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Sunday, June 24, 2012

Condo Boards Take a Stand on Delinquencies

From the New York Times, June 22, 2012 By JULIE SATOW A successful condominium depends, in large part, on owners’ paying their monthly fees promptly and in full. Delinquencies can mean less money for maintenance and amenities — and draw the ill will of fellow residents. While the sheer size of larger buildings can often blunt their impact on the budget, small buildings with a high number of delinquencies can be toxic for buyers and a millstone for sellers. Now, with New York’s economy seemingly recovering, condominium boards are growing more aggressive in cracking down on delinquent owners, according to brokers, lawyers and board members. Some are publicly shaming deadbeats by posting their names on hallway bulletin boards or barring them from facilities like health clubs and concierge services. Others are reflexively filing liens against owners who are more than 60 days in arrears. And boards are writing requirements into their bylaws to provide additional protections. According to data from PropertyShark, in the first quarter of 2011 through the first quarter of 2012, condo boards in Manhattan started 111 foreclosure proceedings against owners for common-charge delinquencies, the most since January 2007, when the company first began tracking the information. The median lien amount in the first quarter of this year was more than $16,500, also the highest figure since 2007. Alexandro Padrés has sat on the board of his building, 184 Thompson Street in Greenwich Village, for five years. Since it was converted to condominiums in 2007, the building has battled owners who fell behind with their monthly common charges and has even navigated the labyrinthine process of a bank foreclosure. “We have had a lot of experience with this,” said Mr. Padrés, 38, a corporate lawyer who became president of the board in 2010, “and we are adopting a zero-tolerance policy. You can’t have situations where an owner is delinquent for six or seven months and just says that they forgot to pay, even though they were being sent monthly notifications. It just isn’t believable.” To ensure payment, the building uses a number of strategies, including a 10-day grace period, after which a letter is sent to the owner. If there is no response, the property manager sends a second letter and refers the matter to the building’s lawyer. If there is still no response, the building files a lien against the unit. Boards are becoming more proactive for a number of reasons: an improving real estate market means there is a greater likelihood that delinquent owners can sell their units for enough to repay the condominium; a proactive approach fits with condominiums’ increasing stringency on buyers’ financials; and finally, after enduring the downturn for several years, boards are growing impatient with owners who are in arrears. “When the market was soft and there were serious problems,” said Stuart M. Saft, a chairman of the New York real estate practice at the law firm Holland & Knight, “no one wanted to go through the foreclosure process because it was expensive, time-consuming, and at the end, they might not be able to sell the apartment.” Most buildings would still rather file a lien, a relatively quick and inexpensive process. When a lien is placed on an apartment, it makes it difficult for the owner to sell, since the buyer will want the lien satisfied before closing. Also, banks are often unwilling to refinance a mortgage or provide a new loan to the owner until the lien is removed. At the same time, condominiums have begun employing other, nonlitigious tactics to persuade the delinquent owner to pay up. This can include barring the owner — or the owner’s tenant, if the unit is being rented — from using nonessential services in the building like the health club or the pool. Doormen may be required to stop accepting packages and deliveries. Some buildings even resort to public humiliation by posting names in common areas. “A number of our buildings, especially those with high-level amenities, are now passing house rules that revoke the privileges of owners or their tenants who are in default for more than 60 or 90 days,” said Dan Wurtzel, the president of Cooper Square Realty, which manages more than 500 buildings in New York City. One complex, Zeckendorf Towers at 1 Irving Place, recently instituted a rule that prohibits a tenant from paying the unit owner advance rent, so that if the owner becomes delinquent it will be able to collect directly from the tenant. “Now, in the event the owner doesn’t keep up with the common charges, this gives the board the ability to go directly to the tenant and have them pay us,” said Lynda Deppe, a senior vice president of City Connections Realty and a resident broker at Zeckendorf Towers. “If they had already paid their rent, we wouldn’t have that leverage.” Other options include working with the owner to create a payment plan, or persuading the owner to sell the unit and use the proceeds to pay outstanding common charges. Even if there is not enough money left to repay the condominium, a sale frees up the apartment for another buyer, who will pay common charges. If all else fails, boards can pursue foreclosure. But the process can take a year or more, during which the unit is still not generating the common-charge payment. In addition, the owner may also have defaulted on his mortgage, so the bank may be pursuing its own foreclosure action. When there are competing claims, the bank takes precedence. Back taxes, too, take precedence over claims from a condominium. “Unless a foreclosure sale brings in far more than the mortgage, our claims are wiped out,” said Jesse Krasnow, a member of the condominium board at the Ansonia at 2109 Broadway. Mr. Krasnow is also a partner of the building’s sponsor and the president of Sirius, the Ansonia’s building manager. “Add to this the fact that bank foreclosures drag on for years, and at the end of it all, the condominium can be out a tremendous amount of money.” At 184 Thompson Street last year, a unit sold at a foreclosure auction for $610,000, which did not cover its $780,000-plus mortgage. “We saw no proceeds from the sale,” Mr. Padrés said. A second option is to sue the unit owner for a money judgment. But, said Richard Sharan, a partner at the law firm Pollack & Sharan, “if a unit owner is in arrears on his common charges, he probably doesn’t have much money to collect.” Money judgments are good for 20 years in New York, however, and can negatively affect an owner’s credit. They can result in eventual payment to the condo if the owner’s other properties are sold or refinanced, said Steven R. Wagner, a partner at the law firm Wagner Davis. It is easier for boards in co-op buildings to recoup maintenance fees, because they can terminate a shareholder’s proprietary lease and force the sale of the unit. Also, the co-op takes precedence over a bank in the case of a bank loan default, and is paid back first. Yet while a co-op has a greater chance of collecting, “it still requires hiring a lawyer and commencing legal proceedings, which can cost money and take time,” said Eva Talel, a partner in the real estate group at the law firm Stroock & Stroock & Lavan. “The building ends up not getting maintenance for the unit over a long period of time and has to spend money it probably hasn’t budgeted for.” When Jack Cassaro, an information technology director at a Wall Street firm, was trying to buy a one-bedroom co-op at 160 East 26th Street in Kips Bay, the board refused to interview him until the seller, who was thousands of dollars in arrears, sent a letter stating that all back maintenance, late fees and legal expenses would be paid in full at the closing. “It was a nightmare,” Mr. Cassaro said. In addition, the board required that Mr. Cassaro put six months of maintenance payments in an escrow account until he moved into the unit. His broker, Elizabeth Kee of CORE, said, “This was supposed to be a cash deal that closed in 10 days, but it turned into a seven-month-plus process.” But although co-ops and condominiums can face an uphill battle in collecting monthly fees that have gone into arrears, the overall impact on the building often depends on its size. At large buildings where hundreds of apartments share the burden of paying the fees, a handful of delinquencies can have a muted effect. Not surprisingly, the buildings in Manhattan that have started the most foreclosure proceedings since the start of 2007, when PropertyShark began tracking them, generally have hundreds of units. They include Worldwide Plaza at 350 West 50th Street, with 14 filings; Trump World Tower at 845 United Nations Plaza, 12 filings; and the Ansonia at 2109 Broadway, 8 filings. Trump Tower at 721 Fifth Avenue rounded out the Top 10, with 6 filings over the past 5 years, according to PropertyShark. At Trump World Tower, for instance, the building is contending with a unit in a bank foreclosure; over the past five years, it has initiated its own foreclosure filings against a dozen others. But with 370 apartments, “it is still less than 2 percent of the building that is in trouble,” said Michael Cohen, the treasurer of the condominium board and a special counsel to Donald J. Trump. “We build in a 5 percent cushion annually into our budget that allows us to handle these unfortunate situations,” Mr. Cohen said, adding the building had $2 million in its reserve account. Still, while size can often cushion the effects of a delinquency on a building’s overall health, the issue is becoming more urgent for buildings across the board. “I am increasingly seeing apartments in better buildings that are issuing notices or instituting foreclosure proceedings,” said Mr. Wagner, the lawyer. “It is something that is on everyone’s mind.” PAY UP CONDO boards have a few options when an owner stops paying his monthly charges. Unfortunately, the most effective remedies are often the most expensive and time-consuming — and while a legal procedure like a foreclosure drags on, the unpaid bills continue to pile up. Legal experts recommend the following steps: POLITE BUT FIRM Start off with a letter requesting payment if it is 30 days past due. Then follow up, if the money is not forthcoming, with a more strongly worded letter, perhaps from the building’s lawyer. The board could offer to work out a payment plan. THIS IS SERIOUS If the bill still isn’t paid, the board can file a common-charge lien on the unit. At this point, the owner’s access to amenities or doorman services could be suspended. In rare cases, the board could offer to buy the unit. THE GLOVES ARE OFF If all else fails, the board can sue for monetary damages or start a foreclosure filing. (Of course, the owner’s bank may already have done this.)

Tuesday, April 17, 2012

For N.J. same-sex couples, filing taxes turns headaches into migraines



From the New Jersey Star Ledger
By Sharyn Jackson/The Star-Ledger April 16, 2012

When the city of San Francisco briefly legalized same-sex marriage in 2004, Jack Denelsbeck and Jonathan Javins jumped at the chance to wed. The couple had been together for seven years, and at a time when gay marriage wasn’t legal anywhere else, they thought it would be their only chance to say their vows in front of friends and family.

"I will never forget how overwhelming it felt to join hands and exchange rings," said Denelsbeck, 33. "We both burst into uncontrollable heaving sobs."

The last thing on their minds was taxes.

Soon afterward, the California Supreme Court deemed the couple’s nuptials invalid. So when Denelsbeck and Javins moved to New Jersey from Brooklyn three years later, they entered into a civil union, which grants the same rights and protections as marriage, only without the title. It wasn’t as romantic as that day at San Francisco’s city hall, but finally gaining recognition of their relationship overshadowed the shock that would come later.

"We didn’t think about taxes when we got the civil union," said Denelsbeck, a health educator in Manhattan. "But then, all of a sudden, there were all of these issues."

Filing taxes can be a headache for anyone. But for New Jersey’s same-sex couples in civil unions, especially those who work in other states, that headache is more like a migraine, the pain is magnified by a labyrinth of tax guidelines due to varying recognitions of their marital status.

Because same-sex marriage laws vary from state to state, how a unioned couple may file in each state they live and work also varies. Civil unioned New Jerseyans who work in New York, for instance, have to prepare six or more tax forms, while heterosexual couples need only prepare three.

This year, Denelsbeck and Javins had to prepare seven, at a cost of $925.

"Every year it’s more and more stressful and frustrating," said Denelsbeck, who lives with Javins, 40, in Jersey City.

Both interstate commuters, the couple tried using self-serve tax software the first couple of years and found it somewhat helpful, but once they bought property together, it became too complex to navigate. Now they use a CPA, having to pay up to 40 percent more than the average married couple as a result of the time and fees it takes to complete the extra returns.

The headache begins at the federal level. Because of the Defense of Marriage Act, the federal government does not recognize same-sex unions. So New Jersey couples who are civil unioned must file their federal taxes as individuals.

Frances Micklow/The Star-LedgerJack Denelsbeck, right, and his partner Jonathan, who live in N.J., work in N.Y. and are in a civil union, are in a tax conundrum.

But their state taxes, which can be filed jointly, are culled from a joint federal return. That means couples must also fill out the federal paperwork as if they are married, pull the information for New Jersey, and then throw it away.

Now say the couple earns income in New York City. New York recognizes civil unions for legal purposes but not for tax purposes, so they have to file as individuals — unless they wed there after the state legalized same-sex marriage in 2011, in which case they can file jointly.

Denelsbeck and Javins schedule several meetings with their CPA each year to get their taxes in order. Besides taking up hours of their time, they have to pay for the extra paperwork — and they miss out on any federal marriage-related deductions, which could amount to thousands of dollars.

Worse than the financial loss, said Denelsbeck, is the feeling of having to file as an individual, both federally and in the state where they work. "Having to check a box that doesn’t reflect my relationship, you kind of feel like you’re being demeaned."

And it works both ways. New Jersey couples who married in New York default to a civil union here, explained Hayley Gorenberg, the deputy legal director of Lambda Legal, a gay and lesbian civil rights organization.

"It’s just insulting to their committed married relationships," said Gorenberg. "It’s a shame that people are trying to do their basic civic duty as taxpayers, and the government is throwing these hurdles in their way."

John Traier, a CPA at Hammond Traier & Burns in Wayne, specializes in preparing taxes for same-sex couples in the tri-state area. He said it’s a challenge for accountants to serve same-sex clients. "It just gets kind of hairy," said Traier. "The tax software hasn’t really been written to deal with the same-sex landscape. So we’ve been suffering through it."

Also suffering through it are the couples who decide to file without the help of an accountant. Turbo Tax keeps up-to-date on state marriage laws and explains to married gay couples how to fill out both the individual and dummy federal forms. But the company admits there are limits to the instruction it can offer.

"Because of the complexity and lack of clarity on the various states rules regarding civil unions or same-sex marriages, tax software is currently not able to provide tailored guidance for those that need to file non-resident returns," wrote Ashley Kirkendall, a company spokeswoman, in an email.

Despite the extra work, Denelsbeck said he and Javins have no plans to get married on the other side of the Hudson just so they can prepare one less tax form. Instead, he would like to see marriage recognized in his home state first. A bill granting same-sex marriage passed in the state Senate and Assembly this past February, only to be vetoed by Governor Chris Christie.

"We were so close and the momentum keeps on building," said Denelsbeck. "But whenever tax time comes around, we’re still reminded that we’re not treated as equal citizens."

Sunday, October 23, 2011

SAME SEX MARRIAGE IN NEW YORK


(from the Marriage Bureau, City of New York)
New York’s Marriage Equality Act was signed into law by Governor Cuomo on June 24, 2011, allowing same-sex couples to marry legally in New York for the first time.

New York City has always prided itself on its openness and diversity, and we look forward to welcoming all couples who want to get married amid our bright lights and legendary sights, including many landmarks of gay history. Whether you are a native New Yorker or someone who has dreamed of having your wedding in New York City, that opportunity is now yours. The City is committed to accommodating all eligible couples who would like to marry, whether they are of the same or opposite sex.

The New York City Clerk started issuing Marriage Licenses and performing civil marriage ceremonies for same-sex couples on July 24, 2011.

It’s important to keep in mind that getting married in New York City is a multi-step process. Couples must complete an application and receive a Marriage License at the City Clerk’s office before they can legally wed.

For general information about marrying in New York, please see the City Clerk’s website http://www.cityclerk.nyc.gov/html/marriage/same_sex_couples_faq.shtml.

Thursday, August 5, 2010

COURT REJECTS SAME-SEX MARRIAGE BAN IN CALIFORNIA


New York Times August 5, 2010
By JESSE McKINLEY and JOHN SCHWARTZ

SAN FRANCISCO — Saying that it discriminates against gay men and women, a federal judge in San Francisco struck down California’s voter-approved ban on same-sex marriage on Wednesday, handing supporters of such unions at least a temporary victory in a legal battle that seems all but certain to be settled by the Supreme Court.

Wednesday’s decision is just the latest chapter in what is expected to be a long battle over the ban — Proposition 8, which was passed in 2008 with 52 percent of the vote. Indeed, while striking down Proposition 8, the decision will not immediately lead to any new same-sex marriages being performed in California. Vaughn R. Walker, the chief judge of the Federal District Court in San Francisco, immediately stayed his own decision, pending appeals by proponents of Proposition 8, who seem confident that higher courts would hear and favor their position.

But on Wednesday the winds seemed to be at the back of those who feel that marriage is not, as the voters of California and many other states have said, solely the province of a man and a woman.

“Proposition 8 cannot withstand any level of scrutiny under the Equal Protection Clause,” wrote Judge Walker. “Excluding same-sex couples from marriage is simply not rationally related to a legitimate state interest.”

Supporters of Proposition 8 said that the decision defied the will of the people of California, and could well be an issue in November’s midterm elections.

“This is going to set off a groundswell of opposition,” said Jim Garlow, the pastor of Skyline Church in La Mesa, Calif., and a prominent supporter of Proposition 8. “It’s going to rally people that might have been silent.”

Wednesday’s decision applied only to California and not to the dozens of other states that have either constitutional bans or other prohibitions against same-sex marriage. Nor does it affect federal law, which does not recognize such unions.

Still, the very existence of federal court ruling recognizing same-sex marriage in California, the nation’s most populous state, set off cheers of “We won!” from crowds assembled in front of the courthouse in San Francisco. Evening rallies and celebrations were planned in dozens of cities across the state and several across the nation.

In West Hollywood, Ron Cook, 46, an accountant who is gay, said he was thrilled by the decision. “If the court had come back and upheld it,” he said. “I would have moved out of the state.”

The plaintiffs’ case was argued by David Boies and Theodore B. Olson, ideological opposites who once famously sparred in the 2000 Supreme Court battle between George W. Bush and Al Gore over the Florida recount and the presidency. The lawyers brought the case — Perry v. Schwarzenegger — in May 2009 on behalf of two gay couples who said that Proposition 8 impinged on their constitutional rights to equal protection and due process.

On Wednesday, Mr. Olson called the decision a “victory for the American people,” and anyone who had been denied rights “because they are unpopular, because they are a minority, because they are viewed differently.”

For advocates of gay rights, same-sex marriage has increasingly become a central issue in their battle for equality, seen as both an emotional indicator of legitimacy and as a practical way to lessen discrimination.

“Being gay is about forming an adult family relationship with a person of the same sex,” said Jennifer Pizer, the marriage project director for Lambda Legal in Los Angeles, who filed two briefs in support of the plaintiffs. “So denying us equality within the family system is to deny respect for the essence of who we are as gay people.”

But Andrew Pugno, a lawyer for the defense, said Proposition 8 had nothing to do with discrimination, but rather with the will of California voters who “simply wished to preserve the historic definition of marriage.”

“The other side’s attack upon their good will and motives is lamentable and preposterous,” Mr. Pugno said in a statement.

During the trial, which ended in June, plaintiffs offered evidence from experts on marriage, sociology and political science, and emotional testimony from the two couples who had brought the case. Proponents for Proposition 8 offered a much more straightforward defense of the measure, saying that same-sex marriage damaged traditional marriage as an institution and that marriage was historically rooted in the need to foster procreation, which same-sex unions cannot, and was thus fundamental to the existence and survival of the human race.

But Judge Walker seemed skeptical of those claims. “Tradition alone, however,” he wrote, “cannot form the rational basis for a law.”

Even before appeals to higher courts, Judge Walker seemed ready to continue to hear arguments, telling both sides to submit responses to his motion to stay the decision by Friday, at which point he could lift or extend it.

How the decision might play politically was also still unclear. In 2004, same-sex marriage was seen as a wedge issue that helped draw conservatives to the polls, and Richard Socarides, who advised President Bill Clinton on gay rights issues, said that this decision could be used as a rallying cry for Republicans again. “But Democrats and most importantly President Obama will now have to take sides on whether gays deserve full equality,” Mr. Socarides wrote in an e-mail.

In California, it could also affect the race for governor. Jerry Brown, a Democrat, has been vocal in his support of same-sex marriage in his current role as California attorney general and hailed the decision on Wednesday. Meg Whitman, a Republican, has taken the position that marriage should be between a man and a woman — in line with the language of Proposition 8 — though she says that she strongly supports the state’s domestic partnership laws, which afford many of the same rights as marriage.

Gov. Arnold Schwarzenegger in a statement on Wednesday supported the ruling, saying it “affirms the full legal protections” for thousands of gay Californians.

Some gay rights activists initially feared the case, believing that a loss at a federal level could set back their more measured efforts to gain wider recognition for same-sex marriage, which is legal in five states and the District of Columbia. But those concerns seemed to fade as the trial began, and on Wednesday, the mood was of elation and cautious optimism that Mr. Boies and Mr. Olson’s initial victory might change the debate.

Kate Kendell, executive director for the National Center for Lesbian Rights, said that she believed that there were members of the Supreme Court who “have a very deep-seated bias against L.G.B.T. people,” meaning lesbian, gay, bisexual and transgender. But, she added, “This legal victory profoundly changes the conversation” by involving “folks in the legal world and the policy world who were previously unmoved by this struggle.”

For those who had actually filed the suit, Wednesday’s victory, while measured, also seemed sweet.

“This decision says that we are Americans, too. We too should be treated equally,” said Kristin M. Perry, one of the plaintiffs. “Our family is just as loving, just as real and just valid as anyone else’s.”

Sunday, June 20, 2010

ESTATE TAX IN LIMBO

By Jeanne Sahadi, senior writer
June 18, 2010

NEW YORK (CNNMoney.com) -- Estate planning attorneys may worry that their persistent headaches are a sign of something more serious. But once they remember what they do for a living, the headaches start to make perfect sense.

That's because they are operating in a kind of weird estate tax limbo. The federal estate tax was here, now it's gone for a year. It's probably coming back soon, although no one can say exactly what it will look like.

Unless Congress acts, the estate tax will be back next year and no more than $1 million of a person's estate would be exempt from it. That's well below the $3.5 million exemption in place last year. And the top estate tax rate would be 55%, up from 45% in effect last year.

Oh, and just because there is no federal estate tax this year doesn't mean heirs of someone who dies in 2010 have no federal tax liability on their inheritance. They very well may, but it can be hard to tell them in some instances what it will be because of ambiguities in the law.

So what's an estate planner to do?

"You try to do as little as possible," [[for the estate of] someone who died in 2010," said Steve Hartnett, associate director of education at the American Academy of Estate Planning Attorneys.

And when you absolutely have to do something, he said, you make your best guess and hope it turns out to be the right one when Congress gets around to clarifying the estate tax rules of the road.

One potential minefield is how to deal with the change in "step up" rules for heirs.

Under the old regime, heirs who wanted to sell inherited assets had to pay the capital gains tax on the gains accrued since the day they inherited the asset. In other words, the "cost basis" of the asset was essentially stepped up to present day. Those rules go back into effect next year.

This year, however, when heirs sell appreciated assets they will owe capital gains tax on all the gains since the deceased bought the asset. But the first $1.3 million in gains is treated as tax free. And for surviving spouses, another $3 million is as well.

Say an estate's assets with $5 million of gains are sold. Non-spousal heirs would only pay the capital gains tax on $3.7 million. A widow who is sole beneficiary would only owe tax on $700,000.

As a result of the new step-up rules, estate planners face an array of new complexities. One of them is advising clients when to sell an asset to minimize the tax bite. For instance, if the heirs of someone who dies this year don't sell an appreciated asset until 2011 or beyond, which step-up rules will they be subject to? Hartnett says how the law will be applied isn't clear.

Equally confusing is how best to cook up an estate plan for someone who is living now and plans on doing so at least until 2011.

The 'who knows?' factor
The only good news is that generally speaking relatively few taxpayers are affected by the federal estate tax itself.

At most, only an estimated 1.76% of estates would be affected in 2011 if the estate tax is resurrected with a $1 million exemption, according to a recent report by the Congressional Research Service.

Then again, every estate of someone who died this year, no matter how small, will be affected by changes to rules governing heirs' step-up in cost basis.

Optimists still hold out hope Congress will offer clarity before 2011, but the smart money says it won't come before the mid-term elections in November.

Then again, who knows?

Lawmakers shocked the death rattle out of people by actually letting the estate tax lapse this year. Soon after, there was talk that they would reinstate the estate tax retroactively. Wrong again. Now halfway through the year, few expect that will happen.

Next expectation? Lawmakers absolutely, positively will come up with a more lenient version of the federal estate tax for 2011 than the one slated for currently.

Several key senators have been trying to cut a deal for months. Negotiations have stalled on more than one occasion.

"We're almost half a year away from a tax policy that a super majority of senators say they don't support. Yet, we're stuck," Sen. Charles Grassley, R-Iowa, said earlier this week. "This time-sensitive issue has taken a back seat to everything else."

Anne Mathias, director of research at Concept Capital's Washington Research Group, thinks it's a fair bet to assume the new exemption level will fall somewhere between $3.5 million to $5 million.

But she also said if Republicans sweep the mid-term elections, and win at least 60 seats in the Senate, they may push to extend the repeal of the tax.

When Hartnett was asked what he thinks will happen with the estate tax next year, he gave the only answer he and his colleagues can give for many estate tax questions these days: "I don't know."

Tuesday, May 18, 2010

REAL ESTATE: TOUGH TIME FOR SELF- EMPLOYED BORROWERS


May 12, 2010
A Tough Time for Self-Employed Borrowers

By BOB TEDESCHI
MOST borrowers are facing a much tougher mortgage environment than a few years ago, but for those who are self-employed or own small businesses, maneuvering through a loan application can be even more arduous.

Before 2008 these borrowers, many of whom have difficulty documenting their income, often used what are known as stated-income loans. Lenders focused on credit histories and earnings estimates, circumventing the need for pay stubs or W-2s.

But during the mortgage crisis, stated-income loans became known as “liar’s loans,” because some borrowers falsely inflated their incomes, and qualified for more than they could afford.

Today, stated-income loans have nearly disappeared. Those still available through regional lenders like Hudson City Savings Bank come at a cost: interest rates around a quarter of a percentage point higher than conventional loans and down payments of at least 30 percent.

The self-employed borrower’s only choice, mortgage brokers say, is to submit two years’ tax returns and hope that they qualify for a conventional loan.

That would not be a problem, the brokers said, if all self-employed people filled out their tax returns conservatively. But in this economic climate, the self-employed have been more likely to lighten their tax liabilities by taking business deductions, thereby lowering their official income levels, as well as the likelihood of qualifying for a loan.

“You have to be more conservative about how you claim your deductions, or how you approach unnecessary purchases for the business,” said Robert Duquette, the president of the New York Association of Mortgage Brokers.

Mr. Duquette says that self-employed borrowers will have no trouble qualifying for loans if they have significant cash, as well as credit scores of at least 700, and stable and significant profit for the previous two years.

But many small-business owners, hit by the recession, are showing losses on their income tax statements.

“Of course, a borrower can make an argument for extenuating circumstances, like reserve duty for a few months, or a temporary hospitalization,” said Regina Mincey-Garlin, the president of RCG Mortgage Solutions in Montclair, N.J.

Mr. Duquette of the New York Mortgage Brokers Association said the mortgage crisis had hurt small-business owners more than others. “Everyone who’s getting income from places other than salary and wages is getting hit harder than everyone else,” he said, “because they’re being scrutinized more carefully.”

And those who have only recently started a business — perhaps after a layoff — may face even greater difficulties, he added. During the recession, many companies laid off workers, hiring them back on a contractual basis. Because these people have no long-term history of stable earnings, Mr. Duquette said, lenders often reject their applications or impose higher rates.

Still, self-employed applicants shouldn’t give up hope, said Debra Killian, the president of Charter Oak Lending, a mortgage broker in Danbury, Conn. Many people wrongly assume they cannot qualify for a loan at all, she said, “but 30 percent of the time — maybe 40 — they’ll qualify. They may be frustrated at all the documentation we ask them to provide, but they can still qualify.”

Small-business owners considering whether to qualify a purchase as a business or personal expense on their taxes, Ms. Killian said, should do the math.

If a business owner shows too little net income to qualify, say, for a $300,000 mortgage at 5 percent, and instead qualifies for a 5.25 percent loan, the monthly payments add up to an extra $5,520, roughly, for the first 10 years of the more expensive loan.

“If you save yourself a few thousand dollars in taxes in a year by taking those extra deductions,” Ms. Killian said, “how much will that cost you on your mortgage, or your ability to even get a loan?”

Monday, May 10, 2010

DEMAND GROWS FOR FHA MORTGAGES IN NEW YORK


Demand Grows for F.H.A. MortgagesBy ELIZABETH A. HARRIS
Published: May 5, 2010, The New York Times

THE government program that allows qualified people to buy homes with very little money down is gaining traction in New York.

The loans, offered through the Federal Housing Administration and available since 1934, provided 1 percent of the home loans in the region in 2007, but the number jumped to around 18 percent in 2009.

As credit tightened, developers also got on board when they realized their new apartments weren’t selling.

“When we started the process, nobody was familiar with F.H.A.,” said David Behin, an executive vice president of the Developers Group, whose recent projects include the Edge condominiums in Williamsburg, Brooklyn. “And to be frank, I wasn’t that familiar with it either. But we had problems with our buyers’ being able to get loans. The world was in flux, and new development faced its own special set of problems.”

Mortgage brokers, he said, suggested the F.H.A.

The agency does not actually make loans but insures them. The mortgages can then be given to people with scant credit history — like young first-time buyers — or even tarnished credit, and the down payments can be as low as 3.5 percent. The F.H.A. vets buyers to determine whether they’ll be able to pay the loan back.

“F.H.A. has stuck to the basics through the years,” said Vicki Bott, a deputy assistant secretary at the Department of Housing and Urban Development. “We always documented income, we always evaluated credit. We want to be sure that the underserved market can still obtain a home, as long as they can make the payments.”

According to Ms. Bott, the F.H.A’s goals are threefold: to serve underserved markets, to give the housing market a boost when loans are hard to come by, and to protect itself to make sure it can keep doing business.

In the national market, “F.H.A. has always played a countercyclical role,” Ms. Bott said. According to HUD data, the percentage of F.H.A. loans in the mortgage market fell to just below 5 percent in 2005 and 2006. “Now it’s grown to 30-plus percent as capital has withdrawn from the market,” Ms. Bott said.

To qualify for an F.H.A. loan, the home as well as the buyer must be approved. If the home is in a condominium building, the entire structure must be submitted as a whole. (The F.H.A. does not insure loans made in co-op buildings.)

During the credit boom, developers did not often see the need to submit to the application process — and even now, condo boards can be tough to convince.

Another quirk that helped minimize F.H.A’s presence in the New York City market was price. Until 2008, the maximum loan amount for F.H.A. financing was $362,790, far lower than the price of most apartments.

But two years ago, as the government tried to prop up the sputtering housing market, the limit in expensive areas like New York shot up to $729,750.

Suddenly, apartments in buildings with lap pools and gyms could qualify. Trendy complexes like the Toren in downtown Brooklyn and the Edge in Williamsburg started publicizing their F.H.A.-approved status. And companies like National Condo Advisors have sprung up to help developers and boards navigate the paperwork.

And as the loans have become more prevalent, the stigma that once trailed the F.H.A. has begun to melt away.

“I think some buyers might have thought it was only for people who couldn’t obtain regular financing when credit was easier,” said Stephen G. Kliegerman, the executive director of development marketing at Halstead Property. “But that’s really not the truth. It’s an alternative for anyone who wants a lower cash-down alternative.”

Meanwhile, as the F.H.A has taken on a bigger role in the mortgage industry, it has seen its default rate rise and its reserve fall below levels mandated by Congress. And its responsibilities are about to increase. Later this year, some homeowners whose houses are worth less than their mortgages can begin the process of refinancing through F.H.A. loans as part of the Obama administration’s effort to deal with the foreclosure crisis.

Some on Capitol Hill have expressed concern. Last year, Representative Scott Garrett, a New Jersey Republican, introduced legislation that would have raised the minimum F.H.A. down payment to 5 percent. H.U.D. itself has decided to raise the down payment to 10 percent for buyers with credit scores below 580.

But according to Ms. Bott, the F.H.A.’s presence in the market is so pronounced that any pullback could hurt housing as a whole.

“F.H.A. is in a tough place,” said Ingrid Gould Ellen, co-director of the New York University Furman Center for Real Estate and Urban Policy. “Its role is to provide credit to the market at times when private lenders withdraw because they see it as too risky. On the one hand, we get upset if it isn’t lending enough, but by definition they’re coming in at risky times. It’s a little bit of a Catch-22.”

Sunday, November 1, 2009

The Effectiveness of a "Will Contest" Clause in a Last Will and Testament

from The New York Times
October 29, 2009
Clauses Aimed at Keeping the Heirs Quiet
By DEBORAH L. JACOBS

TO deter lawsuits, many estate plans include a no-contest clause, which provides that anyone who formally challenges the plan gets nothing. Brooke Astor, the New York philanthropist, had one in her will. Michael Jackson reportedly used one in his living trust, a private document that disposed of most of his assets.

While some lawyers recommend the clauses for all wills and living trusts, others include them only when they see red flags for disputes, as when a parent favors one child over others or when there are tensions between someone’s spouse and children from an earlier marriage.

These clauses are becoming more important as people live longer, said Dana G. Fitzsimons Jr., a lawyer with McGuireWoods in Richmond, Va., who handles will contests. The decline in mental faculties that sometimes accompanies old age and the reliance on one child as caretaker are common patterns in court cases, he said.

The provisions that rein in lawsuits by disappointed heirs are known in legal jargon as “in terrorem” clauses, and that Latin term is certainly apt. They threaten to disinherit anyone who sues — for example, asserting that there was some impropriety surrounding the will.

With or without such a clause, if a will is found to be invalid, assets are distributed according to the terms of a previous will or state law, depending on the circumstances, said Howard M. Zaritsky, a lawyer in Rapidan, Va. With a no-contest clause, those who lose a case to have the will thrown out, or bring one on lesser grounds, forfeit what they otherwise would have received.

After Michael Jackson’s death, questions arose about whether his mother, Katherine Jackson, would lose her 40 percent share of the trust assets if she opposed the people named as executors in his will. Ms. Jackson applied to California’s Superior Court for a ruling on this limited issue, as state law permitted her to do. Judge Mitchell Beckloff ruled that she could challenge the executors’ authority without running afoul of the no-contest clause.

A common misconception is that a no-contest clause can turn back heirs who have been disinherited. But the clause has no teeth if they have been left nothing, because “there’s no downside to contesting the plan,” said Paul N. Frimmer, a lawyer with Irell & Manella in Los Angeles. He recommends leaving disfavored heirs enough money so that they will not risk bringing a case.

Although no-contest clauses are usually aimed at relatives, the one in Mrs. Astor’s 2002 will specifically refers to any “entity” — clearly meant to dissuade the charities named in the document from challenging it, said Lisa M. Stern, a lawyer with Proskauer Rose in New York. A 2003 codicil, or amendment, to the will reduced the charities’ share of the estate. But if they participate in a will contest, now expected in Westchester County Surrogate’s Court, and the case fails, they risk getting nothing, Ms. Stern said.

(The fate of Mrs. Astor’s estate has been complicated by the recent conviction of her son, Anthony D. Marshall, and one of her lawyers, Francis X. Morrissey Jr., on charges that they conspired to steal from her by tricking her into changing her will. This might support the charities’ argument that an earlier version of her will is the valid one. Andrew M. Cuomo, the state attorney general who by law represents charities, is not affected by the no-contest clause.)

Most states permit some form of no-contest clause, but Florida specifically prohibits them. If you sign a will while living in another state and it contains a no-contest clause, and then move to Florida and die there without changing your estate plan, the clause would be invalid for most of your assets, said Julie Ann Garber, a lawyer with the Andersen Firm in Key West. One exception might be real estate owned in the state where you lived previously, she said.

In states that permit no-contest clauses, standards for applying them vary and their wording is subject to interpretation, said Matthew P. Matiasevich, a lawyer with Evans, Latham & Campisi in San Francisco, who represents clients in estate lawsuits.

A classic example involved the will of William Randolph Hearst, the newspaper tycoon who died in 1951. More than half a century later, several relatives who were receiving income from a trust established by the will wanted to sue the trustees for investment decisions that they claimed favored future beneficiaries. Court papers show that in 2005 each current beneficiary was to receive an $8.3 million payout from the trust, financed with a portion of the dividends from Hearst Corporation stock.

In a Dec. 19, 2006, decision, the California Court of Appeal affirmed a 2005 trial court order and found the suit would violate the no-contest clause.

GIVEN the complications that can arise, estate planners said the best defense against will contests was to take steps during life to preserve the peace. For example, rather than leaving relatives guessing about the motives behind your decisions regarding who gets what, you may want to spell out your reasoning in your estate-planning documents — or have a frank discussion beforehand.

Other strategies anticipate the two most common grounds for contesting a will or trust. One is undue influence, which refers to efforts by someone to coerce you to sign estate-planning documents that favor him over others. Another is the argument that you lacked capacity when you signed the document, meaning that you didn’t know what assets you had, what you wanted to do with them and who your relatives were.

When one child plays an active role in caring for an elderly parent, others may worry that their sibling is pressuring the parent for a larger share of the inheritance, and that can lead to a claim of undue influence, Ms. Stern said. In such situations, she asks that the child be out of earshot during phone calls or meetings about estate planning. To document a client’s mental state, lawyers sometimes rely on doctors’ exams and videotapes that show a client signing the document and discussing its contents.

For extreme cases there’s another tactic. It involves setting up barriers to will contests by signing a series of documents, each only slightly different from the one it replaces, over a period of years. Those who want to contest the plan must then have each of these documents found invalid before they get to the one they want to apply. And that can be a daunting task.

Friday, August 14, 2009

LIVING WILLS ARE NOT DEATH PANELS.

Living Wills, also known as Advance Directives, are an important part of anyone's life planning and estate documents. Contrary to falsehoods being spread during the current healthcare reform debate, a living will actually puts the PATIENT in control to dictate what specific care the patient desires to be administered or withheld in the event of an end of life condition. In the absence of such, the default mechanism is to keep the patient alive, even if the patient would indefinitely be in a persistent vegetative state. 99.9% of my clients, in fact, do not want to be kept on a ventilator or other life sustaining measures indefinitely - which would occur in the absence of a living will. Living Wills should be executed to prevent such a scenario, along with Healthcare Proxies and Powers of Attorney.

Tuesday, July 14, 2009

NEW YORK GOVERNOR WILL DELAY SAME-SEX MARRIAGE BILL


FROM THE NEW YORK TIMES
July 11, 2009
With Senate Astir, Governor Will Delay Same-Sex Marriage Bill
By DANNY HAKIM
ALBANY — Gov. David A. Paterson will delay his plan to force a vote on a bill to legalize same-sex marriage until early September because the Senate is too unsettled now to take it up, his spokesman said on Friday.

The governor had vowed three weeks ago to force the senators to take up the matter before they left for their summer break. But the Democrats were struggling to reorganize themselves on Friday, a day after they reclaimed control of the Senate and ended a bitter leadership feud that had halted action in the chamber for more than a month.

“Governor Paterson believes that marriage equality is an important civil rights issue and will be working with Senate leaders to move the process forward,” said the spokesman, Peter E. Kauffmann, adding that the governor was more immediately focused on the state’s dwindling tax revenues.

Mr. Kauffmann said the governor would probably call a special legislative session in early September so lawmakers could close an anticipated hole in the state’s budget.

“At that time,” Mr. Kauffmann said, “he will also work with legislative leaders to include additional issues that were not addressed in regular session, such as unemployment insurance, marriage equality and ethics reform.”

Senate Democrats are unlikely to take up the marriage bill on their own. They remain deeply divided and, in many cases, estranged from one another, after the infighting and personal attacks of the nearly five-week leadership battle.

Democratic leaders said they would return to the capital next Wednesday and Thursday to conclude the legislative session but would avoid the most divisive issues.

“There was a general consensus that we wouldn’t take on extremely controversial bills in the next week,” said Pedro Espada Jr., who was named Senate majority leader on Thursday. He added, “There’s a point that was reached and exceeded in terms of the exhaustion factor for the institution as a whole.”

Notable bills whose fate remains unclear include a measure that would allow Mayor Michael R. Bloomberg to retain control over New York City’s public schools and legislation to expand the city’s rent control laws.

Lawmakers were negotiating with the city on Friday to amend mayoral control legislation supported by Mr. Bloomberg. Senator John L. Sampson, the leader of the Democratic caucus, supports a greater role for parents in the school system.

Mr. Espada said that he expected the Senate to take up the mayoral control measure next week, and that bills intended to bolster rent control laws were likely to be shelved, at least for now. Mr. Espada and other top Democrats have forged close ties to the real estate industry.

On same-sex marriage, several senators said privately that the caucus was reluctant to take it up because of the strident opposition of Senator Rubén Díaz Sr., a Bronx Democrat and Pentecostal minister. With the caucus holding a tenuous single-seat majority, there is a focus on keeping members happy.

“We just got unity,” Mr. Díaz said in an interview when asked about the marriage issue. “Don’t start to un-unify us. Let us have some kind of honeymoon.”

Last month, the governor, a champion of same-sex marriage rights, vowed to make sure that the Senate voted on the issue before breaking for the summer. “It has always been my intention to see same-sex marriage come to the floor,” he said on June 21, adding, “I don’t want there to be any confusion.”

Mr. Paterson declined to be interviewed about his shift in plans.

The Senate stalemate ended on Thursday after Mr. Espada, of the Bronx, abandoned an alliance with the Republicans. He returns to a caucus bitterly divided along racial lines and in the throes of reorganization.

Under a new leadership deal, Mr. Sampson, of Brooklyn, is the effective leader of the Senate and Mr. Espada has the vaguely defined title of majority leader. Malcolm A. Smith of Queens, the former Democratic leader, will remain as Senate president for what senators describe as a transition period.

Other bills that may be taken up include measures to overhaul the state’s embattled ethics oversight panel, the Commission on Public Integrity, and to provide less generous pension benefits to new public workers. Democrats are also negotiating with Republicans, in fits and starts, over rule changes to make the Senate operate more fairly.

“I don’t think we’re going to have a very ambitious agenda,” said Senator Eric T. Schneiderman, a Manhattan Democrat. He added, “Under the present circumstances, with all of the breakdowns in the system and the traumatized personal relationships, I think most of the senators would like to pass the things we have to pass and get out of town.”

The Senate resumed business late Thursday, and senators stayed until about 2 a.m. Friday to pass largely uncontroversial bills.

Senators were in a feisty mood. Some criticized the governor as taking an unusually hard line against them over the last month. And they took the rare step of voting down, by a 35-to-27 vote, a measure backed by Comptroller Thomas P. DiNapoli that would have allowed local governments to borrow state money to pay their pension bills.

The vote was widely seen as a rebuke to Mr. DiNapoli, who had withheld the paychecks and travel vouchers of senators in recent days to try to prod them to end their standoff. There was broad laughter in the chamber after the bill was defeated.

Senators concluded by approving a sales tax increase for New York City, raising the tax by one-half of a percentage point, to 8.875 percent. The stalemate delayed passage of the bill, costing the city an estimated $60 million.

A number of Democrats criticized the measure as unfairly burdensome to the poor. Senator Liz Krueger, a Manhattan Democrat, said the Senate should let the city balance its own budget.

“We, as we know, have our own headaches here running our state government,” Ms. Krueger said. “I’m not sure we’re up to taking on, solving the problems of, every local government.”

Jeremy W. Peters contributed reporting.

Wednesday, June 3, 2009

THE IMPORTANCE (AND RISKS) OF A POWER OF ATTORNEY

from the New York Times
May 21, 2009
Putting Your Faith in a Power of Attorney

By DEBORAH L. JACOBS
TRUST and estate lawyers routinely tell their clients about the importance of signing a durable power of attorney. Often written at the same time as a will, it appoints a family member, friend or adviser as an agent to act on your behalf in financial and legal matters — even if you become incompetent.

But as essential as these documents are, they face new — and continuing — obstacles. One is using them amid the disruptions in the financial services industry. Another is an old problem that may have grown more acute after recent scams and frauds: Many people mistrust these documents, which give unbridled power to your agent. So some people sign them to appease their lawyers but never give them to the person designated to handle their affairs.

“A power of attorney is a license to steal,” said Bernard A. Krooks, a specialist in elder law at Littman Krooks in New York who nonetheless encourages clients to sign a power of attorney. “You have to be careful who you appoint as your agent.”

Some states have tried to reduce abuses. In New York, for example, a new law requires that as of Sept. 1 all new powers of attorney be signed not only by the principal (the person granting the power) but also by the agent — a reminder of his or her obligation to put the principal’s welfare first.

In addition, if the power of attorney includes the authority to make total annual gifts of more than $500 to one person or charity, that power must be included in a separate rider that, like a will, must be signed in the presence of two witnesses.

The law, enacted Jan. 27, may deter some people from signing a power of attorney, Mr. Krooks said.

He and other lawyers remind their clients that even if signing a power of attorney makes the client feel vulnerable, it’s far better than living without one. If you become incompetent, you lack the capacity to make legally binding commitments. Without a power of attorney, your family might have no choice but to ask a court to appoint a guardian to oversee your finances. This can be an expensive and sometimes embarrassing ordeal and can involve unpleasant, even acrimonious, exchanges.

Although the two are sometimes confused, a durable power of attorney, which deals only with financial matters, and a health-care proxy, which authorizes an agent to make medical decisions on your behalf, are distinctly different. And when thinking about signing a durable power of attorney, it is important to consider the following issues:

WHOM CAN YOU TRUST? The best person to put in charge, lawyers say, is a close family member — preferably one who lives nearby. Most financial advisers do not want this responsibility, nor is it cost effective to pay their hourly fee to handle routine tasks like paying bills.

Naming joint agents, which is allowed only in some states, is one way to provide checks and balances. Or you can appoint another person, like an attorney, an accountant or a family friend, to supervise the arrangement.

Before appointing an agent, it is important to determine whether that person is willing to take on the duties. If you’re nervous about giving the signed document to your designated agent right away, you could leave it with your lawyer with instructions on when to turn it over, said Gloria S. Neuwirth, a lawyer with Davidson, Dawson & Clark in New York. In that case, remember to tell your agent whom to contact.

WHAT POWERS SHOULD BE INCLUDED? You ought to authorize your agent to take any financial action you could take yourself, said Lawrence P. Katzenstein, a lawyer with Thompson Coburn in St. Louis. This could include estate-planning strategies like financing college savings plans for children or grandchildren, prepaying charitable bequests and converting traditional I.R.A.’s to Roth I.R.A.’s.

If you have set up a living trust — a way to provide for yourself financially and to transfer assets to friends or family after your death instead of having them distributed under the terms of a will — you should carefully distinguish between the responsibilities of the trustee and those of the agent, Mr. Katzenstein said. He recommends that you indicate whether the agent may take money out of the trust, and that you give the agent the authority to transfer assets into it if you become incompetent.

Even if most assets are ultimately held by the trust, you still need the agent to perform quasi-personal functions like signing a nursing home contract or tax return and accessing a safe-deposit box.

This is not always easy, and the digital world has made it harder, in some ways.

Wendy S. Goffe, a lawyer with Graham & Dunn in Seattle, relied on a power of attorney that her husband, Scott Schrum, had given her to piece together his paperless financial life after it was found that he had cancer. While he was disabled, the form gave Ms. Goffe access to electronic records, including those for her husband’s rollover I.R.A. and 401(k) and the 529 college savings plan he had managed for their daughter Maya, 7.

The biggest chore was tracking down shares of stock that Mr. Schrum, also a lawyer, had purchased by exercising employee options online. Because of “a string of bad luck,” Ms. Goffe said, the financial institution holding the options and the couple’s brokerage company had been sold, their Web sites eliminated and the records put into storage. The shares, worth $7,500, had been credited to a stranger’s account. In dealing with each institution, she needed to present the power of attorney.

WHEN DOES THE DOCUMENT TAKE EFFECT? You can choose to make it effective from the moment you sign it, or specify that it be activated by a specific event, for instance, if you become incompetent.

The problem with the second approach, known as a springing power, is that someone must decide when you have reached that state, said Ms. Neuwirth, the New York lawyer. Traditionally, this has required a medical opinion and can lead to disputes.

Even when powers are effective immediately, the agent may not be sure when it’s necessary to take control. That is what happened to Dr. Mark Segall, a surgeon in Los Gatos, Calif., who said his elderly parents gave him power of attorney in 1996.

Knowing that they were private about financial matters and valued their independence, he did not use it until last year, when he said they seemed relieved to have his help. He then discovered that they had been shredding all their mail, including bills, for many months and had accumulated about $1,100 in finance charges on their credit card (at Dr. Segall’s request, the company waived the late fee).

WHERE IS A POWER OF ATTORNEY VALID? Because state laws vary, you cannot assume that a power of attorney signed in one state will be honored in another. Howard M. Hujsa, a lawyer with Cummings & Lockwood in Bonita Springs, Fla., recalled a client whose son was unable, under his mother’s power of attorney, to sell her house after she became incompetent.

Her power of attorney was signed in Massachusetts, which at the time required only one witness; his mother had moved to Florida, where the property was located, and Florida law says an agent with power of attorney cannot sell real estate on behalf of the principal unless the document is signed by two witnesses.

The family had to go to court to have the son appointed as guardian. He continued in this role until his mother died several years later and he had to file annual reports to the court, something an agent under a power of attorney is not required to do. The process wound up costing the family more than $30,000 in additional legal fees, Mr. Hujsa said.

Likewise, if you plan to spend time overseas and buy or sell real estate, conduct business or open a bank account there, you need to find out what the law in that country requires, said Anne J. O’Brien, a lawyer with Arnold & Porter in Washington. Very few countries will honor durable powers of attorney from other jurisdictions, she said.

While some countries have an equivalent form, others permit the arrangements only under court supervision, said Mark Summers, a lawyer with Speechly Bircham in London. In Britain, you must use a power of attorney that is 25 pages long.

Many Americans are surprised to find out that a British power of attorney can cost several thousand dollars, he said, about 10 times what a lawyer would charge in the United States to prepare a much shorter document.

CALIFORNIA HIGH COURT UPHOLDS GAY MARRIAGE BAN


FROM THE NEW YORK TIMES
May 27, 2009
California High Court Upholds Gay Marriage Ban

By JOHN SCHWARTZ
The California Supreme Court upheld a ban on same-sex marriage Tuesday, ratifying a decision made by voters last year. The ruling comes at a time when several state governments have moved in the opposite direction.

The court’s decision does, however, preserve the 18,000 same-sex marriages performed between the justices’ ruling last May that same-sex marriage was constitutionally protected and voters’ passage in November of Proposition 8, which banned it.

The court’s opinion, written by Chief Justice Ronald M. George for a 6-to-1 majority, noted that same-sex couples still had a right to civil unions. Such unions, the opinion said, gives those couples the ability to “choose one’s life partner and enter with that person into a committed, officially recognized and protected family relationship that enjoys all of the constitutionally based incidents of marriage.”

Justice George wrote that Proposition 8 did not “entirely repeal or abrogate” the right to such a protected relationship. Instead, he said, it “carves out a narrow and limited exception to these state constitutional rights, reserving the official designation of the term ‘marriage’ for the union of opposite-sex couples as a matter of state constitutional law.”

The 18,000 existing marriages can stand, he wrote, because Proposition 8 did not include language specifically saying it was retroactive.

Heated reaction to the decision began immediately, with protesters blocking traffic near the Supreme Court building in San Francisco and advocates for same-sex marriage making plans for their own ballot initiative.

In Los Angeles, Jennifer C. Pizer, marriage project director for the gay rights organization Lambda Legal, said the decision “puts it to us to repair the damage at the ballot box.” One of the state’s largest gay rights groups, Equality California, sent an e-mail message to supporters pleading for contributions to raise $500,000 toward “a massive campaign to put an initiative on the ballot and win.”

Shannon Minter, legal director of the National Center for Lesbian Rights, called the decision “a terrible blow to the thousands of gay and lesbian Californians who woke up this morning hoping and praying their status as equal citizens of this state would be restored.”

Those who backed Proposition 8 were elated. Andrew P. Pugno, general counsel for ProtectMarriage.com, the leading group behind last year’s initiative, said he and his allies were “very gratified” by the decision.

“This is the culmination of years of hard work to preserve marriage in California,” Mr. Pugno said in an e-mail message.

Kenneth W. Starr, dean of the Pepperdine University School of Law, who had argued before the justices in favor of Proposition 8, said the ruling “represents a ringing judicial affirmation of the right of the people of California to amend the State Constitution at the ballot box.”

The California court ruled last May that same-sex couples enjoyed the same fundamental “right to marry” as opposite-sex couples. That sweeping 4-to-3 decision provoked a backlash from opponents that led to Proposition 8, which, after a bitter campaign fight, garnered 52 percent of the vote in November.

Tuesday’s opinion focused on whether the use of a voter initiative to narrow constitutional rights under Proposition 8 went too far.

Supporters of same-sex marriage, who filed several suits challenging the proposition after its adoption, argued that the change to the state’s Constitution was so fundamental that the initiative was not an amendment at all but instead a “revision,” a term for measures that rework core constitutional principles.

Under California law, revisions cannot be decided through a simple signature drive and a majority vote, as with Proposition 8. Instead, they can be placed on the ballot only with a two-thirds vote by the Legislature.

But the justices said the proposition was an amendment, not a revision. It has been historically rare for the state’s courts to overturn initiatives on the ground that they are actually revisions, and many legal scholars had deemed the challenge to Proposition 8 a long shot.

During oral arguments, in March, the justices’ questions clearly anticipated the reasoning of Tuesday’s majority opinion, with Justice Joyce L. Kennard suggesting then that even if the initiative took away the “label of marriage,” it did not undermine the substantive rights involved. Mr. Minter, representing the plaintiffs, disagreed, arguing that without the word “marriage,” same-sex couples would find “our outsider status enshrined in our Constitution.”

Chief Justice George’s opinion dealt directly with that point, stating that the court understood the importance of the word and was not trying to diminish that importance. But, he wrote, the legal right of people to call themselves married is only one of the rights granted to same-sex couples in the decision last May, and so “it is only the designation of marriage — albeit significant — that has been removed by this initiative measure.”

Karl M. Manheim, a professor at Loyola Law School Los Angeles who had filed a brief with the court opposing Proposition 8, called the decision a “safe” one from justices who can be recalled by voters. The change wrought by Proposition 8 was anything but narrow, Professor Manheim said, and claiming that the word “marriage” is essentially symbolic is like telling black people that sitting in the back of the bus is not important as long as the front and the back of the bus arrive at the same time.

In nearly three months since the case was argued, three other states have legalized same-sex marriage, joining Massachusetts and Connecticut, which had already done so. On April 3, the Iowa Supreme Court, repeatedly citing California’s decision of last May, struck down a state statute that limited civil marriage to the union of a man and a woman.

Less than a week later, the Vermont legislature narrowly overrode Gov. Jim Douglas’s veto of a bill that allowed same-sex couples to marry.

Then, on May 6, Maine’s legislature, too, passed a bill allowing same-sex marriage, and Gov. John Baldacci promptly signed it.

Initiatives legalizing same-sex marriage are also moving forward in New York and New Jersey. A similar measure stalled by a slim margin in the New Hampshire legislature this month but could come up for a new vote in June. In addition, opinion polls of Americans’ attitude toward same-sex marriage indicate that they favor allowing it.

The sole dissenting vote in Tuesday’s decision came from Justice Carlos R. Moreno, previously mentioned as a possible choice by President Obama for the United States Supreme Court.

Justice Moreno wrote that Proposition 8 means “requiring discrimination,” which he said “strikes at the core of the promise of equality that underlies our California Constitution” and, he added, “places at risk the state constitutional rights of all disfavored minorities.”

Saturday, April 18, 2009

NY GOV PATERSON INTRODUCES SAME-SEX MARRIAGE BILL



April 17, 2009
Paterson Introduces a Same-Sex Marriage Bill

By JEREMY W. PETERS
Gov. David A. Paterson introduced a bill on Thursday to legalize same-sex marriage, vowing to personally involve himself in the legislative debate at a level that is rare for a chief executive in New York.

Throwing the weight of his office behind legislation that still faces considerable obstacles in Albany, Mr. Paterson said he would leverage the personal relationships he developed over two decades in the State Senate to see the bill voted on — and passed. The vote is expected to turn on the thinnest of margins in the Senate, and some advocates say Mr. Paterson’s direct involvement could prove pivotal.

At a news conference in Manhattan on Thursday, Mr. Paterson, a Democrat, invoked the abolitionist movement of the 1800s, the writings of Harriet Beecher Stowe and the Supreme Court’s Dred Scott decision to argue that New York had neglected civil rights for gays and lesbians for too long. “I’m putting a stop to it,” he said. “We have a duty to make sure equality exists for everyone.”

The announcement came amid growing activity around the country on same-sex marriage: Iowa and Vermont have legalized the practice in the past month, and the New Hampshire State Senate has been debating it this week. Massachusetts and Connecticut already have gay marriage, and a campaign is under way to extend it across New England by 2012.

In New York, the State Assembly passed a same-sex marriage bill in 2007 by a vote of 85 to 61, a margin expected to widen when the measure is reconsidered this spring. But the path in the Senate is less clear: 32 votes are needed, and Democrats say about 25 of their 32 members now support it. So the outcome will most likely hinge on whether Mr. Paterson and other advocates can persuade Republican senators reluctant to break ranks with their leaders to back the bill.

Gay-rights advocates expressed confidence on Thursday that Governor Paterson’s personal involvement could make a difference, despite his dismal approval ratings and struggle to advance other aspects of his agenda. They said lawmakers sometimes feel less confined by partisan loyalty on civil rights issues like same-sex marriage.

“This isn’t something that hinges on his popularity — it’s too personal of an issue,” said Alan Van Capelle, executive director of the Empire State Pride Agenda, the gay-rights group pushing same-sex marriage. “It defies ordinary Albany political logic.”

Mr. Van Capelle and other advocates pointed out that in 2002, 13 Republicans joined 21 Democrats to pass a law that specifically banned discrimination based on sexual orientation. The outcome of that vote was in doubt until the last minute — an uncommon occurrence in Albany, where the leaders of the Senate and the Assembly rarely allow bills to reach the floor without being sure they will pass.

Some supporters of same-sex marriage, most notably Mr. Paterson, are pushing for a similar approach now. By forcing a vote without knowing its result, the logic goes, dubious senators might feel pressured to support the bill for fear of appearing hostile to gay rights.

Gay advocacy groups are a powerful force in Albany. The Human Rights Campaign, Gill Action Fund and Empire State Pride Agenda funneled hundreds of thousands of dollars into a handful of competitive campaigns last year, helping Democrats pick up two seats to capture a majority in the Senate for the first time in more than four decades.

“It’s sort of a carrot and stick argument,” said Daniel J. O’Donnell, an assemblyman from the Upper West Side who is leading the effort in that house to shore up support for Mr. Paterson’s bill. “If you move ahead with the bill, you could use the stick and say, ‘You’re not our friend if you vote against us, and we’re going to find someone to replace you.’ ”

But Austin Shafran, a spokesman for the Senate majority leader, Malcolm A. Smith, said on Thursday that the bill would “be brought to the floor as soon as there are enough votes to pass it.”

Mr. Paterson’s role in steering the bill through Albany, which is still being worked out among his aides, legislative officials and lobbyists, is the latest in a list of personal campaigns on gay-rights issues throughout his career.

As a rank-and-file state senator in the 1980s, Mr. Paterson led the first effort to establish hate crimes laws in New York. Years later, when a hate-crimes bill passed, in 2000, it included protections for gays and lesbians at Mr. Paterson’s urging.

In 2002, as the Senate minority leader, Mr. Paterson led Democrats in rounding up enough votes to pass the law prohibiting discrimination against gays and lesbians. He has frequently attributed his passionate advocacy of gay rights in large part to his close relationship with a gay couple who were friends with his parents in Harlem. He still affectionately refers to the couple, now deceased, as Uncle Stanley and Uncle Ronald.

His emotional investment in the issue was on display Thursday in a 15-minute speech that placed gay marriage in the historical context of slavery, disenfranchisement of women and shunning the disabled.

“We have all known the wrath of discrimination,” said Mr. Paterson, New York’s first black governor. “We have all felt the pain and the insult of hatred. This is why we are all standing here today.”

Surrounded by some three dozen members of the state’s political establishment, including members of Congress, senior state legislators and Mayor Michael R. Bloomberg, he added: “We wish to fulfill the dreams of those Americans, both the living and the dead, who struggled unremittingly and courageously over the past two centuries to expand those freedoms to more Americans. Often we have fallen short, but the marvel and the miracle of America is that we keep marching forward for justice.”

Monday, April 13, 2009

GAY VOWS, REPEATED FROM STATE TO STATE: WILL THE US SUPREME COURT STEP IN?

From the New York Times
April 12, 2009
Gay Vows, Repeated From State to State

By ADAM LIPTAK
WASHINGTON — And now there are four. In the space of a week, the number of states allowing same-sex marriage has doubled, with Iowa and then Vermont joining Massachusetts and Connecticut. In California, gay and lesbian couples were exchanging vows for five months before voters put a stop to the practice in November. Californians are still talking it over, though, and loudly. New York and New Jersey may be next to debate the question.

In other contexts, this sort of turmoil might amount to an invitation for the United States Supreme Court to step in. But there are all sorts of reasons the court is likely to keep its distance, and a central one is the endlessly debated 1973 decision that identified a constitutional right to abortion.

“The concern about creating another Roe v. Wade looms large,” said Nathaniel Persily, who teaches law and political science at Columbia. “At least five members of this court, if not more, would probably be reluctant to weigh in on this controversy, especially given the progress that is being made in state legislatures, state courts and public opinion.”

Court decisions on issues like school desegregation, abortion and same-sex marriage can raise questions about the judicial branch usurping the democratic process. But there are strategic issues as well. The Supreme Court not only decides cases but also decides which cases to decide. In jurisprudence as in life, timing is everything.

Even some strong supporters of abortion rights believe, for instance, that Roe went too far too fast and may have been counterproductive. One of them is Justice Ruth Bader Ginsburg.

“The court bit off more than it could chew,” Justice Ginsburg said in remarks after a speech at Princeton in October. It would have been enough, she said, to strike down the extremely restrictive Texas law at issue in Roe and leave further questions for later cases.

“The legislatures all over the United States were moving on this question,” she added. “The law was in a state of flux.”

Roe shut those developments down and created a backlash that lasts to this day.

“The Supreme Court’s decision was a perfect rallying point for people who disagreed with the notion that it should be a woman’s choice,” Justice Ginsburg said. “They could, instead of fighting in the trenches legislature by legislature, go after this decision by unelected judges.”

Until the Vermont Legislature acted on Tuesday, victories for same-sex marriage also came only from courts, but they were state courts. These courts based their decisions on state constitutions, which, moreover, means that the United States Supreme Court almost certainly could not review those particular rulings, even if it were inclined to.

Successive state court lawsuits from supporters of same-sex marriage reflect a strategy that is pragmatic about building local support, said Andrew Koppelman, a law professor at Northwestern. “The Iowa decision,” he said, “is the product of a very smart legal team researching every state supreme court and every state legislature.” The Iowa Supreme Court ruled in favor of same-sex marriage a little over a week ago.

“It’s courts that started this,” Mr. Koppelman said of the same-sex marriage movement. “The courts are able to make a difference if there is a social movement that could go either way.”

Patrick J. Egan, who teaches politics and public policy at New York University, said the aftermath of controversial court decisions tended to follow a pattern. Immediately after a decision, he said, the mere fact of judicial endorsement of a position increases public acceptance slightly. Then politicians’ initial reactions can help sway public opinion.

The pattern on same-sex marriage, Professor Egan said, is that “Republicans react very opposed and Democrats react very, very neutrally.” As a consequence, he said, “opposition to same-sex marriage shoots up a bit in the month or two or three after a big court decision.”

Later, though, unless the decision is overturned, the public lives with the consequences and decides for itself. “Over time,” Professor Egan said, “people’s experience with the policy changes their attitudes.”

Professor Koppelman said Roe followed that general pattern.

“On the one hand, Roe certainly triggered an enormous backlash,” he said. “On the other hand, it created a generation of American women who grew up with the right to abortion assumed.”

In “Public Opinion and Constitutional Controversy” (Oxford, 2008), Professors Egan and Persily, along with Kevin Wallsten, tracked public opinion about gay rights after several court decisions.

When the Supreme Court, in Lawrence v. Texas in 2003, struck down a Texas law making homosexual sex a crime, public support for same-sex marriage — a question not directly implicated by the decision — dropped sharply. “Even that case actually provoked a major backlash,” Professor Persily said.

Five months later, the Supreme Judicial Court of Massachusetts issued its decision allowing same-sex marriages, causing public support for such marriages to fall further. It did not recover to pre-Lawrence levels until 2005.

But since then there has been remarkable movement in support of same-sex marriage.

“The most recent CNN poll put it at 44 percent,” Professor Persily said. “More important, the opposition has gone down. And people who are opposed are much more likely to favor civil unions,” as opposed to no rights at all for gay couples.

“There has been a shift of about 10 percentage points in five years” in public support for same-sex marriage, Professor Persily added. “On a deep moral issue like this, that’s very rare.” Public opinion about abortion, by contrast, “has been largely frozen for years.”

The trend toward greater support for same-sex marriage is likely to continue, Professor Egan said. Part of it is generational: younger people are far more apt to support gay rights than older people. And part of it is a product of changing social attitudes.

Since the Vermont Legislature decided to allow same-sex marriages, legal scholars have been debating whether that political victory could have been secured without the judicial decisions that preceded it.

“Without the activist decisions on same-sex marriage,” Professor Persily said, “there might not have been a fire lit under the legislature that passed it.”

Wednesday, April 1, 2009

NEW YORK HIGH COURT TO HEAR APPEALS ON OUT OF STATE SAME-SEX MARRIAGE CASES

From the New York Times.
April 1, 2009
State Court of Appeals to Hear Two Same-Sex Marriage Cases

By JEREMY W. PETERS
ALBANY — The state’s highest court agreed on Tuesday to hear arguments in two cases that challenge New York’s recognition of same-sex marriages legally performed elsewhere.

Lower courts have already sided with two government entities that revised their policies to honor the marriages, but those decisions were appealed by the Alliance Defense Fund, a Christian group that is waging multiple legal battles in New York to stop state and local entities from recognizing marriages of same-sex couples who were wed in places, like Massachusetts and Canada, where the ceremony is legal.

Neither case involved Gov. David A. Paterson’s directive last May that ordered state agencies to recognize legal same-sex marriages performed outside New York State.

One case, Godfrey v. Spano, stems from the Westchester County executive’s 2006 decision to begin officially honoring out-of-state marriage licenses for gay couples the same way it did for heterosexual couples.

The other case, Lewis v. New York State Department of Civil Service, was filed after the department agreed in 2007 to begin recognizing out-of-state, same-sex marriages for the purpose of extending health insurance to spouses of public employees.

Brian Raum, senior legal counsel for the Alliance Defense Fund, said Tuesday that the group believed that the Court of Appeals would reverse the lower courts in both cases.

“We’re confident that we’re on the right side of the law,” he said. “The law in New York states it will not recognize marriages that conflict with public policy in New York. Since New York only recognizes marriage between one man and one woman, for any court to recognize same-sex marriage would be to recognize marriages that run contrary to New York law.”

Susan Sommer, senior counsel from Lambda Legal, a gay rights group that is representing Westchester County and the civil service department, said she had hoped the court would decide not to hear the cases, but added that she was optimistic it would not rule against same-sex couples.

“I think the rulings in the lower courts were correct and consistent with all the other prevailing decisions in the state,” she said. “I’m looking forward to making the same arguments to the high court so we can ask it to affirm those same arguments that have prevailed in all other cases.”

Sunday, March 8, 2009

WHAT CONTRACT?


from the New York Times
March 8, 2009
What Contract?

By MICHAEL M. GRYNBAUM
COULD the days of the iron-clad contract be numbered?

It used to be that once a buyer went to contract on an apartment, the terms of the deal were all but set in stone. Sales prices never budged, and if the buyer balked, the down payment went bye-bye.

But double-digit price declines and the lending drought have started to threaten this once near-inviolable pillar of New York real estate. Buyers are demanding concessions from developers on apartments that they say have lost up to 30 percent in value. Others are hoping to back out of their contracts entirely, while keeping their down payments in the process.

The sudden demand has sent lawyers scurrying to uncover avant-garde legal tactics for ducking out of a deal. Downtown conversions like 75 Wall Street and new developments like One Hunters Point in Long Island City are facing suits from buyers seeking to break contracts on the basis of a once-obscure consumer protection law.

The number of New Yorkers filing claims with the attorney general’s office to claw back their down payments has more than tripled in the last two years, although most disputes don’t reach this step. In 2007, 57 claims were filed; in 2008, 168. By Feb. 20 of this year, the office had already recorded 74 claims.

The ultra high end is not immune. At the Brompton, a heavily marketed Upper East Side condominium designed by the architect Robert A. M. Stern, lawyers say some buyers are calling on the project’s developer to pay closing costs, cover taxes and relocation expenses, and, yes, even retroactively drop the price of apartments.

It remains unclear whether these efforts will be convincing, whether at the negotiating table or in a court of law. On the developer’s side is the legal strength of a signed contract and the financial leverage of a buyer’s deposit.

But the incentives have realigned in a market where many apartments are now worth less than their purchase prices. It may make financial sense for buyers to cut their losses and leave their deposit on the table rather than move into a money pit. And while developers would pocket the down payment, they might be stuck with a unit that eventually sells for much less — or even worse, just sits. This new math may put some developers in a negotiating mood.

“Behind this, the big elephant in the room is the price,” said Adam Leitman Bailey, a real estate lawyer who says he is representing unhappy buyers from nearly 50 buildings.

The traditional method for a buyer to break a contract is to prove that some element of the completed unit differs from the developer’s offering plan. This is why lawyers have been known to use lasers to measure square footage to within a millimeter and to debate descriptions of views and amenities.

But if the issue is more financial than material, buyers may be forced to “in essence, throw themselves at the mercy of the developer,” said Peter Graubard, a real estate lawyer.

“They are saying, ‘Hey, listen, I’m in a financial hardship and the loss of this 10 or 15 percent deposit is going to be devastating to me right now,’ ” said Mr. Graubard, explaining that every one of his clients who went to contract before October 2008 — about 30 in all — is trying to renegotiate or abandon a deal.

Officials at the attorney general’s office said they were seeing more appeals based on such emotional pleas.

But these arguments may not fly. Unless a contract includes a mortgage contingency, nothing in the law allows for a change in financial circumstances or the lending market to constitute a “right of rescission.”

Sometimes, though, a bit of saber-rattling can shake loose concessions.

“Threatening not to close, threatening legal action, maybe the threat of an attorney general’s action, all can bring a developer to negotiate,” Mr. Graubard said.

Some lawyers are looking beyond the traditional methods of arguing breach of contract.

A Web site called No-Condo.com opened in December and immediately received nearly 100 queries from New York residents who want their deposits back. It is the brainchild of Lawrence Weiner, a lawyer at Wilentz, Goldman & Spitzer in Woodbridge, N.J., whose arsenal includes the Interstate Land Sales Full Disclosure Act, a 41-year-old consumer protection law rarely applied in the city.

Created to protect against speculators selling uninhabitable plots, the act requires developers of condominiums or conversions with more than 100 units to provide buyers with a particular type of property report containing information like proof of ownership and the availability of public utilities.

“I wouldn’t categorize it as a technicality,” Mr. Weiner said. “A lot of developers, in a rush to bring things to market, chose not to comply, or maybe they didn’t even realize they needed to comply.” Since December, Wilentz has filed lawsuits on behalf of buyers at 20 Pine Street, 75 Wall Street, One Hunters Point, One Brooklyn Bridge Park and 111 Fulton Street. The developers of these buildings all declined to comment or did not return calls.

The law has its limits as a negotiation device: a developer is exempt from the act if he or she has pledged to complete the unit within two years. But for distressed buyers in certain buildings, the Land Sales Act may offer a way out.

Cynthia Ehrlich, a self-employed tax accountant in her early 50s, made an $85,000 down payment — “all the money I had” — last March on a small one-bedroom at 75 Wall Street, a full-service condominium converted from an old bank building.

The problems began almost immediately. Ms. Ehrlich said she had been attracted to the property by a 10-year tax abatement, but soon learned that the development had not yet qualified for the abatement program. In May, she lost a major source of revenue, and was consequently turned down for a mortgage. Because her contract did not have a contingency clause, she said, the developer declined to return her deposit.

She plans to file suit this month for a return of her deposit on the grounds that the property violated the Land Sales Disclosure Act by not providing the proper property report. Ms. Ehrlich said she had regained hope after learning of the existence of the act.

“It’s the only good news I got,” Ms. Ehrlich said. “It’s a lot of money to lose, and I don’t make a lot.”

The developer of 75 Wall Street, the Hakimian Organization, declined to comment.

At the Brompton, with its “Stylishly Proper” slogan, luxe location on East 85th Street and prices to match, several buyers said they were in financial straits. A group of nearly 30 buyers recently organized over the Internet and held a meeting to discuss their options.

“We just feel this is not primarily a real estate issue,” said Patricia Congiu, 45, an Upper East Sider who went to contract on a 1,900-square-foot three-bedroom in September 2007. “This is not a situation where someone signed a contract and the price went down. It’s a global recession, like nothing seen since the Great Depression.”

Ms. Congiu said she and her husband had “wanted the building to be our final home. We were looking forward to raising our family there.” But now she is not sure whether her income can support the property. Like several other buyers in the Brompton, she said she hoped the developer, the Related Companies, would sympathize with their situation and provide relief so they can move in. “If they gave us a concession,” she said, “we can have a cushion. I don’t want to hurt the building.”

Other unhappy buyers at the Brompton say financial concerns are not the issue. Marc Rossell, 54, went to contract with his wife in August 2007 for a 3,600-square-foot spread, combining three ninth-floor apartments.

He said he was told by the developer that his southern view would clear an adjacent building, but on a walk-through inspection, he found “a water tank right there outside of our windows, and an ugly rooftop.” Mr. Rossell did not think the view matched the description in the offering plan, and believed the discrepancy could help him get free of his contract.

“It didn’t seem to be of the same quality that they basically represented in the showroom,” he said. “We definitely have the money. It’s not that at all.”

Through a spokeswoman, Related declined to comment.

As buyers become more cautious, contracts may begin looking more like they did before the housing boom of the last 15 years.

“You’re going to see a shift back toward an inclusion of mortgage contingencies,” predicted Jay B. Solomon, a partner at Klein & Solomon, a real estate law firm. Such contingencies provided an out for buyers when financing was not available, but they fell out of favor in the last 15 years as buyers faced more competition for apartments.

Under New York state law, buyers in a new development have the right to get out of their contracts if the developer does not close at least one unit within a year of the originally projected start date. Developers almost always find a way to meet this requirement, but lawyers say that buyers are now putting those initial deals under a microscope.

“If you see one unit that’s closed and nothing else for three months, that seems sort of suspect,” said Meg Goble, a partner at the real estate law firm Hanley & Goble. “If you see the unit has closed and there’s no certificate of occupancy, that also looks sort of suspect.”

Ms. Goble said evidence that the sponsor had spun some sort of sweetheart deal for the unit, like giving it away to a friend, could provide a legal ground for breaking a contract.

Of course, not everyone in the industry has sympathy for the buyer who wants concessions or money back.

“I think it is the height of audacity,” said Stuart Saft, a partner in the real estate division of Dewey & Leboeuf, which represents several large developers in contract disputes. “The buyer calls and says, ‘The apartment is not worth as much as when we signed for it.’ My response for that is, if the market went up 20 percent, would you have given us 20 percent more because the market improved?”

And for his part, Mr. Graubard, primarily a buyers’ lawyer, is skeptical of efforts to undo purchase agreements. “You really can’t get that creative; there’s only so far you can go,” he said. “Without the enforceability of a signed contract — well, really, what do we have?”