Real Property Law Section Blog

Seller’s Contractual Duty Only to Deliver "Existing" Certificates of Occupancy: Malpractice by Purchaser’s Attorney

A complaint against a purchaser’s attorney has recently been held to state a cause of action for damages for legal malpractice. The contract of sale for a multi-use commercial property provided" "[a]t closing, the Seller shall deliver copies of all existing Certificates of Occupancy for the premises." Seller later asserted that COs did not exist and that he had no obligation under the language of the contract to procure and deliver them. As a result, the purchaser was unable to obtain financing for the acquisition, and the seller declared the buyer to be in breach and retained the $173,000 down payment. Purchaser’s attorney’s motion to dismiss was denied by the Supreme Court, which denial was affirmed by the Appellate Division, Second Department. The purchaser alleged that his attorney negligently negotiated the terms of the contract, thereby permitting the seller to refuse to procure and deliver the COs, resulting in damages of $173,000. The Appellate Division’s opinion said that, taking these allegations as true and according the plaintiff the benefit of every possible favorable inference, they state a cause of action. Malik v. Beal, 864 N.Y.S.2d 153 (2d Dept. 2008).

Here, the purchaser’s attorney apparently missed the limitation of the seller’s delivery obligation to "existing" COs. He did not obtain a representation that COs did exist. Purchasers’ attorneys beware!

Karl B. Holtzschue

Chapter 521 of the Laws of 2008, signed into law by Governor Paterson on September 4, 2008, adds Section 27-2405 ("Tenant notification of indoor air contamination") to the Environmental Conservation Law. Section 27-2405 is effective December 3, 2008.

Lawrence Schnapf of Schulte Roth & Zabel LLP, and Joshua Stein, of Latham & Watkins LLP, summarized and discussed the new legislation in an article they wrote for NYSBA's website. Click here to see the article:
http://www.nysba.org/Content/NavigationMenu19/Articles/IndoorAirQualityReport.pdf

The Office of Tax Policy Analysis of the NYS Department of Taxation and Finance has issued a memorandum (TSB-M-08(5)R) dated October 27, 2008 captioned "Special Additional Mortgage Recording Tax Exemption for Federal Credit Unions that Convert to State Credit Unions".

The memorandum provides notice of an exemption from the special additional mortgage recording tax on mortgages where the mortgagee is a NYS chartered credit union that has converted from a federal credit union on or after January 1, 2009.

The memorandum is posted at: http://www.tax.state.ny.us/pdf/memos/mortgage/m08_5r.pdf

The next meeting of the Real Property Section's Committee on Condominiums and Cooperatives will be held on Friday, November 7, from 9 AM until Noon at the Penn Club, which is located at 30 West 44th Street, in Manhattan.

Section Members will be able to participate in the meeting by telephone starting at 9:10 AM. Committee Members will receive dial-in information by email from the State Bar. Section Members who have not joined the Committee but who wish to participate by telephone need to contact Chairs Ira Goldenberg (Igoldenberg@hwkmlaw.com) or Dennis Greenstein (Dgreenstein@seyfarth.com) no later than Friday, October 24.

The Agenda for the meeting is the following:

I. General (Goldenberg & Greenstein) (9:10-9:15)
A. Comm. meetings by telephone conference
B. Condo & Coop Comm. meeting July 25, 2008, Hershey, PA
C. Advanced Topics CLE (1/29/09) Marriott Marquis, NYC
D. Upstate Practitioners CLE (March ‘09), Albany
E. RPLS Summer Meeting (7/16-7/20/09) Ogunquit, ME

II. Topics & Reports
A. Attorney General Update (9:15-10:15)
Asst. Atty. General Kenneth Demario
B. Representing Buyers or Sponsors in Difficult Economic Times: contract defaults and disputes (10:15-10:35)
Steve Goldman, Esq.
C. Attorney Escrow Account Issues for Offering Plans: are IOLA’s appropriate? Alvin Schein, Esq. (10:35 -10:55)
D. Condo/HOA/Coop Underlying Loans: Lender Concerns
Allen Seilhammer of Comm. Assoc. Banc &
Sheldon Gartenstein of NCB. (10:55-11:20)
E. Condemnation Issues for Condominiums
Douglas Heller, Esq. (11:20-11:40)
F. Tax Issues Update
Joel Miller, Esq. (11:40-noon)

III. Miscellaneous
Questions, Comments, and New Matters

IV. Adjournment

Chapter 521 of the Laws of 2008, signed into law by Governor Paterson on September 4, 2008, adds Section 27-2405 ("Tenant notification of indoor air contamination") to the ECL Under this Section, the owner of real property, or its agent, to whom indoor air contamination "test results" have been provided by an "issuer", is required to "provide a fact sheet [prepared by the Department of Health] and timely notice of any public meetings required to be held to discuss such results to all tenants and occupants and upon request such test results and any closure letter, within fifteen days of receipt of such results". Section 27-2405 is effective December 3, 2008.

"Test results" include "the results of any tests conducted on indoor air, subslab air, ambient air, subslab groundwater samples, and subslab soil samples". An "issuer" includes (i) a person subject to an order issued pursuant to (i) ECL Title 13 ("Inactive Hazardous Waste Disposal Sites"), Navigation Law Article 12 ("Oil Spill Prevention Control and Compensation"), or Title 12-A of Article 13 of the Public Health Law ("Inactive Hazardous Waste Disposal Sites"), (ii) a "participant", as defined in subdivision 1 of ECL Section 27-1405, subject to an agreement entered into pursuant to ECL Title 14 ("Brownfield Cleanup Program"), (iii) a municipality subject to a contract entered into pursuant to Title 5 of ECL Article 56 ("Environmental Restoration Program"), or (iv) New York State's Department of Environmental Conservation.

Section 27-2405 also requires the owner, or its agent, of a property subject to controls for the mitigation of indoor air contamination or as to which there is monitoring pursuant to an ongoing remedial program, to provide a fact sheet prepared by the Department of Health and, on request, any test results and closure letter, as to indoor air contamination at the property it has received to any prospective tenant before a lease or rental agreement is executed. The rental or lease agreement is to contain the following text on its first page, in at least twelve point bold face type:

"NOTIFICATION OF TEST RESULTS. The property has been tested for contamination of indoor air; test results and additional information are available upon request".

"On August 5, 2008, Governor Paterson signed into law comprehensive legislation that the New York State Legislature had passed in June, referred [to] by some as the Foreclosure Prevention and Responsible Lending Act. The law provides assistance to homeowners with high-cost subprime and non-traditional home loans who are in danger of losing their homes. This law also provides consumer protections in the subprime lending industry. Provisions of the new law go into effect at different points in time, statring immediately".

The paragraph above is from "New State Law Addresses Mortgage Foreclosure Crisis and Subprime Lending Abuses", by Kirsten Keefe and Elizabeth Hasper of the Empire Justice Center, in Albany, which has been posted to the NYSBA website at the link set forth below.

http://www.nysba.org/Content/NavigationMenu19/Articles/ForeclosurePrevRespLendAct2008summary.pdf

Note also the article "Chapter 472: New N.Y. Mortgage Foreclosure Legislation", by M Berey, published in the New York Law Journal on September 11, 2008.

Under subparagraph "a" of paragraph 4 of subdivision (a) [now subparagraph a(1)] of Civil Practice Law and Rules ("CPLR") Section 8021 ("County clerks other than as clerks of court"), the charge to record, enter, index and endorse a certificate on an instrument is $5.00. A recording officer can charge $3.00 for each page or portion of a page and $.50 for each additional town, city block or other index in which the instrument is to be indexed. On an assignment of more than one mortgage or the "release" of more than one lease, there is an additional fee of $3.00 for each mortgage assigned or lease "released" in excess of one.

Chapter 288 of the Laws of 2008 signed into law by Governor Paterson on July 7, 2008, amended subdivision (a) of CPLR Section 8021. It renumbered the existing subparagraph "a" as subparagraph "a(1)" and added subparagraph "a(2)", which reads, in part, as follows:

"(2) Notwithstanding clause one of this subparagraph, any county may opt by county law to increase the fee for recording, entering, indexing and endorsing a certificate on any instrument from five dollars to twenty dollars and, in addition thereto, increase from three dollars to five dollars for each page or portion of a page. Such increase shall take effect thirty days after the county enacts such fees. For the purpose of determining the appropriate recording fee, the fee for any cover page shall be deemed an additional page of the instrument…"

Local Laws have been enacted pursuant to Chapter 288 in a number of Counties. Increases in recording charges took effect in Columbia County on September 15, 2008, in Essex and Warren Counties on September 18, 2008, in Clinton, Franklin, and Rockland Counties on October 1, 2008, in Nassau County on October 4, 2008, in Putnam County on October 6, 2008, and in Tompkins County on October 8, 2008. Increases will take effect in Suffolk County, on October 16, 2008 and in Ulster County on November 3, 2008.

Selected laws affecting real property enacted so far in 2008:

A251/S5621 Lender prohibited from exercising due on sale clauses for homes - Chap 152
A1269/S1531 Sex offender prohibited from license as r.e. broker or salesman - Chap 430
A7007A/S3825 Appointment of Art 7-A administrator is basis to declare mortgage due or certify dwelling abandoned - Chap 529
A7519/S4874 Requires seller to establish escrow for broker's commission - Chap 436 [RPLS memo in support]
A7700/S4963A Residential assessment ratio - Chap 78
A10766/S7645 Extends tax rate reduction on REITS - Chap 416
A10817/S8143 Governor's Program Bill on mortgage foreclosure - Chap 472 [RPLS memo in support if amended]
A10952/S5634 Requires notification of tenants of testing for indoor air contamination - Chap 521
A11544/S8517 Requires notice re certified copy of deed - Chap 485
A11574/S7915C Clarifies adverse possession - Chap 268 [RPLS memo in opposition to final bill]

Bills not enacted:


A1743 NYSLTA bill to license title agents - did not pass [RPLS memo in support]
A3994 Applications to purchase coops - did not pass
A8948 Disclosure of LLC members - passed Assembly only [RPLS memo in opposition]
A9295 County Clerk discretion re mortgages (anti-MERS) - did not pass [RPLS memo in opposition]
A9491 Nassau County Clerk discretion re mortgages (anti-MERS) - did not pass [RPLS memo in opposition]
A11424 Revise PCDA - did not pass [RPLS memo in support]

To find copies of bills, go to:

1. RPLS portion of NYSBA website: www.nysba.org, then "Sections", then "Real Property Law Section", then "Status of Pending Legislation" (search by bill number, click on number) (For RPLS memoranda go to "2007-2008 Legislative Memoranda") or go to
2. Senate website: www.senate.state.ny.us, then "Bills and Laws" or go to
3. Assembly website: www.assembly.state.ny.us, then "Bill Search and Legislative information".

Karl B. Holtzschue, Co-Chair, RPLS Committee on Legislation
email: kbholt@gmail.com

A meeting of the Commercial Leasing Committee of the Real Property Law Section will be held at noon on September 18, 2008 in the Penn Club, 30 West 44th Street, NYC. The topic for discussion will be landlord and tenant's obligations in the wake of the Kronish Lieb case. (Kronish Lieb Weiner & Hellman LLP v. Tahari, LTD., 829 NYS 2d 7(1st Dept., 2006)

The meeting is open to members of the Commercial Leasing Committee. For further information about the meeting, or to join the Committee, please contact either of its co-Chairpersons, Bradley Kaufman (bkaufman@pryorcashman.com) or David Zinberg (dzinberg@ingramllp.com).

Chapter 333 of the Laws of 2008 authorizes the Town Board of the Town of Northeast in Dutchess County to establish a Community Preservation Fund. To provide a source of revenue for the Fund, the Act adds Article 31-A-3 ("Tax on Real Estate Transfers in the Town of Northeast") to the Tax Law, authorizing the Town, subject to approval by referendum, to adopt a Local Law imposing a transfer tax of up to two percent (2%) of consideration, payable by the grantee, on the conveyance of real property in the Town or an interest therein. Among the exemptions to be applied is "[a]n exemption from the tax which is equal to the median sales price of residential real property within the applicable county, as determined by the Office of Real Property Services pursuant to Section 425 of the Real Property Tax Law…" A Return will be required to be filed, and any tax due paid, to record an instrument conveying real property or an interest therein within the Town.