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Important Considerations with Mergers & Acquisitions of Real Estate Brokerage Firms

The real estate industry has certainly been through a lot during the COVID-19 pandemic. At the start of the pandemic, many real estate agents and brokerage firms faced the real concern that the entire real estate market was on the brink of collapse. The panic that had set in quickly subsided and, surprisingly, the real estate market took off in many markets following the initial lockdown orders issued in March in New York and surrounding states. Many left the densely populated urban areas for a more rural setting and employees began working remotely. As a result, the New York City market was hit particularly hard and has lagged in the recovery in comparison to other areas.

As a result of the market conditions, many real estate brokerage firms have effectuated key mergers and acquisitions, and entered into strategic partnerships. The pandemic caused companies to seriously consider consolidation with other firms to solidify established market share or to simply sell their assets to or merge with other companies to firm up operations that were impacted by the pandemic. This article will focus on key aspects to be considered when contemplating a merger or acquisition.
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The Loss of Life Caused by Hurricane Ida and Its Impact on the New York Real Estate Market

On Sept. 1, 2021, our area was hit particularly hard from the remnants of Hurricane Ida. Record-setting levels of rain fell in just a few hours causing unprecedented flash flooding leaving horrific death and destruction in its wake. Our thoughts and prayers go out to all of those who lost their lives and to their loved ones. The flooding caused by Ida took the lives of 29 people in New Jersey, 16 people in New York City and one person in Connecticut. Of those who died in New York City, 11 perished  in illegal basement apartments (see https://nyti.ms/3kcfq4y).

New York City has long had problems with illegal basement apartments which number in the tens of thousands. Unfortunately, it is at times like this when the real danger of these illegal apartments is brought to the forefront. Homeowners, real estate agents, real estate attorneys and other real estate professionals need to be aware of the dangers and the potential liability that exist in connection with illegal apartments.
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A Heightened Focus on Inspections, Due Diligence After the Tragic Condominium Collapse in Florida

On June 24th, 2021, our nation witnessed one of the deadliest and most tragic building collapses in its history. It sadly claimed the lives of 98 unsuspecting and innocent residents. Our thoughts and prayers go out to the victims and their families.

Since that sad day, information has continued to come to light in the news regarding the horrific structural conditions of the condominium and the documented history of the complaints relating to those conditions. A tragic event such as this serves as a reminder to all real estate professionals (attorneys, real estate agents, management agents, etc.), and to those individuals who are interested in purchasing a condominium unit or cooperative apartment (the “unit”), of the critical importance of conducting all of the necessary due diligence and physical inspections even when purchasing a condominium or cooperative apartment.
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Recent Ransomware and Cyber Attacks: The Real Estate Industry Must Beware!

Recent ransomware attacks and major hacks have thrust into the spotlight the importance of businesses, including those in the real estate industry, having the necessary protocols and protections in place to protect themselves and their clients from cybercriminals. During the COVID-19 pandemic there has been a substantial rise in cybercriminal activity. The recent ransomware attacks and cyber-attacks on targets such the Colonial Pipeline Co. (which runs a major East Coast fuel pipeline), JBS, S.A. (one of the world’s largest meat processors), the Washington D.C. Metro Police Department, and New York City’s Law Department, to name a few, should make businesses aware of the very real threat of such attacks and the widespread disruption they can cause.
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The State of Eviction and Foreclosure Bans in New York and at Federal Level

On May 4, 2021, Gov. Andrew Cuomo signed legislation (see https://bit.ly/2RIW8bq) extending the statewide ban on certain residential and commercial evictions and foreclosures in New York. The bill extends the COVID-19 Emergency Eviction and Foreclosure Prevention Act of 2020 and the COVID-19 Emergency Protect Our Small Businesses Act. The legislation extends protections prohibiting residential and commercial evictions, foreclosure proceedings and credit discrimination and negative credit reporting related to the COVID-19 pandemic until Aug. 31, 2021.

The bill’s sponsor, New York State Senator Brian Kavanagh, cited the findings of the Center for Disease Control that these moratoriums help prevent the spread of the COVID-19 virus because they provide individuals with a stable place to live. Similarly, President Trump and the CDC had also put in place nationwide bans on evictions. However, on May 5, 2021, a federal judge struck down the CDC’s Order extending the nationwide ban on evictions. The Federal District Court decision would not affect the validity of the New York State ban.
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The 2nd Circuit Reverses Course: Landlord is Not Found Liable Under Fair Housing Laws

Two years ago, on March 4, 2019, the 2nd Circuit Court of Appeals in New York in Francis v. Kings Park Manor, Inc. (see https://bit.ly/2Kd38bo) (“Kings Park Manor I”) held that a landlord could be liable under the Federal Fair Housing Act (see https://bit.ly/2WBzEdH) and the New York State Human Rights Law (see https://dhr.ny.gov/law) for failing to protect a tenant from harassment and discrimination by another tenant. At the time, it was an important decision as it was only the second time a court imposed an obligation on a landlord to take affirmative steps to curtail tenant-on-tenant discrimination.

More than two years later, the 2nd Circuit Court of Appeals reversed course and, in a decision issued on March 25, 2021 (see https://bit.ly/2Ov4rpX) (“Kings Park Manor II”), held that “…landlords cannot be presumed to have the degree of control over tenants that would be necessary to impose liability under the FHA for tenant-on-tenant misconduct.” This decision now limits the exposure that landlords and property managers have under the FHA and NYSHRL.
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Antitrust Issues are Back in the Spotlight

The following occurrences all highlight the importance of real estate licensees having a working knowledge of antitrust laws and dangers associated with any violation of antitrust laws: the recent antitrust lawsuits in the real estate industry, the focus on large technology and social media companies by Congressional leaders, the Department of Justice antitrust lawsuit and settlement with the National Association of Realtors (see https://bit.ly/38o41Iy), and large real estate firms like Zillow becoming licensed brokers and members of multiple listing services.

Brian Levine, Esq., In-House Counsel and Director of Legal Services and Professional Standards for HGAR, highlighted in a recent article (see https://bit.ly/3t5E4W9) the dangers of agents engaging in behavior that could be deemed a violation of federal and state antitrust laws especially where a new player, namely Zillow, has entered the real estate field. On March 9, 2021, a complaint was filed in the United States District Court Western District of Washington in Seattle, by Rex – Real Estate Exchange, Inc. against Zillow, its affiliated entities, Trulia and NAR for antitrust violations (see https://bit.ly/3qy7vyx).
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The ‘New’ Federal Rule and Employee Versus Independent Contractor Analysis

On Jan. 8th, the U.S. Department of Labor issued its final rule (“Final Rule”) clarifying the standard for employee versus independent contractor status under the Fair Labor Standards Act (see https://bit.ly/371n8rp). The new rule was set to go into effect on March 8th, however, the Biden administration has delayed the rule’s effective date to May 7th. It may ultimately be withdrawn altogether. Whether or not the Final Rule goes into effect, it is important to review it and the independent contractor versus employee analysis as it relates to the real estate industry.

In New York, and nationwide, it is a widely accepted practice for real estate salespersons to be treated as independent contractors. Over the years there has been litigation brought against brokerage firms because agents have been requested to fulfill mandatory office hours, complete mandatory training and undertake other office responsibilities (e.g., answer phones, attend to the reception desk, etc.) that have traditionally been fulfilled by office staff rather than salespersons. This article will address the state of the law, particularly federal and New York law, as it applies to employment classification.
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The New COVID-19 Relief Package: Highlights of the Second Round

On Dec. 27, 2020, President Trump signed into law the Consolidated Appropriations Act, 2021 [see https://bit.ly/3qb3WOP] which passed overwhelmingly by both the House and Senate. The Appropriations Act is the largest bill (over 5,000 pages) ever passed by Congress. It includes $900 billion in pandemic relief funds to assist businesses and provide important funding and resources for vaccination measures. This article will focus on the major aspects of the COVID-19 relief measures included for businesses.

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Proposed Changes to the DOS Advertising Regulations and NAR’s New Clear Cooperation Policy

On March 4, 2019, the 2nd Circuit Court of Appeals in New York in Francis v. Kings Park Manor, Inc. (see https://bit.ly/2Kd38bo) found that a landlord can be held liable under the Federal Fair Housing Act (“FHA”) (see https://bit.ly/2WBzEdH) and the New York State Human Rights Law (“NYSHRL”) (see https://dhr.ny.gov/law) for failing to protect a tenant from harassment and discrimination by another tenant. While the Court’s holding may seem an obvious result, especially in light of the egregious behavior of the defendants, the issue decided in this case is a novel one and it is only the second time that a similar issue has been reviewed by the courts (see Wetzel v. Glen St. Andrew Living Community, LLC (U.S. Dist. Ct. Northern Dist. Ill. (July 27, 2016) at https://bit.ly/2MEXocA). It is important for landlords and property managers to know that their exposure to liability under the FHA has been expanded. Real estate professionals should also be aware of the decision in Francis, as it could significantly impact their landlord and property management clients.
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