Do I need to obtain a Certificate of Occupancy if I’m adding a deck to my Queens, NY home?

A Certificate of Occupancy is a document issued by the New York City Department of Buildings which is evidence that a home or addition to a home, such as a deck, has been built in accordance with plans approved by the Building Department and may legally be used or “occupied.” When buying a home, your attorney will review a report of title to make sure, among other things, that there is a certificate of occupancy (or “C of O”) for the home and any additions made to the home since it was built; such as a dormer, extension or deck.

Under the standard contract of sale used by New York City attorneys, the seller is obligated to provide such C of Os. While a seller may have cut corners when adding, say, a deck, by not filing proper plans and obtaining a C of O (yes, it is less expensive in the short run to build a deck without the proper permits) they would now have to retain professionals to file the necessary plans and undertake any remedial work which may be required to obtain the C of O. In the long run, a home owner may wind up spending more money to correct the problem created by not obtaining a C of O in the first place.

Even if you’re not planning on selling your home, by not obtaining a C of O when you build your deck, you could expose yourself to potential liability if someone is injured due to your deck not conforming to building department specifications. A tragic example of this occurred in Queens not so long ago when a second story deck collapsed resulting in injuries and a fatality. It turned out that there was no C of O for the deck and it was not built in compliance with Building Department regulations. What would otherwise have been a tragic accident became a potential multimillion dollar lawsuit.

If you plan on building a deck, or buying a home with an existing deck, be sure you consult with professionals.   You’ll enjoy your deck more knowing it’s legal and above all, safe for you and your family.

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What Not to Tell Your Real Estate Broker When Buying a Queens New York Home.

Many people  seek the services of a real estate broker when house hunting.  Real estate brokers and their sales people provide valuable services to both buyers and sellers of properties in New York.   Nevertheless, as a buyer, it is important to understand the real estate broker’s relationship with you, else in some cases you may inadvertently put yourself at a competitive disadvantage when bidding on a property.

To understand how this could occur, you must know who the broker is working for as this fact determines what duties the broker owes to each party in the transaction.  In the vast majority of cases in New York, the broker has been hired by the seller and owes, among other duties, that of confidentiality and full disclosure to their employer, the seller.  The only duties they owe to you, the buyer, is that of honesty and fair dealing. If you, as a buyer, tell the broker certain information that you don’t want to get back to the seller, say for instance your top price, not only is the broker under no obligation to keep this information confidential, but, in fact, has a duty to disclose this to the seller.  You can imagine how this could weaken your bargaining position.

The scenario where a buyer mistakenly believes the broker is working for them and owes them a duty of confidentiality, is not far fetched.  In fact, a  study conducted by the Federal Trade Commission showed a large percentage of buyers believed just that.  As a result, many states, including New York, enacted legislation requiring brokers to disclose, in writing, exactly who they are working for and what duties they owe to each party.

If you keep in mind who the broker is working for when you are house hunting, you can increase your chances of getting your new home at the best possible price.

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Do I Need to Pay Sales Tax When I buy a Business in New York?

When you purchase a New York business, you will need to pay sales tax on the value of the personal property included in the sale.  The sales tax rate depends on the county in which the business is located. In the counties comprising New York City, the sales tax rate is 8.875%.

Your purchase agreement will typically allocate the purchase price of the business among various items, for example, Good Will, a Covenant Not to Compete, a Lease, Inventory, Equipment and Motor Vehicles.  Sales tax will be due on the value allocated to the personal property; in this example, the equipment and motor vehicles.

To comply with the New York State sales tax law,  you must  file form AU-196, Notification of Sale, Transfer or Assignment in Bulk, at least ten days prior to the closing of the transaction.   In the form, you allocate the purchase price among the various items as set forth in your contract of sale.  Based on this allocation, the Tax Department will send the purchaser an invoice for the sales tax.   Additionally, the  Tax Department will perform an audit to determine if the seller has any unpaid sales tax liability.

If your  closing takes place  prior to the State’s determination of the seller’s sales tax liability, the tax law provides that the State can look to the purchaser for payment of any sales tax which may be due from the seller.  Most purchase agreements therefore will  provide for a portion of the purchase price to be held in escrow by the seller’s attorney until a final determination by the Department of Taxation of the seller’s sales tax liability, if any. Any sales tax liability of the seller will then be paid from this escrow

The allocation of the purchase price in an agreement to purchase a business will have other tax consequences in addition to determining the sales tax so it’s advisable to consult with your attorney and accountant when making the allocation in your contract.

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Queens Attorney George H. Dippel Discusses Wills and Probate on the Radio show Law You Should Know

My Blog readers are invited to listen to an exclusive preview of my guest appearances on the weekly radio program “Law You Should Know” hosted by Kenneth J. Landau, Esq on WHPC 90.3 FM, streaming on www.ncc.edu/whpc.

The first segment on Wills airs on Monday Oct 15, 2012 from 4-4:30 PM, Tuesday Oct 16, 2012 at 12 noon and Sunday Oct 21, 2012 from 7-7:30 AM. The second segment on Probate airs Monday Nov 19, 2012 from 4-4:30 PM, Tuesday Nov 20, 2012 at 12 noon and Sunday Nov 25, 2012 from 7-7:30 AM. There will be a free podcast available soon on Itunes.

Show 1 Wills  LYSK1

Show 2 Probate LYSK2

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Can I use a Power of Attorney for a New York Real Estate Closing?

I often have clients who, for various reasons, are unable to attend a real estate closing and ask if they can sign a power of attorney instead.  A power of attorney is a document in which a person appoints someone to act as their agent and perform certain acts on their behalf.  The powers which may be given to your agent are very broad, but there are limits.  You cannot grant to your agent the power to make health care decisions.  That can only be done in New York State by signing a different document called a Health Care Proxy.  Likewise, if you are a fiduciary such as an executor of an estate or trustee of a trust, you cannot delegate your powers to an agent.  Otherwise, you can grant to your agent very broad powers, for example, to manage your financial affairs, or limited powers to sign documents on your behalf at a real estate closing.

It is more common for sellers at real estate closings to use powers of attorneys. Most purchasers utilize bank financing and lenders are reluctant to permit the use of powers of attorneys by their borrowers. If you are a purchaser and need to use a power of attorney, check with your bank to see what their policy is concerning powers of attorneys.

If you are a seller or a purchaser whose lender has agreed to permit the use of a power of attorney, you can ask your attorney to prepare the power of attorney, which in New York State is known as the Statutory Short Form Power of Attorney.  The form and the meaning of its provisions is set forth in New York State’s General obligations Law section 5-1501.  The power of attorney will need to be signed by you and the person you appoint as your agent, before a notary public.  In the form, you can specify exactly what powers you are giving your agent and limit its use to a particular closing.

At the closing, your agent will need to sign an affidavit that you are alive (A power of attorney is only effective while the principal is alive.),  you have consented to the transaction, the power of attorney has not been revoked and is in full force and effect. This affidavit is commonly called a “Full Force and Effect Affidavit.”  Thus it is generally a good idea that you are available to speak to your agent by phone so that he or she can confirm these facts the day of the closing.

If you wish to use an an existing power of attorney, have it reviewed by your attorney to see if it is acceptable.  New York laws concerning powers of attorneys have changed frequently in the last few years and older forms, if they were signed after the effective date of the most recent change, may not be valid.

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Can I prevent someone I have disinherited from contesting my New York will by leaving them one dollar?

I have come across so many people who believe that you can prevent a will contest by leaving someone one dollar that I have to call this common misconception an Urban Myth.  In New York State, if you do not leave an heir at least the same amount they would inherit if you died without a will, they have a right to contest the probate of your will. I have discussed what probating a will means and what contesting a will involves in previous posts.

This doesn’t mean you can’t disinherit an heir, it just means that they have the right to try to prove that your will is somehow invalid, for example, you didn’t have testamentary capacity when you signed the will or that the will wasn’t executed in accordance with the required legal formalities. This is often a very difficult task for the disinherited heir.

Provided your will withstands such challenges, New York State Law allows you to disinherit any heir except a spouse who is entitled to what is called an “Elective Share,” regardless of what your will provides.  An elective share is usually equal to one third of your estate.  Other than that, you can disinherit children, siblings, parents and other heirs.

You may wish to leave an heir an amount that while significant, is less than what they would be entitled to if you died intestate, that is, without a will.  In such a case, you may be able to discourage them from contesting your will by including an “In Terrorem” clause, which in Latin, literally means to frighten.   Essentially such a clause states that if anyone challenges your will and loses, they forfeit any amount that they would otherwise receive under your will.

While is it is always prudent to seek the advice of professionals when planning  the distribution of your estate, it is especially important to seek experienced legal counsel if you decide to disinherit that Black Sheep of the family.

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How do I start a home business in New York?

Maybe you’ve been downsized, or just out of college, and like many in these tough economic times decided to start your own business.  Operating out of your home is often a good option (Steve Jobs started Apple in his parents’ garage) until your business grows sufficiently to justify the cost of relocating.  So what steps do you need to take to get your home business up and running?

Initially,  you need to decide the legal form under which you’ll operate your business. The simplest way to conduct a business is as a sole proprietor.  You’ll open banks accounts and sign agreements under your own name.  If you will be doing business under a name other than your own, you will need to file a DBA (“Doing Business As”) Certificate with the county clerk.

The drawback of operating as a sole proprietor is that you expose your personal assets, such as your home and bank accounts to your business creditors and lawsuits resulting from your business operations.  To shield your personal assets from such claims, you can form and operate as a corporation or limited liability company.  Your corporation or limited liability company will need an Employer Identification Number that you obtain from the IRS.  You’ll need an Employer Identification Number to open business bank accounts, file tax returns and to obtain various permits.

Whether you operate as a sole proprietor, corporation or limited liability company, if you will be selling goods or providing services subject to New York State sales tax, you will have to obtain a Certificate of Authority from the New York State Department of Taxation.

Depending on your business, you will need to explore with your insurance broker what type of insurance is suitable and/or necessary.   If you will have employees, you need to comply with the worker’s compensation laws and unemployment laws.

Lastly, depending on your business, you may need to obtain various permits from applicable New York State and local agencies. Good starting points are New York State’s Online Permit Assistance and Licensing website and New York City’s Business Express website.

The above may seem daunting, but your attorney and other professionals can guide you on your path to an exciting new career as a business owner.

 

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How do I change my New York Will?

Clients frequently inquire about changing their wills after significant events in their lives such as marriage, birth of a child or death of a beneficiary.

A person can change their will as long as they possess “testamentary capacity,” a legal term that means that they have a general understanding of three things: what their assets are, who society would consider the natural objects of their bounty and what their will provides.

You should not attempt to change a will by making notes in the margins of a previously signed and witnessed will as any such changes will not be effective. Also, any notes or memos attached to a will will not be valid unless they have been signed with the same legal formalities as a will.

An existing will can be amended by signing a codicil (an amendment) to the will or by signing a new will, which revokes the prior will. In both cases, the codicil or the new will must be executed with the same legal formalities, i.e., signed before two witnesses.

An attorney can help you decide whether a codicil to a will or new will is appropriate in your circumstances.

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What does it mean to assume a lease when buying a New York business?

As is often the case when purchasing a small business, the business owner will be leasing its space from the building’s owner. So, in addition to purchasing the assets of the business, (As I discussed in a previous post, it is almost always preferable to purchase a business’ assets rather than purchasing its stock.) the purchaser will need to take over the seller’s rights under their lease. This is accomplished through an “Assignment and Assumption of Lease” in which the seller assigns or transfers their rights as a tenant under the lease to the purchaser, who in turn, assumes the seller’s obligations under the lease.

Most commercial leases require the landlord’s consent to such an assignment and assumption so the asset purchase agreement must be contingent upon obtaining such consent. The lease may further condition the landlord’s approval upon the payment of certain fees and the creditworthiness of the purchaser. It is important that the asset purchase agreement adequately address these issues.

Lastly, since the purchaser will be assuming all the seller’s obligations under the lease being assigned, it must be carefully reviewed before entering into the asset purchase agreement.

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What happens to my assets when I die in New York?

This question from clients is often accompanied by the question, “Do I need a will?” In order to answer these questions it’s necessary to discuss the various ways you can plan how your property will be distributed when you pass away. You can:

1. Specify your beneficiaries in a last will and testament
2. Designate beneficiaries in life insurance policies and financial accounts
3. Hold property in trust with designated beneficiaries
4. Own property jointly with rights of survivorship, with the property going to the joint owner upon your death

JOINT OWNERSHIP WITH RIGHTS OF SURVIVORSHIP

Many married couples own a home jointly with rights of survivorship, which in New York State is called a Tenancy by the Entirety. Upon the first spouse’s death, the home passes to the surviving spouse by operation of law. There is no need to probate a will or bring an administration proceeding. Likewise, joint bank accounts and security accounts will pass to the surviving spouse.

DESIGNATED BENEFICIARIES

As with joint accounts, proceeds of life insurance policies will pass directly to the designated beneficiaries with no need to bring a probate or administration proceeding. The same holds true for IRAs and securities accounts in which you have designated beneficiaries.

SOLE OWNERSHIP WITHOUT A LAST WILL AND TESTAMENT

What happens to property you may own upon your death which you owned solely in your own name without designated beneficiaries? Absent a last will and testament, New York State law directs that such property passes to your heirs or what the laws calls your intestate distributees. Such heirs could be your spouse, children, parents, siblings, nieces and nephews. Generally an administration proceeding must be commenced in Surrogates Court in which an administrator is appointed who has the authority to collect property and distribute it to the heirs.

SOLE OWNERSHIP WITH A LAST WILL AND TESTAMENT

Most people are familiar with the concept of having a last will and testament in which you designate the beneficiaries who will receive your property upon your demise. What many people don’t realize is that a will only directs who will receive property not otherwise disposed of by virtue of joint ownership or having designated beneficiaries. Such property is said to pass outside of the probate estate and is not subject to your will. If there are no assets in your probate estate, it is not necessary to probate your will. This is often the case when the first spouse of a married couple passes away. If there are assets in your probate estate, your will must be probated after which your executor can collect and distribute your estate.

LIVING OR INTER VIVOS REVOCABLE TRUST

In order to avoid probate people often establish living trusts, or, in legal terms, Revocable Inter Vivos Trusts. Legal title to your property must be transferred to the trust. You are the trustee of your trust and have complete control over trust assets. Upon your death, your successor trustee, which you have appointed in the trust agreement, distributes trust property to beneficiaries you designated. If all of your property had been transferred to the trust, there will be no probate assets and no need to probate a will or bring an administration proceeding. Is it then always preferable to have a living trust instead of a will? Not necessarily. Setting up a living trust is often more expensive and more involved that signing a will. However, in cases where probate of a will may be problematic, for example, where you have disinherited an heir, thus inviting a probate contest, or where your heirs are not easily ascertainable, in which case a costly and lengthy search for missing heirs would be required by the court; a living trust may be a better choice than a will.

As you can see, due to the many forms in which you may own your assets, it is advisable to seek professional advice in planning the final distribution of your estate.

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