Inside This Issue

Congratulations to BBWG Super Lawyers ..........1

LITIGATION UPDATE

Preserving Landlord’s Claim For Arrears Against An Estate ............................2

When Does Permanent Actually Mean Permanent (Vacatur) .............................3

TRANSACTIONS AND CASES OF NOTE ................5

BBWG IS BLOGGING .........2

BBWG IN THE NEWS .........4

BBWG AS INDUSTRY SPEAKERS ........5

CO-OP / CONDO CORNER ..........................6,7

E D I T O R S

Magda L. Cruz

Aaron Shmulewitz

Kara I. Rakowski

UPDATEMAY / JUNE 2013 | VOLUME 25

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

Belkin Burden Wenig & Goldman, LLP

WE’RE GOING GREEN

We are now offering the BBWG Newsletter online. If you would still like to receive a print copy, please contact Larry Tricerri at ltricerri@bbwg.com.

CONGRATULATIONS TO BBWG SUPER LAWYERS

Sherwin Belkin, Howard Wenig, Jeffrey L. Goldman, Aaron Shmulewitz and Steven Kirkpatrick have been

named “New York Super Lawyers for 2013” by the Thomson Reuters rating service of outstanding lawyers from

more than 70 practice areas who have attained a high degree of peer recognition and professional achievement.

Craig L. Price and Matthew Brett have been named “2013 New York Rising Stars.”

Craig L. Price Matthew Brett

Sherwin Belkin Howard Wenig Jeffrey L. Goldman

Aaron Shmulewitz Steven Kirkpatrick

L IT IGATION UPDATE

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PRESERVING LANDLORD’S CLAIM FOR ARREARS AGAINST AN ESTATE

By Jordi Fernandez

On occasion, a tenant or shareholder dies owing arrears to the landlord. When this occurs, a landlord can preserve its rights to

be paid from the assets of the deceased tenant’s Estate. Preserving this claim is commonly referred to as filing a Claim Against the Estate.

There are three important conditions which must exist for the landlord to preserve its claim. First, an Estate must exist and either an administrator or executor must be appointed for that Estate. If the Estate has not been created and a representative has not been appointed for that Estate, the landlord has the right to formally create that Estate and request the Public Administrator, be appointed for the Estate.

Second, there must be assets in the Estate to pay the arrears. When a will is filed or a proceeding to appoint an administrator is commenced in Surrogates’ Court, the estimated value of the Estate is usually filed as well. That estimated value becomes public record. The landlord can inexpensively evaluate whether it is worthwhile to preserve the claim by a simple review of the Surrogate’s Court records.

Third, the landlord must serve a Notice of Claim Against the Estate. The Notice of Claim is a simple document which summarizes the amount of the claim and its basis. However, simple as it is, if not prepared and served correctly, the landlord’s claim can be rejected by the Estate. If the rejection is valid, the landlord will not receive payment of the arrears.

Once a Claim Against the Estate is properly served, the Estate has ninety (90) days to allow or reject the claim.

If neither occurs in that time frame, a claim is deemed to have been rejected. If the claim is allowed, it may be paid by the Estate before the Estate’s account is settled, provided there are assets to pay the Claim and another creditor of the Estate is not required to be paid before the landlord.

If a Claim is rejected, the Surrogate’s Court will make a determination on the validity of the claim. This prevents beneficiaries of the Estate from receiving the assets of the Estate before a valid debt of the Estate is paid.

If you believe you have a valid claim for arrears against an Estate of a tenant or a shareholder, Belkin Burden Wenig & Goldman, LLP can help you preserve that claim, enabling you to be paid from the assets of the Estate.

Jordi Fernandez (jfernandez@bbwg.com) is an associate in BBWG’s Litigation Department.

BBWG is doing a monthly blog for StreetEasy.com – an online real estate site.

Sherwin Belkin, a partner in BBWG’s Administrative Law and Appeals Departments, authored a blog posting entitled: “The Legality of Airbnb: Do Online Sublets Comply with NYC Laws?” on StreetEasy.com on March 20, accessible at

http://ownyourhome.streeteasy.com/the-legality-of-airbnb-do-online-sublets-comply-with-nyc-laws/.

Mr. Belkin also blogged on April 24 on StreetEasy.com about the number of roommates that tenants can have under New York’s Roommate Law, “Not on the Lease? – Legal Guide to the Rights of Non-Tenants” at http://ownyourhome.streeteasy.com/not-on-the-lease-legal-guide-to-the-rights-of-non-tenants/.

Mr. Belkin has a page on StreetEasy.com at: http://ownyourhome.streeteasy.com/sherwin-belkin/.

Aaron Shmulewitz, head of the firm’s co-op/condo practice also penned a blog posting entitled “Got an Entrenched Board? Know Your Rights as a NYC Home Owner” on April 11, accessible at:

http://ownyourhome.streeteasy.com/got-an-entrenched-board-know-your-rights-as-an-nyc-home-owner/.

BBWG IS BLOGGING

L IT IGATION UPDATE

WHEN DOES PERMANENT ACTUALLY MEAN PERMANENT (VACATUR)

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By David M. Skaller

In order for a person to claim succession rights to a rent regulated apartment, the person seeking succession rights has the burden of

proof to show that he/she primarily resided in the apartment with the tenant of record as both their primary residence for a period of two years (one, where the person seeking succession rights is 62 or older or is mentally or physically handicapped) prior to the death or permanent vacatur of the tenant of record. There have been a number of housing court and Appellate Term decisions addressing the issue of what is meant by the term of permanent vacatur. The evolving case law has now reached the Appellate Division, First Department in the case of Third Lenox Terrace Associates v. Edwards.

In Edwards, the rent stabilized tenant of record initially entered into a two year lease beginning on November 15, 1995.

The landlord commenced a nonprimary residence holdover proceeding in 2005 alleging that the tenant had been primarily residing elsewhere. The tenant admitted that she moved out of the apartment in 1998. The tenant’s sister asserted the defense of succession rights to the apartment. The Housing Court dismissed the proceeding and found that the sister had succession rights. The landlord appealed and the Appellate Term reversed and found for the landlord

At trial, it was not disputed that the tenant had moved out of the apartment in 1998, but continued to execute renewal leases for the apartment extending through November 2005. In addition, the tenant continued to pay rent with money orders issued in her name during that period of time. The Appellate Division held that the tenant could not have permanently vacated the apartment at any time prior to the expiration of her most recent lease that expired on November 30, 2005 because of her ongoing connection to the apartment. Thus, the relevant two year period of time

prior to the tenant’s permanent vacatur would be between 2003 and 2005. Since the tenant admittedly did not primarily reside in the subject apartment since 1998, the Appellate Division affirmed the Appellate Term in reversing the housing court’s determination that the sister had proven her defense of succession.

Similar fact patterns as that in Edwards continue to arise. Tenants often will move out of their apartment and not notify the landlord, but will continue to pay rent, sign renewal leases and receive documents, such as utility bills, bank statements and other documents to the apartment even after they have moved out. Based upon the holding by the Appellate Division in Edwards, it would appear that in those cases, the tenant will not be viewed to have permanently vacated their apartment, thus, depriving the person claiming succession rights from having rights to the apartment.

In situations where tenants have moved out of the apartment years ago and left a family member or others with purported succession rights in the apartment, it is not a foregone conclusion that the person asserting succession rights will prevail if that person shows that he/she occupied the apartment as their primary residence for the two years prior to the time the tenant moved out of the apartment.

David M. Skaller (dskaller@bbwg.com) is a partner in BBWG’s Litigation Department.

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BBWG IN THE NEWS

Sherwin Belkin, a partner in BBWG’s Administrative Law and Appeals Departments, was quoted in a February 25 article on Law360.com, stating that short-stay rental companies are likely to face litigation more frequently due to a recent court decision, and in a February 28 article on Law360.com regarding rent abatement issues arising from Hurricane Sandy.

Mr. Belkin also responded to an inquiry in the online “Q&A” feature of the Sunday New York Times Real Estate section on March 17 about rent stabilized tenants’ succession rights issues Finally, Mr. Belkin and Aaron Shmulewitz, head of the firm’s co-op/condo practice, were both quoted in the same article in the March 31 Sunday New York Times Real Estate section, discussing the rights and obligations of rental landlords and co-op/condo boards vis-à-vis pets.

In addition to the foregoing, Mr. Shmulewitz also responded to inquiries in the online “Q&A” feature of the Sunday New York Times Real Estate section regarding co-op boards’ obligations regarding complaints of marijuana smoke odors emanating from an apartment (February 15) and the rights of a new spouse with regard to co-op ownership (April 5). Mr. Shmulewitz was also quoted in a March 10 article in the New York Post on issues arising from affairs between doormen and residents. Finally, Mr. Shmulewitz was quoted in the April 26 New York Times Real Estate article, “Co-op Presidents Tell All.” Mr. Shmulewitz, commenting on the quintessence of over-reaching board presidents, recounted some unusual actions that Manhattan board presidents have demanded be taken against shareholders who are their neighbors.

Jeffrey Goldman, co-head of BBWG’s Litigation Department, represented long-time firm client, Donald Trump, in a hotly contested contract dispute over a

lucrative license agreement with menswear company, Phillips-Van Heusen Corp., and won a directed verdict against the plaintiff, ALM International, after a nine-day jury trial. The case was covered by numerous media outlets during the week of April 22, including the New York Post, USA Today, the Huffington Post, The Real Deal, Citybizlist, and Law360.com, which quoted Mr. Goldman describing the outcome as “a warning to all those who see Mr. Trump as a high-profile wealthy target for litigation. He will aggressively defend all such actions without compromise to verdict.”

Joseph Burden, co-head of BBWG’s Litigation Department, represents the owner of the building featured in the New York Times Home article on April 25, “The Art of Digging In.” The noteworthy late 19th century factory turned into fantastical lofts at 135 Plymouth Street in Brooklyn’s DUMBO, occupied by 100 or more residents, engaged in the arts and other creative ventures, is described as a “behemoth” that is “emblematic of the recent wave of Loft Law applicants,” very different from what was covered by the original Loft Law. Mr. Burden, an expert on both eras of loft buildings, discussed the ongoing efforts to reach a deal with the tenants in order to legalize the lofts at 135 Plymouth for residential use.

Magda Cruz, a partner in BBWG’s Appeals Department, was quoted in the April 26 New York Law Journal’s front page article, “Waivers Clear Way for Approval of Rent Overcharge Class Action Lawsuits,” concerning a notable J-51/luxury deregulation trio of putative class actions which the Appellate Division, First Department ruled could proceed. Ms. Cruz argued the appeal on behalf of the only owner in the trio of cases that received strong dissenters, opening the way to a possible appeal to the State’s highest appellate court. The Thomson Reuters online blog, “News

& Insight” also featured the case, Gudz v. Jemrock Realty, and quoted Ms. Cruz concerning the incongruence of using class action litigation to determine apartment-specific legal rents. Litigation partner, Steven Kirkpatrick, who represents the owner in the lower court, was also quoted on the casein Law360.com.

David M. Skaller, a partner in BBWG’s Litigation Department, was quoted in an April 3 article in the online edition of Crain’s New York on the rights of parties under leases after Hurricane Sandy.

Martin Meltzer and Matthew Brett, partners in BBWG’s Litigation Department, were both quoted in the March 20 online article on Law360.com, entitled “How to Survive NYC Housing Court.”

Craig L. Price, a partner in BBWG’s Transactional Department, was quoted in a January 13 online article on Law360.com on the anticipated effect of federal mortgage law reform on borrowers’ ability to obtain mortgages. Mr. Price was also quoted in a February 22 online posting: “Am I Too Young to Buy a House?” accessible at http://loans.org/mortgage/questions/am-too-young-buy-house.

Steven Kirkpatrick, a partner in BBWG’s Litigation Department, was cited in an April 4 article in the New York Post as having successfully obtained an injunction against a homeless shelter opening in Carroll Gardens, Brooklyn.

Craig Gambardella, an associate in BBWG’s Litigation Department, appeared on an episode of the Food Network competitive cooking program “Bobby’s Dinner Battle” in February, and was featured in that regard in the March edition of The Real Deal.

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BBWG AS INDUSTRY SPEAKERS

Daniel T. Altman, head of BBWG’s Transactional Department, addressed brokers at Marcus & Millichap on April 9, discussing the anatomy of a commercial closing and creating a positive relationship between attorneys and brokers.

David Skaller, a partner in BBWG’s Litigation Department, was a panelist at an April 11 seminar on Landlord & Tenant Law at the Benjamin N. Cardozo School of Law.

Joshua Losardo, a partner in BBWG’s Administrative Law Department, was a guest speaker at a meeting of the Small Property Owners of New York (SPONY) on April 17.

Mr. Losardo discussed differences between rent stabilized and deregulated leases, and also spoke about the recent establishment of a Tenant Protection Unit at DHCR.

Magda Cruz, a partner in BBWG’s Appeals Department and a member of the New York City Rent Guidelines Board, spoke at a meeting of the Community Housing Improvement Program (CHIP) on April 18. Ms. Cruz discussed a recent ruling by the Appellate Division, First Department concerning its impact on apartments that were deregulated while owners received J-51 tax benefits and which are now re-stabilized (72A Realty v. Lucas). Ms. Cruz also discussed

recent public RGB reports on economic factors relevant to the promulgation of the 2013-2014 rent guidelines for rent stabilized apartments in New York City.

Michael Shampan, an associate in BBWG’s Transactional Department, spoke at a new home buyer seminar sponsored by Chase Bank on March 20.

Phillip Billet, an associate in BBWG’s Administrative Law Department and a member of a Judge Advocate General’s unit of the New York State Militia, gave a lecture on military law to other units of the Militia on April 7.

CASES OF NOTEMAGDA CRUZ, a partner in BBWG’s Appeals Department, successfully argued an appeal involving a dispute between a cooperative board and a sponsor concerning unsold apartment and parking space shares. In North Shore Towers Inc. v. Three Towers Assoc., the Appellate Division, Second Department, reinstated the cooperative board’s complaint, finding that the cooperative had stated viable claims against the sponsor for breach of the cooperative’s governing documents. Shortly after the decision was reported, a legal publisher expressed interest in using the complaint that litigation partner, MATTHEW BRETT, drafted as a model pleading for cases against a breaching sponsors or holders of unsold shares. Partners SHERWIN BELKIN and JOSEPH BURDEN, and associate ALEXA ENGLANDER, joined MS. CRUZ on the winning appellate brief.

ORIE SHAPIRO, a partner in BBWG’s Administrative Law Department, obtained a favorable decision at the New York City Environmental Control Board on behalf of a Manhattan condominium, arguing successfully that, since apartments in a condominium are separate parcels of real property, the condominium as an entity is not responsible for violative conditions within a unit owner’s apartment that were not caused by the condominium. In another matter, MR. SHAPIRO also succeeded in overturning the Department of Environmental Protection’s imposition of an alleged water/sewer charge arrearage on a Manhattan apartment complex, saving the client $85,000 claimed due by DEP.

TRANSACTIONS OF NOTEHOWARD WENIG, DANIEL T. ALTMAN and CRAIG L. PRICE, partners in the firm’s Transactional Department, handled the purchase of The Fine Arts Building in Midtown for $34 million, in only the second sale in the building’s history. Built in 1908 originally as a carriage house to the Bloomingdale’s Flagship Store one block away and three doors from the world famous D&D Building, the Fine Arts Building has a considerable presence in New York’s premier Design District. MR. PRICE also represented the seller of a townhouse on the Upper West Side for nearly $8 million. BBWG was instrumental in helping the client maximize the profitability of this property--in 2005, the firm handled the purchase of the then 9-unit building and, through the efforts of its Administrative Law and Litigation departments, enabled the owner to successfully vacate the property so that the client could convert it to single family occupancy.

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CONDO CANNOT SUE SPONSOR’S ARCHITECT FOR CONSTRUCTION DEFECTS Lore Condominium v. Gaetano Supreme Court, New York County

COMMENT | This was a curious outcome, since the architect was also a principal of the sponsor.

CO-OP SHAREHOLDER CAN SUE FORECLOSING BANK TO STOP SALE, DUE TO BANK’S FAILURE TO COMPLY WITH STATUTORY NOTICE PREREQUISITES

Millien v. Citigroup Inc. Supreme Court, Kings County

CONDO, BOARD AND MANAGING AGENT NOT LIABLE FOR INJURY SUFFERED BY EMPLOYEE OF UNIT OWNER’S ALTERATIONS CONTRACTOR Guryev v. Tomchinsky New York State Court of Appeals

COMMENT | The majority based its decision on the fact that the Unit Owner had no control over the employee. The dissent argued that the condominium’s alterations agreement vested such control in the Board.

CO-OP SHAREHOLDER NOT ENTITLED TO CLAIM OF LOST EARNINGS ARISING FROM MOLD COMPLAINT

Fraser v. 301-52 Townhouse Corp. Appellate Division, 1st Department

FORMER CO-OP SHAREHOLDER BARRED FROM CHALLENGING CO-OP’S ADOPTION OF FLIP TAX, DUE TO STATUTE OF LIMITATIONS Katz v. Third Colony Corporation Appellate Division, 1st Department

CO-OP BOARD MEMBER CANNOT CHALLENGE STATE COURT LOSS IN FEDERAL COURT

Rottier v. Paz United States District Court, Southern District of New York

COMMENT | The Court invoked the “Rooker-Feldman Doctrine” in so ruling.

CONDO DEBT OWED TO SPONSOR UNENFORCEABLE, SINCE IT VIOLATED STATUTORY BORROWING REQUIREMENTS

Board of Managers of Marbury Club Condominium v. Marbury Corners, LLC Appellate Division, 2nd Department

COMMENT | This very creative argument by the Board’s counsel could open the door to wholesale disavowal of condominiums’ debts to sponsors per offering plans, like mortgages on purchased superintendent apartments, and closing adjustments.

REJECTED CO-OP BUYERS ENTITLED TO RETURN OF DEPOSIT DESPITE THEIR HAVING BREACHED CONTRACTUAL PROHIBITION ON APPLYING FOR FINANCING; BUYERS ALSO AWARDED ATTORNEY FEES

Salzberg v. Brooks Supreme Court, New York County

COMMENT | The seller’s failure to comply with specific default notice requirements in the contract doomed the seller’s claim to deposit retention following the buyer’s breach.

HOLDER OF UNSOLD SHARES ORDERED TO PAY UNPAID MAINTENANCE TO CO-OP

199 E. 7th St. v. ABC Realty Supreme Court, New York County

COMMENT | The Court held that the Holder of Unsold Shares failed to refute the co-op’s evidence of the debt, despite the absence of separate bank accounts at the managing agent, an incredibly poor practice.

CO-OP AND MANAGING AGENT NOT GROSSLY NEGLIGENT, NOT LIABLE FOR PUNITIVE DAMAGES, OVER 9-YEAR HISTORY OF LEAKS INTO APARTMENT

Baker v. 40 E. 80 Apt. Corp. Supreme Court, New York County

COMMENT | The Court noted that the co-op had retained several engineers and contractors in an effort to address the cause of the leaks; however, various other claims against the co-op survived dismissal.

CO-OP | CONDO CORNERBy Aaron Shmulewitz

Aaron 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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CONDO ROOFTOP UNIT OWNERS’ BOUNDARY FENCE DISPUTE LEFT UNRESOLVED, DUE TO QUESTIONS OF FACT

Semel v. Kubali Appellate Division, 1st Department

CONDO UNIT OWNER LIABLE FOR REPAIRS TO CONCRETE CEILING SLAB, SINCE COLLAPSE OCCURRED DURING HIS ALTERATIONS

Gordon v. Board of Managers of The 18 East 12th Street Condominium Appellate Division, 1st Department

CO-OP ENTITLED TO ADDITIONAL AWARD OF ATTORNEY FEES 1050 Tenants Corp. v. Lapidus Civil Court, New York County

COMMENT | In this long-standing non-payment litigation (it began in 2004), the Court noted how the shareholder (a well-known retired real estate attorney) had fought the co-op at each step, and lost, and appealed.

CO-OP’S SERVICE OF NOTICE OF MEETING ON SHAREHOLDERS BY CERTIFIED MAIL VALID SINCE PERMITTED BY PROPRIETARY LEASE, EVEN THOUGH SHAREHOLDERS FAILED TO ACCEPT OR CLAIM MAILING Lebovits v. 104 Division Avenue HDFC Supreme Court, Kings County

CONDO PURCHASERS CAN SUE SPONSOR’S ARCHITECT FOR MALPRACTICE

Newswalk Condominium v. Shaya B. Pacific LLC Appellate Division, 2nd Department

COMMENT | In denying the architect’s motion to dismiss, the Court went against the trend in recent decisions of cutting off such claims, holding that this claim was not pre-empted under the Martin Act.

SELLER ENTITLED TO SUMMARY JUDGMENT FOR BUYER’S FAILURE TO CLOSE ON ADJOURNED TIME-OF-ESSENCE CLOSING DATE

Nassau Beekman, LLC v. Ann/Nassau Realty, LLC Appellate Division, 1st Department

COMMENT | While involving an entire building, this decision is instructive—the Court held that the contract’s integration clause barred reliance on the parties’ prior practice of orally adjourning the closing date any further.

CO-OP SHAREHOLDER HAS PROPERTY INTEREST IN COMMON GROUNDS SUFFICIENT TO SUPPORT SHAREHOLDER’S ABILITY TO DEDUCT REPAIR ASSESSMENT AS CASUALTY LOSS

Alphonso v. Commissioner of Internal Revenue United States Court of Appeals for the Second Circuit

COMMENT | The Court emphasized that the co-op’s proprietary lease and house rules restricted use of the common grounds to shareholders and their guests, thus establishing her property interest therein.

CONDO PURCHASER CANNOT SUE SPONSOR FOR GENERAL DEFECT CLAIMS NOT SPECIFIED ON PUNCHLIST

Gidumal v. Site 16/17 Development LLC Appellate Term, 1st Department

COMMENT | The Court also held that the purchaser also cannot sue the sponsor’s principals by piercing the corporate veil, and also cannot sue the selling agent (barred by integration clause in contract).

CO-OP SHAREHOLDER ENTITLED TO 100% MAINTENANCE ABATEMENT FOR PERIOD DURING WHICH APARTMENT UNINHABITABLE DUE TO FLOOD

12-14 East 64th Owners Corp. v. Hixon Appellate Term, 1st Department

COMMENT | But the Court held that no abatement was available during a subsequent period when the shareholder denied access for repairs and hired her own contractor to make her repairs.

SHAREHOLDER CANNOT SUE CO-OP FOR ALLEGED MISTAKEN EXCESSIVE SHARE ALLOCATION

Stidolph v. 771620 Equities Corp. Appellate Division, 2nd Department

COMMENT | The shareholder was held to be time-barred since he sued 10 years after he knew of the alleged mistake and 17 years after it allegedly occurred.

COMMERCIAL CONDO UNIT OWNER MUST PAY COMMON CHARGES, CANNOT CLAIM FAILURE TO REPAIR OR OFFSETTING CLAIMS AS DEFENSES

Board of Managers of Honto 88 Condominium v. Red Apple Child Development Center Supreme Court, New York County

COMMENT | The Court dismissed 20 affirmative defenses by the Commercial Unit Owner, including that an alleged agreement existed for payment of common electrical charges.

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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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