Contract Matters: Working Together to Negotiate Complex Transactions Presented by: Steven Ebert, Esq., Managing Member, Ebert Lontok, LLC (“EL”) 110 East 30th Street, 5th Floor New York, NY 10016 Telephone: 212-290-4000 Email: steven.ebert@ebertlontok.com www.ebertlontok.com Ebert Lontok Attorneys-at-Law
Table of Contents What are the Consequences of Default Under the Contract? Pitfalls for Clients in the “Standard Form” Contract Mortgage Contingency Board Approval Property Violations Representing and Managing Investor Clients Representing and Managing Foreign National Clients
The Contract Deposit & Default How much for the Contract Deposit? Customary Minimum vs. Maximum Risks to Purchaser Risks to Seller Consequential Damages Specific Performance Notice of Pendency
Mortgage Contingency-I “The obligation of Purchaser to purchase under this contract is conditioned upon issuance…of a written commitment from an Institutional Lender pursuant to which such Institutional Lender agrees to make a first mortgage loan, [with certain terms] at the prevailing fixed or adjustable rate of interest and on other customary commitment terms.”
Mortgage Contingency-II “To the extent a Commitment is conditioned on the sale of Purchaser’s current home, payment of any outstanding debt, no material adverse change in Purchaser’s financial condition or any other customary conditions, Purchaser accepts the risk that such conditions may not be met…”
Mortgage Contingency-III Controlled Purchaser Risks: Mortgage and HELOC Sale of a Property Credit Scores Assets (Risk of Market Fluctuations) Income Uncontrolled Purchaser Risks: Unilateral Bank Changes/Guideline Issues Commitment Expirations Bank Funding Failure Last Minute Surprises
Mortgage Contingency-IV Gaps of the Mortgage Contingency Document Expiration Project Approval Expiration Interest Rate Lock Expiration (Concerns in a rising rate market) Is a Funding Contingency Possible Solution?
Mortgage Contingency -- V “Know Before You Owe” – CFPB 10/3/15 – New Concerns under the new mortgage laws (aka TRID)
Board Approvals Consent (Co-op) Right of First Refusal (Condo) Who Submits the Application? When is the Application Due? (Defined Days) Approval vs. Unconditional Consent How Much Time Must the Parties Wait for the Co-op to Act? Right of First Refusal (Condo) Who Submits the Application? When is the Application Due? (Reasonable Time) Waiver by the Condominium Board What if the Condominium Board does not Act?
Property Violations “Seller shall comply with all notes or notices of violations of law or municipal ordinances, orders or requirements noted or issued as of the date hereof by any governmental department having authority as to lands, housing, buildings, fire, health, environmental and labor conditions affecting the Premises.”
Investor Clients-I Choice of Entity Factors to Consider Liability Individual Partnership (General vs. Limited) Corporation Limited Liability Company (LLC) Liability Control Taxation
Investor Clients-II Financing Taxation Mortgages Equity Partners Income Tax of Rental Income Deductions 1031 Like-Kind Exchanges Primary Residence v. Second Home v. Investment Property (Status Conversions)
Investor Clients-III Rent Paid in Advance v. Security Deposit Is there a Limit on the Amount of the Security Deposit or the Amount of Advance Rent a Landlord can Collect? Security Deposits in Leases Escrow Accounts Who Keeps the Interest Earned?
Investor Clients-IV Property Type Specific Issues: Condominium 1 to 4 Family Rental Fees and Speed of Approvals Ownership Concentration in the Project Sponsor Competition Property Management Rehabilitation Projects Should an Investor Ever Buy in a Co-op?
Foreign National Purchasers-I Who is a “US Person”? Are there any Legal Restrictions on Purchases of US Real Estate? Funding the Purchase Money Transfers Mortgages
Foreign National Purchasers-II Applying for an ITIN (Individual Taxpayer Identification Number) Tax Status and Income Tax Payments Property Management Escrow Account
Foreign National Purchasers-III Should a Foreign National Buy a Co-op? What building rules should be checked. Can a Foreign National be “Turned Down” on a Condo Purchase?
Foreign National Sellers What do you Need to Know Before you List the Property? FIRPTA – Foreign Investment in Real Property Tax 1031 Like-Kind Exchanges ITIN (Individual Taxpayer Identification Number)
Contact Details Steven R. Ebert, Esq. Ebert Lontok, LLC 110 East 30th Street, 5th Floor New York, NY 10016 Telephone: 212-290-4000, ext 304 Mobile: 917-670-3156 Facsimile: 212-290-1717 Email: Steven.Ebert @ebertlontok.com Website: www.ebertlontok.com
Personal Biography & Firm Profile Steven Ebert has significant experience in real estate, finance and general business transactions and has received the Super Lawyers Magazine Award of Excellence in Practice in 2015 and 2014. He received his Juris Doctor from the University of Pennsylvania Law School, and also attained a Masters in Governmental Administration and a Bachelor of Arts, cum laude, both from the University of Pennsylvania as well. Mr. Ebert has represented purchasers, sellers, landlords and tenants in the acquisition and leasing of residential and commercial real estate. He has represented commercial and investment banks, credit enhancers, loan sellers and government agencies in the securitization of more than $5 billion worth of mortgage backed and other asset backed securities. Mr. Ebert has also participated in a variety of legal matters that included the formation of business entities, corporate governance matters and M&A transactions. Prior to founding Ebert Lontok, Steven Ebert was an attorney with the law firms of Cadwalader, Wickersham & Taft and Arent Fox. Before Mr. Ebert started his legal career, he served as a consultant to the Director of Commerce of the City of Philadelphia and worked on economic development programs, real estate tax abatement programs and analyzed business competitiveness factors between major municipalities across the United States. Mr. Ebert has lectured at numerous academic centers, real estate broker continuing education programs and private industry forums, including events hosted by financial institutions and real estate companies, on matters of real estate, business law and taxation. Firm Profile: Ebert Lontok maintains a strong team of attorneys and paralegals to handle your real estate needs. We regularly represent purchasers, sellers and financial institutions at closings in New York City, Westchester County, Putnam County, Long Island and other areas, and have the business, taxation and litigation expertise to address more complex matters.