- Posts by Thomas D. Kearns
PartnerTom represents owners, operators and developers in the acquisition, financing, development, ground leasing, and sale of significant properties. His experience includes office towers, commercial condominiums, industrial ...
Medallions placed by the Historic Landmarks Preservation Center add to the color and richness of New York.
Be careful of creating binding oral agreements.
Justice Demarest tries to help a member of an LLC but criticizes the LLC Agreement.
A clause providing that a landlord or mortgagee won’t be liable for damages may not be enforceable in the face of bad faith conduct.
Fiduciary Duties should be addressed in Delaware LLC agreements.
A survey is crucial in evaluating the real estate owned as part of a business and to make sure you are getting all that you think you are.
Where an owner of a property is a C Corp and the property is its primary asset, its principals frequently seek to sell the stock of the C Corp to avoid the double taxation that would occur if the real estate were sold and the corporation were subsequently liquidated. Purchasing the stock of a C Corp significantly complicates the acquisition of the real estate, but at the right discounted price, the purchase may be attractive to an educated purchaser.
LLC Agreements may restrict access to the records of the Company
The typical clause reciting that contract won't be binding unless countersigned does not defeat claims when signed contract and deposit is held by seller for two weeks.
I have updated my Client Alert on using Delaware instead of New York LLC’s after New York's recent 546-552 West 146th Street v. Arfa New York Appellate Division ruling which refused to grant reimbursement of legal fees to a member of a New York LLC who sued for indemnification under an express indemnification clause because the clause did not expressly mention “fees on fees", i.e., the clause did not expressly authorize reimbursement of legal fees in order to enforce the indemnification provisions. This is directly opposite established Delaware law. My revised Client Alert is set forth below and may be directly viewed here.
Bankruptcy Court has many advantages in resolving commercial real estate mortgage issues.
The long history of the old Bulova factory in Sag Harbor took another twist last month - this time involving a freeze out LLC merger of one partner by another.
SEC issues proposed rules in response to JOBS Act requirement to loosen Reg D...
New 3.8% Medicare Tax on Investment Income and Expiration of Lower Gains Rate....
Mistake by Bank in Closing Cost Estimates Results in Bank Paying the Cost . . .
Value of Tenant’s Rent Stabilized Lease is an Asset Which May Be Sold to Satisfy Creditors . . .
Even Private Individuals May be Governed by New Statute . . .
Small Partial Eviction Does Not Excuse All Rent . . .
Lease Clause That Trade Fixtures Belong to Tenant Make Tenant Liable for UST . . .
Court Rules That Disabled Tenant Entitled to Use Front Entrance . . .
Olshan Leasing Practice Matches Boom in NYC . . .
We continue to see creative strategies in the workout of troubled real estate. Here are a few with our thoughts as to structure and action plans:
Court of Appeals in Assured Guaranty v. J.P. Morgan Holds That Private Securities Fraud Actions are Still Permitted . . .
Theatre Development Fund and Astor Room Open at Kaufman Astoria Studios . . .
Rule Against Perpetuities Does Not Apply to Lease Renewals . . .
Cell antenna opponents have moved from NIMBY to NOMCR (Not On My Condo Roof) . . .
Update: The decision described in my blog post of January 21 has been overturned. See post dated February 24, 2011. The original post is below as it was originally written. In an earlier post I discussed Bleecker St Tenants Corp v. Bleecker Jones LLC where the co-op claimed that the Rule Against Perpetuities defeated a renewal right under a long term commercial lease signed years ago. The Perpetuities Rule has long bedeviled law students and is a famously esoteric mind-bender. At its most simplistic, it prohibits options which might vest in perpetuity. The co-op creatively tried to use ...
Update 11/27/10: The Delaware legislature amended the LLC Act to overrule the Halvorsen case I discuss below. "A limited liability company agreement is not subject to any statute of frauds (including § 2714 of this title)." Here’s one transactional lawyer’s opinion on the recent Delaware Supreme Court decision in Olson v. Halvorsen: the Court did not need to reach the question of whether the Delaware Statute of Frauds applies to oral LLC agreements but when it did so, the answer it gave was wrong. The result in the case was correct since the complaining member never proved an oral ...
Exploring the use of commercial condo structure to gain exemption on real estate taxes
A retail lease in SOHO provided for a renewal rent determined by an “independent MAI appraiser chosen by Landlord”. Should be pretty easy, right? Not so fast says Justice Tolub in Georg Jensen v. 130 Prince Associates LLC, NYLJ, 6/26/09, pg 26. The appraiser hired by the landlord worked for the management company for the landlord. In addition, there was no written retainer agreement with the appraiser, the written report was prepared well after the oral appraisal was given and the appraiser didn’t seem credible to the court. ”[T]he court finds it so flawed in its methodology as ...
New York's Martin Act governs the sale of securities including cooperative and condominium apartments. Since the Court of Appeals CPC v McKesson decision in 1987 it has been accepted that individual purchasers do not have a private right of action under the Martin Act. Courts have held, however, that common law fraud actions remain available. The last 20+ years have seen an array of court decisions trying to find the exact line between common law fraud and mere Martin Act violations. Common law fraud is hard to show - you need an act or omission, scienter (bad intent) and reliance. So ...
Retail storefront vacancies in Manhattan seem to be increasing. I was reminded of the recent change in Section 216 of the IRS code making it easier for a co-op to own its own retail space when I looked out of a bus window at a large vacant store on Madison Avenue. If that building is owned as a co-op and the co-op owns its own retail space, the co-op is taking a big monthly hit in revenue. If the co-op's monthly maintenance charges are based in part on rent from that now vacant store, the co-op will have a significant shortfall. I can just imagine being on a co-op board which sends a notice to ...
Ticor Title Insurance Company has turned title insurance on its head. Instead of viewing its product as helping a lender vet and insure deals, it is defending a claim made by a lender by turning the table and saying the lender shouldn't have made the loan in the first place. Unbelievable? You betcha. Now other title industry pundits are defending the actions (New York Law Journal 10/8/08 by Bagwell). Ticor's defense? While the deed in the chain of title was fraudulent (the prior owner was murdered) and Ticor did insure title, Countrywide should have known that fraud was possible since they ...
While walking into Riverside Church today for the convocation celebrating Trinity School’s 300th anniversary I was handed a flyer protesting Trinity’s proposed sale of the apartment building it owns next to its school. I am not supportive of the rent stabilization system that has survived in New York since it is not based on need. There are simply too many stories of actresses keeping pied-a-terres in New York and rent stabilized tenants with expensive summer homes. I am cognizant that the system helps many who could not otherwise afford housing. But the system has outlived both ...
Private lenders who step into the breach when funds are needed to acquire a site or keep a job moving until a construction or permanent loan is closed frequently look for ways to share in the upside of the project. Becoming a member of the borrower is fraught with difficulty – management time is required, definitions of profits are sometimes elusive and if the deal craters, there may be no profits to share. A recent lender in that position creatively asked for a fixed percentage of revenues of the borrower – no fight over profits needed. It was a condo project and the revenues should be easy ...
Update January 2010: The decision I discuss in my original post was overturned. See my update dated January 21, 2010. The proverbial floodgates of litigation in the co-op world appear to have opened. The first case may be Bleecker St Tenants Corp v. Bleecker Jones LLC where the co-op tried to use the Rule Against Perpetuities to defeat a long term commercial lease signed years ago which no doubt limited rent to 20% of income (NYLJ, 9/4/08, pg 27). The Perpetuities Rule has long bedeviled law students and is a famously esoteric mind-bender. At its most simplistic it prohibits options which ...
Question:
We have owned the property as Tenants in Common (“TICs”) for an extended period. We do not have a written agreement between us. We are signing a new, very significant lease. What ownership issues should we address?
Real estate investment LLC and partnership agreements frequently include “shotgun” buy/sell clauses in the event one partner wishes to force a sale of the property or to otherwise resolve a deadlock. (We use “shotgun” to refer to the “You buy us or we buy you at a value of $X” type clauses where a sale of either side is required.) Many clients have asked for guidance on these clauses and we have put together the thoughts of our real estate and litigation lawyers experienced in exercising these provisions:
An unfamiliar and little understood change in New York City Real Property Transfer Tax (“RPT”) which has been in effect since August 1997 assists sellers of homes, cooperatives and condominiums to substantially reduce their transfer taxes and, if done correctly, also helps purchasers reduce their mortgage recording taxes. The complexity of rules (and increased legal fees) generally limit these tax savings to sales of high-end residences where sellers and purchasers can realize a significant benefit.