TPS-Barrister Associates - Legal Analysis

During the 2001 sessions of the New York State Legislature,
the following legislation affecting Real Property was passed, and signed into law by the Governor.

Encroaching Building Walls Onto Streets
Chapter 490 of the Laws of 2001 amends Section 38-a of the General City Law; Section 130(7) of the Town Law; and Section 6-632 of the Village Law so as to create a uniform procedure whereby an owner of real property of which the front or exterior wall of any building encroaches upon any street or highway, may submit a request in writing to the legislative body of such municipality for authorization to maintain such wall during the time such wall is in existence. The statute creates a procedure for the handling by the applicable municipality of such an application, which included a public hearing on public notice to other owners of realty located within 500 feet of the subject premises.

The legislative body of such municipality is given the power to grant such applicant a license to continue to maintain such wall, as aforesaid, if it determines that the maintenance of such wall does not interfere or impede the right of the public to use such municipal roadway. Such license is revocable at any time if the legislative body of such municipality determines that as the result of a contemplated improvement of such roadway, the existing wall will constitute an impediment to the use of such roadway. Furthermore, such encroaching wall must be removed upon notice given by the municipality in the event that such building is abandoned or enters into a state of disrepair because of lack of care. [This section does not apply to real property located within the cities of New York and Buffalo.] Became effective 11-21-2001.

Enhanced Star Exemption-Third Party Notice
Chapter 233 of the Laws of 2001 amended R.P.T.L. section 425(5) by the addition of a new paragraph (C) which provides that a Senior Citizen eligible for the "Enhanced Star Exemption" may request that a duplicate copy of the notice of such entitlement be sent to an adult third party. This law also sets forth the procedures for sending the same; and the content of such notice. Became effective 9-4-2001.

First Time Buyer-Real Property Tax Exemption
Chapter 529 of the Laws of 2001 permits localities to provide a partial tax exemption for a period not to exceed five years for a first time home buyer of newly constructed homes. The maximum exemption would be 50% in the first year and would be phased out by 10% each year thereafter. To qualify for the exemption, neither the homeowner nor their spouse shall have owned a primary property, a vacation home or an investment property during the three year period prior to the purchase of the primary exempt residence. Certain other qualifications are imposed upon such first time homebuyers as to their earnings and the cost of the new home which relate to limitations imposed by the SONYMA in their low interest Rate Mortgage Program. This law became effective 11-28-2001, and applies to all tax years beginning on or after 1-1-2001, and is available to purchases made prior to 12-31-2005; or pursuant to a contract entered into prior to such date.

Qualified Leasehold Condominiums-Defined
R.P.L. Section 339-3(12) which defines a leasehold interest in real property intended for use for either residential, commercial or industrial condominium purposes, or any combination thereof, has been amended by Chapter 354 of the Laws of 2001 so as to add to the premises defined as "Qualified Leasehold Condominiums," premises owned by the "Queens West Development Corporation." Other premises previously so defined included the "Battery Park City Authority" and the "Roosevelt Island Operating Corporation." All of these premises are located within the City of New York. Became effective 9-19-2001.

Real Property Tax Abatements
Chapter 294 of the Laws of 2001 amends the Real Property Law Section 467-a(2) so as to extend for three (3) additional years until the year 2003, partial abatements which may be granted by these municipalities on residential, co-operative or condominium residential units within the Cities of New York and Buffalo, of 25 percent on property whose average unit value is less than $15,000; and of 17.5 percent on those which exceed $15,000. Became effective 9-7-2001.

Real Property Tax Law-Exemptions
R.P.T.L. section 467(2) which provides for exemptions for real property owned by persons over the age of 65 years, has now been amended by Chapter 199 of the Laws of 2001 to require that for an exemption to be granted to such property where a child resides, or attends a public school of elementary or secondary education, the appropriate School Board must adopt a resolution to that effect, after a hearing conducted separate and apart from the procedure followed for any other hearing, local law, ordinance or resolution. Became effective 8-20-2001.

Satisfaction of Money Judgment-Exemption
Chapter 141 of the Laws of 2001 amends paragraph 2 of subdivision (c) of C.P.L.R. section 5205 by adding to those trusts and/or plans whose assets, annuities and payments are exempt from the satisfaction of money judgments: any plan that satisfies the requirements of the Internal Revenue Code, Section 457 [a 457 plan]; and the funds of a participant therein. This act became effective 8-6-2001, and applies to all judgments rendered in any case decided on or after 10-1-2000.

Senior Citizen Rent Increase Exemption
The definition of "income" set forth in R.P.T.L. 467-b (1)(c) which sets the limits of the amount of money which may be received by a Senior Citizen from all sources in order to be eligible to receive a rent increase exemption; and which excludes certain sources of money from that calculation; has been amended by Chapter 500 of the Laws of 2001 so as to include among the exempted income sources, monies received by any house hold member from a public or private pension in any given year, which does not exceed the consumer price index for such year. Became effective 11-21-2001.

Title Insurance
A new subdivision (4) has been added to Sec. 595-a of the Banking Law by Chapter 212 of the Laws of 2001, which provides that no mortgage broker, banker or exempt organization shall, as a condition to the approval of a mortgage loan, require the use of a particular title insurance underwriter or agency. This law became effective 8-29-2001.

Trusts-Authority of Trustee to Invade Principal
Chapter 204 of the Laws of 2001 amends paragraphs (b), (c) and (d) of E.P.T.L. section 10-6.6, and adds a new paragraph (g) to such section, so as to permit a Trustee to invade a trust without the consent of any interested party, and without obtaining court approval, for any proper object of the trust. [Court approval may still be sought at the discretion of the trustee.] The instrument of such invasion shall be filed in the court, and shall be served upon interested parties, and on the parent or person with whom a minor resides. This law further provides that it shall not be construed so as to abridge the right of any trustee who has such a right of invasion, to appoint property to a further trust under any other section of this Chapter; or under another statute; or under common law. This law became effective 8-20-2001.

Uniform Commercial Code
Chapter 529 of the Laws of 2001 makes substantial changes in Article 9 of the New York Uniform Commercial Code. Among those changes is the amendment of Section 9-501, which governs the place of filing of Code documents, and now creates a new statewide system for filing Code documents, eliminating the need for county filing of collateral documents which do not affect real property. Documents respecting security interests in co-operatives will continue to be filed on a county-by-county basis.

With respect to documents originally filed in a particular county, or in the office of the Department of State, which document provided for the filing in such place or office, all documents amending, assigning, continuing or terminating the same, shall continue to be similarly filed; and where the original document is filed in both places, all amendments, modifications, terminations and assignments of the same, will continue to be filed in both offices as was the original document. As to any original Financing Statement filed in a county office that provided for collateral that the Revised Article 9 now requires to be filed in the Department of State, the secured party should not file any document in the local county. Rather, Section 9-706 provides for a document known as "In Lieu of Filing" which should be filed in the Department of State. Such Section 9-706 document is to be filed there with a new U.C.C.-1. This law became effective 7-1-2001.

Mr. Sherris is Counsel of T.P.S. Abstract Corporation and a member of the Real Property Law Committee of the Bar Association of Nassau County.

September 27, 1998

Facts:

A Street Report, if ordered in connection with an examination of the land records for title insurance purposes, would show the legal street widths. In this instance, the width would be shown without any consideration given for the proposed street widening. It should, but this is by no means a given, that such a proposed widening as represented by the adoption of a widened street line, would show up in such search. Likewise, such information as to a proposed widening of the street upon which the premises front, might be indicated on a land survey. It is the surveyor’s judgment call, as to whether to show such information .

Resolution:

There are three issues to be resolved here:

A. Does this state of fact affect marketability of title?

The foregoing does not constitute failure of marketability of title, since the fee title to the premises remains unaffected in the hands of the record owner in the absence of a vesting of title to a portion of the premises pursuant to a legal condemnation for the widening. Neither does this uncompleted action by the municipality constitute a lien upon the premises.

B. Does this state of facts constitute an exception to the insured title?

Again, no title question has been posed by these facts. In this instance over 35 years have passed since the adoption of the proposed street widening line; and we have seen such situations in existence for over a half century without a condemnation proceeding having taken place. Such situations demonstrate that whatever the motivation involved in the original action, the matter has been comfortably, and probably permanently, shelved.

C. What kind of affirmative insurance, if any, can be issued in these circumstances?

Yes, most assuredly, affirmative insurance can be offered. The most pertinent would be assurance that in the event of a condemnation, that the insured fee owner would receive an appropriate condemnation award as determined by the Court.

September 7, 1998

A client is purchasing aco-operative apartment for more than $100,000.00; and the institution,
which is lending to them a portion of the purchase price, requires a Lien Search.

Should you recommend to your client that they have their ownership insured by title insurance?

The purchaser of a co-operative apartment understands that the cash they are putting down on the purchase, constitutes a significant investment of their family assets; and that when they have borrowed a portion of the purchase price; that this obligation to repay it, constitutes a burden on such assets.

What they often fail to realize, is that they also have significant, albeit indirect, burden to repay the very large mortgage which the Co-operative has placed upon the entire land and building(s). They may also fail to focus on the fact that the monthly assessments also go toward the Co-operative’s mortgage payments, repair and maintenance costs. These payments are necessary to protect their family investment. In this sense, it is no different from the purchase of title insurance on any residence of which they own the Fee.

The rate for this insurance is substantially less than that for ordinary title insurance, recognizing that there are exceptions to title insurance coverage of a co-operative, in this instance, not present with the ordinary fee title insurance. We call counsel’s attention to the fact, that the New York Insurance Law now specifically authorizes and provides for the title underwriters to insurance the ownership investment in a co-operative apartment.

In addition to the foregoing, as an attorney, you know that there are a number of significant areas where failure to obtain title insurance may have serious consequences. Among these are:

a. Failure of title in the Co-operative entity.

b. Mechanics liens which can affect the common areas of the co-operative, as well as an individual apartment.

c. Devolution of the ownership of an apartment through the death of a prior owner.

d. Failure of obtain the required consent of the Co-operative Board to the transfer of ownership.

We urge that you consider these facts when advising your client as to the pros and cons of ordering title insurance for them when they purchase a co-operative apartment.

August 31, 1998

Facts:

Title is currently held by: “A” and “B” his, wife. Consequently they hold title as tenants by the entirety.
They desire to alter the character of their holding so as to pass the entire title in “B”, but to do in two different tax years.

Resolution:

Since the nature of a tenancy by the entireties is such that the parties do not hold a specifically defined interest in the subject realty while they are married, the parties cannot achieve their objective by a one deed transfer; or even by two deeds of transfer.

Accordingly, the procedure to be followed, is as follows.

a. The first deed is made: ”’A’ and ‘B’ his wife, as tenants by the entireties to “A” and ‘B’, as tenants in common.”

b. The second deed is made: “’A” to ‘B’, as to an undivided one-quarter interest, all as tenants in common. ‘A’ now owns a one-quarter interest; and ’B’ now owns a three- quarters interest.”

c. The third deed is made in the next tax period, and recites: “’A’ to ‘B’, as to the remaining one-quarter interest. ‘B’ now owns the entire interest in the premises.”

Note: Appropriate tax forms must accompany the recording each of these conveyances.

August 24, 1998

Procedures to be followed relative to estate taxes when the Title Certificate returns the death of the certified owner,
and the death occurred less than ten (10) years (Federal Statute of Limitations); or less than fifteen (15) years
(N.Y. State Statute of Limitations), and the gross estate exceeds the statutory minimum, Federal and/or State, as the case may be.

When these issues are raised as exceptions in the Title Certificate, it is suggested that counsel’s focus be on just what proofs which can reasonably be expected to be obtained from the appropriate agency of government. The underwriter is usually aware of same, and will require that it be produced.

The I. R. S. will provide on request a Release of Estate Tax Lien in all relatively uncomplicated estates, which Release is acceptable by the County Clerk (or Register) for recordation. In similar fashion, the N. Y. State Tax Commission will issue such a Release, each upon the completion of their appropriate forms accompanied by their standard fee for the issuance of the same.

The I.R.S. will in all cases, issue what is called, an “Estate Closing Letter”, upon the payment in full of the estate tax. The State Tax Commission has a similar type of form (captioned differently), which is also in the nature of an accounting, which states the total tax due, the amount paid and received, and the balance due (ie. which if fully paid will indicate the balance as: “-0-“)

In all cases there the gross amount of the estate is clearly less than the appropriate statutory minimum, this Company, and most companies will accept an affidavit to that effect executed by an executor, administrator, or estate representative.

P.S. Please note that there is no estate tax lien (State of Federal) where the conveyance is by the surviving tenant by the entireties, or joint tenant. When the conveyance is being made by the estate of the last to die, of a tenancy by the entireties or joint tenant, the foregoing procedures must be gone through for each estate where the death occurred within the statutory period.

August 17, 1998

Facts:

In January, 1971, the bankruptcy Referee accepted a bid of $1,000. for the purchase of the debtor's right, title and interest in the premises, but no deed was then issued. After the bankruptcy sale, the automatic stay was lifted on the sheriff’s motion; and he sold the judgment creditor's interest in the premises. Among those receiving notice of the adjourned sale date, was the purchaser at the bankruptcy sale. Both of the original tenants by the entirely were still alive. A year prior to the current transaction, these proposed sellers acquired the interest of the Sheriff's grantee and now seek to sell the premises to this Company’s assured.

Resolution:

In the process of the examination of title, we requisitioned the long closed bankruptcy file from the Federal Government's warehouse, and learned that the bankruptcy sale had been made subject to all liens against the premises.

In addition to examining the requisitioned records at the Bankruptcy Court, we prepared an opinion of title and other documents to expedite the closing process. We also engaged in numerable conversations and negotiations, by and between the sellers' and purchasers’ counsel; a representative of the Sheriff's department; and the bankruptcy trustee. We secured a confirmatory deed from the Referee which conveyed whatever interest the debtor had in the bankruptcy estate. We were then able to close the transaction without risk to the parties.

July 27, 1998

Normally, when Seller’s counsel is faced with the necessity of disposing of a judgment or federal tax lien returned in a Title Certificate against a name similar to that of the Seller, their first instinct is to dash off an affidavit by the seller, stating that such judgment or lien “is not against the seller, against a person or entity of similar name.” Counsel is sometimes puzzled when the title company refuses to accept this affidavit as dispositive of the judgment or lien.

Most title companies have had the experience that in such circumstances, sellers are prone to identify their son and/or daughter as the lien debtor rather than themselves, as means of avoiding the legal consequence of a judgment or lien against themselves as the record owner of the subject real property. Accordingly, title companies will generally require additional co-oboration before accepting the proffered affidavit as dispositive of the issue.

Where the lien is a Federal Tax Lien, the matter is simplified as such lie contains the taxpayer’s social security number or I.D. number on it. In this instance, the Seller must bring such identification with them to the closing. However, N.Y. State Tax Warrants do not contain such information on the face of the warrant, and the Tax Commission will not provide such information by telephone. Accordingly, the taxpayer must obtain and provide that information prior to the closing, in addition to bringing the Social Security or I.D. information with them to the closing.

With respect to private money judgments, the nature of the proof to be adduced from the judgment creditor will vary depending on the character of the transaction, the default of which gave rise to the judgment. Counsel is advised in this instance to consult with purchaser’s title company in advance of the closing as to the type of proof they will require.

July 20, 1998

The effect of service made upon the United States, an agency or department thereof, in a mortgage foreclosure action,
not made in strict accordance with the provisions of the U.S. Code. [See also service upon the
People of the State of New York, or an agency or department thereof.]

Too much care cannot be given to the process of checking proofs of service prepared and executed by process servers, and filed in foreclosure actions. Even where the foreclosure action is brought in a State Court, the procedures respecting service upon the United States or its agencies or departments, must be made in accordance with the provisions of the U.S. Code. Similarly, specific provisions of the C.P.L.R. must be followed where the State or its agencies or departments are involved. The issue is not whether the means of service used by the plaintiff did in fact give adequate notice of the pending action, but rather, were the specifics of the statutory requirements followed.

Section 2410 of Title 28 of the U.S. Code governs civil actions brought in State or Federal Courts where the purpose of the action is to quiet title, foreclose a mortgage or other lien, or partition real property premises, where jurisdiction is sought over an interest of the United States, a department or agency thereof. Subsection (b) provides for a two step process where the action is brought in a State Court. (1) A copy of the complaint must be served upon an assistant U.S. Attorney, or a clerical employee designated by such attorney in the federal district where the real property is located; AND (2) Copies of the process and complaint must be sent by registered or certified mail to the Attorney General of the United States at Washington, District of Columbia.

Recognizing that the local district offices of the attorney general cannot enter an appearance or otherwise answer or plead without first receiving authority from the Attorney General in Washington, D.C., the fact that if, in a given pending case, the district assistant attorney general has not appeared or moved, should be taken as a tip-off of a possible failure of proper service. Where the State has been made a party defendant in such an action, non-appearance or pleading by the Attorney General should similarly be taken as a warning of possible failure of proper service. In both of such instances, no jurisdiction is acquired over the particular government, or its subdivisions.

June 29, 1998

The issue presented herein, was whether a chain link fence set some ten (10) feet in from the record
line of a very substantial tract of land, would constitute an “out of possession”
question that should be raised as an exception to title.

The rule of thumb, is that whenever a fence or boundary hedge is inset more than one (1) foot from a record property line, a title underwriter will except from coverage as land “out of possession,” the land lying between the exterior record line, and the interior fence or hedge line.

In this circumstance, for a period of over ten years, successive counsel for the party whose fence was inset from the property line by over ten (10’) feet, wrote annual letters to the adjacent owner, calling their attention to this, and stating that this condition was being allowed to remain, without the intention of the writer to vest title in such adjacent owner. No contradictory communication, orally or in writing, was ever received from such notified adjacent owner, claiming title to the inset strip, by reason of the existence of this condition.

In our view, this sustained period of notifications to the adjacent owner, placed upon this adjacent owner who might be in a position to urge a claim of adversity, the obligation to set forth the same. However, no such claim was ever put forth by them.

Accordingly, we determined not raise the title objection of “land out of possession,” provided that the most recent counsel who authorized and sent these letters, and the party upon whose behalf these letters were sent, furnished the underwriter with an affidavit that neither of them had received any notice of objection thereto, or claim of adverse possession.

June 22, 1998

Respecting mortgage foreclosure sales, what are the standards of title
which have to be met as to Marketability and Insurability of Title?

Generally, contracts for the purchase and sale of real property involve the implied condition that marketable title, as the same may be limited by the contract, are delivered. However, the written contract usually requires that insurable title be delivered, again as the same may be defined by the contract.

With respect to the title required to be delivered by a Referee to the successful bidder at a mortgage foreclosure sale, there is no such element as to the delivery of insurable title. The only legal requirement present with respect to a foreclosure sale is that marketable title be delivered, subject only to minor exceptions as to utility easements contained in the Notice of Sale.

The major effect of this distinction, is that it is no answer to a successful bidder at a foreclosure who rejects title on the grounds of lack of marketability, that a title insurance underwriter is willing to unconditionally insure title without exception, unless the final judgment of foreclosure and sale, so provides.

June 1, 1998

Husband and wife were the owners of a co-operative apartment, as "John Jones and Mary Jones, his wife."
The wife died. They had one child. After her death, who was (were) the owners of the apartment unit?

The stock of a co-operative corporation, and the possessory right held pursuant to a proprietory lease, are deemed to be personal property, for the purposes of transfer of ownership of a co-operative apartment unit.

Since the interest of "tenancy by the entirety" exists only with respect to real property, ownership of the co-operative apartment after the death of Mary Jones was in John Jones as to an undivided one-half interest which he continued to own after his wife's death; and in the Estate of Mary Jones, deceased, as to the other one-half interest.

As the only heirs of Mary Jones was her husband, John; and her son, Irwin, they shared the ownership of the remaining one-half interest which formerly belonged to Mary. The closing documents should therefor read: "John Jones, as to an undivided one-half interest; and John Jones and Irwin Jones, as to the one-half interest formerly owned by Mary Jones, deceased."

May 18, 1998

What procedures should be followed when securing the notarization of a real property document,
by a person residing in a foreign country?

A. According to an international treaty executed a number of years ago by virtually all the world's nations, the site occupied by a country within a host country as an Embassy, Legation or Consular Office, is deemed to be the territory of such occupying country. Certain employees within such offices have the designated authority to exercise notorial functions.

B. Where an official document is executed by a foreign official, attorney or judge in a host country, and is in that foreign language, the following steps must be taken in order that such document will be acceptable for recordation here in a County Clerk's office:

1. The document in question must be presented to the agency of the host government which is responsible for foreign affairs (Foreign Office), for translation of the document into English, and certification of the signor as to his/her official position.

2. A United States officer in an Embassy. Consular or Legation office in such host country, must certify as to the accuracy of such translation, and the authority of the foreign servicer of such host country, who acted pursuant to the requirements of subparagraph (1) above.

3. If the signature to be taken is that of an American living abroad who is a member of the United States armed forces, see C.P.L.R. 2309(d).

May 11, 1998

Does an abandonment of a "paper" (unopened) street, result in the passage of title?
What is the result?

Whatever the condition of fee title of the road, as it existed prior to the abandonment, remains, as no transfer of title to the same occurs as the result of the abandonment. Where different parties own lands on opposite sides of a street, each owns the land in the bed of that street to the center line thereof; and that center line remains the division line between their properties.

One result of the abandonment, is that the right of each party to use the entire width of said street, is extinguished where both parties join in the abandonment. This abandonment is done pursuant to the Tax Law, and results in the land in the bed of the street being placed on the tax rolls, as assessed parcels.