Real Estate Broker Legal Newsletter

EAST END TOWN AND VILLAGE REQUIREMENTS REGARDING THE ISSUANCE OF AN UPDATED CERTIFICATE OF OCCUPANCY FOR PROPERTY TRANSFERS

By: David M. Dubin, Esq.

While it has become standard practice for East End attorneys representing purchasers to include in their contracts of sale a requirement that the seller provide an updated certificate of occupancy that covers all buildings and other improvements located on the property requiring same, there is a disparity among the East End villages and towns regarding the requirements and process for obtaining an updated certificate of occupancy. Since it can take some time for the municipality to schedule an inspection, and since there are times where the homeowners have made improvements which have not been permitted and approved but must be before an updated certificate of occupancy is issued, a prudent seller should start the application process early on, which includes providing an updated survey to the municipality.

Set forth below are the present requirements for obtaining an updated certificate of occupancy in the East End towns and villages.

Southampton Town
An updated certificate of occupancy is not required by the Southampton Town Code, however, the Town of Southampton will issue an updated certificate of occupancy provided that the applicant furnish a current survey, a completed application, and payment of the $250 application fee. Notably, in March 2017, the Southampton Town Board decided not to proceed on a proposed local law which would have mandated updated certificates of occupancy upon any change in ownership of a property.

Southampton Village
An updated certificate of occupancy is required by the Southampton Village Code upon a change of ownership. “No building hereafter erected or as to which there has been a change of ownership shall be used or occupied in whole or in part until a certificate of occupancy shall have been issued by the Building Inspector.” Southampton Village Code Section 119-8(A). The application fee is $100, and requires a completed application along with a current survey.

East Hampton Town
An updated certificate of occupancy is not required by the East Hampton Town Code, however, the Town of East Hampton will issue one provided the applicant submit a completed application, provide a current survey, and payment of the $200 application fee.

East Hampton Village
An updated certificate of occupancy is required by the East Hampton Village Code upon a change of ownership. “No building or structure hereafter erected as to which there has been a change of ownership shall be used or occupied in whole or in part until a certificate of occupancy shall have been issued by the Code Enforcement Officer.” East Hampton Village Code 104- 11(A). A completed application, an application fee of $150, and a current survey are required.

Quogue Village
An updated certificate of occupancy is required by the Quogue Village Code upon a change of ownership. “It shall be unlawful to use or permit the use of any building or other structure located on any premises, lot or land, or part thereof, as to which there has been a change in ownership unless within three months either before or after the effective date of such change of ownership there shall have been issued by the Zoning Administrator an updated certificate of occupancy.” Quogue Village Code Section 196-61(F). A completed application, application fee of $250, and current survey are required. Notably, the Quogue Village Code also states that: “The issuance of an updated certificate of occupancy shall not signify or imply that the Zoning Administrator has inspected the interior of any building or other structure or any of its electrical, plumbing or other systems.”

Westhampton Beach Village
An updated certificate of occupancy is required by the Westhampton Beach Village Code upon a sale or transfer of ownership. “An updated certificate of occupancy shall be required upon the sale or transfer of any improved real property including a condominium and it shall be unlawful to use or occupy any improved real property after title has been transferred without first obtaining an updated certificate of occupancy.” Westhampton Beach Village Code Section 197- 64(C). A completed application, an application fee of $100, and a current survey are required.

North Haven Village
The North Haven Village Code requires an updated certificate of occupancy upon a change of ownership. “No building hereafter erected or as to which there has been a change of ownership shall be used or occupied in whole or in part until a certificate of occupancy shall have been issued by the Building Inspector.” North Haven Village Code Section 55-7(A). A completed application, an application fee of $125, and a current survey are required.

Sagaponack Village
An updated certificate of occupancy is not required by the Sagaponack Village Code, however, they will issue one provided the applicant complete an application, provide a current survey, and payment of $500 application fee.

Sag Harbor Village
An updated certificate of occupancy is required by the Sag Harbor Village Code following transfer of ownership. “Any change of ownership of any property containing a building or structure shall require that the successor owner obtain a new certificate of occupancy within 30 days.” Sag Harbor Village Code Section 300-17.3(B). A completed application, current survey, and application fee of $100 are required.

Riverhead Town
An updated certificate of occupancy is not required by the Riverhead Town Code, however, the Town of Riverhead will issue one provided that the applicant submit an application form, current survey, and an application fee of $150.

Southold Town
An updated certificate of occupancy is not required by the Southold Town Code, however, the Town of Southold will issue one provided the applicant submit a completed application, payment of the $50 application fee, and a current survey.

Prudent attorneys for purchasers of improved properties on the East End will insist that the sellers provide an updated certificate of occupancy, which, upon issuance, will give the purchaser and his or her attorney the comfort of knowing that the municipality has inspected the property and has found that the improvements have been legally made. Because it can take some time to obtain a current survey and to schedule the municipality’s inspection, it is important for attorneys for sellers to insist that the purchasers furnish a current survey without delay so that the issuance of the updated certificate of occupancy does not hold up the closing.

 

HOW MUCH TIME FOR “TIME OF ESSENCE?”

By: Patrick B. Fife, Esq.

Very soon after a real estate contract of sale is signed, real estate brokers and attorneys are often asked the same question by clients — “When are we going to close?” The answer in New York is not a simple one.

Typically contracts of sale will have the language “closing on or about x date.” New York courts have interpreted this “on or about date” to be an approximate target date, and not necessarily the precise date on which the parties should presume they are closing. Even the most sophisticated purchasers often have difficulty with “on or about” closing dates, as they want to know when the exact closing date will be so they can arrange for movers or contractors.

However, with an “on or about date,” a closing can be postponed for any reason or no reason, and the general rule in New York is that either party can have a “reasonable” time to delay or postpone the closing. Unfortunately, there is no hard definition of how much of an adjournment is “reasonable.”

Given the uncertainty involved in determining a “reasonable” adjournment, and clients’ desires to schedule a definitive closing date, at some point, a party may want to establish a definitive closing date by sending what is called a “time of the essence” notice. This notice must (1) give clear, distinct, and unequivocal notice that time is of the essence; (2) give the other party a reasonable time in which to act; and (3) inform the other party that if it does not perform by the designated date, it will be considered in default. The notice need not state specifically that “time is of the essence” as long as it specifies a time on which to close and warns that failure to close on that date will result in default.

Clients often ask that the “time of the essence” notice set an immediate closing date or one within the next week. However, New York law does not generally consider that to be a reasonable amount of time, and a time of the essence letter that does not give the other party sufficient time to perform constitutes a nullity.

Ultimately, what amounts to a reasonable time to perform depends on the circumstances of each case. Several recent cases decided by New York’s courts have explored the issue of what constitutes a reasonable time to perform under a time of the essence notice.

In Shimuro v. Preston Taylor Products, LLC, 146 A.D.3d 729 (1st Dept. 2017), the purchaser brought a lawsuit seeking return of its downpayment for the purchase of a commercial condominium unit. The seller failed to deliver title to the purchaser at closing free and clear of all liens and encumbrances as required by the contract, as there was a pending assessment action between the seller and the condominium board. The purchaser sent a letter December 19, 2014 stating that seller was in default, that purchaser was “ready, willing and able” to close in accordance with the sale agreement, that purchaser was setting a new closing date of January 19, 2015, “time being of the essence,” and that failure to close would result in the purchaser’s right to terminate the contract. The court found that, under the circumstances, the purchaser’s notice was sufficient to make the closing date time of the essence.

In Immperatore v. 329 Menahan St., LLC, 130 A.D.3d 784, 784–85 (2d Dept. 2015), the Court found an even shorter period of time to be appropriate notice. The contract at issue set a closing date of October 30, 2013, and provided that the seller was to retain the down payment as liquidated damages if the purchaser defaulted. In a letter dated November 8, 2013, the seller’s attorney informed the purchaser’s attorney that the closing was scheduled for December 3, 2013, that time was of the essence, and that the purchaser would forfeit its down payment if it did not close by that date. The purchaser did not appear at the closing, and the seller declared the purchaser in default of the contract, and retained the downpayment. The Court found that 25 days was sufficient to declare time of the essence, and that the Supreme Court should have granted the seller’s motion for summary judgment declaring that it was entitled to retain the down payment.

Finally, in 11-01 36 Ave. LLC v. Quamar, 54 Misc. 3d 622, 623–24 (Sup. Ct. Queens Co. 2016), a purchaser brought an action against a seller for breach of contract and specific performance. The parties had entered into a contract on December 17, 2015, the purchaser made a downpayment of $100,000, and the contract set a closing date for “on or about January 29, 2016.” On March 30, 2016, purchaser sent a time is of the essence notice to the sellers setting a closing date of April 6, 2016. Given the purchaser gave only 7 days notice, the court denied the purchaser’s motion for summary judgment, and held that there was a “genuine issue of material fact as to whether the letter allowed vendors sufficient time for performance precluded summary judgment.”

These cases demonstrate that, in most instances, the safest course of action when sending a time of the essence notice is to set the closing date at least thirty days from the date of the notice. While the client may want to demand that the closing occur sooner, doing so may render the time of essence a nullity and jeopardize the client’s position and its ability to close the deal in a timely manner.

 

PROTECTING YOUR BROKER’S COMMISSION

By: Alexandra Halsey-Storch, Esq.

As a general rule, a real estate broker is deemed to have earned their commission once she/he produces a buyer who is ready, willing, and able to purchase the subject property on the terms acceptable to the seller. Unfortunately, disputes between a seller and their broker about whether a broker has “earned” their commission can occur, and sometimes litigation ensues. To prevail in an action to recover a commission, a broker must prove that (1) they are duly licensed; (2) they had a contract, express or implied, with the party to be charged with paying the commission; and (3) they are the procuring cause of the sale. A handful of recent New York court cases, summarized below, illustrate important principles that brokers should keep in mind to minimize the possibility of being unable to recover a commission.

In Saunders Ventures, Inc. v. Catcove Group, Inc., 58 N.Y.S.3d 417, 151 A.D.3d 991 (2nd Dept. 2017), the court denied a motion for summary judgment and held that there was a triable issue of fact where there was an “an ambiguity in the agreement as to whether the commission was to be earned when the contract of sale was executed or upon a successful closing…” The brokerage agreement at issue provided that certain real property in the Town of Southampton was to be listed with a broker for 120 days. An extension clause further provided that upon the expiration of 120 days, the broker could provide a written list of “actively interested purchasers” to the seller, and should a closing between an actively interested purchaser and the seller take place within one year, the broker would still be entitled to its commission. Because of the timing of events in this case, the broker’s right to recover its nearly $100,000 commission came down to whether the agreement intended that the commission was earned upon the execution of a contract of sale (in which case, the broker would have been entitled to its commission), or upon a successful closing (in which case, the one year extension would have expired and the broker would have been precluded from receiving its commission). This case highlights the importance of a clearly written brokerage agreement. To minimize ambiguities it is always advisable that an experienced real estate attorney review brokerage agreements.

In Amirkhanian v. Berniker, 47 N.Y.S.3d 22, 147 A.D.3d 475 (1st Dept. 2017), the court denied a broker its commission and held that (1) a purported broker who “referred” a client to another, in exchange for a share of the commission earned from a purchase by that client, was precluded from recovering his share of the commission because the broker failed to have a proper New York real estate broker or real estate salesperson license, and (2) absent an out-of-state broker license, the broker could not recover a “split commission” or “finder’s fee.” This case illustrates the importance of keeping a broker’s license current. While this is a seemingly rudimentary obligation, a failure to do so could preclude a broker from recovering an otherwise earned commission.

Lastly, in Saunders Ventures, Inc. v. Morrow, et al., 133 A.D. 3d 584, 18 N.Y.S.3d 712 (2nd Dept. 2015), the court denied the defendant’s motion to dismiss and held that the evidence submitted by the broker demonstrated that, while it might not have been the “procuring cause of the sale,” the broker was entitled to its commission on the basis that it had created an “amicable atmosphere in which negotiations proceeded.” The court noted that the broker had discussed the availability of the subject property with the eventual purchaser, provided the purchaser with the requested data necessary to make an offer, and put the purchaser in touch with the property’s exclusive broker because only the exclusive broker was permitted to contact the seller. The court’s decision underscores why it is critically important for brokers to prepare and retain records of their communications with potential purchasers and any other efforts they are expend to facilitate a transaction. The absence of these records can make the recovery of a commission very difficult, if not impossible, in the event of a commission dispute.