This is a preview of the full Winter 2023-2024 Quarterly Newsletter. Click Here to read the full newsletter.
Is That Lease Really NNN?
Discusses the appeal of NNN (triple net) leases in 1031 exchanges for individuals seeking tax deferral. NNN leases relieve property owners of maintenance, repair, insurance, and tax obligations, making it a hands-off investment with fixed monthly payments. Properties with credit tenants under NNN leases can act as annuities, generating steady income once initial acquisition costs are covered. However, investors face challenges in identifying suitable NNN properties within a 45-day timeframe during a 1031 exchange, and many of these properties are located across the country, limiting site visits. The article highlights the importance of carefully reviewing lease documents, as some properties marketed as NNN may have unexpected landlord obligations and expenses. Brokers, though helpful, may not catch potential issues, making early involvement of legal counsel crucial for due diligence. It emphasizes that the anticipated return on investment is a key factor, and involving counsel early can avoid late discovery of unanticipated costs, ensuring a smoother 1031 exchange process.
Questions of Fact Preclude Summary Judgment
The article explores ongoing litigation over the J-51 tax program’s impact on residential tenancies and rent calculation post-deregulation. In Jekielek v. 260 Partners, L.P., tenants claimed overcharges and fraud due to delayed re-regulation. The Supreme Court ordered damages, but the Appellate Division identified factual issues requiring trial. Key concerns include owner conduct as fraud, tenants proving fraud elements, and justification for rent increases. The article underscores owners’ non-obligation to maintain improvement records indefinitely and clarifies the base date for overcharge calculations. Jekielek provides vital insights into evolving rent regulatory law.
Quick Compliance Check
Owners of apartment buildings with 3+ units must share fire safety documents, including Emergency Preparedness and “Close the Door” Notices. New tenants receive an Emergency Preparedness Guide, Building Information Form, Evacuation Checklist, and Annual Fire Bulletin. After the initial occupancy, tenants get the Guide, Information Form, and Checklist every 3 years, and the Annual Bulletin annually. Compliance with signage format and delivery methods for tenant notices is crucial.
The article discusses an increase in Section 8 Voucher applications due to changes in Voucher Payment Standards, raising permissible rent. Building owners face compliance concerns in application evaluation, renewal, and court matters. Section 8 Vouchers are a lawful source of income, which owners must accept if the asking rent aligns with the VPS. Special riders address Section 8 tenant issues, emphasizing proactive maintenance to avoid subsidy suspension. Landlord/Tenant litigation with Section 8 tenants requires “good cause” for eviction and often involves notifying the PHA. The article advises careful evaluation and communication to navigate this complex area and avoid Human Rights Complaints.
LLC’s Members + Creditors
The article explains that creditors of a limited liability company (LLC) generally can only pursue the business assets, not personal assets of members. Members are protected from personal liability, but under certain conditions, they may be liable. Creditors can access a member’s profit interest in the LLC through a judgment, but cannot seize the LLC’s property. The article cites a case where lack of independence led to affecting both member’s and LLC’s assets. It advises individuals involved with LLCs to seek legal counsel for understanding rights and obligations.
DHCR’s New “First Rent” Doctrine
The article discusses changes to the “First Rent Doctrine” by the DHCR, impacting rent regulation in New York. Amendments include rules for calculating first rents based on prior non-residential use, combining apartments, and adjusting rents when apartment dimensions change. These changes became effective on November 8, 2023, affecting various aspects of rent regulation.
New York’s “Prompt Payment Act” Amended
Governor Kathy Hochul signed Senate Bill 3539 amending the Prompt Payment Act for construction contracts in New York. Changes include allowing contractors to invoice in full upon substantial completion, limiting retainage to 5%, and mandating release within 30 days of final work approval. Failure to comply may result in 1% monthly interest. The amendments apply to contracts from November 17, 2023, emphasizing the need for owners and contractors to ensure compliance in their construction contract forms.
2024 Partner Promotions
We’re thrilled to announce well-deserved Partner promotions for some outstanding members of our team, effective January 1, 2024:
• Anthony Morreale;
• Israel A. Katz; and
• Brian Bendy.
Awards and Accolades
David Skaller, Partner at Belkin Burden Goldman, recognized as a top 10 real estate litigator in New York by Business Today for his expertise in landlord-tenant matters and notable achievements in the field.
Belkin Burden Goldman LLP extends heartfelt congratulations to Amir Shriki, the shining recipient of this year’s Lamplighter Award, and to all the remarkable honorees at the Belev Echad Gala!
BBG In the News
Sherwin Belkin, founding partner at a law firm, spoke at the Greenpearl New York Multifamily Summit on October 12. He participated in the Rent Stabilized Private Round Table, discussing relevant topics. Martin Heistein, co-head of the Administrative Law Department, presented at a seminar on “Building Owner Strategies” on October 26, sponsored by Marcus & Millichap. He discussed regulatory policy changes impacting multifamily housing and post-HSTPA operations.
Recent Transactions of Note
Members of BBG’s Transactional Department recently handled various transactions, including a 30-year ground lease in Queens for a battery energy storage system. The team negotiated retail leases, polling place leases, and extensions for clients in locations like Midtown, World Trade Center, and Upper East Side. Additionally, they facilitated buy/sell transactions, refinancing, and alternative transactions, such as assisting a joint venture in bidding for FDIC’s Signature Bank loan portfolio. The Land Use/Zoning team achieved successes in rezoning applications, stakeholder outreach, air rights sales, and zoning due diligence across multiple boroughs.
• Condo wins foreclosure of lien for unpaid charges.
• Co-op board’s decision on Jacuzzi protected by business judgment rule.
• COVID-era condo board election disputes adjudicated.
• Condo denied preliminary injunction to stop noisy nightclub.
• Enforceable liquidated damages for late completion of alterations.
• Co-op shareholder must pay $192,000 for wrongful roof use.
• Co-op prevails in non-payment proceeding against estate.
• Condo buyer forfeits $1.9 million deposit for refusing to close.
• Co-op board decides shareholders’ dispute over common hallway décor.
• Condo ordered to hold new election; ineligible candidates barred.
• Condo unit owners can sue board for non-repair of units.
• Property owner must protect nearby properties from excavation damages.
• Condo board strictly liable under labor law for contractor’s employee injury.
• Condo board can impose payment requirement for unit owner to incorporate hallway.
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