Real Estate Q&A
Interview with Attorney Nathaniel Muller, as featured in Manhattan Profiles.
Real estate is probably the single largest asset most people own. How can using the right lawyer secure these assets?
Real estate is usually the largest purchase an individual will make in his or her lifetime. Being properly advised and counseled is crucial. Peace of mind for the client is the ultimate goal. A good real estate lawyer will protect his client from any pitfalls and will advise on tax issues. There are various scenarios depending both on the purpose and nature of the purchase (main or secondary residence or investment property, condo, co-op or house) and the status of the purchaser (U.S. or foreign buyer). Lawyers who specialize in real estate are familiar with all these situations and can guide you on how to structure the purchase or sale of your property in order to maximize both the legal shield and the potential tax consequences, whether during ownership or upon resale. Most importantly, the right lawyer will keep the communication with his client open during the entire transaction (and afterwards should the need arise). The right lawyer will make the transaction happen as smoothly as possible and deal with all the details, alleviating the stress that some—if not most—individuals experience during this kind of transaction. Peace of mind for the client is the ultimate goal.
What separate roles do a real estate agent and lawyer have?
A real estate agent will help you sell or buy, but is not qualified to give legal advice. An experienced attorney will of course review the contract of sale, the minutes and offering plan of the building if it is a co-op or condo, but mainly, he’ll make sure the appropriate legal structure specific to your needs and goals is put in place. Additionally, there could be fiscal implications in any transaction and the right lawyer will help you chose the right option for your transaction whether you are an individual, a trust, a corporation or a shareholder.
What are the first steps to purchasing a home?
Before looking for a home the potential buyer should consider the following: Will the house be used as a main residence, investment property or any other purpose? Are you interested in purchasing a co-op, condo, or townhouse? There are legal differences which we will be happy to explain to you. If the purchaser intends to finance the property, he or she needs to be pre-approved for a loan. Especially in Manhattan, because real estate is a very fast market, a seller will not wait for a potential buyer to put his paperwork in order. Also, if one seeks to change the certificate of occupancy of a townhouse into a multiple dwelling or a condominium offering plan, for instance, a thorough analysis of the possibilities of the contemplated asset should be undertaken very early on in the process.
Do real estate lawyers advise on mortgage-related issues?
A real estate lawyer can help you find an experienced loan officer or mortgage broker who will better assist you in obtaining a loan. Once the loan is approved, your real estate lawyer will be in close contact with the lender’s counsel and will assist in resolving any issues that should arise in order to make the transaction happen as smoothly and as fast as possible.
Is it common practice to ask a prospective lawyer for references of satisfied clients?
An attorney is not allowed to give references because of the lawyer-client privilege and confidentiality requirements. However, most of our clients are referred to us directly by previous satisfied clients.
What are the three key questions a client should ask before hiring a lawyer?
1)”Who will be my point person? Will the attorney I am meeting with be my contact, or his paralegal or secretary?” At our office, you will have one and only one interlocutor: your attorney. 2) “Do you practice anything else besides real estate transactions?” The counterintuitive answer to this question is that an overspecialized attorney may miss aspects specific to your transaction, because he does not have a general view of the array of possible issues. For instance, a good transactions attorney also practices litigation because he will use his litigation experience to better draft transaction agreements, and thus better shield his client. Likewise, identifying pitfalls and potentially detrimental issues in a real estate transaction may require knowledge of wills and estate law, corporate and business law, family law or immigration law. This is true in all fields of law, but more particularly in residential and commercial real estate transactions. 3)”Do you bill flat fees or by the hour?” We use flat fees. There is no surprise fee for the client, and we prefer simplifying, rather than unduly delaying and complicating a transaction. Flat fees help achieve this goal.
What complications can arise when buying and selling at the same time?
Buying and selling at the same time requires delicate timing. Sometimes you sell before you buy or you buy before you sell. Anybody buying and selling at the same time needs to be ready to find a temporary housing arrangement between the two closings. But there are other options. If you have sold your residence, but haven’t closed on your new dwelling yet, you might want to negotiate a post-closing agreement with your buyers (sort of a short-term rental). Please note, this is not always possible with a co-op. More rarely, a buyer can enter in a pre-closing possession agreement if the residence he is purchasing is vacant and his current lease expired or he already sold his former property. Again, this is rarely possible in a co-op and requires the board’s approval in the case of a condominium. Another issue is differing capital gains within the framework of a 1031 exchange. This is a tool used to differ payment of capital gains by identifying and closing, within a specific timeframe, on investment property or properties of at least the same value as the investment property being sold.
Can someone enter a contract without consulting an attorney?
There is no obligation to hire an attorney to review the contract of sale, but this is very unwise and rare. The other party will generally be legally represented and buying or selling without legal advice puts you at risk of failing to identify issues that can potentially cost a lot of time and money in the future. The attorney you hire will guide you and protect your interests during the transaction. What is a title examination? Title examination exists only for condominiums and houses or townhouses. Co-ops have simple lien searches, because technically a co-op owner is a tenant, while the physical ownership rests with the co-op, so there are no title issues. Title insurance will cover for all liabilities, title defects, liens and encumbrances attached to the ownership of a property, which have not been detected by title examination. It is the responsibility of the title company to research the title chain prior to closing, establish a title report and then guarantee its report with a title insurance policy. While not legally required, I am not aware of any transactions that do not involve a title insurance policy. While it is not common to have a challenge in the chain of title of ownership of an apartment in Manhattan, there have been situations where, on the morning of the closing, a seller drew on a line of credit linked to the apartment ownership (thus creating an undetected lien on the property). I have also seen developers who inadvertently sold the land on which the new construction stands, in addition to the specific unit being purchased, multiple times—thereby potentially creating numerous claims to the plot of land on which a building stands. Given the value of real estate in New York, forgoing title examination and insurance is an unreasonable risk.
How long does a closing process generally take and what’s important to know in advance?
For a co-op, the rule of thumb is ninety days between the time a contract is signed and closing. For condominiums, I have done closings within a week of contract signing. It depends whether the apartment is occupied, board approval process (if any) and the availability of the funds for closing.
How important is it for a lawyer to understand how a client’s business works before taking his case?
Every individual is unique and every case has its own challenges. It is essential for a good lawyer to understand his client, his personal and professional situations, his strength and weaknesses and his present and future goals to assist him and give him the best legal advice. The communication between the attorney and client should be fluid and constant. It is a relationship of partnership and trust. A good attorney does not work for his client. He works with his client.