As 2017 winds to a close, East End real estate owners and their brokers are beginning to gear up for deals that will close in 2018. Beyond the major tax changes, which are still being conferenced between the House and Senate, here are the top 5 legal changes affecting the real estate community.
Title Insurance Search Fees Capped
Title insurance companies historically made a large portion of their revenue through charging exorbitant ancillary search fees. These searches are required by buyers (and certain sellers) to conduct due diligence as to the legal status of the property being transacted. To be clear, not all fees were historically high, and some were even waived as a loss leader for the title company to obtain future business. Now, regulations by the New York Department of Financial Services require that all ancillary search fees must be uniform for every customer and that there are express caps on certain search fees, such as a patriot search, a bankruptcy search, a municipal or department search, a recording fee, a survey inspection, overnight mail charges and even a charge for escrow services.
Title Insurance Closer Fees Restricted
Buyers at real estate closings are no longer required, or even permitted, to tip their real estate closer. These tips historically ranged from $100 to about $250 and were an undisclosed tack-on to a real estate closing’s exorbitant fees, which many buyers were mystified to first learn about at the closing. Realizing the need to make all fees disclosed incident to real estate closing, the New York Department of Financial Services has strictly prohibited these tips. Additionally, the Department of Financial Services has implemented a three-day notice provision for any fees chargeable to the seller for the payoff of an existing lien. Historically, these fees also ranged from $100 to about $250 per a lien payoff, where each additional lien was charged at a reduced rate. Now, in addition to the three-day notice, these fees must be consistent in amount regardless of the number of payoffs.
Residential Lease CO Disclosure Requirement
Prior to executing a residential lease with a tenant, a landlord of a property with three or fewer units must now, per statute, provide a conspicuous notice in boldface type as to whether a certificate of occupancy is currently valid for the dwelling unit subject to the lease. Best practice is for landlords to provide their tenants with an actual copy of the valid certificate of occupancy, which fully satisfies the boldface type notice statutory requirement, incident to signing the lease. This requirement cannot be waived by the parties in their lease or otherwise.
Suing to Rescind a Contract Isn’t a Breach
There is going to be an uptick in lawsuits to define or rescind contracts of sale throughout the state. New York’s highest court ruled that bringing such a lawsuit does not expose the purchaser to a counterclaim alleging that they breached the contract, which was previously an unsettled question in the state. Before the Court of Appeals was a case where the purchaser sought to rescind certain contract amendments that were allegedly induced by misrepresentations concerning the seller’s ability to complete requisite remedial work to the property that was required for development. Predictably, the seller counterclaimed by arguing that the purchaser’s act of bringing the lawsuit was in and of itself a breach of the contract of sale as an anticipatory repudiation. Moving forward, such a counterclaim is no longer available and as a result, it is anticipated that purchasers will be far more motivated to bring rescission and reformation lawsuits on during the contract stage of a real estate transaction to leverage and/or define the terms.
Videotaping Thy Neighbor Creates Private Right of Action
Residential owners and tenants can now sue their neighbor when such neighbor installs video equipment on such neighbor’s property “for the purpose of video taping or taking moving digital images of the recreational activities which occur in the backyard of such owner’s or tenant’s property if the video recording is done “with the intent to harass, annoy or alarm” or threaten such owners or tenants. You must be very careful where your surveillance camera points!
