Purchaser of Mortgage Cannot Foreclose Peter Moulinos

A recent decision by the Supreme Court of the State of New York, New York County, has ruled that a purchaser of a mortgage, which is already in default, cannot foreclose on that mortgage without personal knowledge of the default.

In this decision, Judge Paul Wooten ruled that the Plaintiff, who acquired the mortgage after the default of the borrower, did not have personal knowledge of the default and could therefore not provide testimony or evidence to the Court regarding the circumstances surrounding the default. The Court did rule however that an affidavit from the original mortgagee, JP Morgan Chase, setting forth the circumstances surrounding the default would allow the foreclosure to proceed.

According to Peter Moulinos, this decision is significant as purchasers of defaulted mortgage notes often do not obtain a covenant for the future cooperation of a mortgagee upon the sale of a mortgage. Without the cooperation of an original mortgagee, a purchaser of a mortgage will not be able to close. Original mortgagees are often hesitant to provide their cooperation after the sale of the mortgage as their main goal is to sell the mortgage and disengage themselves from any further liability or ties to the mortgage.

Please contact Peter Moulinos at info@moulinos.com with any questions regarding this decision.

Attorney General Will Not Decide Escrow Disputes Peter Moulinos

Here is an article which appeared in The Real Deal discussing the decision by the New York State Attorney General not to adjudicate or determine disputes over the right to retain escrow deposits in real estate transactions between buyers and sellers. Peter Moulinos, Esq., is also quoted in the article.

Click here to read the article.

Mortgage Declared Void After Joint Tenant Dies

When one joint tenant passes away his interest goes to the other joint tenant, and extinguishes a mortgage Bank of America held on the property.

In 1999 Ms. Teresa Smith was the sole owner of a piece of property in Port Washington, New York. That February she conveyed, by quitclaim deed, her entire ownership in equal shares to herself and David Hassid, as joint tenants with the right of survivorship. Seven years later, in 2006, Bank of America, N.A., provided Mr. Hassid a $300,000 loan that was secured by a mortgage on the property. Ms. Smith was completely unaware of this mortgage on the property until 2009 when Mr. Hassid passed away.

It was then that Bank of America, N.A., declared the loan to be in default for non-payment. Ms. Smith commenced an action for a declaratory judgment arguing that after Mr. Hassid’s death the mortgage was extinguished. She felt she was the sole owner of the property by right of survivorship. When Mr. Hassid acquired the loan Bank of America accepted the mortgage on the property without first seeing that the joint tenancy was severed or that all joint tenants had signed. Regardless, Bank of America contended that not all the unities had been maintained in the joint tenancy.

In creating and maintaining a joint tenancy there are four unities that must always exist; time, title, interest and possession. Bank of America contended that Mr. Hassid’s mortgage destroyed the unity of interest, therefore the joint tenancy too. They argued that this mortgage served as written evidence that he intended to sever the joint tenancy. Furthermore, by destroying this joint tenancy the two owners became merely tenants-in-common. Ultimately meaning that Mr. David Hassid’s ownership would be passed to his estate and the mortgage would be valid.

The Appellate Division, Second Department, brought to light that a mortgage is only a lien on a property and not a transfer of title. The court found that Mr. Hassid’s mortgage on the property did not act to sever the joint tenancy. Upon his death his interest in the property went to Ms. Smith and Bank of America’s mortgage became null and void.

This case is cited as Smith v. Bank of America, N.A., (2nd Dept. 2012) Index #04463/2011. If you have any questions regarding this article, please contact Peter Moulinos at info@moulinos.com.

New Ability to Repay Mortgage Rules

Here is a summary of the new rules which were released today by the Consumer Financial Protection Bureau (CFPB) which are intended to protect borrowers from obtaining loans that they cannot afford to repay. The rules eliminate “no doc” loans, preclude banks from using “teaser rates” and eases the requirements for borrowers refinancing loans which are deemed risky to more conventional loans.

Predatory Servicing v. Predatory Lending by Peter Moulinos

Much has been written and litigated over the past couple of years about predatory lending by banks. However, little has been written about predatory servicing of loans by servicing companies.

Predatory lending is a term used to describe unfair, deceptive, or fraudulent practices by a lender while dealing with a borrower during the loan origination process. Those practices include providing a loan to a borrower whom the bank knows cannot re-pay the loan or charging excessive fees, points and expenses for the loan.

Predatory servicing however is a term used to describe unfair, deceptive or fraudulent practices by a lender, or another company which services a loan on behalf of the lender, after the loan is granted. Those practices include also charging excessive and unsubstantiated fees and expenses for servicing the loan, wrongfully disclosing credit defaults by a borrower, harassing a borrower for repayment and refusing to act in good faith in working with a borrower to effectuate a mortgage modification as required by federal law. In each such instance, a borrower may have a cause of action against a lender, or its servicing company, for predatory servicing.

Predatory servicing even takes place while a borrower is in bankruptcy. In some instances, a loan service provider will submit a proof of claim during the bankruptcy process and include unwarranted and unsubstantiated charges to the outstanding loan balance in an effort to recover additional profits from the bankruptcy estate.

For more information regarding predatory servicing, or to discuss a potential claim, you can contact Peter Moulinos at peter@moulinos.com.

Fraud Suit For Luxury Rent Deregulation Dismissed

In Katz 737 Corp. v. Cohen, our firm represented Carol Cohen, a prominent real estate broker in New York City, and her husband Lester Cohen who were accused by their landlord of under-reporting her income in order to maintain a rent stabilized apartment in violation of luxury rent deregulation laws. The landlord, prior to selling its building to Harry Macklowe for a reported $250 million, had argued that the Cohens had committed fraud in failing to properly report their income to the Department of Housing and Community Renewal (“DHCR”).

We successfully obtained dismissal of the landlord’s action in the Supreme Court of the State of New York on the basis that the landlord cannot assert a claim of fraud against the Cohens because any dispute must be resolved by the DHCR. Additionally, we successfully argued that the landlord had not stated any claim of fraud against the Cohens and merely conjured a lawsuit against them based on speculation and innuendo. The landlord thereafter appealed the dismissal.

The Appellate Division, First Department, in a lengthy opinion upheld the dismissal. Specifically, the Court ruled that “[t]his action is no more than an attempt to launch a belated collateral attack against determinations that are subject to the rule of administrative finality and by which [the landlord] is bound….The present plenary action alleging that the Cohens fraudulently underreported their income for the years in issue to avoid luxury deregulation of their dwelling unit is merely an attempt to relitigate issues administratively determined and to circumvent the jurisdiction of DHCR to decide such matters. The law vests exclusive original jurisdiction in DHCR to determine whether a rent-stabilized tenant’s household income exceeds the threshold for deregulation (Administrative Code § 26-504.3[b], [c][2]).”

The Court also ruled that that the landlord’s “pleadings show that it placed no reliance upon the Cohens’ statements of income or upon DHCR’s findings….Further, [the landlord's] fraud allegations are wholly speculative; there are no allegations offered from which it could reasonably be inferred that the Cohens provided fraudulent income statements, and there are no non-conclusory allegations that they earned more than $175,000 in two consecutive years (see generally Eurycleia Partners, LP v Seward & Kissel, LLP, 12 NY3d 553, 560 [2009]). The crux of [the landlord's] fraud argument, that the Cohens fraudulently hid their annual income in an S-Corporation that cannot be traced without proper discovery, is likewise without merit since that income cannot be considered for purposes of determining whether the Cohens met the $175,000 threshold to warrant luxury deregulation (see e.g. Matter of Nestor, 257 AD2d 395 at 396). Thus, there is no basis upon which this action may be maintained.”

The case was decided on December 20, 2012 and is cited as Katz 737 Corp. v Cohen, 2012 NY Slip Op 08818.

Not For Profit Ineligible For Rent Stabiliazation by Daniel Bateman

The New York City Civil Court has ruled that a Not for Profit organization was not eligible to receive benefits as a rent stabilized tenant.

Iris House is a not for profit organization which operates a program that provides housing for women and families living with HIV. They rent numerous apartments out as scatter site housing as well as provide these individuals and families with supportive services. Since 1998 Iris House had rented an apartment from Lexington NY Realty LLC, each year the leases have been issued on rent stabilized lease forms. However in the fall of 2011 when it came time for Iris House to renew their lease they were served with a Notice to Vacate terminating Iris House’s tenancy December 31, 2011.

The question before the court to decide was whether Iris House is a rent stabilized tenant entitled to benefits under the rent stabilization laws. Lexington NY Realty brought before the court the case Manocherian v. Lenox Hosp 84 NY2d 385 [1994]. This stated that corporations renting premises on behalf of occupants who for various reasons could not be named tenants only were entitled to Rent Stabilization where the lease specifies a particular individual on the lease. This is to prevent a corporation from gaining perpetual tenancy.

Due to the fact that Iris House never had a specific occupant on the leases the court found they lack rent stabilization status. Even assuming that this lease was for the benefit of a group of families affected with HIV/AIDS, it still does not remedy the fact that no specific individual was on the lease. At the time of the lease signing, Iris House had no idea who the occupant of the apartment would be.

This case was reported in the New York Law Journal on October 11th, 2012.

Landlord Must Obtain Leave of Court to Evict Incapacitated Person Peter Moulinos

We recently represented an incapacitated person, Nancy Lynch, who resided in an apartment on the Upper West Side for approximately 55 years. Ms. Lynch’s landlord, which is part of the wealthy Estate of Sol Goldman, sought to evict Ms. Lynch on the basis that she did not reside in the unit, which was rent stabilized. The landlord commenced eviction proceedings.

However, because Ms. Lynch was declared incapacitated by the Supreme Court of the State of New York, and appointed a guardian over her property and person, Peter Moulinos argued that the landlord needed Court approval prior to commencing an eviction proceeding against her. The Civil Court of the City of New York initially refused to dismiss the petition on such basis.

On appeal, the Appellate Term ruled that the eviction proceeding could not proceed without leave of the Supreme Court. This ruling was significant in that it required the landlord to obtain leave of court even though Ms. Lynch was declared incapacitated after the landlord filed the eviction proceeding.

The Appellate Term’s decision is cited as 25 W. 68th St. LLC v. Lynch, 2012 NY Slip Op 50843(U), 35 Misc 3d 138(A).

Adverse Possession of Property Granted Peter Moulinos

In Galli v. Galli, Peter Moulinos represented the Plaintiff who sought a judgment of adverse possession and to quiet title to a property previously held by his parents for more than twenty (20) years.  The Plaintiff and his parents maintained and possessed the subject property continuously, exclusively, openly, notoriously and under a claim of right hostile to the ownership interest of the Defendant.

During the course of the litigation, the Defendant conceded that she never maintained the property, participated towards its expenses nor even visited the property.  The Plaintiff also submitted an affidavit in support of his claim, as well as affidavits of other family members which stated that neither the Defendant, nor her deceased husband, ever made any claims to the property since 1960 and they “did not believe they were owners of the property having exercised no control, possession or claim to the property since 1960.”  The Plaintiff also provided evidence of the extensive repairs, improvements and alterations made to the property since 1972 by he and his parents.

The Defendant argued that the Plaintiff did not have a “claim of right” to the property because the Defendant’s 25% interest in the subject property was never subject to an ouster. The Court did not agree with the Defendant and ruled that Plaintiff did not have to show ouster.  All that Plaintiff was required to show was that his possession of the property was (1) hostile and under a claim of right, (2) actual, (3) open and notorious, (4) exclusive, and (5) continuous for the statutory period.

The ruling was significant as the Court was not required to deal with the application of the 2008 amendments to the adverse possession laws of New York given that adverse possession in the property vested in the Plaintiff prior to these amendments.

The case is cited as Galli v. Galli, 36 Misc. 3d 1203A, 2012 NY Slip Op 51182U (Sup.Ct. Kings Cty. 2012) and the ruling was issued by the Hon. Arthur M. Schack.

Nephew Denied Succession Rights to Rent Controlled Apartment Peter Moulinos

The Appellate Term recently reversed a lower court’s directed verdict which previously granted a nephew succession rights to a rent controlled apartment previously leased by the nephew’s aunt.

In Fort Washington Holdings LLC v. Abbott, the nephew, Maurice Abbott, had lived with his aunt in a rent controlled apartment since 1967 until his aunt passed away in 2008.  The landlord sought to remove Abbott from the apartment claiming that Abbott was a non-traditional family member of the aunt who was not entitled to succession rights to the apartment.  At trial, a jury ruled that Abbott was not entitled to the apartment.  In a stunning reversal of the jury’s verdict, the presiding judge ruled that the evidence presented overwhelmingly favored Abbott and that, based on his relationship with his aunt since 1967, entitled him to continue to maintain the apartment.

The landlord appealed the judge’s ruling and the Appellate Term sided with the landlord. The Appellate Term ruled that there was insufficient evidence presented to establish that the nephew and the aunt were financially interdependent on each other.  The Court ruled that “a claimed successor must establish both the emotional and financial underpinnings of his or her relationship with the tenant to qualify for eviction protection as a nontraditional family member.”

According to Peter Moulinos, this ruling is significant in that the Appellate Term reverse the judge’s ruling, which reversed the jury’s finding, on the basis that the nephew did not present sufficient evidence to show that he had a financially intertwined relationship with his aunt that would prevent his eviction.