In a arbitration filed by a brokerage firm, Casa Blanca Real Estate (“Casa Blanca”), against our clients, Charles and Fabienne Abrecht (“the Clients”), an arbitrator issued an award against Casa Blanca concluding that Casa Blanca was not entitled to a brokerage commission after the brokerage agreement between the parties had expired and there was no showing of bad faith by the Clients, even though the property was ultimately sold to buyers first introduced to the property by Casa Blanca.

Specifically, the arbitrator found that the brokerage agreement between the parties entitled Casa Blanca to a commission if the property was sold to any individual introduced by Casa Blanca to the property,up to ninety (90) days after the expiration of the brokerage agreement. The arbitrator found that the ultimate buyer made an offer to purchase the Co-Op Apartment did not result in “a contract of sale for the Property [. . .] within ninety (90) days of the Term’s end.” Based on this simple fact, Casa Blanca was not entitled to its claimed condition.

Next, although Casa Blanca made a claim for quantum meruit for services rendered as the procuring cause of the transaction, although bad faith on the part of the Clients was the key allegation in the Complaint. Casa Blanca did not present any evidence of bad faith on behalf of the Clients. Moreover, Casa Blanca’s counsel made no reference to that theory in his opening or closing statements. Instead, he argued in his opening statement: “if Casa Blanca is shown to be the procuring cause, they’re entitled to their commission irrespective of any bad faith by the Abrechts.” Thus, the allegation that Respondents had engaged in bad faith was implicitly abandoned. The arbitrator found that the Clients did not engage in bad faith in their decision to proceed with a new broker to sell the Property after the brokerage agreement with Casa Blanca had expired to the individual introduced to the Property originally by Casa Blanca.

The arbitration was held before Gerald M. Levine and conducted pursuant to the AAA International Rules of Arbitration. The award was issued on March 18, 2024.

Clark Tower, LLC (“Clark”) brought this suit against Wells Fargo Bank, N.A., as Trustee for the Registered Holders of J.P. Morgan Chase Commercial Mortgage Securities Trust 2007 (“the Mortgagee”) wherein Mortgagee held a mortgage to property owned by Clark. Clark was the owner of an office building but defaulted on its mortgage in 2015. Clark and its loan servicers negotiated to restructure the loan, thereby avoiding a foreclosure. The maturity date of the two notes negotiated during restructuring was September 1, 2017, a date Clark attempted to extend twice. Clark then attempted to refinance the loan however the Mortgagee did not give its consent for an extension despite the parties agreeing on an appraisal value for the property. In February 2019, the Mortgagee foreclosed on the property and purchased it at auction for $43 million. It was sold in August 2021 for $37.1 million.

Clark maintained that the Mortgagee breached the terms of its loan and argued that its motive in doing so was to force a foreclosure of the mortgage and steal the building. The Mortgagee argued that the breach of contract claim should be dismissed as Clark did not prove that it was unreasonable for the Mortgagee to withhold consent to refinance the loan. The Court agreed, finding that the Mortgagee’s arguments regarding their consent right were not in conflict with the contract. The Mortgagee was not required to give consent simply on the grounds that the appraisal value had been agreed upon, and the Court found that the Mortgagee did not give consent to the refinance at the time that the appraisal value was established. However, the Court also decided that it could not issue summary judgment on the motion regarding withheld consent to refinance in the first place as the Mortgagee was unable to prove whether refusal to consent was met the standard of reasonableness under New York law. Furthermore, the Court rejected the Mortgagee’s argument that Clark’s breach of contract claim must be dismissed for lack of damages.

Nevertheless, Judge Melissa Crane dismissed Clark’s breach of contract cause of action as by not paying its debts according to the initial agreement it had breached the terms of the loan first. As for Clark’s wrongful foreclosure claim, the Court found that arguments that the foreclosure would not have occurred if the Mortgagee consented to refinance were speculative and that there was no evidence in the record to support a conspiracy to steal the building. The Court ordered that the complaints against the Mortgagee be dismissed. The decision was filed on April 14, 2023.

I represent buyers of cooperative units a lot. It’s part of my everyday practice and a foundation of the work that I do. Recently, however, I closed a deal that was riddled with so many uncertainties from the get-go, that I feel compelled to write about it.

Pre-Contract

A cooperative unit (the “Unit”) was owned by a divorced couple and their daughter; however, the mother and daughter passed away years ago (at different times), resulting in the “Seller”, for contractual purposes, as (i) the Estate of Mom, (ii) the Estate of Daughter, and (iii) the now-elderly Dad. Already a rough start considering the clearance items needed in an “estate sale,” let alone a double estate sale. But this was just the start.

My client, the purchaser, signed the contract and tendered the 10% contract deposit to the Seller’s attorney. This is where things got interesting.

Eight days went by with no fully executed contract returned. On the ninth day, I received a fully executed contract (the “Contract”) signed by (i) the Executor of Mom, (ii) the Executor of Daughter, and (iii) an Agent of Dad using a dated power of attorney which was over 15 years old. And the best part: in the email to me wherein the fully executed contract was returned, the Seller’s attorney noted that he was advised that Dad passed away – the same day Dad’s Agent signed the Contract on his behalf. Daunting. Was the contract valid? Are we “in contract”?

I immediately obtained a copy of the power of attorney used by Dad’s Agent and phoned my Eagle9 title provider to determine the validity of the Contract (an Eagle9 policy is a type of “title” insurance for cooperative unit purchases). As expected, because the Agent signed an affidavit of full force and effect attesting that Dad was alive when she signed the Contract on Dad’s behalf, technically, the Contract is valid. While there’s a timing issue as to whether the Agent, in fact, signed the Contract before Dad passed, proving otherwise is nearly impossible, and either way, the Contract would need to be amended prior to Closing to supplement the “Estate of Dad” for Dad – something that could not be achieved until Dad’s Will was probated and an Executor appointed by the Surrogate’s Court. So, we’re in Contract in what is already the hairiest deal of my year.

Meanwhile, my client locked his mortgage rate prior to Contract (without telling me), and the rate lock was set to expire with absolutely no extension options.

Clearance

From a clearance perspective, the goal was to stay ahead of the pack. Although not my “job” as Purchaser’s counsel, I was able to touch base with the Cooperative’s counsel within a few days of receiving the Contract to obtain a list of documents needed from the Seller’s side to close. And considering the now three estates comprising the “Seller,” the list was exhaustive.

Not only would Dad’s Will need to be properly probated (something that generally takes 3-9 months depending on the County), all three Estates needed appropriate waivers of Federal and New York Estate taxes, indemnitees, affidavits of debts and domiciles, etc. I won’t bore you with the details.

Did I mention that the Seller’s Attorney, in reality, only represented the Estate of Daughter, and that two other unknown attorneys represented the Estate of Mom and the Estate of Dad, respectively? A fact so unclear from the get-go that even the Contract only listed a single attorney as counsel for the three Estates.

Did I also mention that the Executor of the Estate of Mom is an elderly person who resides in Florida, refused to come to the Closing, and has no email, facsimile, smart phone, or other means of technology?

Did I also mention that the relationship between the Estates is overwhelmingly acrimonious, so much so, that they could not be in the same room with one another without incessantly bickering?

Scheduling a Closing

Remarkably, Dad’s Estate was fully probated in merely three weeks. A miracle by all accounts and a huge kudos to counsel for the Estate of Dad for making that happen. But this only solved one problem. There were still the Cooperative’s and the title company’s document requirements, and the not-so-little issue of the Florida executor who was practically unreachable.

To protect my client, I served the Seller a time of essence letter mandating that we close at noon on Monday in November (the “Closing”) – the day my client’s mortgage rate lock was set to expire.

As we approached the Closing, things started to fall into place, with documents trickling in, albeit slowly. This remained true with respect to everyone except the Executor of the Estate of Mom, the isolated and inaccessible Florida resident.

Two days before the Closing (a Friday), I was told that a package of Closing documents (the “Package”) pre-signed by the Executor of Mom (the Floridian) was overnighted from Florida to New York City to her attorney’s office. Candidly, I had doubt that the Package would arrive on time and even if it did, that the documents therein would be properly executed. Perhaps it’s the pessimistic lawyer in me, but this was the first time in my career that I told a client to pray, as without the Package, there would be no Closing, no rate extension, and no deal.

I wish this is where the saga ended.

While USPS attempted to deliver the Package to the Floridan’s attorney’s office a day prior to the Closing, delivery failed because no one was there to claim the Package. No, I’m not kidding. The Package was now somewhere in New York City scheduled to be delivered on the “next business day,” i.e., sometime on the day of Closing.

The Closing Itself

Naturally, the Package was not delivered in time for the 12PM Closing. Murphy’s Law. And we sat there, at the Closing, for two hours hoping it would arrive. It didn’t. The tension in the room was palpable, and the blank stare from the Floridian’s counsel all but confirmed the deal was dead.

Out of pure coincidence, my client’s real estate broker and personal friend mentioned to me that she was in Florida visiting her parents. In a last-ditch effort to save the deal, I called broker at the Closing table requesting that she locate a mobile notary, drive to the Floridan Executor’s house with documents to sign, WhatsApp message me the documents while I was at the Closing, and overnight FedEx them to the transfer agent’s office.

A stretch? Absolutely. But three hours later, despite all of the above, we managed to pull it off. I am pleased to say that the deal closed, and my client walked away happy (maybe more shocked) as can be.

Takeaways

What can I say? The world wanted this deal to close and fortunately surrounded my client with a team willing to go above and beyond to make it happen. A huge shoutout to the broker who was (luckily) in the right place at the right time and willing to take that extra step to protect our client.

Who you work with matters. Nothing more need be said.

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This article was written by Daniel Levinas, partner of Moulinos & Associates LLC, and counsel to various purchasers and sellers of residential and commercial real estate in New York City.

Photo courtesy of dreamstime.com

Back in February of 2017, there was an incident and alleged verbal confrontation between Charles Oakley (“Oakley”), a former player for the New York Knicks (“Knicks”), and the current owner of the Knicks, James Dolan (“Dolan”). This altercation ended with Dolan having the Madison Square Garden (“MSG”) security guards escort Oakley out of the arena. Following this incident, Oakley sued Dolan and the Madison Square Garden Company for assault and battery due to the alleged physical nature of how the security guards escorted Oakley out of the arena. 

In response to the lawsuit, Dolan stated, “Oakley was drunk and looking for a fight …  He may have a problem with alcohol.” Oakley responded to this irreverent comment from the Knicks owner whereby Oakley affirmed that he was escorted out of the arena due to a long running feud between himself and Dolan, claimed he was not drunk, and that when the guards approached him, he pushed their hands away out of self-defense. The claim from Oakley and his legal team, Wigdor Law Firm, is that Oakley had fallen on the ground twice due to the guard’s physical nature of removing him from the arena. 

As this quarrel has continued to take shape, MSG’s attorney Gibson Dunn and Crutcher’s Randy Mastro (“Mastro”) are now invoking sanctions against Wigdor presumably under Fed.R.Civ.P 11 which provides that when an attorney submits legal documents to court in civil litigation, he/she believes that the document is truthful, supported by the law, and is being submitted for an appropriate purpose. These sanctions against Wigdor are to point out that he has been pursuing “baseless” allegations claiming that “Oakley and his counsel have repeatedly made unsupportable legal arguments and asserted bald-faced lies that have no place in a federal courtroom.”  Mastro said some judges of the Southern District of New York have found that a baseless factual contention is worthy of “severe sanctions.”  In a November 8th ruling granting the defendants’ motion for summary judgement on the remaining claim from this civil procedure, U.S. District Judge Richard Sullivan of the Southern District of New York (“Sullivan”) said these claims are “blatantly contradicted.” Sullivan has left the public with this message: “At this stage of the proceedings, the case is no longer about words. It’s about evidence. And the disputed video evidence conclusively demonstrates that MSG’s security guards did not use excessive force as they escorted Oakley from the arena . . .  to the contrary, the video clearly shows that: the guards asked Oakley to leave; they gave him a chance to leave; and when he refused to leave, and in fact escalated the confrontation, they removed him from MSG by using a degree of force that was indisputably reasonable and appropriate under the circumstances.”   

It will be noteworthy to see whether MSG’s attorneys will continue to pursue litigation of Wigdor under Rule 11 of Civil Procedure. Analogous to the case of Leventhal v. New Valley Corp., 148 F.R.D. 109, 113-14 (S.D.N.Y. 1993), Fed.R.Civ.P 11 had been applied and the outcome of this case was the appropriate sanctioning to award the opposing party’s attorneys’ fees and other expenses resulting from that pleading. Thus, if Dolan’s team is successful, the Wigdor Law Firm may be sanctioned under this rule.  

Manhattan is a Comeback Story — Again! 

The real estate market in Manhattan is slowly, but surely, making a comeback, however, many are pondering whether it is worth investing in real estate right now. Prior to 2020, this question would be a no brainer since the residential property market in New York City is a finely tuned machine which rarely sees hiccups. That is until the COVID-19 pandemic struck down on the entire world causing all markets, including the real estate market, to shut down from March 2020 till the end of June 2020. But now as people are returning to their offices, tourists are coming back, and restaurants are allowing full capacity. Manhattan is back on its feet and returning to a stabilized real estate market with an influx of incoming buyers/renters.

In July 2020, the headlines across the globe were that big cities were now left for dead due to the pandemic’s destruction and the inexplicable prices of living in major cities. Particularly the people of Manhattan felt it was unnecessary and difficult to spend their hard-earned dollar on an apartment or condo during the pandemic. As a result, most people moved out of New York City to the suburbs. Furthermore, this outcome brought some desperation from the residential real estate market such as offering low mortgage rates and lower prices per square foot. As things return to “normal” and people are returning back to their offices, the demand for property is higher than ever. Inventory for apartments is decreasing steadily with progressively increase to prices. According to Goldman Sachs, the GDP is expected to grow at 5.9%, which is driven by reopening of businesses, pent up consumer demand, and the fiscal package boosting consumer and infrastructure spending.

All things considered, the residential real estate market in Manhattan is due for years of consistent surge from investors and prospective residents alike. The answer to the brooding question that was brought up earlier is yes, investing in the real estate market of NYC is primed to not only give way for future returns on such investments, but also to give forthcoming occupiers the comfort knowing that their initial investment will be worthwhile.

In March 2021, the petitioner made a motion for a default judgment. The motion appeared in the HMP several times and the respondents continuously failed to appear. A hearing via teams was set for September 28^th ,2021 and yet again the respondents failed to appear. The court then reserved a decision on the ultimate relief requested in the petitioner’s motion.

Mr. De Castro, a manager for the petitioner, testified that the current lease in question is dated from May 2021 – April 2023. He also testified that a rent demand notice was served prior to the commencement of the proceedings in December 2019 and before COVID-19 put a pause on such hearings being brought forth. Mr. De Castro also testified that he did not receive any COVID-19 hardship declarations or any ERAP applications from any of the respondents.

The court held that the petitioner’s motion and hearing testimony and evidence had established that they’re entitled to a judgment of possession on default against the respondents. The evidence also established a lease was in effect when the proceeding was commenced, and rents were due when it was commenced at the time of the hearing. However, the petitioners are not entitled to a monetary judgment.

The court deemed that hearing on September 28^th, 2021, was enough to suffice as a issuance of a warrant of eviction. Upon issuance of the warrants, the petitioner shall be entitled to execute after service of a notice of eviction.

This judgment sets the tone for future complaints to arise. In cases where eviction proceedings were initiated pre- COVID, judgments will likely be entitled. However, this does not take into consideration those eviction cases brought forth during the pandemic.

According to the Board, poor planning and workmanship has led to several serious health and safety issues: flooding, stuck elevators, electrical explosions, along with “horrible and obstructive noise and vibrations” cased by building sway. Engineers hired by the Board have identified at least 1,500 flaws with the building. Residents, along with the Board, have come together to file a suit against CIM Group and Macklowe Properties.  

The lawsuit was filed in New York’s Supreme Court on September 21st. The Plaintiffs are seeking $250 million; however, this figure does not include punitive damages or individual lawsuits that may arise later. The suit accuses CIM and Macklowe of “one of the worst examples of Sponsor malfeasance in the development of a luxury condominium in the history of New York City”. Macklowe properties promise that their ultimate objective and mission is to create secure and highly profitable real estate investments that will sustain and grow through all business cycles, as seen on their website, https://www.mackloweproperties.com/company-overview.html. Yet, given the nightmare residents at 432 Park Ave. have endured, it’s clear that Macklowe has fallen short of their objective. It will be interesting to see how the suit plays out and what the courts will have to say.   

CEEFPA was extended in May 2021. As a result, a group of New York property owners and other interested parties (the “plaintiff-landlords”) filed a lawsuit in the U.S District Court for the Eastern District of New York alleging, inter alia, that CEEFPA violates the Due Process Clause and the First Amendment. The case, Chrysafis v. Marks, 2021 WL 3560766, (U.S. Aug. 12, 2021), made its way to the U.S. Supreme Court where the high court would address two issues:

• Whether New York’s eviction moratorium law, which continues to block property owners from pursuing eviction proceedings or otherwise challenging their tenants’ bald claims of COVID-19 “hardship,” and compels them to serve as the government’s mouthpieces in transmitting government-drafted messages, declaration forms, and lists of recommended legal service providers to their tenants, deprives these property owners of their due process rights and violates their First Amendment rights against compelled speech; and
• whether the courts below erred in concluding that Jacobson v. Massachusetts requires the application of deferential, rational basis review in evaluating constitutional challenges to government action taken in response to a public health emergency, particularly where, as here, New York has declared its “state of emergency” to be over?

The Court granted the Plaintiff-landlords request to block New York from enforcing the provision of CEEFPA that allows tenants to avoid eviction, without a hearing, on the basis of their certification of alleged hardship due to the pandemic. The Court held that “[t]he moratorium violates the Court’s longstanding teaching that ordinarily ‘no man can be a judge in his own case’”.

However, on September 2, 2021, New York’s Legislature enacted, and Governor Hochul signed into law, a bill which would extend the same provision of CEEFPA, that the Supreme Court had already dealt with, until at least January 2022. Accordingly, the plaintiff-landlords filed an emergency motion to enforce the Supreme Court’s Order, and argued that the new measure conflicted with the Supreme Court’s August ruling and that the new moratorium ignores the reality that landlords usually don’t have access to information to attest renters’ claims that a tenant isn’t suffering from any hardship.

Following the latest judgment of this case, September 9^th 2021, three conclusions were presented. Firstly, CEEFPA violates due process. Secondly it was found that Plaintiffs are suffering irreparable harm from New York’s eviction moratorium, which was never intended to be the case given CEEFPRA’s initial intentions. Thirdly by granting an injunction, the Supreme Court determined that the equities strongly favor Plaintiffs. For these three reasons, the Court held that the Supreme Courts injunction should be enforced. With this being held, it will be interesting to see how tenants will continue to be protected via CEEFPA and how landlords will use this judgment to uphold their rights.

Two-bedroom, two-bathroom East Village pads that would normally go for $4,000 plus a month, now went for $2,100. Two-bedroom apartments in Brooklyn neighborhoods like Williamsburg went for $2,000. Many people thought this would lead to an age of “affordable housing”. However, now that we are adjusting to life in a COVID-19 Era, a sense of normalcy is returning. Now those who are looking to renew their leases for the same “affordable” cost are not being offered the same deal.   

In some instances, landlords are asking for a 60% increase in rent. Now landlords are looking to recoup the losses from the pandemic (Bloomberg). Rents are not on the rise across New York City back to pre-pandemic numbers, in some instances surpassing those pre-pandemic numbers. This isn’t just a New York City issue, a Yardi report concluded that rents across every major city in the U.S rose this year. Nationwide, the average rent for the month of August 2021 was $1,539, up 10.3% from the previous year.   

Now that many are able to work from home, we may see another shift of people leaving the city in hopes of finding affordable housing.