E D I T O R S

Magda L. Cruz

Aaron Shmulewitz

Kara I. Rakowski

UPDATEBelkin Burden Wenig & Goldman, LLP

Belkin Burden Wenig & Goldman, LLP | 270 Madison Avenue | New York, NY 10016 | Tel 212 .867 .4466 | Fax 212 .867 .0709 Attorney Advertising 1

SEPTEMBER | OCTOBER 2014 | VOLUME 33

Inside This Issue

LITIGATION UPDATES

CERTIFICATE OF CONFORMITY – ROUND 2 .......................1, 2

COURT COMPELS SALE OF CONDO UNIT TO BOARD DESIGNEE .......................1, 3

CO-OP / CONDO CORNER ....................... 4, 5

TRANSACTIONAL UPDATE

WHEN THE DEPARTMENT OF FINANCE AND THE DEPARTMENT OF BUILDINGS DISAGREE, IT CAN COST YOU ...................................6

BBWG IN THE NEWS ........7

CASES AND TRANSACTIONS OF NOTE ...........................7

WE’RE GOING GREENEffective January 2014, BBWG has discontinued the printed copy of the Newsletter. To continue to receive

the electronic version of the Newsletter, please sign up for our mailing list at www.bbwg.com.

By David Brand

In an apparent case of first impression, on February 25, 2014, Justice Anil C. Singh (New York Supreme Court) ruled in favor of plaintiff The

South Tower Residential Board of Managers of

continued on page 3

COURT COMPELS SALE OF CONDO UNIT TO BOARD DESIGNEE

CERTIFICATE OF CONFORMITY – ROUND 2

By William Rifkin

In the April 2014 issue I discussed the necessity for a Certificate of Conformity pursuant to CPLR §2309(c) that must accompany an out-of-state

affidavit. Without the Certificate of Conformity, the proponent could face the prospect that the affidavit will be ignored by the court, resulting in either the motion being denied, or granted on default.On August 13, 2014, the Second Department in

Midfirst Bank v. Mable Agho, NYLJ 1202667557305, at *1 (App. Div. 2nd, Decided August 13, 2014), brought clarity to this issue and even set forth the template form to be used so that an out-of-state affidavit will pass muster under CPLR 2309(c).

The Second Department noted that certificates of conformity are used in a variety of actions: foreclosure, malpractice, slip-and-fall actions, actions under the insurance law, motor vehicle negligence actions, contact actions, or in any type of action where the affidavit is being executed by a person who does not reside in New York.

L I T IGAT ION UPDATE

L I T IGAT ION UPDATE

continued on page 2

Time Warner Center Condominium, holding that the Board could elect to exercise its right of first refusal to purchase a condominium unit and then designate a third-party as its nominee to take title to that unit, so long as the exercise of the right of first refusal benefits the Condo unit owners. Though this decision has been appealed to the First Department and is, therefore, not yet final,

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CERTIFICATE OF CONFORMITY – ROUND 2continued from page 1

Midfirst involved a residential foreclosure action. Midfirst moved for summary judgment that was unopposed by defendant Agho. Notwithstanding the default, the lower court denied the motion on the grounds that the affidavit upon which Midfirst sought to establish the default and its entitlement to summary judgment did not contain a certificate of conformity. On appeal, the Second Department reversed and granted summary judgment and for the appointment of a referee to compute the sums due to Midfirst.

Initially, the Appellate Division reviewed a mortgagee’s burden of proof in order to establish its right to summary judgment in a residential foreclosure action. The Court then addressed the primary issue in the appeal of whether the out-of-state affidavit by a foreclosure specialist executed in Oklahoma that also contained an acknowledgment under Real Property Law §299-a[1] satisfied CPLR 2309(c).

The Second Department held that when “a document is acknowledged by a foreign state notary, a separate ‘certificate of authentication’ is not required to attest to the notary’s authority to administer oaths (citation omitted).” The Court went on to hold that: “A certificate of authentication becomes necessary when an out-of-state acknowledgment is provided by a foreign officer other than one enumerated in Real Property Law §299, or when the acknowledgement is taken in foreign countries other than Canada, or by foreign mayors or chiefly civil officer not under seal (see Real Property Law §311[2]-[4]).” Relying on Real Property Law §309-b(1), the Second Department then set forth the template to be used for an out-of-state acknowledgment:

“State, District of Columbia Territory, Possession, Or Foreign County) ss:

On the __ day of __ in the year ___, before me, the undersigned, personally appeared _______, personally known to me or proven to me on the basis of satisfactory evidence to be the individual(s) whose name(s) is (are) subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their capacity(ies), and that by his/her/their signature(s) on the instrument, the individual(s) or the persons upon behalf of which the individual(*s) acted, executed the instrument. (Signature and office of the individual taking acknowledgment)”

The Second Department held that it was reversible error for the lower court to have excluded the affidavit since it contained the acknowledgment. Further, the Second Department held that “since Mill’s signature upon the affidavit was acknowledged by a notary licensed in Oklahoma, no separate certificate of authentication was required (see Real Property Law §§299, 311[5]).”

Lastly, the Second Department held that the absence of a certificate of conformity is not fatal. It is a defect that can be corrected nunc pro tunc under CPLR §2001, since “no substantial right of the defendants is prejudiced” by its absence.

The Second Department has brought uniformity to the procedure to be employed in having out-of-state affidavits executed, and it has also given guidance to the lower courts on how they should handle these affidavits. Hopefully, the other Departments will follow Midfirst Bank v. Mable Agho so that there is uniformity throughout the State.

William Rifkin (wrifkin@bbwg.com) is a partner in BBWG’s Litigation Department.

L I T IGAT ION UPDATE

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continued from page 1

L I T IGAT ION UPDATE

COURT COMPELS SALE OF CONDO UNIT TO BOARD DESIGNEE

it is a decision that is worthy to consider in the developing area of law defining the scope and application of condominium rights of first refusal.

In 2010, the owner of a condominium unit at the South Tower Residential section of the Time Warner Center Condominium began marketing its unit for sale. The adjacent unit owner was interested in purchasing it so he could combine it with his apartment.

Pursuant to the Condo’s bylaws, if a unit owner entered into a contract with a third party to sell its unit, the sale was subject to the Board’s right of first refusal to purchase that unit. The bylaws also allowed the Board to assign its right to purchase a unit to a designee. The seller sent the contract of sale to the Board. Shortly thereafter, the Board designated the neighbor to step into the Board’s shoes and purchase the unit.

As part of the negotiations between the Board and the neighbor, he proposed the Board grant a license to exclusive use of a portion of the hallway to be incorporated into the combined unit. The neighbor was willing to pay the Board almost $400,000 for this license. In other words, the

neighbor agreed to purchase the unit for sale at the price under the contract, plus $400,000 to the condo. Since the deal would benefit the condo unit owners, the Board decided to exercise its right of first refusal. For reasons which remain unclear, the seller refused to sell to the neighbor for the same price he was getting under the contract.

The Board commenced an action to compel the seller to sell to the neighbor at the contract price. After some preliminary skirmishing, the Board moved for summary judgment.

Justice Singh was unmoved by the seller’s arguments and ruled in favor of the Board. Justice Singh reasoned that the bylaws were clear; the seller knew that its contract of sale was subject to the Board’s right of first refusal. The bylaws further made it clear that the Board was empowered to designate another entity (in this case the neighbor) to purchase the unit and clearly acted within the parameters of the business judgment rule. Furthermore, the Board had negotiated that it would receive nearly $400,000 that would have been lost if the right of first refusal was not exercised. The seller had tried to argue – unsuccessfully –

that the Board could not designate the neighbor to purchase the unit because the sale would not benefit all the other unit owners. Clearly, the $400,000 benefited the Condo and all of the other unit owners.

The Court concluded that the Board had demonstrated that (a) it substantially performed its contractual obligations; (b) the seller was able to convey the unit; and (c) the Board had no adequate remedy at law and granted specific performance. By selling to the neighbor, the seller was not suffering any financial hardship since the neighbor would be purchasing the unit pursuant to the agreed upon terms set forth in the contract. Accordingly, Justice Singh ordered the seller to sell to the neighbor.Justice Singh’s well-reasoned decision confirmed a Board’s right of first refusal and, in this case, the Board’s unequivocal right to designate a third-party to take title. Joseph Burden, a partner, and David Brand, an associate, with Belkin Burden Wenig & Goldman, LLP, represented the Board in this matter.

David R. Brand (dbrand@bbwg.com) is an

associate in the Firm’s Litigation Department.

WHICH BROKER HAD INTRODUCED THEM

SPRE Realty, Ltd. v. Dienst Appellate Division, 1st Department

COMMENT | In denying the buyers’ motion to dismiss, the Court held that the broker might be able to establish at trial that it was the “direct and proximate link” for the purchase, based on its signif icant involvement with the buyers, introducing them to the sponsor, an architect, and repeated visits to the building with them.

CO-OP SHAREHOLDER NOT LIABLE FOR INJURY TO CONTRACTOR’S EMPLOYEE

Campos v. 68 East 86th Street Owners Corp. Appellate Division, 1st Department

COMMENT | The Court applied a statutory exception to this apartment owner, who was not in control of the work.

COMMERCIAL CONDO UNIT OWNER CAN SUE BOARD FOR AMENDING DECLARATION TO RESTRICT PERMITTED USES

82 Retail LLC v. Eighty Two Condominium Appellate Division, 1st Department

COMMENT | But most other claims were dismissed, including all claims against individual Board members.

PURPORTED TRANSFER OF CO-OP APARTMENT TO TRUST INEFFECTIVE BECAUSE NEVER RECOGNIZED BY CO-OP

Towbin v. Towbin Appellate Division, 1st Department

COMMENT | The purported transfer was based on the execution of a stock power and proprietary lease assignment in 1996.

CONDO BOARD CAN EXERCISE RIGHT OF FIRST REFUSAL ON APARTMENT SALE AND DESIGNATE THIRD-PARTY PURCHASER

Bittens v. The Board of Managers of The Octavia Condominium Supreme Court, New York County

COMMENT | In what is at least the second recent decision on this issue, the Court held that the Board had followed its bylaw requirements and the transaction was for the benefit of all Unit Owners; the Court also held that the unsuccessful initial contract vendee had no standing to enforce the bylaws against the Board.

CONDO CANNOT BLOCK CITIBIKE STATION IN FRONT OF BUILDING

Board of Managers of The Plaza Condominium v. New York City Department of Transportation Supreme Court, New York County

COMMENT—-The Court noted that DOT had followed all required procedures, the station was in a rational location, and DOT’s decision was not arbitrary or capricious.

CONDO UNIT OWNER HELD IN CONTEMPT FOR VIOLATING TRO TO BAR UNAUTHORIZED OCCUPANCY BY “GUESTS”

The Board of Managers of The South Star Condominium v. Grishanova Appellate Division, 1st Department

COMMENT | Endearing her further to all, the Unit Owner apparently also tried to transfer ownership of the apartment without complying with the Condominium’s right of f irst refusal requirements.

BROKER CAN SUE CONDO BUYERS FOR COMMISSION WHERE BUYERS SIGNED CONTRACT FOR DIFFERENT APARTMENT IN NEW CONSTRUCTION BUILDING TO

CO-OP | CONDO CORNERBy Aaron ShmulewitzAaron Shmulewitz heads the Firm’s co-op/condo practice, consisting of more than 300 co-op and condo boards throughout the City, as well as sponsors of condominium conversions, and numerous purchasers and sellers of co-op and condo apartments, buildings, residences and other properties. If you would like to discuss any of the cases in this article or other related matter, you can reach Aaron at 212-867-4466 or (ashmulewitz@bbwg.com).

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CO-OP CANNOT BAR USE OF APARTMENT AS GROUP DAY CARE FACILITY

Walden Gardens, Inc. v. Burns Civil Court, Bronx County

COMMENT | The Court held that the authority granted under the Social Services Law, and the public policy need for facilities like this, trumped the proprietary lease restrictions against such use.

WHILE LIQUIDATED DAMAGES FOR ALTERATIONS COMPLETION DELAYS MAY BE RECOVERABLE BY CO-OP PER ALTERATIONS AGREEMENT, QUESTIONS OF FACT BAR RECOVERY ON SUMMARY JUDGMENT

Manor Towers Owners Corp. v. McGann Civil Court, Bronx County

COMMENT | The questions of fact involved calculation of delay days and whether the co-op caused any of the delay.

CONDO NOT ENTITLED TO RECOVER PRE-FORECLOSURE ARREARS, BECAUSE FAILED TO RECORD LIEN

Acqua Capital, LLC v. Board of Managers of Spook Rock Industrial Park Condominium 1 Supreme Court, Rockland County

COMMENT | Condominiums must record timely and aggressively to protect their interests; this condo lost f ive years of common charges on a commercial unit by its inexplicable administrative failure.

PRIOR AWARD OF ATTORNEY FEES TO CO-OP DOES NOT BAR CO-OP FROM SEEKING ADDITIONAL ATTORNEY FEES FOR LATER PARTS OF LITIGATION

1050 Tenants Corp. v. Lapidus Appellate Division, 1st Department

COMMENT | This is the most recent pronouncement in a litigation that has endured for more than decade; the shareholder was a well-known real estate litigation attorney.

CO-OP SHAREHOLDER EVICTED FOR NON-PAYMENT AND FAILURE TO ADHERE TO TERMS OF PRIOR STIPULATION OF SETTLEMENT

Codrington v. Wendell Terrace Owners Corp. Appellate Division, 2nd Department

FREE-MARKET RENTAL TENANT WHO STOPPED SUBLEASING THROUGH AIRBNB CURED HER NOTICED DEFAULT, CANNOT BE EVICTED

Gold Street Properties, L.P. v. Freeman Civil Court, New York County

COMMENT | Although not involving a co-op or condo, this decision is instructive for the rationale of the holding. Occupancy through services like AirBnB is spawning lots of litigation.

CO N DO C A N N OT COU N T ERC L A I M AG A I N S T FORECLOSING BANK LATE IN MORTGAGE FORECLOSURE ACTION AFTER PREVIOUSLY FILING ONLY A NOTICE OF APPEARANCE

Bank of America, N.A. v. Brooks Supreme Court, Westchester County

COMMENT | The Court also held that the condominium could not sue the bank for damages for not prosecuting the foreclosure action more quickly and aggressively.

QUESTIONS OF FACT PRECLUDE SUMMARY JUDGMENT ON CONDO BOARD’S SUIT TO FORECLOSE ON LIEN FOR UNPAID ASSESSMENT

The Board of Managers of The 4260 Condominium v. Caballero Appellate Division, 1st Department

COMMENT | Under the condominium’s bylaws, while unit owner consent was not required for expenditures for repairs, consent was required for expenditures for alterations, additions and improvements.

CO-OP CANNOT BLOCK CITIBIKE STATION IN FRONT OF BUILDING

Cambridge Owners Corp. v. New York City Department of Transportation Appellate Division, 1st Department

COMMENT | As with a similar decision above, the Court noted that DOT had followed all environmental and procedural requirements.

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TR ANSACT IONAL UPDATE

WHEN THE DEPARTMENT OF FINANCE AND THE DEPARTMENT OF BUILDINGS DISAGREE, IT CAN COST YOU

By Jamie B. Chapman

When purchasing real property, whether a single-family home or a multi-family building, a purchaser’s first concerns are probably going to

be: 1) how much are my property taxes? and 2) how much will I have to pay in transfer taxes at closing? These costs are interrelated and can be significant, so it is recommended that purchasers have an experienced attorney conduct due diligence on the property before they sign a contract to prevent any surprises at closing or in the future. In order to determine how much the property taxes will be, the purchaser needs to review the property tax bills and the rate at which the property is being taxed. Property tax bills are readily available online through the New York City Department of Finance (“DOF”) website for properties located in all five boroughs. The property tax bills indicate the “Building Class” and corresponding “Tax Class.” A review of the most recent property tax bill for the premises will indicate how the property is classified by DOF for real estate tax purposes – whether the property is taxed at a commercial rate or a residential rate.

Once a purchaser has ascertained how the property is taxed by DOF, he/she should then see how the New York City Department of Buildings (“DOB”) classifies the legal use of the property. If the property has a certificate of occupancy (“CO”), then DOB will classify the property based on the CO. In many instances, however, the premises may have been built prior to the enforcement of certificate of occupancy regulations in 1938, so there will be no CO. If there is no CO, then DOB will look at the initial inspection cards (I-cards) for the property to determine its legal use.

Often, there is a conflict between how DOF and DOB classify a property. DOF may have the property classified as residential whereas DOB records indicate that the property is commercial, or vice versa. If the property is residential, then the Seller will pay New York City transfer taxes at closing at the residential rate (1% if the purchase price is $500,000.00 or less and 1.425% if the purchase price is $500,000.01 or greater). Moreover, if the property is residential, the Purchaser will be required to pay the New York City mansion tax (1% of the purchase price) at closing on all purchases of $1,000,000.00 or more. On the other hand, if the

property is commercial, then the Seller will pay New York City transfer taxes at closing at the commercial rate (1.425% if the purchase price is $500,000.00 or less and 2.625% if the purchase price is $500,000.01 or greater) and there will be no mansion tax payable by the Purchaser at closing. Mortgage taxes will also be imposed on the purchaser at different rates, based on the property’s classification.

We have found that there is no clear-cut rule for how conflicts between DOF and DOB are handled for transfer tax purposes at closing, and it depends on each title company’s policy. When there is a conflict, some title companies consider DOB’s classification of a property to be definitive, while other title companies consider DOF’s classification to be definitive. Moreover, some title companies look to the current actual use of the property when there are conflicts between DOF and DOB.

In order to prevent unexpected costs at closing and to deal with the possibility of an audit by DOF after closing, it is important for a purchaser’s counsel to discuss this issue with the title company and seller’s counsel to address any conflicts between DOF and DOB’s classification of the property, prior to signing the contract, so as to ensure that all parties are in agreement as to how such conflict will be handled at closing. Furthermore, if the purchaser believes the DOF classification of the property is incorrect, then the purchaser should seek to have the DOF classification changed post-closing.

For questions concerning residential real

estate transactions, BBWG Transactional

Department partners, Craig L. Price (cprice@

bbwg.com) or associate Michael Shampan

(mshampan@bbwg.com) can answer them.

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BBWG IN THE NEWS

SHERWIN BELKIN, a partner in the firm’s Administrative Law and Appeals Departments, responded to an inquiry in The New York Times Sunday Real Estate section on-line edition on June 21, regarding the right of a small building owner to increase the rent payable by its superintendent. Mr. Belkin also commented on Mayor DeBlasio’s new housing initiative on law360.com on May 15, and on the Rent Guidelines Board’s rent increase orders on globest.com on June 25.

The RGB’s rent increase orders were also the topic of comment by MAGDA L. CRUZ, a partner in the firm’s Litigation and Appeals Departments (and a long-time member of the RGB), on Bloomberg.com on June 24 and in The Wall Street Journal on June 25.

JOSEPH BURDEN, co-head of the firm’s Litigation Department, authored an article in the June edition of The Cooperator discussing a recent Court decision (in a case of apparent first impression) in which BBWG had successfully represented a luxury condominium that exercised its right of first refusal and designated a third-party purchaser over the objections of the apartment’s seller.

AARON SHMULEWITZ, head of the firm’s co-op/condo practice, was quoted in an article on dnainfo.com on June 4 discussing the trend in apartment buildings becoming smoke-free.

Craig L. Price, a partner in the firm’s Transactional Department, lectured to the Downtown Roundtable of the Real Estate Board of New York on June 6 on “Assignment and Assumption of Mortgages”; Mr. Price also was an instructor for two CLE classes sponsored by TitleVest in July, on the topics of townhouses, and overcoming closing obstacles, respectively.

JORDI FERNANDEZ, an associate in BBWG’s Litigation Department, authored an article entitled “Emergency Access to a Sealed Apartment”, which appeared in the June/July edition of The Mann Report.

CRAIG GAMBARDELLA, an associate in the firm’s Litigation Department, presented a seminar to Massey Knakal brokers on owner use proceedings, on May 29.

CASES AND TRANSACTIONS OF NOTE

JEFFREY L. GOLDMAN and ROBERT JACOBS, co-head of the firm’s Litigation Department, and a partner in the firm’s

Transactional Department, respectively, completed the firm’s successful representation of a condominium sponsor/commercial

unit owner in an arbitration proceeding before the American Arbitration Association; the final ruling significantly limited the

allocation of common charges for the commercial unit, and awarded fees and costs to the commercial unit owner.

CRAIG L. PRICE, a partner in the firm’s Transactional Department, handled the purchase and financing of several Manhattan

townhouses with aggregate purchase prices in excess of $20 million.

THE BBWG TRANSACTIONAL TEAM of Craig L. Price, Allison Lissner, Lawrence T. Shepps and Jamie B. Chapman,

represented major New York investors in the 1031 tax deferred disposition of an Upper East Side mixed use property and

acquisition of a triple net leased site in Bethpage, NY and 2 shopping centers in Coventry, Rhode Island. Financing for the

acquisitions was provided by First Republic Bank.

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Belkin Burden Wenig & Goldman, LLP270 Madison Avenue | New York, NY 10016

Please Note: This newsletter is intended for informational purposes only and should not be construed as providing legal advice. This newsletter provides only a brief summary

of complex legal issues. The applicability of any or all of the issues described in this newsletter is dependent upon your particular facts and circumstances. Prior results do not

guarantee a similar outcome. Accordingly, prior to attempting to utilize or implement any of the suggestions provided in this newsletter, you should consult with your attorney.

This newsletter is considered “Attorney Advertising” under New York State court rules.

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