In "sponsor" transactions, the sponsor is required to provide the due diligence materials to the purchaser. However, some sponsors may charge a refundable deposit fee to ensure that the due diligence materials are returned to the sponsor in the event that the purchaser does not proceed with the transaction. Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the
  14. 14. [Type here] information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY 10 20 16 Legal Line Question of the Week Delivery is Required for a Valid Lease and Contract I was recently representing a landlord in a one year residential lease. The tenant signed the lease and sent it back to the landlord. The landlord signed the lease but before he could send the signed lease back to the tenant, the tenant's attorney cancelled the lease. The attorney stated that the lease was not valid because it had not been "delivered" to the tenant. Is this correct? Yes, it is most likely the case that the lease was not effective and binding until it was delivered to the tenant. In New York State, delivery is a requirement of a valid lease. In a well cited New York case, 219 Broadway Corp. v. Alexander's, Inc., 46 N.Y.2d 506 (N.Y. 1979), the court held that "A lease ... requires the fulfillment by the parties of certain prerequisites to take effect. It is the well-established rule in this State that delivery is one such requirement, the absence of which, without more, renders the lease ineffective." The requirement also applies to other conveyances of land, such as contracts for the purchase and sale of real estate. Important Tip: The definition of "delivery" will vary from contract to contract (and lease to lease; a lease is a form of contract). Many real estate contracts will spell out acceptable delivery methods within the contract itself. For example, it is becoming much more common for leases to contain provisions Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  15. 15. [Type here] allowing electronic delivery in addition to traditional hand delivery. In certain instances, a court may also imply delivery based on the conduct of the parties. All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY 10 06 16 Legal Line Question of the Week Proposed Amendments to Department of State Rules and Regulations Can you please summarize the proposed amendments to the New York State Department of State Rules and Regulations (the "Regulations") that affect real estate licensees in New York? Recently the New York State Department of State (the "DOS") published certain proposed amendments to the Regulations (the "Amendments"). The purpose of the Amendments is to update obsolete and outdated portions of the Regulations. The publication of the Amendment in the New York State Register on September 28, 2016 commenced a 45 day public comment Neil B. Garfinkel, REBNY Broker Counsel
  16. 16. [Type here] period. At the conclusion of the public comment period, the DOS will either adopt or amend the Amendments. The following is a brief summary of the Amendments: 19 NYCRR 175.1. This regulation has been amended so that real estate licensees are required to deposit any monies or other property of their principal into a separate bank account within three days of the receipt of such monies. The amended Regulation will read: A real estate broker shall not commingle the money or other property of his principal with his own and shall at all times maintain a separate, special bank account to be used exclusively for the deposit of said monies and which deposit shall be made within three business days. Until such time as the money is deposited into a separate, special bank account, it shall be safeguarded in a secure location so as to prevent loss or misappropriation. Said monies shall not be placed in any depository, fund, or investment other than a federally insured bank account. Accrued interest, if any, shall not be retained by, or for the benefit of, the broker except to the extent that it is applied to, and deducted from, earned commission, with the consent of all parties. 19 NYCRR 175.7. This regulation has been amended so that real estate brokers may only receive compensation from multiple parties with the consent of their clients. The amended Regulation will read: A real estate broker shall make it clear for which party he is acting and he shall not receive compensation from than one party except with the full knowledge and consent of the broker’s client. 19 NYCRR 176.3 (a). This regulation has been amended to add License Safety to the list of required Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  17. 17. [Type here] subjects included in the course of study for licensure as a real estate salesperson. The amended Regulation will read in part: Section 176.3. Subjects for study—real estate salespersons. (a) The following are the required subjects to be included in the course of study in real estate for licensure as a real estate salesperson, and the required number of hours to be devoted to each subject: License Safety……………………………………… 1 19 NYCRR 177.3. The regulation has been amended to mandate that a detailed outline of the subject matter of any module containing at least one hour of instruction be included on the form for approval of the course of study. The amended Regulation will read in part: (g) a detailed outline of the subject matter of each course of seminar containing at least 22½ hours of instruction, or of each course module containing at least one hour of instruction, together with the time sequence of each segment thereof, the faculty for each segment, and teaching techniques used in each segment; 19 NYCRR 177.7. This regulation has been amended to change the computation of instruction time to 50 minutes. The amended Regulation will read: Section 177.7 Computation of instruction time. To meet the minimum statutory requirement, attendance shall be computed on the bases of an hour equaling 50 minutes.
  18. 18. [Type here] 19 NYCRR 175.25 (d)(2). This regulation has been amended to require real estate licensees to include their license type on business cards. The amended Regulation will read in part: Section 175.25. Business cards. (2) Notwithstanding subdivision (c) of this section, business cards must contain the business address of the licensee, license type, and the name of the real estate broker or real estate brokerage with whom the associate real estate broker or real estate salesperson is associated. All business cards must also contain the office telephone number for the associate real estate broker, real estate salesperson or team. All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY 9 15 16 Legal Line Question of the Week
  19. 19. [Type here] Students and Fair Housing Law Are students a "protected class" under Federal, New York State, or New York City fair housing laws (collectively the "Fair Housing Laws")? No, students are not a "protected class" under Fair Housing Laws. The current protected classes under Fair Housing Laws include: race, color, religion/creed, age, national origin, alienage or citizenship status, sex, gender (including gender identity and sexual harassment), sexual orientation, disability, marital and familial status, partnership status, lawful occupation, military status, family status, and lawful source of income. Although being a student is not a protected class, students are protected by Fair Housing Laws. For example, age is a protected class. Accordingly, students cannot be discriminated against because of their age. A housing provider’s policy that forbids students from living in a building based upon the age of the student would violate Fair Housing Laws. Important Tip: All housing providers and real estate brokers should contact a fair housing attorney prior to adopting any housing policy related to students (as well as any other actual or perceived protected class). Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY
  20. 20. [Type here] 8 25 16 Legal Line Question of the Week Buyer Representation FAQs We have received numerous questions regarding "buyer representation" in the REBNY RLS environment. The following are the most frequently asked questions that we receive regarding this topic. Question: Is a buyer always entitled to be represented in a transaction? Answer: Yes, the New York State Department of State ("DOS") has consistently stated that a buyer always has a right to be represented in a real estate transaction and the listing broker must always honor this right. The DOS has stated that "any such denial will be construed as a violation of the listing broker’s duty to deal honestly, fairly and in good faith with the buyer." Question: May a listing broker refuse to work with a buyer’s broker if the seller has specifically asked the listing broker not to do so? Answer: No, doing so would still amount to a violation of the listing broker’s duty to deal honestly, fairly and in good faith with the buyer even though the listing broker was following the seller’s instructions. According to the DOS, "If a seller chooses to use the services of a real estate broker, the seller must do so with the understanding that the broker cannot refuse to cooperate with real estate brokers who represent buyers." Question: Is a buyer’s broker entitled to a commission by virtue of introducing the buyer to the property? Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  21. 21. [Type here] Answer: No, simply showing a buyer a property does not necessarily entitle a REBNY member to a commission. A broker is only entitled to a share of the commission if he or she is considered the "procuring cause" of the transaction. Question: What is "procuring cause?" Answer: There is no specific definition of "procuring cause." However, case law suggests that in order to be considered the procuring cause, a real estate broker must show a "direct and proximate link between the bare introduction of the buyer and seller and the consummation [of a sale]." In other words, a REBNY member must bring together a meeting of the minds between the buyer and seller and show that he or she generated a chain of circumstances which led to the sale. The ultimate determination of whether or not the REBNY member procured the buyer, and thus can be considered the procuring cause, is a fact-sensitive inquiry that turns on the specific facts and circumstances of each case. Question: May a buyer switch real estate brokers at any time during a transaction? Answer: Yes, absent an exclusive representation agreement, a buyer may switch real estate brokers at any time during a transaction. However, the buyer’s decision to change brokers does not necessarily dictate which broker is the procuring cause of the buyer. For example, let’s assume that Broker A represented the buyer for the entire transaction and, on the night before closing, the buyer instructs Broker A not to come to the closing because the buyer wants to bring Broker Z to the closing. The buyer has the right to change to Broker Z, but doing so does not negate the fact that Broker A was the "procuring cause" of the buyer. In this case, Broker A would still be entitled to share in the commission even though the buyer has changed brokers. Once again, the determination of who is the procuring cause of the transaction is a fact-sensitive inquiry that turns on the specific facts and circumstances of each case.
  22. 22. [Type here] All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY 8 18 16 Legal Line Question of the Week May I notarize my purchaser’s co-op board package? I am a licensed real estate salesperson and a New York State notary public. I am representing a purchaser in a transaction and have been asked to notarize the purchaser’s co-op board package. May I do so? Although New York State law does not explicitly prohibit you from notarizing a co-op board package on behalf of your purchaser, it is advisable that you do not do so in order to avoid the appearance of impropriety or self-dealing. According to the New York State Department of State, a notary may be disqualified to act in certain cases by reason of the notary having an "interest" in the matter. Stated broadly, a notary may not notarize a document: (i) "if the notary is a party to" or (ii) is "directly and pecuniarily interested in the transaction." For example, a notary could not notarize a document which grants the notary a power of attorney to act on another person’s behalf. Similarly, a notary could not notarize a Last Will and Testament that names the notary as a beneficiary. Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  23. 23. [Type here] A real estate salesperson could take the position that they do not have a direct or pecuniary interest in the purchaser’s co-op board package. However, because the real estate salesperson stands to collect a commission upon the closing of the transaction, one could argue that notarizing the co-op board package may create an appearance of impropriety and self- dealing and should be avoided. All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY 7 28 16 Legal Line Question of the Week
  24. 24. [Type here] Can a Landlord Request Proof of a Disability and the Need for an Assistance Animal? I am a real estate broker and I represent the landlord of a building that has a "no pet policy." A tenant in the building has informed the landlord that she requires an Assistance Animal to help alleviate her anxiety. May the landlord request verification that (i) the tenant has a disability and (ii) the Assistance Animal is required because of the disability? First, a real estate broker should never request this type of verification on behalf of a landlord. Rather, if a landlord would like to verify that a tenant has a disability or the need for an Assistance Animal, the real estate broker should instruct the landlord to speak to an attorney who can advise the landlord on the appropriate way to handle the request. The landlord (or landlord’s attorney) should then communicate directly with the potential tenant. It is my opinion that a real estate broker should not serve as an intermediary in this situation. There is too much potential for inappropriate statements or requests on the part of the real estate broker. Nevertheless, this situation most likely fits the limited circumstances under which a landlord may request to verify a tenant’s need for an Assistance Animal. A landlord may make such a request under two circumstances: (1) if the disability is not readily apparent or known to the landlord or (2) if the need for the requested accommodation (i.e. the Assistance Animal) is not readily apparent or known to the landlord. Keep in mind that Federal Law defines a person with a disability as "any person who has a physical or mental impairment that substantially limits one or more major life activities; has a record of such impairment; or is regarded as having such impairment." For example, because of the nature of the disability, if an individual requests an accommodation for an Assistance Animal in order to alleviate her anxiety, it is likely that neither the anxiety nor the need for the Assistance Animal is likely readily observable. Thus, in this situation, a landlord most likely can request verification. On the other hand, if a blind individual requests an accommodation for a guide dog, because of the nature of the disability, both the blindness and the need for the Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  25. 25. [Type here] Assistance Animal is likely readily observable. Thus, in the guide dog situation, the landlord most likely cannot request verification. According to the US Department of Housing and Urban Development, "A [landlord] also may not ask an applicant or tenant to provide access to medical records or medical providers or provide detailed or extensive information or documentation of a person's physical or mental impairments." Instead, if a landlord has the right to request verification of a tenant’s disability, the landlord should do so by requesting a letter that has been completed by a qualified third party verifier. The third party verifier does not need to be a doctor, but he or she must be a professional who is familiar with the disability. In the letter, the third party verifier should attest that (1) the tenant is actually disabled, (2) the tenant needs the accommodation because of his or her disability, (3) the particular accommodation is actually necessary, (4) the accommodation helps the individual cope with his or her disability, and (5) he or she would testify to the information under oath. Important Tip: Issues relating to fair housing, including the protected category of "disability," are very complex. Real estate brokers must seek counsel if they are confronted with questions or situations that they are not sure how to handle. For information on the difference between an Assistance Animal and a Service Animal please see our previous Legal Line Question of the Week on Assistance Animals and Service Animals. All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY 7 22 16
  26. 26. [Type here] Legal Line Question of the Week Disclosure of Interest in a Property I am a licensed real estate salesperson and a REBNY member. My broker, who is a member of the REBNY RLS, is currently listing a property that I own. Must I disclose my ownership interest in the property to potential purchasers? Yes, according to Article IV, Section 7 of the REBNY RLS Universal Co-Brokerage Agreement, "in accordance with Section II(B)(6) of the [REBNY] Code of Ethics," if a REBNY member has an ownership interest in a property that his or her broker is disseminating through the REBNY RLS, "the Listing Information to be disseminated through the RLS shall disclose that interest." Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY
  27. 27. [Type here] This email and any files transmitted with it are confidential and intended solely for the use of the individual or entity to whom they are addressed. If you have received this email in error, you are directed not to read, disclose, reproduce, distribute, disseminate or otherwise use this transmission, and we also request that you immediately delete this message and its attachments, if any. Delivery of this message to any person other than the intended recipient(s) is not intended in any way to waive privilege or confidentiality. Finally, the recipient should check this email and any attachments for the presence of viruses; REBNY accepts no liability for any damage caused by any virus transmitted by this email. 7 15 16 Legal Line Question of the Week Secondhand Smoke in a Co-op Apartment I am a licensed real estate salesperson and I represented a co- op purchaser who recently complained to me about the smell of secondhand smoke in her apartment. Is a co-op board legally obligated to prevent secondhand smoke from entering a shareholders’ apartment? Yes, the New York Supreme Court for New York County (the "Court") recently held that a co-op board may be held liable for allowing secondhand smoke to permeate into a shareholders’ apartment from other parts of the building. In the case of Reinhard v. Connaught ("Reinhard"), the Court stated that, generally, co-op boards have a duty to reasonably assist shareholders with issues involving secondhand smoke. In Reinhard, the Court reasoned that the board had breached the proprietary lease because they did not take reasonable steps to eliminate the secondhand smoke problem. The Court also held that, in situations where a resident is unable to use his or her apartment because of secondhand smoke, this may amount to a violation of the Implied Warranty of Habitability, Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  28. 28. [Type here] entitling the resident to a rent abatement. (Please see our previous Legal Line Question of the Week on New York's Warranty of Habitability for more information). Therefore, your purchaser should consult with an attorney regarding her rights and may also consider writing a letter to the co-op board explaining the situation and requesting their assistance in resolving the problem. Additionally, please see our previous Legal Line Question of the Week on Marijuana in a Co-op Apartment for more information on how a shareholder may handle a similar situation. Important Tip (Correction): The Important Tip section of the Legal Line Question of the Week on Secondhand Smoke in a Co-op Apartment, released on July 14, 2016, incorrectly stated that New York City requires all buildings to adopt a smoking policy, which must be disclosed to residents. It is presently not legislatively mandated that buildings have such a policy in place. All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY 6 30 16 Legal Line Question of the Week
  29. 29. [Type here] Broker’s Obligation to Disclose Status of Illegal Property I am a real estate broker and I am listing a rental apartment that I am concerned may not have the proper permits. Am I obligated to confirm the legal status of an apartment before marketing it to the public? Yes, the New York State Department of State ("DOS") recently confirmed, in an Opinion letter, that real estate brokers ("Brokers") must make a reasonable effort into verifying the legal status of the properties they market and must disclose, including in advertisements, any knowledge of a property’s illegal status to potential purchasers or tenants. According to the DOS, "a broker who fails to demonstrate a working knowledge of the property being marketed, fails to demonstrate the level of competency required to transact business as a Broker in violation of [New York Real Property Law] §§441 and 441-c." This opinion is consistent with prior New York State Court decisions, which have held that Brokers are responsible to, "use due diligence in checking the information being provided by the seller from the easily accessible on-line public record." The DOS justified holding Brokers to this standard because of their status as real estate "professionals," whereas the purchaser and seller are presumed to be unsophisticated and untrained. Furthermore, if a Broker has actual knowledge that a property is illegal (i.e. lacks a permit, etc.) such information, without exception, must be disclosed to potential purchasers. Any failure to disclose information actually known to a Broker will be considered a breach of the purchaser’s "confidence or reasonable expectation of fair dealing." In order to ensure compliance, the DOS recommends that Brokers "make reasonable efforts to verify the legal status of the properties they are offering." A breach of this responsibility may result in disciplinary action against the individual Broker and their company. The Broker may also be required to return any commissions it received on the transaction, which would be deemed to be unearned. Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  30. 30. [Type here] Important Tip: A real estate broker’s obligation to disclose can involve complex issues. Legal counsel should be consulted if the real estate broker has any questions or concerns about their disclosure obligations. All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY 6 23 16 Legal Line Question of the Week ADA Compliant Websites I am a real estate broker and I have been informed that real estate brokers who maintain websites may be subject to lawsuits if such websites are not compliant with the Americans with Disabilities Act ("ADA"). Should I ensure that my website complies with the ADA? Yes, real estate brokers ("Brokers") that utilize a website for business purposes should ensure that their website complies with the ADA. Legal action may be sought against Brokers who maintain websites that are not properly accessible to persons with disabilities. The ADA is a federal law which prohibits discrimination against persons with disabilities "in all areas of public life." More Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate
  31. 31. [Type here] specifically, Title III of the ADA prohibits discrimination against persons with disabilities in "places of public accommodation," and applies to most companies conducting business with the public. Although the text of the ADA does not mention websites or the internet, several United States Courts and the United States Department of Justice ("DOJ") have taken the position that, pursuant to Title III of the ADA, business related websites must be accessible to persons with disabilities. The DOJ is expected to issue a rule finalizing this position in 2018. One step that Brokers may take to comply with the ADA is to make their website compatible with adaptive software that allows a person with a disability to alter the website’s content so that it is decipherable to them. For example, someone who is blind may use a specialized internet browser that allows him or her play the text in an audio format. Important Tip: Brokers utilizing a website should contact their website provider as well as their attorney in order to assess whether they are in compliance with the ADA. and banking practices at Abrams Garfinkel Margolis Bergson, LLP All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY 6 16 16 Legal Line Question of the Week
  32. 32. [Type here] The Roommate Law After reading last week’s Question of the Week on the New York City Occupancy Standard, I am curious about how this law interacts with the New York State Roommate law. Can you please provide a brief FAQ on the Roommate Law and explain how it is limited by the New York City Occupancy Standard? FAQs: 1. Q: What is the general concept behind the New York Roommate law? A: Broadly speaking, the New York Real Property Law Article 7, Section 235-f (the "Roommate Law") grants certain individuals the right to share their apartments with at least one roommate. Pursuant to the law, a landlord may not "restrict occupancy of residential premises, by express lease terms or otherwise, to a tenant or tenants or to such tenants and immediate family." 2. Q: If there is one person named on the lease how many roommates may be added to the apartment? A: Pursuant to the Roommate Law, if you are the only tenant named on the lease and you or your spouse occupies the apartment as a primary residence, you may share the apartment with immediate family, one additional occupant, and the occupant’s dependent children (collectively, a "Roommate"), provided that total occupancy in the apartment remains compliant with the New York City Occupancy Standard. 3. Q: How does the New York City Occupancy Standard limit the Roommate Law? A: If allowing a Roommate to occupy an apartment would cause the total occupancy to exceed the New York City Occupancy Standard (80 square feet per person), the Roommate may not lawfully occupy the apartment. For example, if a tenant lives in a 150 square foot apartment, he or she may not have a Roommate Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  33. 33. [Type here] because there is not enough room pursuant to the Occupancy Standard (two people would be required to have 160 square feet of living space). 4. Q: Who are considered immediate family members for purposes of the Roommate Law? A: The Roommate Law does not define the term "immediate family." However New York courts have interpreted the definition to include the tenant’s spouse, parents, children and step children. 5. Q: If the specific terms of the lease state that a tenant may not share the apartment with anyone who is not a tenant, is the provision enforceable? A: No, according to the Roommate Law, any provision of a lease or rental agreement purporting to waive a tenant’s right to a Roommate is "null and void." 6. Q: Must a Roommate be added to a lease after moving into the apartment? A: No, there is no requirement that a Roommate be added to the lease. However, the Roommate Law provides that the tenant "shall inform the landlord of the name of any occupant within thirty days following the commencement of occupancy by such person or within thirty days following a request by the landlord." All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY
  34. 34. [Type here] 6 09 16 Legal Line Question of the Week Occupancy Standards in New York City I am a real estate salesperson and I am representing the owner/landlord of a residential building who, in order to prevent overcrowding, would like to prevent a couple and their teenage son from moving into an apartment containing 400 square feet, excluding hallways, bathrooms, and foyers. May the owner/landlord restrict their occupancy in this manner? No, in New York City landlords and owners must comply with the occupancy standard set by the New York City Housing Maintenance Code ("the Code"). According to the Code, "every person occupying an apartment in a class A or class B multiple dwelling or in a tenant-occupied apartment in a one or two family dwelling," must have a livable area of at least 80 square feet. Additionally, "for every two persons who may lawfully occupy an apartment, one child under four may also reside therein, except that a child under four is permitted in an apartment lawfully occupied by one person." In order to calculate the maximum number of people who may occupy an apartment, you must divide "the total livable floor area of the apartment by 80 square feet." Hallways, bathrooms, water closets, and foyers do not count as "livable floor area" for purposes of this calculation. Consequently, the landlord must permit the couple and their teenage son to occupy the apartment because each occupant would have at least 80 square feet of livable space (3 persons x 80 square feet = 240 square feet of minimum space and the apartment has 400 square feet). Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the
  35. 35. [Type here] information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY 6 02 16 Legal Line Question of the Week The Capital Gains Tax Exemption I have been speaking to a seller about representing her in the sale of a residential property. The seller has owned the property and used it as her primary residence for one year and nine months. The seller has indicated that she cannot sell until she has owned the property for at least two years. What is the importance of the two year time frame? The two year time frame that the seller is referring to relates to the way that the "gains" on the sale of the property is taxed for income tax purposes. In general, income is taxed differently depending on how it was earned. Income is generally taxed either as a long term capital gain or as ordinary income. Long term capital gains are taxed at a preferential rate as compared to ordinary income. The profit from the sale or exchange of a property is a capital gain. On the other hand, ordinary income includes salary, wages, commissions, etc. Thus, after selling a home the amount gained on the transaction is usually taxable at the preferential long term capital gains rate. Additionally, if the home seller owned the home for at least two years before making the sale, he or she may be partially or totally exempt from paying the capital gains tax. According to the Internal Revenue Service ("IRS"), a taxpayer may automatically exclude the first $250,000 gained from the sale Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  36. 36. [Type here] (or the first $500,000 gained if filing with a spouse) if the following are true of the transaction: 1. The taxpayer owned the house and used it as his or her primary residence for at least two of the five years preceding the sale; 2. The home was not acquired in a 1031 Exchange during the past five years; and 3. The taxpayer has not claimed any exclusion for the sale of a home in the two years prior to the current sale. For example, if your seller waits for the two year period and then sells the property for a gain of $600,000, only $350,000 would be subject to the capital gains tax. The other $250,000 gained on the sale would fall into the exemption and the seller would not have to pay any capital gains taxes on this amount. Important Tip: Real estate licensees cannot provide legal or accounting advice. Accordingly, real estate licensees should always recommend that the parties they are representing speak with their own accountant, tax advisor and/or attorney in order to ascertain the exact tax consequences of a particular transaction. All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY 5 05 16 Legal Line Question of the Week
  37. 37. [Type here] Fair Housing, Disparate Impact and Criminal History - FAQs I understand that the U.S. Department of Housing and Urban Development recently released "Guidance on the Application of the Fair Housing Act Standards to the Use of Criminal Records by Providers of Housing and Real Estate-Related Transactions" (the "HUD Guidance"). Can you please provide an FAQ on the content of the HUD Guidance? FAQs: 1. Q: What does the HUD Guidance address? A: The HUD Guidance addresses how the "disparate impact" theory of liability applies "in Fair Housing Act cases in which a housing provider justifies an adverse housing action–such as a refusal to rent or renew a lease–based on an individual’s criminal history." 2. Q: What is the "disparate impact" theory of liability? A: "Disparate impact" occurs when a housing or lending policy, which appears facially neutral or seemingly non- discriminatory, has a disproportionate adverse effect or impact on members of a protected category under the Fair Housing Act and there is no legitimate, non- discriminatory business need for the policy or practice. The United States Supreme Court (the "Supreme Court") in Texas Department of Housing and Community Affairs v. Inclusive Communities Project, Inc. (the "Texas Dep’t of Housing") upheld "disparate impact" as a viable theory of liability under the Fair Housing Act. 3. Q: Are persons with a criminal history a protected category under the Fair Housing Act? A: No, persons with a criminal history are not a protected category under the Fair Housing Act. Rather, race is the relevant protected category addressed in the HUD Guidance. This is because certain racial groups Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  38. 38. [Type here] are "arrested, convicted and incarcerated at rates disproportionate to their share of the general population." Thus, "criminal records-based barriers to housing are likely to have a [disparate] impact" on these racial groups. 4. Q: Must there be intent to discriminate in order for a court to impose liability under the Fair Housing Act based on a "disparate impact"? A: No. In Texas Dep’t of Housing, the Supreme Court ruled that a consumer may bring an action claiming fair housing discrimination based on "disparate impact" even if no intent to discriminate exists. Further, the Supreme Court upheld that liability may be found where a legitimate business interest for the policy or practice exists but there was a less discriminatory option available. Thus, a housing provider may violate the Fair Housing Act if his or her "policy or practice has an unjustified discriminatory effect, even when the provider had no intent to discriminate." 5. Q: Does the Fair Housing Act completely prohibit housing providers from considering an individual’s criminal history? A: No. The Fair Housing Act only prohibits arbitrary and overbroad bans related to criminal history. Thus, housing providers should revise the policies they have in place in order to undertake a holistic approach to evaluating candidates. Any policy that prescribes for an absolute ban on applicants with a criminal history will violate the Fair Housing Act. According to the HUD Guidance, "Policies that exclude persons based on criminal history must be tailored to serve the housing provider’s substantial, legitimate, nondiscriminatory interest and take into consideration such factors as the type of the crime and the length of the time since conviction."
  39. 39. [Type here] 6. Q: What must a housing provider show in order to establish that there policy does not violate the Fair Housing Act? A: The HUD Guidance explains that there is a three-step framework used to judge claims against a housing providers’ allegedly discriminatory policy. Within this framework, the housing provider only has the burden of proving the second step. In the first step, the claimant must show that a disparate impact has actually resulted from the policy. Then, in the second step, "the housing provider must be able to provide evidence proving both that the housing provider has a substantial, legitimate, nondiscriminatory interest supporting the challenged policy and that the challenged policy actually achieves that interest." Finally, "In the third step, the burden shifts back to the [claimant] to prove that such interest could be served by another practice that has a less discriminatory effect." 7. Q: Does the HUD Guidance make a distinction between policies that impose restrictions based on arrests versus those that impose restrictions based on convictions? A: Yes. The HUD Guidance explains that a housing policy which excludes individuals because of an arrest history is never "necessary to achieve a substantial, legitimate, nondiscriminatory interest." Thus, housing providers’ may not use prior arrest history as a proper basis for denying an individual access to housing. All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice.
  40. 40. [Type here] If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY 4 07 16 Legal Line Question of the Week Payment for Window Guards in Rent Stabilized Apartments I am a licensed real estate salesperson and I represent a tenant who is leasing a rent stabilized apartment. The tenant has a nine year old child and is therefore subject to the window guard requirement. The landlord is requesting that the tenant pay for the installation. May a landlord pre-condition installation of a window guard on a tenant’s payment in a rent stabilized apartment? No, a landlord may not pre-condition installation of a window guard on a tenant’s payment in a rent stabilized apartment but the landlord may impose a $10 reimbursement charge after the window guards have been installed. According to the New York City Health Code (the "Code"), "No communication from a landlord to a tenant shall indicate that the installation of window guards is optional or in any manner dependent upon payments by the tenant." Moreover, the Code states that "Landlords shall not impose any type of pre- condition such as fees or any other psychological deterrent, preliminary to the installation of window guards." This rule applies to both market rate and rent stabilized/rent controlled apartments. However, according to the New York City Department of Health’s Window Guard General Information pamphlet, "The Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  41. 41. [Type here] New York State Division of Housing and Community Renewal has established the following scale of a pass-along fee for ‘rent controlled’ and ‘rent stabilized’ apartments which may be imposed one month after the installation of window guards: a one-time $10.00 per window guard maximum fee which may be pro-rated or amortized over a period of one year, two years, three years, in equal monthly payments according to the option elected by the tenant." Important tip: Please see our previous Legal Line Questions of the Week on Window Guards and Waiving Window Guard Requirement for additional information. All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY This email and any files transmitted with it are confidential and intended solely for the use of the individual or entity to whom they are addressed. If you have received this email in error, you are directed not to read, disclose, reproduce, distribute, disseminate or otherwise use this transmission, and we also request that you immediately delete this message and its attachments, if any. Delivery of this message to any person other than the intended recipient(s) is not intended in any way to waive privilege or confidentiality. Finally, the recipient should check this email and any attachments for the presence of viruses; REBNY accepts no liability for any damage caused by any virus transmitted by this email. 3 31 16 Legal Line Question of the Week
  42. 42. [Type here] Record Retention I am a licensed New York real estate broker and I am creating a record retention policy for my firm. Are there any rules or regulations which stipulate what records licensed real estate brokers and real estate salespersons are required to maintain? Yes. Title 19 NYCRR §175.23 of the Rules and Regulations affecting Real Estate Brokers and Salespersons (hereinafter "the Regulation") addresses which records licensed real estate brokers and real estate salespersons (collectively "Brokers") are required to maintain. According to the Regulation, all licensed Brokers must keep and maintain, for a three year period, the following information for most residential sales: "(1) the names and addresses of the seller and the buyer, (2) the broker prepared purchase contract or binder, or if the purchase contract is not prepared by the broker, then the purchase price and the amount of deposit (if collected by the broker), (3) the amount of commission paid to the broker, (4) the gross profit realized by the broker if purchased by him or her for resale, (5) any document required under Article 12-A of the Real Property Law and (6) the listing agreement or commission agreement or buyer-broker agreement." The foregoing information must be kept for sales involving real property used or occupied, or intended to be used or occupied as a home or residence improved by a co-op, condominium, or one-to-four family dwelling. The Regulation does not apply to sales of "unimproved real property upon which such dwellings are to be constructed." Records may be stored in either paper or electronic form. Please note that the Regulation contains a "safe harbor" provision, which recognizes that a Broker will not be found to have violated the Regulation if he or she was not provided with Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  43. 43. [Type here] the required documents or information in a particular transaction. Important Tips: The Regulation does not apply to leasing transactions (due, in my opinion, to an omission when the Regulation was drafted). However it is recommended that, in connection with leasing transactions, Brokers always keep a record of (i) the names and addresses of the landlord and tenant, (ii) the terms of the transaction, including the rental amount and the term, (iii) the amount of commission paid to the real estate broker, and (iv) the listing agreement, fee agreement or representation agreement. The obligation to maintain a copy of the Agency Disclosure Form for leasing transactions is required under Section 443. Although the Regulation sets a three year period for record retention, you should maintain digital versions of records for an unlimited period of time. The cost associated with scanning, digitizing and storing electronic records is nominal and the ability to locate past records, potentially beyond three years, can be invaluable. All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY 3 24 16
  44. 44. [Type here] Legal Line Question of the Week "Ours Alone" Listings I am a REBNY member and I recently came across a listing labeled as "Ours Alone." What is an "Ours Alone" listing and may "Ours Alone" listings be listed on the REBNY Listing Service? "Ours Alone" is a term used to describe exclusive listing agreements entered into verbally. This designation distinguishes "Ours Alone" listings from "Exclusive" and "Co- Exclusive" listings, which are terms that may only be used to describe written exclusive listing agreements. If a REBNY member enters into a verbal exclusive listing agreement, the member must label the agreement as being "Ours Alone" whenever "transmitted … in any communication with other REBNY firms." (REBNY Code of Ethics, Article V B(3)(b)). According to the RLS Universal Co-Brokerage Agreement Rules and Regulations (the "UCB"), "Ours Alone" listings may not be listed on the REBNY Listing Service ("RLS"). The UCB states: "The RLS will accept Exclusive Listings, and shall not accept Open Listings or oral exclusive listings commonly referred to as ‘ours alone’ listings." (UCB, Article I, Section 4). Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY 3 17 16
  45. 45. [Type here] Legal Line Question of the Week Restoration and Removal Obligations in REBNY Leases I am a licensed real estate salesperson and I am representing a commercial tenant who is concerned about her potential removal and restoration obligations as they are stated under Article 3 of the REBNY commercial lease form. What exactly does Article 3 state and are there any fair modifications that a tenant may suggest to alleviate the tenant's concerns regarding the language of this provision? Article 3 of the REBNY commercial lease form ("Article 3") provides, in part, that a landlord may, by notice to the tenant of not less than twenty (20) days prior to the lease termination date, elect to have the tenant’s improvements (the "Improvements") removed from the premises by the tenant. Accordingly, the tenant must repair and restore the premises to the condition that existed prior to installation of the Improvements and the tenant must repair any damage to the premises or the building caused by the removal of the Improvements. Tenants will frequently request an opportunity to negotiate Article 3 and there are several compromises that a landlord may find acceptable in order to reach an agreement on an amended Article 3. These compromises may include: 1. An agreement that tenant is not required to restore the premises to their condition prior to the construction of the Improvements. 2. An agreement that the tenant shall not be liable for any minor damages to the carpet, ceiling and/or walls caused by the tenant's removal of the Improvements. Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP
  46. 46. [Type here] 3. An agreement that the tenant shall not be required to remove the Improvements unless the landlord requests that the tenant does so when the landlord approves the Improvements. If the landlord fails to notify the tenant at the time of the approval of the Improvements, then the landlord waives the right to require removal of the Improvements. 4. An agreement that the tenant shall only be responsible to remove "Specialty Alterations" made to the premises, as opposed to the removal of all Improvements. A "Specialty Alteration" is generally defined as those alterations, installations, additions or improvements consisting of raised floors, vaults, filing systems, internal staircases, dumbwaiters, pneumatic tubes, vertical and horizontal transportation systems, any alterations which are structural in nature or penetrate or otherwise affect any floor slab and any textured, mirrored and/or decorative walls, ceilings, floors and other alterations of like character or nature. 5. An agreement that the tenant shall not be required to remove any Specialty Alterations unless the landlord requests that the tenant does so when the landlord approves the Specialty Alterations. If the landlord fails to notify the tenant at the time of the approval of the Specialty Alterations, then the landlord waives the right to require removal of the Specialty Alterations. Important Tips: Please contact legal counsel if you have any questions regarding how these provisions can be negotiated from a landlord and tenant perspective. 1. For additional insight, please watch the following video: http://agmblaw.com/media/larryhaber/off-the-wall-aka- tenant-restoration-and-removal-obligations-at-lease- termination/
  47. 47. [Type here] All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday- Friday 9:00 a.m. - 5:00 p.m. Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY 2 26 16 gal Line Question of the Week ansion Tax (Revised) I am a licensed New York state real estate broker and I am representing a purchaser who is considering buying an apartment for $999,999.00. My purchaser is worried that she will be required to pay the Mansion Tax on the sale. Can you please tell me what the Mansion Tax is and whether she will have to pay the Mansion Tax if the apartment closes at $999,999? The Mansion Tax is a fee paid by the purchaser of residential real property in New York State, when the total consideration is One Million ($1,000,000.00) Dollars or more. Residential real property is defined as "any premises that is or may be used in whole or in part as a personal residence at the time of conveyance, and includes a one-, two-, or three-family house, an individual condominium, or a cooperative apartment unit." The Mansion Tax is equal to 1% of the total "consideration." New York State Tax Law defines "consideration" as the price actually paid or required to be paid for the real property. This amount corresponds with the "amount of consideration for conveyance" listed on Schedule B, Part II, Line 1 of the New York State Real Property Transfer Tax Form TP-584 ("the TP584"). See the illustration below for the relevant portion of the TP- 584. Neil B. Garfinkel, REBNY Broker Counse Partner-in-charge of rea and banking practices a Abrams Garfinkel Marg Bergson, LLP
  48. 48. [Type here] If the total consideration for the property (as it appears on the TP-584) is for anything less than $1,000,000.00, the purchaser will not have to pay the Mansion Tax. Thus, if the total consideration for the apartment is $999,999.00 the purchaser does not have to pay the Mansion Tax on the sale. Nonetheless, determining whether the Mansion Tax applies to a particular transaction is not as simple as ascertaining the purchase price for the property. If the purchase price of residential property is less than $1,000,000.00, a purchaser may still have to pay the Mansion Tax because of what is known as "grossed up consideration." In New York, the consideration in a real estate transaction is "grossed up" (increased) if a purchaser agrees to pay the seller’s transfer taxes on the transaction. In this scenario, the transfer taxes that the purchaser has agreed to pay are added to the purchase price as part of the total consideration. Accordingly, real estate brokers should be aware of the transfer tax implications when the purchase price approaches $1,000,000.00 and the purchaser agrees to pay the seller’s transfer taxes. In such a scenario, the grossed up consideration could increase the total consideration to exceed $1,000,000.00, thereby implicating the Mansion Tax. In New York City, real estate transactions are subject to both New York State and New York City transfer taxes. The New York State transfer tax is .4% of the total consideration. The New York City transfer tax is 1% of the total consideration if the sale is for $500,000.00 or less and 1.425% of the total consideration for sales greater than $500,000.00. For example, if the purchase price of an apartment is $999,999.00 and the purchaser agrees to pay the seller’s transfer taxes, then the purchaser will be responsible for $3,999.99 in New York State transfer taxes and $14,249.99 in New York City transfer taxes. The combined $18,249.98 of transfer taxes is added to the purchase price and the total grossed up consideration amount is $1,018,248.98. Thus, the purchaser would
  49. 49. [Type here] have to pay the Mansion Tax on this transaction because the total consideration exceeds the $1,000,000.00 threshold. Furthermore, if the purchaser agrees to pay the seller’s transfer taxes, the transfer taxes will be re-calculated using the "grossed up" consideration amount, rather than the original purchase price. Thus, in the example above, the transfer taxes would be recalculated using the grossed up amount of $1,018,248.98. This equates to $18,583.04 in combined New York State and New York City transfer taxes. Important Tip: Please note that because these calculations are complex, you should always consult with an attorney and an accountant when commencing a transaction in which the Mansion Tax may be implicated. mation contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBN egal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prio of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is n construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice. ve any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday-Friday 9:00 a.m. - 5 Please be ready to cite your REBNY member number. For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY 2 18 16 Legal Line Question of the Week
  50. 50. [Type here] Ground Leases I am a licensed real estate salesperson and I am representing a purchaser who is considering a co-op apartment in a building that has a Ground Lease. Can you please clarify exactly what a Ground Lease is? Also, are there any particular considerations that should be made before purchasing a co-op apartment in a building that has a Ground Lease? If a co-op building has a Ground Lease (also known as a Land Lease) it means that the co-op corporation does not own the land under the building. Rather, the co-op corporation leases the land from the owner of the land. About 100 buildings in Manhattan have Ground Leases, many of which are co-ops. Generally the terms of Ground Leases are quite long, varying from terms of 50 to 99 years. Several important considerations should be made before purchasing a co-op apartment in a building with a Ground Lease: 1. Can the rent payable by the co-op corporation increase during the term of the Ground Lease? 2. If the rent can increase during the term of the Ground Lease, how is the increase calculated? Is the increase in rent a set amount or is it based on a formula that requires a determination in the future (for example, the rent increase could be tied to the fair market value of the property). 3. If the rent increases in the future, how does the increase affect the maintenance paid by the co-op shareholders? 4. Does the Ground Lease restrict the co-op corporation in making structural changes to the building? 5. What are the "events of default" under the Ground Lease and does the Ground lease provide for the co-op corporation to cure such defaults. Neil B. Garfinkel, REBNY Broker Counsel Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP

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