Allen,
Morris, Troisi & Simon, LLP
Attorneys at Law
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Frequently
Asked Questions
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How The FAQ Page Works: Our
Frequently Asked Questions and definitions of commonly used terms
have been grouped alphabetically. Some broad topics, such as
"Purchase" are broken down into more relevant
categories, such as "Purchase or Sale of a Cooperative
Apartment" or "Purchase or Sale of a Condominium
Unit". If you go to the broad topic, you will find a
location to "Click" which will enable you to
"Jump" automatically to the more relevant category you
wish to find information about. Please note that all definitions
and explanations have been written with Federal, New York State,
and New York local municipal laws in mind. If your question is
not answered here, please call our office during regular business
hours and we will be glad to help you.
Have Fun!!
Disclaimer: The information provided herein is intended to be
helpful and useful. It is not intended to be relied upon as legal
representation by our firm. Any such reliance is prohibited
without the express written permission of Allen, Morris, Troisi
& Simon.
A B C D E F G H I J K L M N O P Q R S T U V W X Y Z #
Click on the first letter of the word or phrase
you wish to find information about. If the word or phrase you are
looking for starts with a digit or symbol, choose the
"#" link.
-A-
Acceleration Claus: A clause in a mortgage which
provides that the lender or mortgagee, can require immediate
payment of the entire remaining loan amount. Such clauses are in
all mortgages and are usually triggered if the borrower or
mortgagor fails to make their monthly mortgage payments when they
are due, or if the property is sold.
Acknowledgment: A statement by a Notary
Public that the person who executed the attached document stated
to them that they are the person described in the document (the
one who was supposed to execute it), and that they are the person
that in fact did execute it. In the case of an entity other than
a person, such as a corporation, the person executing the
document also states to the Notary Public that they are the
person who has the legal capacity to act on behalf of the entity,
such as an officer of a corporation. (Also see Jurat.)
Adjustable Rate Mortgage (ARM):
A mortgage which provides that the interest rate which is applied
to the outstanding principal balance will adjust at specified
intervals, based upon a formula to determine the new interest
rate. The formula to determine the new interest rate is usually
related to changes in an interest rate index.
Adjustment (At Closing): Every homeowner
must pay certain costs to maintain their home which cover
specific periods of time. For example, real estate taxes are
commonly paid four times a year. In such a case, each quarterly
payment covers a three month period. At the real estate closing
(the actual sale/purchase of a home) those payments which cover
specific periods of time must be apportioned so that each party
will pay for the time in which they are the owner. The seller
pays for the time period before and up to the closing date, and
the purchaser pays for the time period after the closing date. It
is generally accepted that the purchaser will pay for the day of
the closing. If the seller made the payment prior to the closing,
the purchaser must reimburse the seller. If the purchaser pays
for the entire period at the closing, the seller must reimburse
the purchaser.
Administrator: A person appointed by the
court to manage the distribution of the assets of a decedent. An
administrator is appointed when a person dies without a will. A
male is referred to as an Administrator, a female is referred to
as an Administratrix. If a person has a will when they die, then
an Executor is appointed. Jump to Executor.
Affidavit:
A written statement which has been sworn to before a notary
public or an officer of the courts who is authorized to
administer sworn oaths or written statements.
Amortization: Most mortgage loans are
"fully amortizing" loans. At the end of the loan term,
not only have you paid all the interest that has accrued during
the term of the loan, but you have also paid all the principal
back. This is due to the fact that as part of each monthly
payment, part of the payment gets applied to the interest that
has accrued on the outstanding principal balance, and the balance
of the payment gets applied to reduce the principal balance. As a
result, the principal balance decreases over time.
Appliances: Most contracts of sale for a
home, condominium unit, or cooperative apartment, require all
appliances to be in working order at the time of closing. The
appliances that are referred to in such contracts are generally
the mechanical devices found in the kitchen and laundry rooms.
These include the refrigerator, stove, oven, oven hood,
microwave, dishwasher, garbage disposal, trash compactor, plate
warmer, washing machine, and close dryer, but may include other
mechanical devices, depending upon what is present in the home.
Appraisal: A written estimation of the value
of the home being sold. It is generally only considered valid if
done by a third person who is not involved in the transaction,
and who has knowledge of the value of other properties in the
vicinity. Most lenders require an appraisal of a property before
making a mortgage loan, and obtain an appraisal from a
professional appraiser. The cost of the appraisal is paid for by
the person applying for the loan.
Appurtenance: : Generally, a right to use
adjoining property. Such right arises from being an owner of a
specific parcel of land. For example, if your parcel of land is
surrounded on all four sides by someone else's land, and the only
way to get to your land from the road is to cross over the other
person's land, the other persons land is considered an
appurtenance to your land. That is, you have a right to a limited
use of the other's land (to cross over it), and that use is a
benefit to your land.
Assessed Valuation: The
value of your home as established by the municipality. The
municipality usually has an assessor who establishes each home's
value and modifies that value if changes are made to the home
which increase it's value. The Assessed Valuation is then used to
determine the actual amount of real estate taxes which must be
paid to the municipality. For example, if the assessed valuation
of a home is $100,000.00, and the tax rate for real estate taxes
is 1% of the assessed valuation, then the real estate tax for
that year will be $1,000.00.
Assessment: The same as an
Assessed Valuation. Jump to Assessed Valuation.
Assignee: The name for a person or entity
which has something assigned to them.
Assignment of Lease: It is a document used
to transfer the lessee's rights in a lease to another person or
entity. Jump to Assignment (Of Proprietary Lease)
or Assignment (Of Mortgage).
Assignor: The name for a person or entity
that assigns or transfers something to another.
Assignment (Of Proprietary Lease):
This is a document used to transfer the lessee's rights in a
proprietary lease to another person or entity. It is one of the
documents signed in connection with a cooperative mortgage loan.
It is needed if the lender has to foreclose and sell the
apartment to satisfy the mortgage debt. In such an event, the
borrower will not willingly sign the assignment of lease while
they are being foreclosed upon. Therefore, the lender has the
borrower sign the assignment of lease at the inception of the
loan, and holds the document in escrow. It is only used in the
event of a default by the borrower. When the loan is paid off,
the document is returned to the borrower. However, it need not be
returned due to the fact that the borrower no longer owns the
apartment, so the document has no legal effect whatsoever.
Assignment (Of Mortgage):
In states like New York, there is a tax which must be paid to
record a new mortgage. When a borrower refinances their mortgage,
they can legally avoid payment of the tax on a portion of the
refinance amount by having the old mortgage assigned from the
existing lender to the new lender. The tax is due only on new
mortgages. If the existing mortgage is assigned, or transferred
from one lender to the other, there is no new mortgage to be
recorded, therefore no mortgage tax is due. However, there are
additional costs involved in this procedure, such as 1)
Additional recording charges of approximately $100, 2) The
assignor bank transferring the mortgage to the new lender charges
a fee for preparing the assignment of mortgage documents and
arranging for them to be delivered to the new lender's attorneys.
This fee is generally in the range of $500 to $600, 3) And
the assignee bank which is taking over the existing mortgage,
charges a fee for the additional work involved in consolidating
and modifying the terms of the existing mortgage to match the
terms that the new lender agreed to make it's loan by. The
assignee bank's charges generally range from $100 to $500. As a
result, the size of the mortgage being assigned must be
sufficiently large so that the mortgage tax which is saved more
than offsets the additional expenses involved in having the
mortgage assigned from one lender to another. Generally, it makes
financial sense to assign the mortgage to save the tax if the
remaining principal balance of the existing mortgage loan exceeds
$100,000 for properties within New York City, and $130,000.00
elsewhere in New York State. (These figures are only general
guidelines.) It is possible for a mortgage to be assigned in a
purchase/sale situation as well. However, most lenders are not
willing to accept an assigned mortgage in a purchase/sale
situation, but only as part of a refinance. New York State law
does not require a mortgage lender to assign its mortgage to
another lender.
Assumption (Of Mortgage): When a mortgage
lender permits a borrower to sell the home securing the mortgage
loan, and permits the purchaser to take over the mortgage
payments once they become the new owner. This is extremely rare
due to the fact that almost all present day mortgages have
"Due On Sale" clauses
Attestation (By A Witness): Some documents
require an attestation by a witness. This is a signature on the
document by an uninterested party who in fact observed the
document being signed.
AZTEC Form: Jump to Recognition
Agreement.
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-B-
Binder(For a Contract): An informal
agreement between two parties for the sale of real estate. The
purchaser will usually give the seller a token down payment
(usually a few hundred dollars) to show their good faith that
they want to enter into a formal written contract. In
consideration of the token payment, the seller agrees not to
enter into a contract of sale with anyone else for the week or
two that it will take to get a formal written contract signed.
Binder(For Insurance Policy): Once the
insurance premium is paid, and the formal application has been
accepted by the insurance agent, a "Binder" can be
issued which binds the insurance company to the coverage the
customer is seeking. This is commonly used in real estate
transaction due to the fact that it often takes a few weeks for
the insurance underwriter to issue its formal written policy. All
lenders will accept the binder with a paid receipt as evidence
that the property is covered by insurance.
Blanket Mortgage: Jump to Mortgage
(Underlying).
Board Approval: Jump to Corporate
Consent.
Bond: Jump to Promisssory Note.
Broker: Jump to Mortgage
Broker or Real Estate Broker.
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-C-
Chain of Title: "Title" is
one's ownership of real property. (Jump to Title)
The chain of title is the list of prior owners of the same real
property in chronological order.
Chattel Mortgage: Prior to the creation of
the Uniform Commercial Code (Jump to UCC), a
chattel mortgage was a mortgage of personal property, whereby the
collateral for the loan was personal property. Chattel mortgages
are no longer used. Instead, a security interest is given which
is like a mortgage, but designed for use when personal property
is the collateral.
Closing: This is the time and place during
which the purchaser of a home, cooperative apartment, or
condominium unit, pays the seller the balance of the purchase
price, and the seller transfers the title or ownership of the
home to the purchaser. In a refinance situation, it is when the
borrower obtains a new mortgage loan and simultaneously pays off
the old loan.
Closing Costs: The normal costs associated
with completing a purchase/sale or refinance transaction.
Generally they include the following: If you are a Seller of a
Home or Condominium Unit: The NYC Transfer tax, the NYS
transfer tax, the cost to record a satisfaction of mortgage, the
real estate broker's commission, the title closer's fee for
handling the payoff of your mortgage, and your attorney's fee. If
you are a Purchaser of a Home or Condominium Unit: The
various costs associated with obtaining your mortgage which
include an application fee, appraisal fee, credit report fee,
underwriting fee, document preparation fee, and the bank attorney
fee. At the closing the purchaser also pays title charges which
include the mortgage title insurance premium, the fee title
insurance premium, the cost for municipal and departmental
searches, the cost to record the deed and mortgage, the mortgage
tax which is based on the amount of the mortgage, and your
attorney's fee. For a condominium, there are minor additional
recording charges. If you are a Seller of a Cooperative
Apartment: The NYC Transfer tax, the NYS transfer tax, the
transfer agent's fee, any "Flip Tax" which your
cooperative may require to be paid, the cost of having your bank
attend the closing so your mortgage loan can be paid off, and
your attorney's fee. If you are a Purchaser of a Cooperative
Apartment: The various costs associated with obtaining your
mortgage which include an application fee, appraisal fee, credit
report fee, underwriting fee, document preparation fee, and the
bank attorney fee. The cooperative usually has a fee to apply for
the approval to purchase the apartment. There is a cooperative
lien search fee and your attorney's fee.
Cloud on Title: Jump to Defect
in Title.
Collateral: The property used to secure a
loan. In a cooperative loan, the stock certificate and
proprietary lease are the collateral for the bank's loan. As a
result, the stock and lease are held by the bank. When the loan
is paid off, the collateral is returned to the owner.
Commission: Jump to Mortgage Broker
or Real Estate Broker.
Commitment: Jump to Mortgage
Commitment Letter.
Common Charges: The monthly fee which each
condominium unit owner pays to the condominium association to
cover the expenses of the common areas. The fees are used for
building upkeep, snow removal, etc. For a cooperative, the fees
are referred to as "Monthly Maintenance Charges".
Condemnation: When the government, (usually
the local municipality) takes a private citizens property for
government use. The most common situation is when a highway is
made wider, the government takes ownership of the buildings and
land next to the highway so they can be demolished to make room
for the widening of the road. Constitutional law requires that
the owner of the property being taken must be paid "just
compensation" for the land and buildings.
Condominium Board: Like a cooperative, the
condominium association owns the real estate of the building as a
whole, and must operate various systems, such as heating and
plumbing, as a single system. Unlike a cooperative, each
condominium owner is the owner of their individual unit. As a
result, the condominium board is responsible for running the
common systems and taking care of the common areas in which each
unit owner has a percentage interest. To avoid the difficulties
of getting all unit owners together to vote on such mundane tasks
as purchasing fuel oil for the building, a board is elected from
the unit owners which is empowered to make the decisions to run
the condomium.
Condominium Unit: A condominium building is
made up of various individual units which are owned by different
parties. Each unit is considered a separate parcel of real estate
and is conveyed by the delivery of a deed. Each unit shares one
or more living systems, such as a building heating system, or one
or more community services, such as a common pool, which ties
each unit to the condominium as a whole. Each unit is assessed a
proportionate share of the costs of maintaining the common
systems and community services..
Consolidation Agreement: Jump to MECA.
Constructive Eviction: Jump to Eviction,
Constructive.
Conveyance: The transfer of an interest in
real estate. This term usually refers to the transfer of full
ownership of real estate by use of a deed. However, one can
convey a partial interest in real estate by assignment, lease,
mortgage, or other form of encumbrance.
Cooperative Apartment: One of a number of
units, usually residential in nature, which are owned by a
Cooperative corporation. Each apartment owner is issued shares of
stock in the Cooperative corporation representing their
proportionate interest in the corporation based upon the size and
value of their apartment. In addition to shares of stock in the
corporation, each apartment owner is given a proprietary lease
which provides them with the right to inhabit a particular
apartment.
Cooperative Corporation: A specially
chartered corporation, the purpose of which is restricted to the
ownership of real eastate. The corporation issues shares of stock
to each shareholder representing their proportionate interest in
the corporation based upon the size or value of their apartment.
Each shareholder is issued a certificate evidencing the number of
shares issued to them. As a benefit of being a shareholder, they
are also issued a proprietary lease for their particular
apartment. The proprietary lease provides them with specific
rights as a tenant of the cooperative corporation, permitted to
live in the apartment.
Contract of Sale: The written agreement
between two parties where the seller obligates themself to
transfer ownership of the property, and the purchaser obligates
themself to buy the property. It contains certain specific agreed
upon points which make the contract binding. It identifies who
the parties are, what is being sold, where
the thing being sold is located, when the
sale must occur by, and how much the
sales price is.
Corporate Consent: When
two parties agree upon the sale/purchase of a cooperative
apartment, they must apply to the cooperative corporation for its
approval of the sale. This is due to the fact that a cooperative
corporation is a closely held corporation and can therefore
refuse to permit anyone from owning shares in the corporation
except for those which meet with the cooperative's approval.
Corporate consent may not be withheld for descriminatory reasons,
but may be withheld for what has be referred to as "no
reason or any reason".
Covenant: An agreement between two parties
whereby one of the parties obligates themself to either do
something or not do something. Today, the term covenant is
commonly used in real estate to refer to a restriction on the use
of a specific parcel of real estate.
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-D-
Dedication: When land, or an interest in
land, is given by the owner to the public for public use, and the
the apropriate governmental body accepts the land for such public
use.
Deed (Bargain and Sale with Covenants): A
deed is writing signed by the owner of real estate, transferring
the ownership of that real estate to another. A deed is
considered a Bargain and Sale Deed when it states the amount of
consideration received by the seller. "With Covenants"
refers to a deed that contains "Covenants Against Grantor's
Acts". This means that the seller of the property makes a
specific representation in the deed that they have not done or
suffered anything which would encumber the property except what
might be specifically stated in the deed. This is the most common
form of deed in New York.
Deed (Bargain and Sale without Covenants): A
deed is writing signed by the owner of real estate, transferring
the ownership of that real estate to another. A deed is
considered a Bargain and Sale Deed when it states the amount of
consideration received by the seller. "Without
Covenants" refers to a deed that does not contain
"Covenants Against Grantor's Acts". This means that the
seller may have done or suffered something which would encumber
the property, other than those encumbrances stated in the deed.
Deed (Executor’s or Administrator’s):
A deed executed by an Executor or Administrator of an estate.
Such a deed states that the grantor is acting on behalf of the
estate of the individual which owned the real estate while they
were alive, sets forth their appointment by the Surrogate of the
court administering the estate, and states the nature of the
appointment and the authority by which they can sign the deed.
Deed (Quitclaim): This type of deed is not
used very often. It is generally used when the grantor is not
certain of what rights they may have in the real estate, but is
willing to convey whatever rights they may have. Such a deed does
not contain any warrantys or covenants to protect the grantee.
Deed (Warranty): Also known as a "Full
Warranty Deed". This type of deed is almost never used. In
it, the grantor states that there are no defects in the title to
the property and that they will forever defend the purchaser's
title to the property. As a result of the warrantys contained in
this type of deed, the seller is forever responsible for all
conditions which may effect the title to the property from the
beginning of time up through the date of the sale.
Defect in Title: A set of
circumstances or a claim by another party which prevents the
clear and uncontested ownership of real estate. Some defects in
title are common and not considered a problem, such as a
mortgage. Other defects are minimal and are of little concern,
such as a neighbor’s fence encroaching on your property a
few inches. An example of a serious defect in title would include
a claim that a prior transfer of ownership of real estate was
defective or invalid. If such a claim is proven in court, one can
lose their ownership of the real estate.
Description: Jump to Legal
Description.
Dispossess Proceeding: Jump to Eviction.
Down payment: When entering into a contract
for the sale/purchase of real estate, the purchaser makes a
partial payment of the sales price to show their good faith. The
usual down payment amount is ten percent of the sales price. The
down payment is usually held in escrow by the seller’s
attorney. If the transaction is completed, the seller’s
attorney releases the down payment to the seller at closing. If
the sale is canceled, depending on the circumstances causing the
cancellation, the down payment is either returned to the
purchaser, or released to the seller. Typically, the contract of
sale contains obligations and requirements which must be complied
with by each side, and time frames in which to complete those
requirements which dictate whether the down payment will be
released to the purchaser or seller.
"Due-On-Sale" Clause: This refers to a
clause contained in a mortgage which requires the entire balance
of the debt remaining to be paid when the property is sold.
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Easement: The right of one land owner,
arising as a result of such ownership, to freely use the
adjoining land of another. An example would be if a parcel of
land does not have a public road leading to it, but is instead
completely surrounded by another’s private property, the
owner of the surrounded land has a right to cross over the
other’s land to get to their own. This is known as an
"Easement of Access". There are numerous types of
easements, each being limited in the type of use permitted, and
dependant upon whether or not it is needed so the adjoining land
owner can enjoy the full use of their property.
Ejectment Proceeding: A civil proceeding to
remove a person from real estate so that the person rightfully
entitled to possess it is restored to full control over it.
Ejectment was created in common law and has been replaced by
statute with the eviction proceeding. (See Eviction)
Eminent Domain: The right of the government
to take private land for public or other governmental use. The
right is limited so that the reason for the taking must be a
"public purpose" and the government must adequately
compensate the land owner for the lost of their land. The legal
proceeding used by the government to exercise its right of
eminent domain is a condemnation proceeding.
Encroachment: When the use of one’s
land intrudes into the space of an adjoining parcel of land. An
example of this is when one land owner places a fence on the
border of their property, but which in fact is placed a few
inches onto the adjoining land, the fence is encroaching on the
adjoining land.
Encumbrance: An interest in real estate
which may effect the value of the property. Examples include
mortgages, leases, judgment liens, mechanics’ liens,
security interests, easements, and past due real estate taxes.
Equity: The surplus value remaining after
real estate has been sold and all mortgages and other liens have
been fully paid.
Equity of Redemption: When a mortgage is
foreclosed upon, equity of redemption is the right of the land
owner to stop the foreclosure process and get the lien of the
mortgage removed. The right to do this is exercised by paying all
sums due and owing on the mortgage, including principal, interest
and other charges. The right of equity of redemption comes into
existence when the foreclosure proceeding is commenced, and
ceases to exist when the property is sold at the foreclosure
auction.
Erosion: The gradual wearing away of land by
water, wind, currents, tides, or other elements.
Escheat: When a person who owns real estate
dies, if they did not direct in a will who should inherit the
real estate, and if they do not have any surviving family to
inherit the real estate in the absence of a will, the real estate
will automatically become the property of the state.
Escrow (Held By an Attorney): Money of one
or more parties to a transaction which is held by the attorney
and not released until the occurrence of an event which the
parties have previously agreed to. Most commonly, the
seller’s attorney will hold the down payment in escrow until
the closing, at which time the funds are released to the seller.
Escrow (Held By a Mortgagee): The funds held
by a mortgage lender which are specifically used to pay real
estate taxes, hazard insurance, flood insurance, or private
mortgage insurance for the mortgaged property.
Estoppel Certificate: A documents signed by
one party attesting to a certain set of facts therefore
preventing that party from claiming a different set of facts at a
later date. It is commonly used in connection with the assignment
of a mortgage from one lender to another. The borrower signs the
document for the new lender attesting to a certain principal
balance remaining on the old loan and that there are no defenses
to the enforseability of the old loan documents.
Eviction, Constructive:
This term applies to a landlord/tenant situation. Although the
landlord does not physically prevent the tenant from entering
upon and using the premises, the landlord had done, or permitted
to happen, something that may render the premises unfit for the
purpose is was leased. In such a case, the law recognizes that
the tenant has been constructively evicted.
Eviction, (Holdover Proceeding):
The legal proceeding to remove a tenant from possession of the
leased premises. The basis of the proceeding is that the tenant
has violated one of the terms of the lease, other than the
payment of rent, thus enabling the landlord to terminate the
lease. This proceeding can be maintained even though the tenant
is current in their rent payments.
Eviction, (Non-Payment):
The legal proceeding to remove a tenant from possession of the
leased premises. The basis of the proceeding is that the tenants
has failed to pay the rent. This proceeding can be maintained
even though the tenant is complying with all other terms of the
lease.
Executor: A person
appointed in a will, and whose appointment is confirmed by the
surrogate court, to manage the distribution of the assets of a
decedent. An Executor is appointed when a person has a will. If
the person dies without a will, then an Administrator is
appointed. A male is referred to as an Executor, a female is
referred to as an Executrix.
Extension Agreement: Jump
to MECA.
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Fee Simple: Also known as fee simple
absolute. It refers to ownership of real estate without any end
in time or limitation on use. It is a characteristic of land
ownership referred to as the "estate". Other types of
estate include ownership for a term of years, or a life estate
which is ownership for the balance of one’s life.
Fiduciary: A person who has agreed to take
on the responsibility of acting for the benefit of another.
Fiduciarys include executors, administrators, trustees, and
attorneys. When one agrees to become a fiduciary, their actions
in connection with the responsibilities they have taken on must
comply with specific legal standards.
Fixture: An item of personal property which
is attached to real estate, and when attached, becomes part of
and inseparable from the real estate as a whole. Examples would
include light fixtures, ceiling fans, medicine cabinets, and
dishwashers.
Flip Tax: a fee charged by a cooperative
corporation when an apartment owner/shareholder sells their
apartment.
Foreclosure (Of a Cooperative Loan): When
the owner of a cooperative apartment defaults in making their
monthly mortgage payments, under the terms of the loan, the
lender can declare the borrower in default and require immediate
payment of the entire mortgage debt. If the borrower is unable to
pay the entire mortgage debt, the lender can then exercise its
rights under the security agreement and sell the cooperative
apartment at auction. The proceeds of the sale are used to pay
off the mortgage debt, and any excess funds are turned over to
the borrower. The rules governing cooperative loan foreclosure
are contained in the Uniform Commercial Code as adopted by New
York State.
Foreclosure (Of a Mortgage): When the owner
of real estate defaults in making their monthly mortgage
payments, under the terms of the loan, the lender can declare the
borrower in default and require immediate payment of the entire
mortgage debt. If the borrower is unable to pay the entire
mortgage debt, the lender can exercise its rights under the
mortgage and commence a foreclosure proceeding in Supreme Court.
During the course of the proceeding, a Referee is appointed by
the Court to act on its behalf in conducting a public auction of
the real estate, attending the final sale and delivery of a deed,
and thereafter filing with the Court an accounting of the
proceedings and disposition of the monies received from the sale.
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Grantee: The term used to refer to the
person purchasing or receiving an interest in real estate.
Grantor: The term used to refer to the
person selling or conveying an interest in real estate.
Back to Top
Holdover Proceeding: Jump to Eviction, (Holdover Proceeding).
HUD-1 Settlement Statement:
A federal form designed by the Department of Housing and Urban
Development, required to be completed for all residential real
estate transactions in the United States. It is intended to
provide the parties to the transaction with a financial
accounting of their expenses in connection with the transaction.
The design of the form requires the transaction to be conducted
by a "Settlement Agent". The Settlement Agent is a
single person or entity which collects all monies to be paid by
any party to the transaction, and then disburses those funds to
the appropriate payee. In states such as California, where real
estate transactions are handled by escrow companies, or New
Jersey, where all funds delivered or paid in connection with a
real estate transaction must pass through the purchaser’s
attorney’s escrow account, the form provides the parties
with an accurate accounting. However, in New York, there is no
true Settlement Agent. Instead, each party to the transaction
pays what they owe directly to the party they owe it to. As a
result, in New York, it is unusual for the Settlement Statement
to be completely correct. However, it is often referred to by tax
preparers in New York because each line item of the form is
correct, and therefore helpful in locating tax deductible items.
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Intestate: The term used to refer to the
estate of a person who has died without having executed a will.
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Joint Tenants with Right of Survivorship:
Jump to Tenancy (Joint Tenants with Right of
Survivorship.
Jurat: A certification by a Notary Public of
the date when an affidavit was sworn to before that Notary. (See
also Acknowledgment.)
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Laches: A legal doctrine which states
that if you neglect or refrain from asserting your rights against
another party, and sufficient time has passed or other
circumstances have changed so that it would prejudice the other
parties if you were to exercise your rights, you will now be
prohibited by the court from exercising those rights.
Legal Description: In a
real estate transaction, it is the narrative used to exactly
describe the location of, and exact size and shape of a parcel of
land. Generally, it refers to a starting point and then instructs
the reader to proceed in a certain direction for a specific
distance to a point. From that point, there are successive
instructions to proceed in various directions for specific
distances to other points, the result of which will bring the
reader to the point of beginning. This type of description is
referred to as a "metes and bounds description" and is
the most legally binding and accurate type of description.
Another type of legal description is a reference to a filed map.
A filed map description is less accurate and binding than a metes
and bounds description. The least accurate and binding legal
description is a reference to a real estate tax block and lot and
is therefore generally not used for legal description purposes.
Lien: An interest in real estate to insure
the payment of a debt. Liens can be voluntary, such as a mortgage
which is a lien on real estate, or a security interest which is a
lien on the stock certificate and proprietary lease of a
cooperative apartment. Other liens can be involuntary, such as
unpaid real estate taxes which automatically become a lien on
real estate when they become due, or judgements which
automatically attach to all the real estate owned by the
judgement debtor in the county where the judgement is entered on
the records of the court.
Lien Search: A report, usually prepared by a
title or abstract company, which searches the public records of
courts and filing offices to determine if there are any liens
effecting a cooperative apartment. The address and tax
designation of the apartment are searched, as well as the buyers,
sellers, and the cooperative corporation.
Lis Pendens: A notice filed in the county
where real estate is located which puts the world on notice that
a law suit has been instituted which effects the real estate in
question.
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Maintenance Charges: The term used to
refer to the monthly charges which are paid by each cooperative
apartment owner to the cooperative corporation. The maintenance
charges are used to pay for the costs of maintaining the
cooperative. These costs may include the payment of the
underlying mortgage for the building as a whole, purchase of oil
to heat the building, payment of real estate taxes for the
building as a whole, and the cost of repairs to common areas such
as elevators, roofs, etc.
Managing Agent: A corporation or other
entity retained by the cooperative corporation to handle the day
to day operations of the cooperative corporation. The managing
agent attends to the collection of maintenance charges for each
apartment, payment of bills for items to run the building,
payment of real estate taxes, water charges, etc., and payment of
building employees.
Marketable Title: "Title" is the
term used in real estate to refer to the one’s ownership of
land. Marketable Title refers to ownership that is free of liens
and encumbrances, thereby enabling the parcel to be sold. A
parcel of real estate which is encumbered by liens which cannot
be removed is said to have "Unmarketable Title".
(MECA) Modification, Extension &
Consolidation Agreement: When a mortgagor
refinances their loan to obtain a lower interest rate, or to
increase the loan amount, the document used to accomplish this is
the Modification, Extension & Consolidation Agreement. It is
also used when a mortgage is assigned from one lender to another
which may occur when the mortgagor refinances with a new lender.
The form is executed by both the mortgagor (borrower) and the
mortgagee (lender) and is then recorded in the county where the
property is located.
Mechanics Lien: A special type of lien on
real estate which can be used when labor or materials have been
supplied for the construction or repair of real estate. If the
owner of the property does not pay for the labor or materials,
the party providing them can place a mechanic’s lien on the
property. By having the mechanic’s lien in place, the
tradesmen or materialmen have a legal right to be paid before the
property can be sold.
Modification Agreement: Jump to MECA.
Monument: A visible marker used to indicate
the boundry lines of a parcel of land. In New York City, it is
common to find a bronze marker in the cement sidewalk in front of
a building indicating where the private property ends and where
the public sidewalk begins. In residential neighborhoods, there
are often rectagular stones buried at the corner of a lot line
indicating where one persons property ends and the other begins.
Mortgage: A document
which creates a lien against real estate to secure the payment of
a monetary debt. The mortgage instrument is executed in
conjunction with a promissory note which requires the payment of
a debt. The mortgage instrument essentially states that if the
borrower does not keep their promise to make the monthly payments
pursuant to the promissory note, the lender may then sell the
real estate (by instituting a foreclosure proceeding in court)
and use the proceeds of the sale to satisfy the debt owed under
the note. A "Puchase Money Mortgage" is the same as a
regular mortgage, but the proceeds of the loan are specifically
used to purchase the property being used to secure the mortgage
debt. The lender of a Purchase Money Mortgage has slightly
greater rights than the holder of a mortgage that was used to
refinance a mortgage debt.
Mortgage Commitment Letter: A
written offer by a lender to make a mortgage loan which specifies
the terms under which the lender will make the loan.
Mortgage Broker: A person
or company which assists borrowers in the process of applying for
and obtaining a mortgage loan.
Mortgage (Underlying): In
a cooperative apartment building, or a condominium complex, there
are common areas which are owned by, and the responsibility of
the cooperative corporation or the condominium association. (The
roof of the building, elevators, lobby, pool, etc.) The
cooperative corporation or condominium association usually has a
mortgage encumbering these common areas. This mortgage is known
as the "underlying mortgage" because it is the
underlying responsibility of all apartment or unit owners. The
funds to pay the underlying mortgage come from the monthly common
charges or maintenance charges each unit owner pays.
Mortgagee: The term used to refer to the
lender in a mortgage agreement.
Mortgagor: The term used to refer to the
borrower in a mortgage agreement.
Mortgage Taxes: A tax imposed by the
government when a mortgage is recorded in the office of the
County Clerk or City Register. In New York, the tax is a
percentage of the mortgage loan amount. The amount of the tax
varies depending upon what county the property is located in.
Multiple Listing Service: An
association of real estate brokers which share information about
the properties they have listed for sale, thereby increasing the
number of potential buyers for each property.
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Non-Payment Proceeding: Jump to Eviction, (Non-Payment).
Notary Public: A person with the authority
granted by the state to administer oaths. A notary public is the
individual that completes the acknowledgment portion of an
affidavit.
Note: Jump to Promissory Note.
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Open Listing: Jump to Multiple
Listing Service.
Option: A right to purchase a parcel of real
estate at a specified price. An option lasts only for a specific
period of time. The person who purchased the option has the
choice of buying the real estate or not. The person who sold or
granted the option, has no choice, they must sell the real estate
if the option is exercised.
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Partition Proceeding: A legal proceeding
brought by one co-owner of real estate to divide the land so that
each co-owner will end up with an undivided portion. Since most
partition proceedings involve a single structure, such as a
single family home, the partition proceeding often involves the
public auction of the real estate which results in the sale to a
third party. The proceeding is usually begun when one co-owner
wishes to sell and the other does not.
Party Wall: A wall, usually on the boundary
line of two parcels of land, which is shared by structures on
each parcel.
Power of Attorney: A document which is
executed by the "Principal" which invests an
"Agent" with the legal authority to act on behalf of
the principal as if the principal were present to act for him/her
self. The authority granted in the power of attorney dies when
the principal dies, or can be revoked at any time by the
principal.
Promissory Note: A
document in which one party agrees to pay a specific amount of
money to another. It will state the terms of repayment which
include the interest rate which will be charged, the amount of
the monthly payments, where the payments are to be made, and the
date by which the entire debt must be paid.
Proprietary Lease: In the context of a
cooperative apartment, the proprietary lease is the document
which gives a shareholder of the cooperative corporation, the
right to occupy a particular apartment. The proprietary lease
details the terms of the relationship between the cooperative
corporation and the shareholder, which is that of landlord/lessor
and tenant/lessee. The real estate of the apartment (that is, the
physical structure) and the real estate of the building as a
whole, remain the property of the cooperative corporation.
Purchase: Jump to Purchase
or Sale of a Condominium Unit, or Purchase or
Sale of a Cooperative Apartment, or Purchase
or Sale of a Home.
Purchase or Sale of a Condominium Unit:
[It should be noted that the process as outlined, is general
in nature. Your condominium sale/purchase will have some
variation in form.] The process begins with the seller listing
the condominium unit with a real estate broker whose job it is to
find a buyer. When the buyer and seller agree upon the sales
price, the seller’s attorney will prepare a contract of sale
and forward it to the buyer’s attorney, along with the
condominium offering plan and any amendments to the plan. The
attorneys will negotiate the terms of the contract so that they
are reasonable to each party and reflect any unique aspects of
your transaction. The buyer signs the contract first, and their
attorney forwards it to the seller’s attorney along with a
check for the down payment, usually 10% of the sales price. Once
the seller signs the contract, a duplicate original is returned
to the buyer’s attorney. The seller’s attorney then
deposits the down payment check in their escrow account. The
seller’s attorney must now obtain a "Payoff
Letter" from the seller’s mortgage holder. At this
point, the buyer must make two applications. One is the
application to the Board of Managers of the condominium. The
Board of Managers must waive their right of first refusal (the
right to buy the condominium unit at the proposed sales price.)
The other application is for the new mortgage loan to enable the
buyer to purchase the condominium unit. This is usually
accomplished with the assistance of a mortgage broker.
Simultaneously, the buyer’s attorney is obtaining a title
report which discloses all liens affecting the condominium unit,
the condominium as a whole, and any judgements against the seller
or the buyer. Once the Board of Managers waives it right of first
refusal, and the bank has completed all underwriting tasks so
that it is ready to close the loan, and all title issues have
been cleared to the satisfaction of the buyer’s attorney,
the seller’s attorney, and the bank’s attorney, then a
closing date can be scheduled. All parties attend the closing.
They include the buyer, the buyer’s attorney, the seller,
the seller’s attorney, the bank attorney, the title company
representative (referred to as a "title closer"), the
real estate broker, and mortgage broker. At the closing, the
seller executes the deed transferring title or ownership of the
condominium unit to the buyer. The buyer executes the bank
documents so the mortgage loan proceeds can be given to the
seller, and the buyer also brings bank or certified funds for the
balance of the sales price.
Purchase or Sale of a Cooperative
Apartment: [It should be noted that the process as
outlined, is general in nature. Your cooperative sale/purchase
will have some variation in form.] The process begins with the
seller listing the cooperative apartment with a real estate
broker whose job it is to find a buyer. When the buyer and seller
agree upon the sales price, the seller’s attorney will
prepare a contract of sale and forward it to the buyer’s
attorney, along with the cooperative offering plan and any
amendments to the plan. The attorneys will negotiate the terms of
the contract so that they are reasonable to each party and
reflect any unique aspects of your transaction. The buyer signs
the contract first, and their attorney forwards it to the
seller’s attorney along with a check for the down payment,
usually 10% of the sales price. Once the seller signs the
contract, a duplicate original is returned to the buyer’s
attorney. The seller’s attorney then deposits the down
payment check in their escrow account. The seller’s attorney
must now contact the seller’s mortgage holder and instruct
them to retrieve the stock certificate, proprietary lease, and
related loan documents from storage so they will be available for
delivery to the closing. At this point, the buyer must make two
applications. One is the application to the cooperative
corporation for its consent to the purchase of the apartment by
this buyer. The cooperative corporation will either approve the
sale, or decline to consent to it without giving any reason. (A
cooperative corporation can reject a sale for "any reason or
no reason". As a result, when an application is rejected,
most of the time no reason for the rejection is given.) The other
application is for the new mortgage loan to enable the buyer to
purchase the cooperative apartment. This is usually accomplished
with the assistance of a mortgage broker. Simultaneously, the
buyer’s attorney (or the lender’s attorney) is
obtaining a lien search which discloses all liens affecting the
cooperative apartment, the cooperative as a whole, and any
judgements against the seller or the buyer. Once the cooperative
corporation consents to the sale, and the bank has completed all
underwriting tasks so that it is ready to close the loan, and all
title issues have been cleared to the satisfaction of the
buyer’s attorney, the seller’s attorney, and the
bank’s attorney, then a closing date can be scheduled. All
parties attend the closing. They include the buyer, the
buyer’s attorney, the seller, the seller’s attorney,
the payoff bank attorney, the new lender's attorney, the transfer
agent of the cooperative (usually the attorney representing the
cooperative or its managing agent), the real estate broker, and
mortgage broker. At the closing, the seller transfers the shares
of stock to the buyer. (and a new certificate is issued in the
buyer’s names) and also assigns their rights of tenancy in
the apartment to the buyers. This is done by either assigning the
existing lease to the buyers, or canceling the old lease and the
cooperative then issuing a new lease in the buyer’s names.
The buyer executes the bank documents so the mortgage loan
proceeds can be given to the seller (and used to pay off the
seller’s mortgage loan), and the buyer also brings bank or
certified funds for the balance of the sales price.
Purchase or Sale of a Home: [It
should be noted that the process as outlined, is general in
nature. Your home sale/purchase will have some variation in
form.] The process begins with the seller listing the home with a
real estate broker whose job it is to find a buyer. When the
buyer and seller agree upon the sales price, the seller’s
attorney will prepare a contract of sale and forward it to the
buyer’s attorney. The attorneys will negotiate the terms of
the contract so that they are reasonable to each party and
reflect any unique aspects of your transaction. The buyer signs
the contract first, and their attorney forwards it to the
seller’s attorney along with a check for the down payment,
usually 10% of the sales price. Once the seller signs the
contract, a duplicate original is returned to the buyer’s
attorney. The seller’s attorney then deposits the down
payment check in their escrow account. The seller’s attorney
must now obtain a "Payoff Letter" from the
seller’s mortgage holder. At this point, the buyer must
apply for a mortgage loan. This is usually accomplished with the
assistance of a mortgage broker. Simultaneously, the buyer’s
attorney is obtaining a title report which discloses all liens
affecting the real estate, and any judgements against the seller
or the buyer. Once the bank has completed all underwriting tasks
so that it is ready to close the loan, and all title issues have
been cleared to the satisfaction of the buyer’s attorney,
the seller’s attorney, and the bank’s attorney, then a
closing date can be scheduled. All parties attend the closing.
They include the buyer, the buyer’s attorney, the seller,
the seller’s attorney, the bank attorney, the title company
representative (referred to as a "title closer"), the
real estate broker, and mortgage broker. At the closing, the
seller executes the deed transferring title or ownership of the
home to the buyer. The buyer executes the bank documents so the
mortgage loan proceeds can be given to the seller, and the buyer
also brings bank or certified funds for the balance of the sales
price.
Purchase Money Mortgage: Jump to Mortgage.
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Real Estate Broker: A person who works on
behalf of the seller to find a buyer for real estate. The seller
must pay the broker a commission if the broker finds a buyer that
is ready, willing and able to purchase. In New York, brokers must
be licensed by the state. A broker can also work on behalf of the
buyer, in which case the buyer would pay the broker’s
commission.
Recognition Agreement: As
part of obtaining a cooperative mortgage loan, the parties to the
loan must execute the recognition agreement. Those parties
include the bank, the borrower/apartment owner, and the
cooperative corporation. Under the terms of the agreement, the
cooperative corporation agrees to permit the apartment owner to
use the apartment as collateral for the bank loan, and to notify
the bank if the borrower/apartment owner is in default of their
proprietary lease. The bank similarly agrees to notify the
cooperative corporation if the borrower/apartment owner is in
default of their mortgage loan. The most commonly used form of
recognition agreement was written by the Aztec printing company.
As a result, the recognition agreement is often simply referred
to as the "AZTEC" form.
Recording: Certain documents which effect
real estate can be filed in the county where the real estate is
located. When the document is filed, the process is called
"recording" because a permanent record is made of it.
As a result of the recording of a document, if the original of
the document is lost or destroyed, a "certified copy"
of the document can be obtained from the filing office. This
"certified copy" is deemed by law to be as valid and
enforceable as the original. Deeds, mortgages and UCC financing
statements are filed in the Office of the County Clerk. In four
of the five counties of New York City (New York County, Kings
County, Queens County, and Bronx County) these documents are
filed with the City Register. The recording of a document also
give it priority over a similarly recorded document. For example,
if person A obtains a mortgage loan from bank B, and a month
later obtains another mortgage loan from bank C, if the mortgage
document evidencing the loan bank C made was recorded first, bank
C’s loan would have priority over bank B’s loan. The
practical effect of this is that if person A defaulted in the
payment of both loans and both lenders instituted foreclosure
proceedings, the proceed of the foreclosure sale would first have
to be used to fully pay bank C’s loan, and then if there
were money left over from the sale, it would be used to pay bank
B’s loan.
Release of Lien: When a person dies owning
real estate in New York, the state automatically has a lien on
all real estate owned by that person and which located in the
state to guarantee payment of the estate or inheritance taxes. As
a result, after the estate or inheritance taxes have been paid,
New York State will issue a "Release of Lien" document
which will enable the estate to sell the real estate free of the
lien for estate taxes.
RESPA: Jump to HUD-1
Settlement Statement.
Reverse Mortgage: The
difference between a reverse mortgage and a regular mortgage is
how the proceeds of the mortgage loan are disbursed to the
borrower. In a regular mortgage, the borrower gets the entire
loan proceeds when the loan is taken, and then must pay it back
in monthly installments over the life of the loan. In a reverse
mortgage, the lender does not turn over the entire loan proceeds
when the loan is taken, but instead, pays the borrower monthly
amounts which don't have to be paid back until the end of the
loan term.
Restriction: A limitation on the use and
enjoyment of real property. Restrictions are often recited in
either a deed or a lease.
Right of Way: This term generally refers to
the right to pass over the land of another. Being granted a right
of way does not convey an ownership interest, but merely a
limited right for the use of land.
Riparian Rights: The rights of land owners
whose property adjoins a river or stream, which relate to the
ownership of, use and enjoyment of the land under the water and
the water itself.
RPT (Real Property Transfer): Jump to Transfer Taxes (New York City).
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-S-
Satisfaction of Mortgage: A document
executed by the holder of a mortgage (the mortgagee) which states
not only that the lien of the mortgage is extinguished, but that
the underlying debt is paid in full. After the satisfaction of
mortgage is executed, it must be acknowledged and then recorded
in the same office where the original mortgage was recorded. Once
recorded, the lien of the mortgage is extinguished.
Security Interest: When a bank makes a
cooperative loan, since the collateral for the loan is personal
property, (the stock certificate and proprietary lease) not real
property, the borrower must give a security interest in the
collateral to the bank so that it will be able to foreclose if
the need ever arises. By its nature, a security interest provides
that when the borrower defaults in their payments, the bank may
sell the collateral and use the proceeds of the sale to satisfy
the loan.
Settlement Statement (HUD-1) (RESPA):
A federal form required to be completed for every transaction in
the United States involving residential real estate. The form,
designed by the Department of Housing and Urban Development, has
as a form number "HUD-1" and therefore is commonly
known as the "HUD-1 Settlement Statement". The federal
statute requiring the use of the form is known as the Real Estate
Settlement Procedure Act. As a result, the form is also known by
the acronym "RESPA". The form itself is essentially a
balance sheet listing the moneys to be received by each party to
the real estate transaction, and listing each expense each party
must pay. The form was designed to be used in a real estate
transaction completed with a Settlement Agent. A Settlement Agent
is a person or entity which takes in all moneys due from each
party, and pays each of the party's expenses with the funds
received. In New York, real estate transactions are not completed
with a Settlement Agent. Instead, each party pays their cost
directly to whomever they owe. As a result, the net amount due to
or from each party as calculated by the Settlement Statement is
usually not accurate. In New York, parties to a real estate
transaction are represented by attorneys. The attorney provides
the client with a closing statement which is an accounting of
only that party's income and expenses associated with the real
estate transaction. It is for these reasons that the HUD-1
Settlement Statement is not given much credence in New York. In
other states where the HUD-1 Settlement Statement must be
accurate according to state law, such as in New Jersey, attorneys
act as the settlement agent and make sure the HUD-1 is accurate
to the penny. In still other states, such as Arizona or
California, attorneys are not involved in real estate
transactions. Instead, escrow companies or title companies act as
the settlement agent. In those states, since there is no-one to
explain the finances of a real estate transaction for the
parties, the HUD-1 Settlement Statement is the only way for the
parties to know what their expenses were.
Set Back: The distance from a property line
in which a building or other structure in not permitted to be
erected. Each municipality dictates its own set back
requirements.
Specific Performance: Under contract law,
when there is a breach of contract, and when they payment of
monetary damages by the breaching party is inadequate to fully
compensate the other party, the court will order that the
breaching party perform the acts specifically required of them in
the contract. Specific performance is a remedy which the
purchaser can seek when the seller breaches the contract and
refuses to sell the property. The courts recognize that real
estate is very unique due to the fact that the
"location" of the real estate cannot be duplicated. As
a result, specific performance is often one of the remedies
sought in a real estate breach of contract law suit.
Special Assessment: Jump to Assessment.
Statute of Frauds: The law which requires
that certain agreements must be in writing in order for them to
be enforceable in court. One of the types of agreement which
comes under the statute of frauds is the sale of real estate. As
a result, a written contract must be entered into and signed by
all the parties for the contract to be enforceable in court.
Stock Certificate: It is written evidence of
ownership of shares of stock in a corporation. When a cooperative
apartment is purchased, the purchaser is not buying the
apartment, but is instead buying shares of stock in the
cooperative corporation. As a benefit of being a shareholder, the
buyer is also given a proprietary lease which makes them a tenant
of the corporation in a specific apartment and gives them the
right to live in and use that apartment. (In practical terms, the
stock certificate is the primary evidence of ownership of the
apartment.)
Stock Power: A document which when executed
by the owners of shares of stock, provides the transfer agent of
the corporation with written instruction to transfer the shares
of stock on the books and records of the corporation. When a
cooperative apartment is sold, the shares of stock are
transferred from the seller to the purchaser. This is done by
having the owners/sellers of the shares complete and sign the
stock power on the back of the stock certificate, thereby
providing written evidence of their intent to sell the shares.
When a bank makes a cooperative loan, they also have the borrower
sign a stock power which would be used to transfer the shares of
stock if the borrower were to default in the terms of their loan.
Subletting: Subletting occurs when a tenant
enters into a lease with a third party, not assigning the primary
lease to the third party, but providing the third party with the
rights of the tenant to use the leased premises. When an owner of
a cooperative apartment rents the apartment to a third party,
they are subletting the apartment.
Subordination Agreement: An agreement
whereby a party with an interest in real estate agrees to have
the priority of their interest moved behind the priortiy of
another entity with an interest in that real estate. An example
would be where a homeowner has a first mortgage and a home equity
loan, both encumbering the same piece of real estate. If the
homeowner wants to refinance the first mortgage and keep the home
equity loan in place, the home equity loan would have priority
over the new refinance loan. To have the new refinance mortgage
move into the first position of priority, the home equity lender
executes a Subordination Agreement whereby it agrees its rights
will be secondary to those of the new refinance lender. The
Agreement must be recorded in the office where mortgages are
recorded.
Subscribing Witness: Jump to Witness.
Survey: A drawing of real estate from the
perspective of being above the property looking down. The survey
shows the location of the property in relation to the surrounding
parcels, it shows the direction and length of each boundary line,
and it shows all permanent structures located on the property,
such as buildings, patios, decks, fences, wells, ponds, streams,
driveways, etc.
Survey Inspection: A visual inspection of a
parcel in which the person conducting the inspection compares
what they see existing on the property with what is disclosed on
the survey. The inspection is used to determine if there have
been any physical changes to the property since the date the
survey was made.
Survey Reading: A narrative description of
the property highlighting the permanent structures located on the
property, such as buildings, patios, decks, fences, wells, ponds,
streams, driveways, etc.
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Tax Waiver: When an estate is selling a
cooperative apartment, the estate must first obtain a tax waiver
from New York State. The waiver is a form which when issued,
permits other parties to rely on the fact that New York State is
aware that the property being sold is part of the estate, that
New York State is aware of the value of the property, and New
York State consents to the sale of the property free of the New
York State Estate Tax lien. When a cooperative apartment is sold
by an estate, the estate must present at the closing the
following items: 1) The New York State Tax Waiver, 2) A copy of
the death certificate, and 3) Letters Testamentary or Letters of
Administration.
Tenancy (Tenants In Common): A
form of ownership of real estate. Each tenant in common has the
right to use the entire premises. Upon the death of one of the
tenants in common, their interest in the real estate does not
pass to the other tenants, but instead is distributed to the
devisees named in their will, or if they did not have a will, to
their heirs at law. If the document of ownership does not contain
any reference to the form of ownership, the law automatically
assumes a tenancy in common.
Tenancy (Joint Tenants with Right of
Survivorship): A form of ownership of real estate.
Each joint tenant has the right to use the entire premises. Upon
the death of one of the joint tenants, their interest in the real
estate automatically vests in the surviving joint tenants. To
create a joint tenancy, the document of ownership must have some
reference to the fact that the parties intended to create a joint
tenancy.
Tenancy (Tenants By The Entirety):
A form of ownership of real estate. This form of ownership
can only be used by married persons. For real estate, to create a
tenancy by the entirety, there must be some language of intent to
do so. Examples of this would include the following statements
after the parties names: "As Tenants By The Entirety",
"As husband and wife", "his wife", or
"her husband". On January 1, 1996, the law in New York
State changed so as to permit married couples who own cooperative
apartments the opportunity to be treated the same as married
couples who own real property, such as a home or condominium
unit. The change makes it possible for a husband and wife to own
their cooperative apartment as "Tenants By The
Entirety". This form of ownership may result in certain
benefits for married couples in the areas of Estate Planning,
protection from creditors, and Bankruptcy.
Tenant at Sufferance: When the right of a
party to use and enjoy real estate ends, if they still have
possession of the property, their possession is referred to as a
tenancy at sufferance.
Tenant (Month to Month): When a party does
not have a written lease for a specific period of time, the law
will recognize a tenancy according to the intervals that rent is
paid. Since it is most common for rent to be paid on a monthly
basis, this form of tenancy is commonly referred to as a Month to
Month Tenancy.
Tenants By The Entirety: Jump to Tenancy (Tenants By The Entirety).
Tenants In Common: Jump to Tenancy
(Tenants In Common).
Tenants at Will: When a party has possession
of premises with the permission of the owner of the property, but
without any specific time period that the possession may be
uninterrupted. The tenancy can be ended by the owner of the
property at any time.
Testate: A reference to having made a will.
When a person dies having executed a will, they are said to have
died testate.
Title: The word used to
refer to the ownership of real estate along with the rights and
obligations of that ownership, and the liens effecting the real
estate. It is used to infer all that goes along with ownership,
not just ownership itself.
Title Insurance: Insurance to protect
against the loss of, or interference with the use and enjoyment
of real estate. Title insurance is purchased when the property is
purchased, and only insures that moment in time. Any changes in
title, or new liens which occur after the date the policy is
issued, are not covered by the insurance. In New York State, the
premiums for title insurance are set by statute depending upon
the purchase price.
Title Report: A report prepared by a title
insurance company, or an abstract company (which is a local agent
of the larger title insurance company) which provides information
concerning the condition of the title to real estate. The report
states who owns the property, if there are any mortgages
affecting it, if there are any judgements against the owners, if
there are any unpaid real estate taxes, if there are any
violations of law as a result of conditions on the property, and
if all structures on the property were built with proper
applications and approvals from the municipal authorities.
Transfer Agent: In the context of a
cooperative apartment sale, the transfer agent is the entity
entrusted by the cooperative corporation to handle the process of
canceling the old stock certificate and issuing a new stock
certificate to the purchaser, and to assign the seller’s
rights of tenancy in the apartment as evidenced by the
proprietary lease to the purchaser as well. For most
cooperatives, the managing agent handles this responsibility. It
is also very common for the cooperative to have an attorney
represent it due to the fact that transferring ownership in a
cooperative apartment has legal significance and must be done
according to specific legal requirements.
Transfer Taxes (New York City):
Every time real estate located in the City of New York is sold,
the seller must pay a transfer tax to the City of New York. A tax
return (The Real Property Transfer Tax Return - NYC-RPT) must be
filed with the payment of the tax. The tax rate is as follows:
For the sale of a one, two, or three family home, an individual cooperative apartment, or an individual condominium unit:
A) If the sales price is $500,000.00 or less, the tax is 1% of
the sales price.
B) If the sales price is greater than $500,000.00, the tax is
1.425% of the sales price.
For all other conveyances (any real estate in New York City which is NOT a one, two or three family home, an individual cooperative apartment, or an individual condominium unit):
C) If the sales price is $500,000.00 or less, the tax is
1.425% of the sales price.
D) If the sales price is greater than $500,000.00, the tax is
2.625% of the sales price.
There is also a $25 fee to file the tax return with the City of New York.
Transfer Taxes (New York State): Every time real estate is sold in New York State, the seller must pay a transfer tax to the State of New York. A tax return (The Combined Real Estate Transfer Tax Return and Credit Line Mortgage Certificate, commonly known as the "TP-584") must be filed with the payment of the tax. The tax rate is as follows:
A) $2.00 of tax must be paid for each $500.00 of consideration, or fractional part.
Example: $99,750.00 sales price. You must calculate the tax on $100,000.00. So the tax is $100,000.00 ÷ $500.00 = 200 X $2.00 tax rate = $400.00 of tax.
B) If the sales price is $1,000,000.00 or more, there is an additional tax due of 1% of the consideration being paid.
Transfer Taxes (Mount Vernon): When real estate is sold in the City of Mount Vernon, the buyer must pay a transfer tax to The City of Mount Vernon. A tax return (The Real Property Transfer Tax Return) must be filed with the payment of the tax, or if no tax is due. The tax rate is as follows:
The total consideration paid - $100,000.00 = taxable consideration X 1% = Tax Due.
Transfer Taxes (Yonkers): Every time real estate is sold in the City of Yonkers, the seller must pay a transfer tax to The City of Yonkers. A tax return (The Real Property Transfer Tax Return) must be filed with the payment of the tax. The tax rate is as follows:
A) If the total consideration is less than $25,000.00, no tax is due, but the return must be filed.
B) The tax is 2.75% of the total consideration paid.
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Uniform Commercial Code (UCC):
UCC-1 Financing Statement: The UCC-1
financing statement is a form which is filed in the County
Clerk's office, (or in New York City, in the City Register's
Office) which serves two purposes:
First: It "Perfects" the bank's security
interest. By "Perfecting" the security interest, the
bank prevents other creditors of the borrower from getting rights
in the collateral (the cooperative apartment) which would be
superior to the bank's interest. This insureas that if the bank
had to foreclose on the mortgage and sell the apartment, the
proceeds of the sale would first go to satisfy the debt owed to
the bank. Then if any money was left over, the other creditors
would get paid back from the excess funds.
Second: It puts the world on notice that the bank has a
lien against the stock and lease for this apartment. This helps
prevent persons from selling their apartment, or refinancing
their cooperative loan without paying off the bank first.
UCC-3 Amendment: After a UCC-1 financing
statement if filed, if there is any incorrect information on the
form, that may invalidate the form which may cause the bank's
lien to loose its priority over other liens. The UCC-3 amendment
form is used to correct any defects in the original filing. The
form must be filed in order to have any legal effect.
UCC-3 Assignment: When a cooperative loan is
sold from one lender to another, a UCC-3 assignment is filed so
that under the law, the new holder of the loan steps into the
shoes of the old holder of the loan and therefore has the same
priority of lien that the old holder had. The form must be filed
in order to have any legal effect.
UCC-3 Release: When more than one piece of
property is used as collateral for a loan, if the secured party
agrees that part of the collateral is no longer needed to secure
repayment of the loan, the secured party can release part of the
property from the lien and retain the balance of the property as
collateral for the loan. The form must be filed in order to have
any legal effect.
UCC-3 Termination Statement: When a
cooperative loan is fully repaid, the lender, or secured party,
issues a UCC-3 termination which terminates the lien which was
created by filing the UCC-1. The form must be filed in order to
have any legal effect. If a UCC-1 was amended or continued, by
filing a termination statement with the UCC-1 filing number, the
amendment and continuation filings are automatically terminated
as well. This results from the fact that the amendment or
continuation filings only exist to have an effect on the UCC-1.
If the UCC-1 no longer exists, the amendment or continuation do
not have an effect on anything, and are therefore automaticlly
removed of record by the filing office.
Underwriting: When a
loan application is taken, the lender must conduct an independent
investigation of the applicant's creditworthiness and ability to
repay the loan, and make an evaluation of the real estate which
will be used to secure the loan. The process of making these
investigations is called underwriting.
Usury: Usuary occurs when a lender charges a
rate of interest in excess of what is permitted by law in the
jurisdiction where the loan is made.
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Waiver of Right of First Refusal: In the
sale of a condominium unit, the condomium board of directors has
the right to purchase the condomium unit from the seller at the
same price that the buyer is paying for the unit. This is the
condominium's right of first refusal. Once the condominium board
waives its right to purchase at the contract price, the sale can
move forward.
Witness: A person who is
present to see, hear or percieve a fact in person.
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255 Affidavit: In New York State, and in
New York City, a mortgage tax must be paid on the full amount of
the mortgage when a new mortgage is recorded. To legally save on
the amount of mortgage tax due, when a loan is refinanced, the
old mortgage "account" is paid off, but the mortgage
lien is kept in effect and used to secure the modified loan, or
new mortgage "account". When a mortgage is refinanced
by modification, or if it is assigned to a new lender, or if it
is consolidated with another mortgage, an affidavit must be
submitted with the documents to be recoreded explaining why the
recording office should accept the documents for recording with
less than the full amount of mortgage tax due. The affidavit
explains that the old mortgage lien is not being satisfied, but
instead is being modified. Since no new mortgage is being
recorded, no additional mortgage tax would be due. The affidavit
which must be submitted is known as the "255 Affidavit"
becuase the law providing for it is section 255 of the Tax Law.
TP-584: Jump to Transfer
Tax (New York State).
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East 19th Street, New York, New York
10003. Our telephone number is (212)353-0040, and our fax number
is (212)505-8652.
Copyright © 1997, 1998 by Allen, Morris, Troisi & Simon,
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property of their respective owners.