Valentine’s Day will soon be upon us, when everyone’s fancy will turn to — real estate ownership issues? Well, of course! It seems more and more couples (as in unwed couples) are choosing to put off marriage, but not the purchase of a love nest. As the old adage goes, there’s nothing certain in life except for death and taxes. In many instances, love is not forever but regret can be. To avoid unnecessary regret, or unnecessary additional pain that often accompanies a breakup, unwed couples who purchase real estate together should consider what happens to “home sweet home” if the relationship sours or, worse, one of the co-owners suffers an early demise.
The first consideration is how title to the property is to be held. Unless the manner in which the parties are taking title is noted on the deed (other than husband-and-wife or same-sex partners in a civil union), the presumption is that they are taking ownership as tenants in common. In that instance, the lovebirds would each own a 50% undivided interest of the property. Either owner could, if he or she chose to do so, transfer his or her interest to someone else without the consent of or notice to the other cotenant. A tenant in common may also mortgage his or her undivided interest. Moreover, if some tragedy were to befall one of the owners, his or her share of the property would go to the deceased’s heirs. Great. Now you own the property with your significant other’s parents or oddball siblings. That can be awkward if not planned for or considered as a possibility in the first place.
A more appropriate form of ownership where the unmarried couple wants their share of the property to go to their significant other in the event of death is that of joint tenancy. This is a type of ownership where each party owns an undivided interest in the whole. The significant difference between “joint tenancy” and “tenants-in-common” is that of survivorship. That is, if one party happens to leave this mortal coil prematurely, then the survivor will receive the entire estate. In order to create a joint tenancy the deed must specify that the grantees are to hold title as joint tenants. The downside is that a joint tenant may still transfer his or her interest to a third party…which breaks the joint tenancy and creates a tenancy in common as described above.
In either of the above situations, the parties may wish to consider what happens if the relationship terminates, and then address those concerns in a separate agreement.
If the couple decides to get married, or form a civil union in the case of same-sex partners, then the property may be held as tenants by the entirety. Under that situation, neither party may transfer their interest in the property without the consent of the other party. Plus, upon the death of either spouse, the surviving spouse will be deemed to have owned the whole of all rights under the original deed. These are significant benefits of owning property as tenants by the entirety, along with other benefits the limited space in this blog precludes me from going into.
Suffice it to say that purchasing property as a couple carries with it significant rights and responsibilities, starting with the manner in which title to the property is held.
For more information, please contact Tim McKeown at email@example.com
A recent New Jersey Appellate Division case ruled that lawyers handling transactional matters – such as real estate contracts – may have a legal duty to explain to their clients the terms of a contract, even if those terms are unambiguous and the client personally negotiated them.
In the unpublished decision of Cottone v. Fox Rothschild, the Appellate Division overturned the trial court’s dismissal of plaintiff’s claim that his lawyer committed malpractice by missing a last minute revision of a key provision in the contract, which ended up costing the client a lot of money. In doing so, the Appellate Division noted that, although it was clear a professional duty existed, there was no written retainer agreement outlining the scope of the attorney’s duty. In addition, the Appellate Division judges found that material issues of fact existed as to whether the scope of the attorney’s professional duty included a duty to inquire into, or explain to the client, the terms of the agreement, in particular the important contract provision revised at the last minute. So, a jury will get to decide whether the attorney in this case had an obligation to explain the obvious to his client.
The takeaway for lawyers is to not be shy about giving too much information. As Cicero once said, “advice is judged by results, not by intentions.” The takeaway for clients is to read your agreements and ask questions.
In football, if you interfere with the receiver trying to catch the ball, that’s pass interference. In basketball, if you impede the forward progress of the player with the ball, you will draw a foul. In baseball, it is illegal to interfere with the runner between the base paths. Are you starting to discern a pattern here?
Much like in some of our favorite sports, it is also illegal to interfere with a prospective purchaser’s contract, or prospective contract, to purchase property. This was made clear in the recent unpublished Appellate Division case of D’Agostino v. Gesher LLC et als.
In D’Agostino, a broker or brokers allegedly deep-sixed plaintiff’s offer to a foreclosing bank to purchase a foreclosed property. The property was later sold to someone the broker knew for less than what Plaintiff had offered (the bank was unaware of the alleged shenanigans). Plaintiff sued, but his case was dismissed at the trial level because the judge felt there was no case without a signed contract with the bank. The Appellate Division reversed and found that plaintiff presented enough evidence to withstand a motion to dismiss his tortious interference claim. In doing so, the Appellate Division outlined the elements of a tortious interference claim as follows:
1) the existence of a protectable interest;
2) malice — i.e., defendant’s intentional interference without justification;
3) a reasonable likelihood that the interference caused the loss of the prospective gain; and
4) resulting damages.
It is okay to compete against others; however, the “play fair” rule of the playground “play fair” applies in all cases, including the purchase of real estate.
Generally, where there is a final judgment on the merits by a court having jurisdiction, that judgment is conclusive between the parties to a suit as to all matters that were litigated or that could have been litigated in that suit. In other words, you generally can’t have two bites at the proverbial apple.
How does this concept affect the entry of a judgment for possession in favor of a landlord, or a judgment in favor of a tenant dismissing an eviction action? For example, if the landlord evicts a tenant for nonpayment of rent is the landlord then precluded from suing the tenant for damages for the rent that is due? Or, if the landlord loses an eviction action on the basis that the tenancy court did not have jurisdiction because the court could not find a landlord-tenant relationship existed between the parties, is the landlord precluded from filing an action in ejectment in an attempt to remove the tenant from the space?
Fortunately, this concept, known as “res judicata,” generally does not apply to judgments from summary dispossess actions. Thus, examples of where the doctrine of res judicata does not apply after a judgment is entered in an eviction action include:
1. An action by a landlord for ejectment.
2. An action by a landlord for rent.
3. An action by a tenant for wrongful eviction.
4. An action by a tenant for return of the security deposit.
5. An action by tenant for damages.
Thus, a landlord or tenant need not fear being shut out of court on additional claims simply because either party was successful in either prosecuting an eviction action or defending one.
If you are a commercial landlord, then chances are you have a relatively good relationship with your tenants. However, there are instances where a landlord and one of the tenants fall into a toxic relationship, or the tenant simply runs into financial difficulties resulting in nonpayment of rent, forcing the landlord to file an eviction action.
What can a landlord expect to have happen at the trial?
One obvious reason for filing a real estate tax appeal is to obtain a lower assessment on your real property and thereby save significant tax dollars. An equally important reason to keep taxes low is to help maintain the value of the property, making it more saleable in the event that the tax appeal is successful.
As I may have mentioned or alluded to in previous posts, commercial landlords are not free to simply evict a tenant once the tenant does something in violation of the lease. At a minimum, in those instances where the tenant has failed to pay rent, a landlord must file a summary dispossess complaint. In cases of defaults other than for the nonpayment of rent, a Notice to Quit and Demand for Possession must first be served on the tenant and the quit date must pass before an eviction complaint may be filed.
The proper service of a Notice to Quit is critical. Without it, the court will not have jurisdiction to hear the tenancy case. Many commercial landlords have seen their cases dismissed at trial based on the improper service (or lack thereof) of a statutorily required Notice to Quit. Below is a chart outlining the various causes for eviction in a commercial setting together with the Notice to Quit requirements for each. I will post later as to some of the issues that crop up relating to these various causes for eviction.
Your tenant has just breached its lease and moved out of the premises. You determine that both the tenant or guarantor (if there is one) has assets to pursue, and you proceed into suit.
While the suit is pending, you hire a realtor to market the space, because your lawyer told you that you had to undertake reasonable steps to mitigate your damages. Your listing agreement with the realtor is for an initial term of 6 months, and the listing automatically renews unless either party gives 30 days’ notice of cancellation. Every 6 months, you dutifully renew the listing agreement assuming that the realtor is doing what is reasonable to try and move the space.
By the time you go to trial (over 2 years later), your realtor still has failed to generate a buyer or a tenant. Nevertheless, you and your attorney are confident you will prevail, because, you hired a realtor to re-let or sell the premises, after all.
At trial, your realtor simply testifies to the usual realtor activity, i.e., placing signs in the windows and online marketing. Although the realtor testifies as to the “asking” price, your attorney fails to elicit any testimony from you or your realtor as to the “fair market” price for the property. At the conclusion of the trial, you are hit with a bombshell: the court has decided to toss your damage claim, because you have failed to prove that your efforts to re-let the premises were reasonable.
One of the negotiating points of any lease deal is whether the tenant will personally guarantee the lease. Many small start-up businesses are quickly formed with little capital. If the tenant’s business fails, the landlord is left to try and relet the space and maybe pursues the tenant for damages. I say “maybe” only because in many instances pursuing the breaching judgment-proof tenant is an exercise in futility.
An extra level of security, of course, is to have a principal or principals of the tenant personally guarantee the tenant’s performance under the lease. Many landlords, desirous of leasing space, will only push so hard for a guarantee in these relatively difficult economic times. Informed tenants know this and will resist signing a guarantee. How do you break the impasse?
In May 2010, I wrote a post about the serious consequences that could flow from a developer’s violation of the Interstate Land Sales Full Disclosure Act (“ILSA”).
Recently, the Second Circuit Court of Appeals rejected a purchaser’s claim that a developer’s technical violation of ILSA gave the purchaser the right to rescind their contract. In Bacolitsas v. 86th & 3rd Owner, LLC, 702 F.3d 673 (2d Cir. 2012), purchasers sought revocation of their contract with the developer, because it did not contain a description of the lot in a form acceptable for recordation. The Court reversed the District Court and ruled that ILSA only requires that the description of the unit and not the entire contract of sale be in recordable form. In doing so, the Court recognized the practicalities involved in marketing new condominiums prior to the completion of construction. To accept the purchaser’s position would require all such contracts to be executed after construction was completed. A dubious position to say the least.