Claim Against Coop Managing Agent May Proceed by Peter Moulinos

In an action between two cooperative unit owners, the Plaintiff sued the unit owner above him for damage to his unit stemming from a continuous leak into the Plaintiff’s apartment for over 18 months. In addition to suing the unit owner above, the Plaintiff’s real estate lawyer also filed suit against Douglas Elliman Property Management, who was the managing agent of the cooperative. The basis for suing Douglas Elliman was the fact that the cooperative failed to take measures to stop the leak and that Douglas Elliman, in its capacity as managing agent, should be liable for the cooperative’s failure.

Douglas Elliman, through its real estate attorney, moved to dismiss the action on the basis that it could not be held liable for negligent conduct since it was only the agent of the cooperative. The Court however disagreed. It ruled that “the fact that an agent acts for a disclosed principal will not relieve him of liability for his negligent acts, even though the principal may also be liable”. Thus Douglas Elliman could be held liable on a theory of negligence even though it acted only as the agent of the cooperative.

This decision was issued by Judge Deborah James in the action entitled Karydas v. Ferrara-Ruurds, filed in teh Supreme Court of the State of New York, County of New York, bearing index number 101386/12.

Read more:

Estate Fiduciary Not Responsible For Mortgage on Deceased’s Property by Peter Moulinos

An intriguing question arose in an estate proceeding about who is responsible to pay mortgages on a property owned by a deceased party, jointly with another party. In a Surrogate’s Court proceeding, the attorney for the surviving party who jointly owned real estate with the deceased argued that the relative of the deceased who inherited the property, who was also the fiduciary administrator of the estate, was responsible for payment of the deceased’s share of the mortgage. The lawyer for fiduciary argued that the mortgages run with the land and they should not be the responsibility of the fiduciary to pay.

The lawyer for the fiduciary cited to EPTL 3-3.6 (a) which provides that:

“Where any property, subject, at the time of decedent’s death, to any lien, security interest or other charge… is specifically disposed of by will or passes to a distributee,… the personal representative is not responsible for the satisfaction of such encumbrance out of the property of the decedent’s estate….”

Based on this statue, the Court agreed that the fiduciary was not responsible. Since the joint property owner inherited the property, and the mortgages ran with the land, they remained liens on the property and were payable by the joint property owner who now owned 100% of the property.

This proceeding is entitled Estate of Harold Fleisher and was filed in the Surrogate’s Court of New York, County of New York.

Real Estate Attorney Not Disqualified In Contract Dispute by Peter Moulinos, Esq.

Plaintiffs sought to purchase a cooperative apartment unit from the Defendant pursuant to a contract of sale. After the Plaintiffs were rejected by the cooperative board, they demanded that the Defendant return their down payment. The Defendant refused and the Plaintiffs then sued the Defendant for recovery of their down payment.

The down payment was held in escrow by the Defendant’s real estate attorney who was also acting as the escrow agent under the parties’ contract of sale That same real estate attorney represented the Defendant in the ensuing litigation. The Plaintiffs in the course of the litigation sought to have the Defendant’s attorney disqualified from representing the Defendant. The reasoning for such a request was that the Defendant’s attorney would likely be a witness and could not act as an advocate for his client and also as a witness.

The Court refused to disqualify the Defendant’s attorney from representing the Defendant in the litigation. It first stated that every party has an entitlement to be represented by an attorney of their own choosing absent a valid reason for disqualification. In this case, there was no valid reason for disqualification of the real estate attorney given that there were other witnesses who could testify to the same facts that the real estate attorney could testify to. In fact, there was no showing that the real estate attorney could provide relevant testimony anyway.

The case is entitled Vukel v. The Joan Dirigolomo Irrevocable Trust and was decided in the Supreme Court of the State of New York, County of Queens.

Condominium Late Fees Found to be Unreasonable by Peter Moulinos

In an action by the board of managers of a condominium seeking to foreclose a common charge lien, the Court ruled that the unit owners were in fact delinquent in paying their common charges and the Court granted summary judgment to the condominium.

However, the question raised by the unit owners was whether the late fees charged by the condominium were appropriate. The condominium bylaws authorized an assessment of $.04 for every dollar amount that remains unpaid to the condominium. The board of managers went further and imposed a late fee in addition to this amount for the sum of $800 per month. In this case, the unit owners’ monthly common charge was approximately $1,266. The additional late fee therefore amounted to a 63% monthly penalty to the unit owners.

Judge Richard Braun of the Supreme Court of New York, in New York County, ruled that this additional charge was not usurious, under the law. However, the judge examined section 190.40 of the Penal Law, which makes an interest charge of more than 25 percent a criminal offense. Based on the 25% interest threshold set by the legislature, Judge Braun determined that any penalty above that rate would be unreasonable and confiscatory in nature. It therefore awarded the condominium only the $.04 per dollar assessment under the bylaws.

This action is captioned as Board of Managers of the Park Avenue v. Sandler, bearing index number 100066/2013.

Consulate of Qatar Seeks to Terminate Real Estate Contract by Peter Moulinos, Esq.

In a bizarre turn of events, the consulate general of Qatar sought to terminate a $90 million contract to purchase real property in Manhattan for numerous evolving reasons.

After agreeing to purchase the property in September 2013, and even hosting a party at the property prior to going into contract, the Qatari consulate decided that it wanted to terminate the contract. Its reason for doing so was that the seller was subject to a money laundering investigation in France. The seller declared Time Of the Essence under the Contract and the buyer defaulted by not closing even though its attorney attended the closing “just to watch the show”. After being sued by the seller in Court, the Qatari consulate then argued that the person who signed the contract on behalf of the consulate lacked the authority to do so. The consulate filed a motion to dismiss a complaint to compel a closing.

In its ruling, the Court refused to dismiss the complaint however directed the parties to conduct limited discovery to ascertain if the signatory of the contract had the authority to enter into the agreement. The Court referred to the Vienna Convention which does not authorize a consulate to enter into real estate contracts such as the one at issue. It instead sought to apply the New York apparent agency authority doctrine which provides that “an agent may bind his principal to a contract if the principal has created the appearance of authority, leading the other contracting party to reasonably believe that actual authority exists”. This is what the court hoped limited discovery would resolve.

The case is cited as 194 Realty LLC v. Consulate General of Qatar, and is pending in the United States District Court for the Southern District of New York.

Read more:

Condominium Board Cannot Sue Sponsor For Fraud Based on Martin Act

In Board of Managers of 111 Hudson Street Condominium v. 111 Hudson Street, LLC, the Board sued a sponsor for various items including failing to create a reserve account as required under the condominium’s offering plan and for fraud in failing to disclose in the offering plan the damaged condition of the condominium’s cellar. The sponsor argued that it could not be sued for fraud as such a claim was precluded by the Martin Act.

The Martin Act is New York’s blue sky law which prohibits fraudulent and deceitful practices in the sale of securities. Under the Act, the New York Attorney General has the power to investigate possible securities fraud and to commence civil or criminal prosecutions. It has been used to sue sponsors for fraud in offering condominium units for sale to the general public and for making misrepresentations in a condominium’s offering plan.

The sponsor in this case successfully was able to have the Board’s claim for fraud. It claimed that the Martin Act precluded a claim of fraud against it. In agreeing with the sponsor, the Court ruled that a claim for fraud cannot be based solely on a misrepresentation under an offering plan since such claims are intended to be brought by the New York attorney general solely under the Martin Act. The court did rule that claims for fraud may be brought against sponsors in instances where those claims are not solely based under the Martin Act.

This decision was issued by Judge Anil Singh of the Supreme Court of the State of New York, County of New York, bearing index number 651959/14.

Prisoner Can Sublease Unit While in Prison by Stephen Tsamblakos

In a holdover proceeding entitled 46 Downing Street, LLC v. Thompson, Mr. Thompson attempted to be “restored to occupancy” to his unit #1C at 46 Downing Street after being incarcerated in prison.

The issue is that the apartment has been occupied by Ms. Watabe for the past three years. The petitioner, 46 Downing Street, LLC, filed a holdover proceeding against Mr. Thompson for subletting the apartment, while he was in prison. The court ruled in favor of the petitioner, and Mr. Thompson was evicted from the apartment.

Upon Mr. Thompson’s release from prison, he filed a pro se post-eviction order. From there, the appellate term ruled in favor of the respondent, arguing that his imprisonment was a reasonable excuse for his absence from the proceedings. The respondent then filed a motion to dismiss the petition, which Judge Wendt granted, as the petitioner did not provide the respondent the necessary thirty days to end the tenancy. The petitioner argued that he had the right to rent the apartment to Ms. Watabe at market-rate because of Mr. Thompson’s incarceration. The respondent’s argument was that he lived in the apartment since he was seven years old and intended to bring his teenage daughter to the United States from Kuwait to live with him. The apartment is also affordable for the defendant at $450 per month, as his income is $800 per month from social security. Ms. Watabe claims that she intends to purchase a home in Manhattan and is concerned that her lease will be terminated because of the lawsuit.

The respondent’s incarceration “is not enough to defeat the tenancy”. In1970, the Court of Appeals ruled, in Corr v. Westchester County Dept. Of Social Services, that “a patient or inmate of an institution does not gain or lose a residence or domicile, but retains the domicile he had when he entered the institution”. Furthermore, the fact that the landlord rented the apartment Ms. Watabe at a reduced rate of $2,000 illustrated their belief that Mr. Thompson would return to the apartment.

The court awarded Mr. Thompson possession of the apartment. This ruling, however, does not prevent Ms. Watabe from suing the petitioner for any damages, in regards to her lease.

The case was cited as 46 Downing Street v. Thompson, 81450/09, NYLJ 1202732411218, at *1 (Civ., NY, Decided July 25, 2015).

This article was written by Stephen Tsamblakos, a legal intern at Moulinos & Associates LLC.

Article 78 Proceeding for NYU Expansion by Stephen Tsamblakos

In Glick v. Harvey, the plaintiff filed an Article 78 proceeding for land against the defendant, including New York University.
In Downtown Manhattan, residents have begun to grow weary of NYU’s rapid expansion in Greenwich Village. This manifested when a dispute arose over four parcels of municipal land, which the plaintiffs argued was to be designated as parkland. These parcels include Mercer Playground, LaGuardia Park, LaGuardia Corner Gardens, and Mercer-Houston Dog Run.

The New York State Court of Appeals ruled in favor of the University’s plans to expand its facilities, as the plaintiffs were not able to demonstrate that the parcels were implied parkland, which would have protected the land under the public trust doctrine. When first developed, LaGuardia Park was to “always remain in Department of Transportation jurisdictional property, available for DOT use” and not to be “formal or implied dedicated parklands”.

In regard to Mercer Playground, the permit for its development calls for the “temporary” use of the land to serve as a park, and “in the event the DOT requires the property to perform construction work, the Department of Parks and Recreation shall vacate it and return it”. The LaGuardia Corner Gardens were leased to the GreenThumbs Garden Program “on an interim basis, pending the future development or other use of the premises”.
Prior to the appeal, “petitioners sought an injunction of the City’s planned transfer of the parcels and a declaration that the City respondents had unlawfully alienated impliedly dedicated public parkland in violation of the public trust doctrine”, The NY Supreme Court ruled in favor of the petitioners, arguing that the alienation of those parcels violated the public trust doctrine.” However, upon appeal, the Appellate Division ruled in favor of the university, “denying the petition and dismissing the proceeding.”

The two necessary conditions to complete a successful challenge to the alienation of land are to show that the land owner’s intent is unmistakable and “that the public has accepted the land as dedicated to a public use.”

The petitioners were unable to prove that the city planned to permanently dedicate the parcels of land, as the permits reference above demonstrate.
The case was cited as Matter of Glick v. Harvey, No. 107, NYLJ 1202730967649, at *1 (Ct. of App., Decided June 30, 2015).

Can a Cooperative Apartment Be Partitioned?

Where owners of real property cannot agree on the continued ownership or operation of a property, they may commence an action for partition in Court seeking the public sale of the property. The proceeds from the sale are then distributed amongst the owners in accordance with their respective interests.

An person holding an ownership interest in a cooperative apartment however does not technically own real property. Rather, shares in the cooperative are owned which entitle the shareholder to occupy a unit pursuant to a proprietary lease. The cooperative shares owned by the unit owner are considered personal property. Where there is a breakdown in the relationship of owners of a cooperative apartment and, and one wishes to sell the cooperative unit, many people question whether they may maintain an action for partition of the unit.

Generally, the law allows for the partition of a cooperative unit and such a litigation to be commenced. New York RPAPL §901(1) is available to permit the partition of cooperative apartments, which defines partition as “the act or proceeding by which co-owners of property cause it to be divided into as many shares as there are owners, according to their interest therein, or if that cannot be equitably done, to be sold for the best obtainable price and the proceeds distributed according to the respective interests. Chiang v. Chang, 137 A.D.2d 371, 529 N.Y.S.2d 294 (1st Dept. 1988). A partition action of a cooperative unit may not be allowed in the event the cooperative’s by-laws or proprietary lease do not permit partition. Even if those documents do, the cooperative may still need to approve the sale of the cooperative unit to a potential buyer at any public sale.

Therefore, the partition of a cooperative apartment is permissible however with some caveats, specifically the governing cooperative documents.

For any questions related to a partition action, you may call Peter Moulinos at 212.832.5981.

Unit Owner Claims Against Sponsor of Condominium For Construction Defects

With the increasing construction of new condominiums in New York, there is sure to be an increase of claims by unit owners against the sponsor of a condominium for defective and poor construction. Such was the case in the mid and late 2000s when many lawsuits were filed against sponsors for failing to construct a condominium in accordance with the specifications set out in the condominium’s offering plan. During those lawsuits the question arose whether the sponsor breached its warranty which comes with the sale of every new condominium unit sold in New York.

New York State law provides that each single family home, cooperative unit or condominium unit sold by a developer or sponsor be subject to a construction warranty. The law is known as the New York State Housing Merchant Implied Warranty Law, pursuant to General Obligations Law Section 777-a, and provides for the following warranties:

i. one (1) year from and after the warranty date the home will be free from defects due to a failure to have been constructed in a skillful manner;
ii. two (2) years from and after the warranty date, the plumbing, electrical, heating, cooling, ventilation systems must be free from defects due to a failure by builder to have installed such systems in a skillful manner; and
iii. six (6) years from and after the warranty date the home will be free from material defects. This includes physical defects in the structural elements such as foundations, floors, walls and roof framing which make it unsafe or unlivable, pursuant to the Offering Plan, Rights and Obligations of Sponsor.

A sponsor or developer can limit these warranties however cannot shorten the time periods within which they apply. The warranties also do not apply to defects not caused by defective workmanship, materials or design or those defects which were obvious, or would have been obvious, upon inspection. Defects in items sold with a home, such as refrigerators, ovens and air conditioners are not subject to the warranty. A unit owner must also give timely notice to a sponsor or developer in order to claim a breach of warranty.

In order to ascertain the terms of a warranty, a unit owner should review the condominium’s offering plan to determine whether the warranty has been limited, modified or, in some cases, waived by the unit owner at the time it purchased the unit.

For any questions regarding construction defects in condominiums, cooperatives or newly constructed single family homes, please feel free to contact Peter Moulinos at 212-832-5981.