Legal line question of the week rebny

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Legal Line Question of the Week
Security Deposit “Burn Down” Provision
I am a licensed real estate agent representing a commercial tenant in
lease negotiations and the landlord is requesting a larger security
deposit than my client is willing to pay. The landlord will not lower
the initial security deposit requested, but has offered to provide my
client with a security deposit “burn down.” What is a “burn down”
provision?
Generally, as applied to security deposits in commercial leases, a “burn
down” clause provides that after a certain period of time, if a tenant is
not in default of the lease, the landlord will return a portion of the
security deposit to the tenant. For example, if a tenant enters into a
lease for a term of ten years, the lease may provide that if the tenant is
not in default of the lease after the commencement of the third year of
the lease, the tenant can request that the landlord return a portion of the
security deposit (i.e. an amount equal to one month’s rent) back to the
tenant or the tenant can request that the landlord apply a portion of the
security deposit to the payment of the rent under the lease. The “burn
down” provision may further state that at certain other future dates (i.e.
each additional year) the Tenant can then request the return of an
additional portion of the security deposit.
Neil B. Garfinkel,
REBNY Broker Counsel
Partner-in-charge of real estate
and banking practices at
Abrams Garfinkel Margolis
Bergson, LLP
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Flip Taxes
I am representing the owner of a co-op apartment that is in the
process of selling her apartment. The co-op board has just
implemented a flip tax (the "Flip Tax") and the seller is concerned
that the Flip Tax is going to decrease the value of her
apartment. What are the steps that a co-op board must follow
in order to implement a Flip Tax? Will the seller have to pay the
Flip Tax when she sells her apartment?
A Flip Tax is a fee that a co-op charges (usually to the seller)
upon the sale of the apartment. The general purpose of the Flip
Tax is to increase revenue for the co-op without raising monthly
maintenance fees. The origin of the Flip Tax dates back to the
early days of co-op conversions when investors were buying
co-ops (with no intention of living in the co-op) and then
"flipping" the apartment for a profit. The Flip Tax was a way for
the co-op to "share" in the investor's profits. In some cases,
condominiums have also instituted Flip Taxes.
To implement a Flip Tax the co-op board must amend the co-
op’s proprietary lease or the co-op’s by-laws. In order to amend
either the proprietary lease or the by-laws, there must be an
affirmative vote of the co-op’s shareholders (a change of this
nature would typically require two-thirds of all shareholders to
approve). Gathering this type of support can be difficult
depending on the makeup of the co-op. Implementing a Flip
Tax is predictably supported by those shareholders who are
planning on living in the co-op for a long term and opposed by
those shareholders who intend to sell in the near future.
Whether the seller is going to be required to pay the Flip Tax
will depend on the terms and conditions of the co-op’s Flip Tax
provision. For example, the co-op’s Flip Tax provision might
state that it does not apply to shareholders who enter into
contracts of sale within 60 days of the adoption of the Flip
tax. Alternatively, the Flip Tax may apply to all sales closed
after the implementation of the Flip tax. Thus, in order to
determine whether the Flip Tax applies to the seller, you must
look to the terms of the relevant provision in the co-op’s by-
laws or proprietary lease.
Neil B. Garfinkel,
Bergson, LLP

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Important Tip: Co-ops may use a variety of formulas to
calculate a Flip Tax. Generally, this calculation is based on
either a set percentage of the sales price, a set number of
dollars per shares sold, or a percentage of the profit netted
from the sale. Some co-ops have also tied the Flip Tax
percentage to the seller’s length of ownership of the co-op. For
example, a shareholder who has lived in the co-op for a longer
period of time (i.e. ten years) may pay a smaller Flip Tax than a
shareholder who has lived in the co-op for a shorter period of
time (i.e. one year).
LLC Purchasing a Co-op
I am a licensed real estate salesperson and I represent a
purchaser who would like to purchase a co-op apartment in the
name of a limited liability company ("LLC"). Do any co-ops allow
the purchase of a co-op by a LLC?
Yes, although rare, some co-ops may allow the purchase of a
co-op by a LLC.
Historically, co-ops have not permitted the purchase of a co-op
apartment by a LLC because of the difficulties in dealing with
an entity as opposed to an individual shareholder. Specifically,
co-ops have been concerned with: (i) occupancy issues, such
as limiting who may live in the apartment and (ii) the co-op’s
ability to sue the LLC if the LLC or the occupants of the co-op
do not comply with the co-op’s rules or if the LLC fails to make
maintenance payments.
In order to avoid the problems articulated above, a co-op will
generally require a purchaser that is an LLC to: (i) enter into an
Occupancy Agreement that limits the occupancy of the co-op to
specific individuals, (ii) provide a Personal Guaranty from an
individual who will be personally responsible for all of the LLC’s
Neil B. Garfinkel,
Bergson, LLP

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obligations associated with owning the co-op, including the
payment of maintenance fees, and (iii) designate a person that
can act as an "agent for service of process" in the event that
the co-op sues the LLC (the designated person can receive
court documents on behalf of the LLC).
Important Tip: As previously mentioned, most co-ops do not
permit a LLC to own a co-op. Accordingly, your purchaser
should consult with an attorney who can ascertain whether the
co-op will permit an LLC to own a co-op and what documents
will be required in connection with such a purchase.
Representing Multiple Purchasers
I am a licensed real estate agent and I am representing two
purchasers who are considering making offers on the same
property. Am I allowed to represent two different purchasers
who are both interested in bidding on the same listed property?
In Rivkin v. Century 21 Teran Realty LLC, et al., the New York
Court of Appeals held that an individual real estate agent may
not represent multiple purchasers bidding on the same property
without: (i) the full disclosure by the real estate agent to the
purchasers and (ii) the purchasers consenting to such
representation. The Court stated that representing multiple
purchasers, without full disclosure and consent, would be a
conflict of interest and a breach of fiduciary duty because the
real estate agent could not properly negotiate a favorable
purchase price for each of the bidders.
The Court further ruled, however, that different real estate
agents affiliated with the same real estate brokerage firm could
represent different purchasers bidding on the same property. In
Neil B. Garfinkel,
Bergson, LLP

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such a case, each real estate agent’s fiduciary duty to the
purchaser, as well as each real estate agent’s individual
incentive to earn a commission, reduces the risk of each real
estate agent not negotiating in the best interest of their
respective purchaser. Therefore two different real estate
agents, who are associated with the same real estate
brokerage firm and who are representing separate purchasers
bidding on the same property, may do so without the need to
disclose, or obtain consent, to such representation.
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REBNY Member Representing an Immediate
Family Member in a Transaction
I am a REBNY member and I am currently representing my
mother in purchasing a condominium. Must a REBNY member
disclose that he or she is representing a family member in a
real estate transaction?
Yes, under Section II (B)(7) of the REBNY Code of Ethics and
Professional Practices, a REBNY member must provide written
disclosure to all parties involved in the transaction informing
them of the nature of the REBNY member’s relationship with
the party they are representing. Section II (B)(7) states:
"Members shall not engage in any transaction related to their
real estate brokerage activities for themselves, any member of
their immediate families, their firms or any member thereof or
any entities in which they have any ownership interest, without
making their true position known in writing to any party to the
transaction;"
Important Tip: As indicated above, Section II (B)(7) also
requires that REBNY members disclose when they are
Neil B. Garfinkel,
Bergson, LLP

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participating in a real estate transaction for themselves, their
firms, or any entity in which they have an ownership interest.
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n of the Week
s to FIRPTA
broker and I am representing a seller who is not a citizen of the United States. The seller and I would like to know w
it affects the sale. Additionally, I have heard that "FIRPTA" was recently amended. Can you clarify that as well?
for the Foreign Investment in Real Property Tax Act of 1980, is a federal law enacted to ensure that "foreign persons
es generally pay the same amount of federal taxes on the sale as a United States person would. For purposes of FIR
rson is anyone who is neither a resident alien (i.e. a holder of a green card) nor a United States citizen.
quires that upon the disposition of any real property interest in the United States by a foreign person (a "United State
PI") the purchaser of the USRPI must withhold a certain percentage of the gross sales proceeds (which is generally
) and submit the withholding to the IRS. This ensures that federal taxes are actually paid on the sale by the foreign s
n imposed at a rate of 10% of the gross sales proceeds of a USRPI, notwithstanding the fact the actual amount of tax
exceed (or be less than) the amount withheld.
mericans from Tax Hikes Act of 2015 ("PATH") was passed which, among other things, made changes to the withhold
e specifically, for the sale of a USPRI exceeding $1 Million Dollars, PATH raises the withholding amount from 10% to
PRI that are (i) personal residences and (ii) have gross sales proceeds of $1 Million Dollars or less are not affected by
% withholding rate set forth in FIRPTA (note that FIRPTA still does not require the 10% withholding under certain con
proceeds are $300,000 or less and the buyer is an individual acquiring the property as a personal residence).
new provisions under PATH affect the disposition of USPRI taking place after February 16, 2016.
deral tax liability on the sale of a USPRI is less than the amount withheld, a foreign seller may be entitled to receive a
ral tax return. Alternatively, a foreign seller may seek to apply for a Withholding Certificate from the IRS prior to the c
chaser to withhold an amount less than the required withholding amount of 10% or 15% (depending on the gross sal
se see our previous Legal Line Question of the Week on FIRPTA Certificates for further analysis of this topic.
o provides for several other detailed modifications to FIRPTA relating to real estate investment trusts ("REITs"). The
modifications were previously reported by REBNY and can be found by clicking this link.

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uestion of the Week
31 Exchanges
d real estate salesperson and I am representing a seller who is selling a three family
. She is interested in reinvesting the proceeds from the sale in a 1031 Exchange. What is
ge? Will the seller be able to avoid paying capital gains tax by participating in a 1031
Exchange?
Exchange" refers to Section 1031 of the Internal Revenue Code (the "Code"). A 1031
s the seller of an investment property (the "Original Property") the opportunity to defer
on the Original Property if the seller reinvests the proceeds of the sale in the purchase of
a "Like Kind" replacement property (the "Replacement Property").
te that the seller does not avoid paying capital gains on the sale of the Original Property.
ains taxes on the sale of the Original Property are deferred until such time as the seller is
o complete a 1031 Exchange, at which time the capital gains will be payable.
members in further understanding 1031 Exchanges, we have provided answers to the
following frequently asked questions:
any significant time frames that a seller must keep in mind when participating in a 1031
Exchange?
e are two significant time frames that a seller must comply with when executing a 1031
e seller must identify the Replacement Property within 45 days of the closing date of the
y. This 45 day window is known as the "Identification Period." Second, the seller must
the acquisition of the Replacement Property within 180 days from the closing date of the
This is known as the "Exchange Period." The Identification Period and the Exchange
Period begin on the same day and run concurrently.
Q2. What is "Like Kind" Property?
Kind Property is defined broadly under the Code. Any real property held either as an
use in trade or business is considered to be of "Like Kind" with any other real property
as an investment or for use in trade or business. For example, a condominium unit would
Neil B. Garfinkel,
REBNY Broker Coun
Partner-in-charge of real
and banking practices
Abrams Garfinkel Marg
Bergson, LLP

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ke Kind" with a house provided both properties are used as an investment or for use in
. Real property held primarily for personal use does not qualify as "Like Kind" property.
e United States is not considered "Like Kind" with property outside of the United States.
sible to execute a partial deferment of capital gains taxes rather than a full deferment of
capital gains taxes?
seller is not required to invest the full sales proceeds from the Original Property in the
erty. Rather, the portion of the proceeds from the sale of the Original Property that is not
Replacement Property will not qualify for the deferment of capital gains taxes and will be
taxed at the normal tax rate.
4: Is it possible to purchase more than one Replacement Property?
ler may exchange the Original Property into (or out of) as many Replacement Properties
he 180 day Exchange Period. However, the maximum possible deferment of capital gains
es is capped at the amount of the sale proceeds of the Original Property.
s a Qualified Intermediary ("QI") and what role does a QI serve in the 1031 Exchange
process?
metimes known as a "facilitator," is a third party hired by the seller to hold the proceeds
e Original Property so that the seller never takes actual or constructive possession of the
ecessary because, as a requirement for receiving a deferment of capital gains, the Code
om ever taking possession of the proceeds from the sale of the Original Property. Once
fied the Replacement Property, the QI will use the proceeds of the sale being held by the
r to complete the purchase of the Replacement Property on behalf of the seller.
cause the seller must comply with very specific rules in order to utilize a 1031 Exchange,
ant or attorney should always be consulted in connection with such transactions.
ne Question of the Week

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for Victims of Domestic Violence in Rental
Housing
erstand that New York State recently altered its fair
ng laws to protect victims of domestic violence from
ination in rental housing. Can you please explain the
protections provided under the new law.
e as of January 2016, Section 227-d of the New York
eal Property Law ("the Law") expressly prohibits any
, firm or corporation owning or managing any building
dwelling purposes, or the agent of such person, firm or
on" from discriminating against individuals based upon
atus as a "domestic violence victim." Please note that
Law does not apply "to buildings used for dwelling
ses that are owner occupied and have two or fewer
residential units."
ally, it is a violation of the Law to discriminate against a
"domestic violence victim" by:
) refusing to rent a residential unit, when, but for such
status, the rental would not have been refused,
2) discriminating in the terms, conditions, or privileges
of any such rental, when, but for such status, such
discrimination would not have occurred, or
(3) printing or circulating, or causing to be printed or
rculated, any statement, advertisement or publication
which expresses, directly or indirectly, any limitation,
specification, or discrimination.
w defines a "domestic violence victim" as an individual
or has been, or is a parent accompanied by a minor
… who is or has been," a victim of an act that would
ute a violent felony or family offense under New York
w. Examples of felonies or offenses that qualify under
Neil B. Garfinkel,
Bergson, LLP

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include, but are not limited to, assault, sexual abuse,
reckless endangerment and kidnapping.
nt Tip: Also effective as of January 2016, Section 744
ew York Real Property Actions and Proceedings Law
landlords from evicting tenants based on the tenant’s
status as a "domestic violence victim."
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Federal Law Protecting Real Estate Broker's Trade Secrets
(from Independent Contractors)
Can you please provide a brief explanation of the new federal
law, which protects trade secrets from misappropriation by
independent contractors?
The Defend Trade Secrets Act of 2016 (the "DTSA") provides
employers, including real estate brokers, with a federal civil remedy
for the "misappropriation" of the real estate broker's proprietary
information ("Trade Secrets") protected in employment or
independent contractor agreements ("ICAs"). Misappropriation refers
to both the improper acquisition and the improper disclosure or use
of Trade Secrets. Pursuant to the DTSA, federal courts have the
authority to hear claims of misappropriation of Trade Secrets, which
were previously left to state courts.
For example, an ICA signed between a real estate broker and its real
estate salespeople or associate real estate brokers (collectively, a
"Real Estate Agent") may require that the Real Estate Agent keep
the real estate broker's client list confidential. If the Real Estate
Agent discloses the real estate broker’s client list to a third party
without permission, pursuant to the DTSA, the real estate broker may
be able to recover certain damages and attorneys' fees in federal
civil court from the Real Estate Agent.
Neil B. Garfinkel,
Bergson, LLP

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Important Tip: Real estate brokers and Real Estate Agents should
consult with an attorney to discuss how the DTSA affects the
provisions of their ICAs.
1 19 17
Credit Reports
I am a licensed real estate salesperson and I am representing
an individual seeking to rent an apartment. The prospective
tenant has requested a copy of her credit report. May I show
her the credit report?
Yes, you may show a prospective renter or purchaser a copy of
their own credit report. The New York State Fair Credit
Reporting Act ("FCRA") permits sharing a credit report with the
individual to whom the report relates (although the FCRA does
not allow dissemination of credit reports to individuals other
than the individual to whom it relates without a legitimate
business need or the written permission of that individual). In
fact, whenever an adverse action is taken against an individual
on the basis of their credit report, the user of the report must
advise the prospective tenant or purchaser of the reason the
adverse action was taken.
Additionally, New York City Local Law requires that people who
are renting out a property and request information from
applicants for the purposes of obtaining a tenant screening
report, disclose the name of the agency they use to the
applicant and post signage outlining the tenant’s rights
regarding the credit report. For more information on credit
reports please refer to the following article found on the
Neil B. Garfinkel,
Bergson, LLP

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REBNY website: Rule Regarding Signs Required to be Posted
about Tenant Screening Reports.
Important Tip: Real estate brokers should consult with their
credit report company in order to ascertain the company’s
policy regarding distribution of credit reports.
All information contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of
New York ("REBNY"). The REBNY Legal Line Question of the Week, and the information contained therein, shall not be reproduced or
published, in whole or in part, without the express prior written consent of REBNY. The REBNY Legal Line Question of the Week, including the
information contained above, is for general informational purposes only and is not to be construed as the rendering of legal or tax advice. Real
estate licensees are not permitted to provide legal or tax advice.
If you have any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday-
Friday 9:00 a.m. - 5:00 p.m.
Please be ready to cite your REBNY member number.
For more, visit www.REBNY.com. | www.facebook.com/REBNYonFB | www.twitter.com/REBNY
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Finally, the recipient should check this email and any attachments for the presence of viruses; REBNY
accepts no liability for any damage caused by any virus transmitted by this email.
11 17 16

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Cost of Due Diligence Materials in Co-op and Condominium
Transactions
In the re-sale of co-ops and condominiums in New York, is the
buyer or the seller responsible for the cost of obtaining due
diligence materials?
There is no rule mandating that one party pay the cost of
obtaining particular due diligence materials. However, there is
an established custom that is followed in most re-sales of co-
ops and condominiums in New York. Out of the several
different documents included in the term "due diligence
materials," some are customarily expected to be provided by
the seller and others are customarily expected to be provided
by the buyer.
According to custom, it is the responsibility of the seller’s
broker to obtain the offering plan, amendments and financial
statements from the seller and deliver them to the buyer or the
buyer’s attorney. If any of those due diligence items are
missing, the seller is usually expected to obtain a copy, at his
or her own expense, from the managing agent. On the other
hand, the buyer is expected to pay for any "building
questionnaires" that the buyer’s attorney or the buyer’s lender
requests from the managing agent.
In the event that one party refuses to follow the customs set
forth above, the parties will have to negotiate an appropriate
resolution. Whether it is a seller’s market or a buyer’s market
will likely dictate whether the cost of obtaining any missing due
diligence items is shifted from one party to the other.
In "sponsor" transactions, the sponsor is required to provide
the due diligence materials to the purchaser. However, some
sponsors may charge a refundable deposit fee to ensure that
the due diligence materials are returned to the sponsor in the
event that the purchaser does not proceed with the transaction.
Neil B. Garfinkel,
Bergson, LLP

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Friday 9:00 a.m. - 5:00 p.m.
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Delivery is Required for a Valid Lease and Contract
I was recently representing a landlord in a one year residential
lease. The tenant signed the lease and sent it back to the
landlord. The landlord signed the lease but before he could
send the signed lease back to the tenant, the tenant's attorney
cancelled the lease. The attorney stated that the lease was not
valid because it had not been "delivered" to the tenant. Is this
correct?
Yes, it is most likely the case that the lease was not effective
and binding until it was delivered to the tenant. In New York
State, delivery is a requirement of a valid lease. In a well cited
New York case, 219 Broadway Corp. v. Alexander's, Inc., 46
N.Y.2d 506 (N.Y. 1979), the court held that "A lease ... requires
the fulfillment by the parties of certain prerequisites to take
effect. It is the well-established rule in this State that delivery is
one such requirement, the absence of which, without more,
renders the lease ineffective." The requirement also applies to
other conveyances of land, such as contracts for the purchase
and sale of real estate.
Important Tip: The definition of "delivery" will vary from
contract to contract (and lease to lease; a lease is a form of
contract). Many real estate contracts will spell out acceptable
delivery methods within the contract itself. For example, it is
becoming much more common for leases to contain provisions
Neil B. Garfinkel,
Bergson, LLP

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allowing electronic delivery in addition to traditional hand
delivery. In certain instances, a court may also imply delivery
based on the conduct of the parties.
Friday 9:00 a.m. - 5:00 p.m.
10 06 16
Proposed Amendments to Department of State Rules and
Regulations
Can you please summarize the proposed amendments to the
New York State Department of State Rules and Regulations
(the "Regulations") that affect real estate licensees in New
York?
Recently the New York State Department of State (the "DOS")
published certain proposed amendments to the Regulations
(the "Amendments"). The purpose of the Amendments is to
update obsolete and outdated portions of the Regulations. The
publication of the Amendment in the New York State Register
on September 28, 2016 commenced a 45 day public comment Neil B. Garfinkel,

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period. At the conclusion of the public comment period, the
DOS will either adopt or amend the Amendments.
The following is a brief summary of the Amendments:
19 NYCRR 175.1. This regulation has been amended so
that real estate licensees are required to deposit any
monies or other property of their principal into a
separate bank account within three days of the receipt of
such monies.
The amended Regulation will read:
A real estate broker shall not commingle the money or
other property of his principal with his own and shall at
all times maintain a separate, special bank account to
be used exclusively for the deposit of said monies and
which deposit shall be made within three business days.
Until such time as the money is deposited into a
separate, special bank account, it shall be safeguarded
in a secure location so as to prevent loss or
misappropriation. Said monies shall not be placed in any
depository, fund, or investment other than a federally
insured bank account. Accrued interest, if any, shall not
be retained by, or for the benefit of, the broker except to
the extent that it is applied to, and deducted from,
earned commission, with the consent of all parties.
19 NYCRR 175.7. This regulation has been amended so
that real estate brokers may only receive compensation
from multiple parties with the consent of their clients.
A real estate broker shall make it clear for which party
he is acting and he shall not receive compensation from
than one party except with the full knowledge and
consent of the broker’s client.
19 NYCRR 176.3 (a). This regulation has been
amended to add License Safety to the list of required
Bergson, LLP

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subjects included in the course of study for licensure as
a real estate salesperson.
The amended Regulation will read in part:
Section 176.3. Subjects for study—real estate
salespersons.
(a) The following are the required subjects to be
included in the course of study in real estate for
licensure as a real estate salesperson, and the required
number of hours to be devoted to each subject:
License Safety……………………………………… 1
19 NYCRR 177.3. The regulation has been amended to
mandate that a detailed outline of the subject matter of
any module containing at least one hour of instruction be
included on the form for approval of the course of study.
(g) a detailed outline of the subject matter of each
course of seminar containing at least 22½ hours of
instruction, or of each course module containing at least
one hour of instruction, together with the time sequence
of each segment thereof, the faculty for each segment,
and teaching techniques used in each segment;
19 NYCRR 177.7. This regulation has been amended to
change the computation of instruction time to 50
minutes.
Section 177.7 Computation of instruction time.
To meet the minimum statutory requirement, attendance
shall be computed on the bases of an hour equaling 50
minutes.

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19 NYCRR 175.25 (d)(2). This regulation has been
amended to require real estate licensees to include their
license type on business cards.
Section 175.25. Business cards.
(2) Notwithstanding subdivision (c) of this section,
business cards must contain the business address of
the licensee, license type, and the name of the real
estate broker or real estate brokerage with whom the
associate real estate broker or real estate salesperson is
associated. All business cards must also contain the
office telephone number for the associate real estate
broker, real estate salesperson or team.
Friday 9:00 a.m. - 5:00 p.m.
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Students and Fair Housing Law
Are students a "protected class" under Federal, New York
State, or New York City fair housing laws (collectively the "Fair
Housing Laws")?
No, students are not a "protected class" under Fair Housing
Laws. The current protected classes under Fair Housing Laws
include: race, color, religion/creed, age, national origin,
alienage or citizenship status, sex, gender (including gender
identity and sexual harassment), sexual orientation, disability,
marital and familial status, partnership status, lawful
occupation, military status, family status, and lawful source of
income.
Although being a student is not a protected class, students are
protected by Fair Housing Laws. For example, age is a
protected class. Accordingly, students cannot be discriminated
against because of their age. A housing provider’s policy that
forbids students from living in a building based upon the age of
the student would violate Fair Housing Laws.
Important Tip: All housing providers and real estate brokers
should contact a fair housing attorney prior to adopting any
housing policy related to students (as well as any other actual
or perceived protected class).
Neil B. Garfinkel,
Bergson, LLP
Friday 9:00 a.m. - 5:00 p.m.

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Buyer Representation FAQs
We have received numerous questions regarding "buyer
representation" in the REBNY RLS environment. The following
are the most frequently asked questions that we receive
regarding this topic.
Question: Is a buyer always entitled to be represented
in a transaction?
Answer: Yes, the New York State Department of State
("DOS") has consistently stated that a buyer always has
a right to be represented in a real estate transaction and
the listing broker must always honor this right. The DOS
has stated that "any such denial will be construed as a
violation of the listing broker’s duty to deal honestly,
fairly and in good faith with the buyer."
Question: May a listing broker refuse to work with a
buyer’s broker if the seller has specifically asked the
listing broker not to do so?
Answer: No, doing so would still amount to a violation of
the listing broker’s duty to deal honestly, fairly and in
good faith with the buyer even though the listing broker
was following the seller’s instructions. According to the
DOS, "If a seller chooses to use the services of a real
estate broker, the seller must do so with the
understanding that the broker cannot refuse to
cooperate with real estate brokers who represent
buyers."
Question: Is a buyer’s broker entitled to a commission
by virtue of introducing the buyer to the property?
Neil B. Garfinkel,
Bergson, LLP

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Answer: No, simply showing a buyer a property does
not necessarily entitle a REBNY member to a
commission. A broker is only entitled to a share of the
commission if he or she is considered the "procuring
cause" of the transaction.
Question: What is "procuring cause?"
Answer: There is no specific definition of "procuring
cause." However, case law suggests that in order to be
considered the procuring cause, a real estate broker
must show a "direct and proximate link between the
bare introduction of the buyer and seller and the
consummation [of a sale]." In other words, a REBNY
member must bring together a meeting of the minds
between the buyer and seller and show that he or she
generated a chain of circumstances which led to the
sale. The ultimate determination of whether or not the
REBNY member procured the buyer, and thus can be
considered the procuring cause, is a fact-sensitive
inquiry that turns on the specific facts and circumstances
of each case.
Question: May a buyer switch real estate brokers at any
time during a transaction?
Answer: Yes, absent an exclusive representation
agreement, a buyer may switch real estate brokers at
any time during a transaction. However, the buyer’s
decision to change brokers does not necessarily dictate
which broker is the procuring cause of the buyer. For
example, let’s assume that Broker A represented the
buyer for the entire transaction and, on the night before
closing, the buyer instructs Broker A not to come to the
closing because the buyer wants to bring Broker Z to the
closing. The buyer has the right to change to Broker Z,
but doing so does not negate the fact that Broker A was
the "procuring cause" of the buyer. In this case, Broker
A would still be entitled to share in the commission even
though the buyer has changed brokers. Once again, the
determination of who is the procuring cause of the
transaction is a fact-sensitive inquiry that turns on the
specific facts and circumstances of each case.

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Friday 9:00 a.m. - 5:00 p.m.
8 18 16
May I notarize my purchaser’s co-op board package?
I am a licensed real estate salesperson and a New York State
notary public. I am representing a purchaser in a transaction
and have been asked to notarize the purchaser’s co-op board
package. May I do so?
Although New York State law does not explicitly prohibit you
from notarizing a co-op board package on behalf of your
purchaser, it is advisable that you do not do so in order to avoid
the appearance of impropriety or self-dealing.
According to the New York State Department of State, a notary
may be disqualified to act in certain cases by reason of the
notary having an "interest" in the matter. Stated broadly, a
notary may not notarize a document: (i) "if the notary is a party
to" or (ii) is "directly and pecuniarily interested in the
transaction." For example, a notary could not notarize a
document which grants the notary a power of attorney to act on
another person’s behalf. Similarly, a notary could not notarize a
Last Will and Testament that names the notary as a
beneficiary.
Neil B. Garfinkel,
Bergson, LLP

[Type here]
A real estate salesperson could take the position that they do
not have a direct or pecuniary interest in the purchaser’s co-op
board package. However, because the real estate salesperson
stands to collect a commission upon the closing of the
transaction, one could argue that notarizing the co-op board
package may create an appearance of impropriety and self-
dealing and should be avoided.
Friday 9:00 a.m. - 5:00 p.m.
7 28 16

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Can a Landlord Request Proof of a Disability and the Need
for an Assistance Animal?
I am a real estate broker and I represent the landlord of a
building that has a "no pet policy." A tenant in the building has
informed the landlord that she requires an Assistance Animal to
help alleviate her anxiety. May the landlord request verification
that (i) the tenant has a disability and (ii) the Assistance Animal
is required because of the disability?
First, a real estate broker should never request this type of
verification on behalf of a landlord. Rather, if a landlord would
like to verify that a tenant has a disability or the need for an
Assistance Animal, the real estate broker should instruct the
landlord to speak to an attorney who can advise the landlord on
the appropriate way to handle the request. The landlord (or
landlord’s attorney) should then communicate directly with the
potential tenant. It is my opinion that a real estate broker
should not serve as an intermediary in this situation. There is
too much potential for inappropriate statements or requests on
the part of the real estate broker.
Nevertheless, this situation most likely fits the limited
circumstances under which a landlord may request to verify a
tenant’s need for an Assistance Animal. A landlord may make
such a request under two circumstances: (1) if the disability is
not readily apparent or known to the landlord or (2) if the need
for the requested accommodation (i.e. the Assistance Animal)
is not readily apparent or known to the landlord. Keep in mind
that Federal Law defines a person with a disability as "any
person who has a physical or mental impairment that
substantially limits one or more major life activities; has a
record of such impairment; or is regarded as having such
impairment."
For example, because of the nature of the disability, if an
individual requests an accommodation for an Assistance
Animal in order to alleviate her anxiety, it is likely that neither
the anxiety nor the need for the Assistance Animal is likely
readily observable. Thus, in this situation, a landlord most likely
can request verification. On the other hand, if a blind individual
requests an accommodation for a guide dog, because of the
nature of the disability, both the blindness and the need for the
Neil B. Garfinkel,
Bergson, LLP

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Assistance Animal is likely readily observable. Thus, in the
guide dog situation, the landlord most likely cannot request
verification.
According to the US Department of Housing and Urban
Development, "A [landlord] also may not ask an applicant or
tenant to provide access to medical records or medical
providers or provide detailed or extensive information or
documentation of a person's physical or mental impairments."
Instead, if a landlord has the right to request verification of a
tenant’s disability, the landlord should do so by requesting a
letter that has been completed by a qualified third party verifier.
The third party verifier does not need to be a doctor, but he or
she must be a professional who is familiar with the disability. In
the letter, the third party verifier should attest that (1) the tenant
is actually disabled, (2) the tenant needs the accommodation
because of his or her disability, (3) the particular
accommodation is actually necessary, (4) the accommodation
helps the individual cope with his or her disability, and (5) he or
she would testify to the information under oath.
Important Tip: Issues relating to fair housing, including the
protected category of "disability," are very complex. Real
estate brokers must seek counsel if they are confronted with
questions or situations that they are not sure how to handle.
For information on the difference between an Assistance
Animal and a Service Animal please see our previous Legal
Line Question of the Week on Assistance Animals and Service
Animals.
Friday 9:00 a.m. - 5:00 p.m.
7 22 16

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Disclosure of Interest in a Property
I am a licensed real estate salesperson and a REBNY member.
My broker, who is a member of the REBNY RLS, is currently
listing a property that I own. Must I disclose my ownership
interest in the property to potential purchasers?
Yes, according to Article IV, Section 7 of the REBNY RLS
Universal Co-Brokerage Agreement, "in accordance with
Section II(B)(6) of the [REBNY] Code of Ethics," if a REBNY
member has an ownership interest in a property that his or her
broker is disseminating through the REBNY RLS, "the Listing
Information to be disseminated through the RLS shall disclose
that interest." Neil B. Garfinkel,
Bergson, LLP
Friday 9:00 a.m. - 5:00 p.m.

[Type here]
This email and any files transmitted with it are confidential and intended solely for the use of
the individual or entity to whom they are addressed. If you have received this email in error,
you are directed not to read, disclose, reproduce, distribute, disseminate or otherwise use this
transmission, and we also request that you immediately delete this message and its
attachments, if any. Delivery of this message to any person other than the intended recipient(s)
is not intended in any way to waive privilege or confidentiality. Finally, the recipient should
check this email and any attachments for the presence of viruses; REBNY accepts no liability
for any damage caused by any virus transmitted by this email.
7 15 16
Secondhand Smoke in a Co-op Apartment
I am a licensed real estate salesperson and I represented a co-
op purchaser who recently complained to me about the smell of
secondhand smoke in her apartment. Is a co-op board legally
obligated to prevent secondhand smoke from entering a
shareholders’ apartment?
Yes, the New York Supreme Court for New York County (the
"Court") recently held that a co-op board may be held liable for
allowing secondhand smoke to permeate into a shareholders’
apartment from other parts of the building. In the case of
Reinhard v. Connaught ("Reinhard"), the Court stated that,
generally, co-op boards have a duty to reasonably assist
shareholders with issues involving secondhand smoke.
In Reinhard, the Court reasoned that the board had breached
the proprietary lease because they did not take reasonable
steps to eliminate the secondhand smoke problem. The Court
also held that, in situations where a resident is unable to use
his or her apartment because of secondhand smoke, this may
amount to a violation of the Implied Warranty of Habitability,
Neil B. Garfinkel,
Bergson, LLP

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entitling the resident to a rent abatement. (Please see our
previous Legal Line Question of the Week on New York's
Warranty of Habitability for more information).
Therefore, your purchaser should consult with an attorney
regarding her rights and may also consider writing a letter to
the co-op board explaining the situation and requesting their
assistance in resolving the problem. Additionally, please see
our previous Legal Line Question of the Week on Marijuana in
a Co-op Apartment for more information on how a shareholder
may handle a similar situation.
Important Tip (Correction): The Important Tip section of the
Legal Line Question of the Week on Secondhand Smoke in a
Co-op Apartment, released on July 14, 2016, incorrectly stated
that New York City requires all buildings to adopt a smoking
policy, which must be disclosed to residents. It is presently not
legislatively mandated that buildings have such a policy in
place.
Friday 9:00 a.m. - 5:00 p.m.
6 30 16

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Broker’s Obligation to Disclose Status of Illegal Property
I am a real estate broker and I am listing a rental apartment
that I am concerned may not have the proper permits. Am I
obligated to confirm the legal status of an apartment before
marketing it to the public?
Yes, the New York State Department of State ("DOS") recently
confirmed, in an Opinion letter, that real estate brokers
("Brokers") must make a reasonable effort into verifying the
legal status of the properties they market and must disclose,
including in advertisements, any knowledge of a property’s
illegal status to potential purchasers or tenants.
According to the DOS, "a broker who fails to demonstrate a
working knowledge of the property being marketed, fails to
demonstrate the level of competency required to transact
business as a Broker in violation of [New York Real Property
Law] §§441 and 441-c." This opinion is consistent with prior
New York State Court decisions, which have held that Brokers
are responsible to, "use due diligence in checking the
information being provided by the seller from the easily
accessible on-line public record." The DOS justified holding
Brokers to this standard because of their status as real estate
"professionals," whereas the purchaser and seller are
presumed to be unsophisticated and untrained.
Furthermore, if a Broker has actual knowledge that a property
is illegal (i.e. lacks a permit, etc.) such information, without
exception, must be disclosed to potential purchasers. Any
failure to disclose information actually known to a Broker will be
considered a breach of the purchaser’s "confidence or
reasonable expectation of fair dealing."
In order to ensure compliance, the DOS recommends that
Brokers "make reasonable efforts to verify the legal status of
the properties they are offering." A breach of this responsibility
may result in disciplinary action against the individual Broker
and their company. The Broker may also be required to return
any commissions it received on the transaction, which would
be deemed to be unearned.
Neil B. Garfinkel,
Bergson, LLP

[Type here]
Important Tip: A real estate broker’s obligation to disclose can
involve complex issues. Legal counsel should be consulted if
the real estate broker has any questions or concerns about
their disclosure obligations.
Friday 9:00 a.m. - 5:00 p.m.
6 23 16
ADA Compliant Websites
I am a real estate broker and I have been informed that real
estate brokers who maintain websites may be subject to
lawsuits if such websites are not compliant with the Americans
with Disabilities Act ("ADA"). Should I ensure that my website
complies with the ADA?
Yes, real estate brokers ("Brokers") that utilize a website for
business purposes should ensure that their website complies
with the ADA. Legal action may be sought against Brokers who
maintain websites that are not properly accessible to persons
with disabilities.
The ADA is a federal law which prohibits discrimination against
persons with disabilities "in all areas of public life." More
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specifically, Title III of the ADA prohibits discrimination against
persons with disabilities in "places of public accommodation,"
and applies to most companies conducting business with the
public.
Although the text of the ADA does not mention websites or the
internet, several United States Courts and the United States
Department of Justice ("DOJ") have taken the position that,
pursuant to Title III of the ADA, business related websites must
be accessible to persons with disabilities. The DOJ is expected
to issue a rule finalizing this position in 2018.
One step that Brokers may take to comply with the ADA is to
make their website compatible with adaptive software that
allows a person with a disability to alter the website’s content
so that it is decipherable to them. For example, someone who
is blind may use a specialized internet browser that allows him
or her play the text in an audio format.
Important Tip: Brokers utilizing a website should contact their
website provider as well as their attorney in order to assess
whether they are in compliance with the ADA.
Bergson, LLP
Friday 9:00 a.m. - 5:00 p.m.
6 16 16

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The Roommate Law
After reading last week’s Question of the Week on the New York
City Occupancy Standard, I am curious about how this law
interacts with the New York State Roommate law. Can you
please provide a brief FAQ on the Roommate Law and explain
how it is limited by the New York City Occupancy Standard?
FAQs:
1. Q: What is the general concept behind the New York
Roommate law?
A: Broadly speaking, the New York Real Property Law
Article 7, Section 235-f (the "Roommate Law") grants
certain individuals the right to share their apartments
with at least one roommate. Pursuant to the law, a
landlord may not "restrict occupancy of residential
premises, by express lease terms or otherwise, to a
tenant or tenants or to such tenants and immediate
family."
2. Q: If there is one person named on the lease how many
roommates may be added to the apartment?
A: Pursuant to the Roommate Law, if you are the only
tenant named on the lease and you or your spouse
occupies the apartment as a primary residence, you
may share the apartment with immediate family, one
additional occupant, and the occupant’s dependent
children (collectively, a "Roommate"), provided that total
occupancy in the apartment remains compliant with the
New York City Occupancy Standard.
3. Q: How does the New York City Occupancy Standard
limit the Roommate Law?
A: If allowing a Roommate to occupy an apartment
would cause the total occupancy to exceed the New
York City Occupancy Standard (80 square feet per
person), the Roommate may not lawfully occupy the
apartment. For example, if a tenant lives in a 150 square
foot apartment, he or she may not have a Roommate
Neil B. Garfinkel,
Bergson, LLP

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because there is not enough room pursuant to the
Occupancy Standard (two people would be required to
have 160 square feet of living space).
4. Q: Who are considered immediate family members for
purposes of the Roommate Law?
A: The Roommate Law does not define the term
"immediate family." However New York courts have
interpreted the definition to include the tenant’s spouse,
parents, children and step children.
5. Q: If the specific terms of the lease state that a tenant
may not share the apartment with anyone who is not a
tenant, is the provision enforceable?
A: No, according to the Roommate Law, any provision
of a lease or rental agreement purporting to waive a
tenant’s right to a Roommate is "null and void."
6. Q: Must a Roommate be added to a lease after moving
into the apartment?
A: No, there is no requirement that a Roommate be
added to the lease. However, the Roommate Law
provides that the tenant "shall inform the landlord of the
name of any occupant within thirty days following the
commencement of occupancy by such person or within
thirty days following a request by the landlord."
Friday 9:00 a.m. - 5:00 p.m.

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6 09 16
Occupancy Standards in New York City
I am a real estate salesperson and I am representing the
owner/landlord of a residential building who, in order to prevent
overcrowding, would like to prevent a couple and their teenage
son from moving into an apartment containing 400 square feet,
excluding hallways, bathrooms, and foyers. May the
owner/landlord restrict their occupancy in this manner?
No, in New York City landlords and owners must comply with
the occupancy standard set by the New York City Housing
Maintenance Code ("the Code"). According to the Code, "every
person occupying an apartment in a class A or class B multiple
dwelling or in a tenant-occupied apartment in a one or two
family dwelling," must have a livable area of at least 80 square
feet. Additionally, "for every two persons who may lawfully
occupy an apartment, one child under four may also reside
therein, except that a child under four is permitted in an
apartment lawfully occupied by one person."
In order to calculate the maximum number of people who may
occupy an apartment, you must divide "the total livable floor
area of the apartment by 80 square feet." Hallways, bathrooms,
water closets, and foyers do not count as "livable floor area" for
purposes of this calculation.
Consequently, the landlord must permit the couple and their
teenage son to occupy the apartment because each occupant
would have at least 80 square feet of livable space (3 persons
x 80 square feet = 240 square feet of minimum space and the
apartment has 400 square feet).
Neil B. Garfinkel,
Bergson, LLP

[Type here]
Friday 9:00 a.m. - 5:00 p.m.
6 02 16
The Capital Gains Tax Exemption
I have been speaking to a seller about representing her in the
sale of a residential property. The seller has owned the
property and used it as her primary residence for one year and
nine months. The seller has indicated that she cannot sell until
she has owned the property for at least two years. What is the
importance of the two year time frame?
The two year time frame that the seller is referring to relates to
the way that the "gains" on the sale of the property is taxed for
income tax purposes. In general, income is taxed differently
depending on how it was earned. Income is generally taxed
either as a long term capital gain or as ordinary income. Long
term capital gains are taxed at a preferential rate as compared
to ordinary income. The profit from the sale or exchange of a
property is a capital gain. On the other hand, ordinary income
includes salary, wages, commissions, etc. Thus, after selling a
home the amount gained on the transaction is usually taxable
at the preferential long term capital gains rate.
Additionally, if the home seller owned the home for at least two
years before making the sale, he or she may be partially or
totally exempt from paying the capital gains tax. According to
the Internal Revenue Service ("IRS"), a taxpayer may
automatically exclude the first $250,000 gained from the sale
Neil B. Garfinkel,
Bergson, LLP

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(or the first $500,000 gained if filing with a spouse) if the
following are true of the transaction:
1. The taxpayer owned the house and used it as his or her
primary residence for at least two of the five years preceding
the sale;
2. The home was not acquired in a 1031 Exchange during the
past five years; and
3. The taxpayer has not claimed any exclusion for the sale of a
home in the two years prior to the current sale.
For example, if your seller waits for the two year period and
then sells the property for a gain of $600,000, only $350,000
would be subject to the capital gains tax. The other $250,000
gained on the sale would fall into the exemption and the seller
would not have to pay any capital gains taxes on this amount.
Important Tip: Real estate licensees cannot provide legal or
accounting advice. Accordingly, real estate licensees should
always recommend that the parties they are representing
speak with their own accountant, tax advisor and/or attorney in
order to ascertain the exact tax consequences of a particular
transaction.
Friday 9:00 a.m. - 5:00 p.m.
5 05 16

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Fair Housing, Disparate Impact and Criminal History - FAQs
I understand that the U.S. Department of Housing and Urban
Development recently released "Guidance on the Application of
the Fair Housing Act Standards to the Use of Criminal Records
by Providers of Housing and Real Estate-Related
Transactions" (the "HUD Guidance"). Can you please provide
an FAQ on the content of the HUD Guidance?
FAQs:
1. Q: What does the HUD Guidance address?
A: The HUD Guidance addresses how the "disparate
impact" theory of liability applies "in Fair Housing Act
cases in which a housing provider justifies an adverse
housing action–such as a refusal to rent or renew a
lease–based on an individual’s criminal history."
2. Q: What is the "disparate impact" theory of liability?
A: "Disparate impact" occurs when a housing or lending
policy, which appears facially neutral or seemingly non-
discriminatory, has a disproportionate adverse effect or
impact on members of a protected category under the
Fair Housing Act and there is no legitimate, non-
discriminatory business need for the policy or practice.
The United States Supreme Court (the "Supreme
Court") in Texas Department of Housing and Community
Affairs v. Inclusive Communities Project, Inc. (the
"Texas Dep’t of Housing") upheld "disparate impact" as
a viable theory of liability under the Fair Housing Act.
3. Q: Are persons with a criminal history a protected
category under the Fair Housing Act?
A: No, persons with a criminal history are not a
protected category under the Fair Housing Act. Rather,
race is the relevant protected category addressed in the
HUD Guidance. This is because certain racial groups
Neil B. Garfinkel,
Bergson, LLP

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are "arrested, convicted and incarcerated at rates
disproportionate to their share of the general
population." Thus, "criminal records-based barriers to
housing are likely to have a [disparate] impact" on these
racial groups.
4. Q: Must there be intent to discriminate in order for a
court to impose liability under the Fair Housing Act
based on a "disparate impact"?
A: No. In Texas Dep’t of Housing, the Supreme Court
ruled that a consumer may bring an action claiming fair
housing discrimination based on "disparate impact" even
if no intent to discriminate exists. Further, the Supreme
Court upheld that liability may be found where a
legitimate business interest for the policy or practice
exists but there was a less discriminatory option
available. Thus, a housing provider may violate the Fair
Housing Act if his or her "policy or practice has an
unjustified discriminatory effect, even when the provider
had no intent to discriminate."
5. Q: Does the Fair Housing Act completely prohibit
housing providers from considering an individual’s
criminal history?
A: No. The Fair Housing Act only prohibits arbitrary and
overbroad bans related to criminal history. Thus,
housing providers should revise the policies they have in
place in order to undertake a holistic approach to
evaluating candidates. Any policy that prescribes for an
absolute ban on applicants with a criminal history will
violate the Fair Housing Act. According to the HUD
Guidance, "Policies that exclude persons based on
criminal history must be tailored to serve the housing
provider’s substantial, legitimate, nondiscriminatory
interest and take into consideration such factors as the
type of the crime and the length of the time since
conviction."

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6. Q: What must a housing provider show in order to
establish that there policy does not violate the Fair
Housing Act?
A: The HUD Guidance explains that there is a three-step
framework used to judge claims against a housing
providers’ allegedly discriminatory policy. Within this
framework, the housing provider only has the burden of
proving the second step. In the first step, the claimant
must show that a disparate impact has actually resulted
from the policy. Then, in the second step, "the housing
provider must be able to provide evidence proving both
that the housing provider has a substantial, legitimate,
nondiscriminatory interest supporting the challenged
policy and that the challenged policy actually achieves
that interest." Finally, "In the third step, the burden shifts
back to the [claimant] to prove that such interest could
be served by another practice that has a less
discriminatory effect."
7. Q: Does the HUD Guidance make a distinction between
policies that impose restrictions based on arrests versus
those that impose restrictions based on convictions?
A: Yes. The HUD Guidance explains that a housing
policy which excludes individuals because of an arrest
history is never "necessary to achieve a substantial,
legitimate, nondiscriminatory interest." Thus, housing
providers’ may not use prior arrest history as a proper
basis for denying an individual access to housing.

[Type here]
Friday 9:00 a.m. - 5:00 p.m.
4 07 16
Payment for Window Guards in Rent Stabilized Apartments
I am a licensed real estate salesperson and I represent a
tenant who is leasing a rent stabilized apartment. The tenant
has a nine year old child and is therefore subject to the window
guard requirement. The landlord is requesting that the tenant
pay for the installation. May a landlord pre-condition installation
of a window guard on a tenant’s payment in a rent stabilized
apartment?
No, a landlord may not pre-condition installation of a window
guard on a tenant’s payment in a rent stabilized apartment but
the landlord may impose a $10 reimbursement charge after the
window guards have been installed.
According to the New York City Health Code (the "Code"), "No
communication from a landlord to a tenant shall indicate that
the installation of window guards is optional or in any manner
dependent upon payments by the tenant." Moreover, the Code
states that "Landlords shall not impose any type of pre-
condition such as fees or any other psychological deterrent,
preliminary to the installation of window guards." This rule
applies to both market rate and rent stabilized/rent controlled
apartments.
However, according to the New York City Department of
Health’s Window Guard General Information pamphlet, "The
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Bergson, LLP

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New York State Division of Housing and Community Renewal
has established the following scale of a pass-along fee for ‘rent
controlled’ and ‘rent stabilized’ apartments which may be
imposed one month after the installation of window guards: a
one-time $10.00 per window guard maximum fee which may be
pro-rated or amortized over a period of one year, two years,
three years, in equal monthly payments according to the option
elected by the tenant."
Important tip: Please see our previous Legal Line Questions
of the Week on Window Guards and Waiving Window Guard
Requirement for additional information.
Friday 9:00 a.m. - 5:00 p.m.
This email and any files transmitted with it are confidential and intended solely for the use of the individual
or entity to whom they are addressed. If you have received this email in error, you are directed not to
read, disclose, reproduce, distribute, disseminate or otherwise use this transmission, and we also request
that you immediately delete this message and its attachments, if any. Delivery of this message to any
person other than the intended recipient(s) is not intended in any way to waive privilege or confidentiality.
Finally, the recipient should check this email and any attachments for the presence of viruses; REBNY
accepts no liability for any damage caused by any virus transmitted by this email.
3 31 16

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Record Retention
I am a licensed New York real estate broker and I am creating
a record retention policy for my firm. Are there any rules or
regulations which stipulate what records licensed real estate
brokers and real estate salespersons are required to maintain?
Yes. Title 19 NYCRR §175.23 of the Rules and Regulations
affecting Real Estate Brokers and Salespersons (hereinafter
"the Regulation") addresses which records licensed real estate
brokers and real estate salespersons (collectively "Brokers")
are required to maintain.
According to the Regulation, all licensed Brokers must keep
and maintain, for a three year period, the following information
for most residential sales:
"(1) the names and addresses of the seller and the buyer, (2)
the broker prepared purchase contract or binder, or if the
purchase contract is not prepared by the broker, then the
purchase price and the amount of deposit (if collected by the
broker), (3) the amount of commission paid to the broker, (4)
the gross profit realized by the broker if purchased by him or
her for resale, (5) any document required under Article 12-A of
the Real Property Law and (6) the listing agreement or
commission agreement or buyer-broker agreement."
The foregoing information must be kept for sales involving real
property used or occupied, or intended to be used or occupied
as a home or residence improved by a co-op, condominium, or
one-to-four family dwelling. The Regulation does not apply to
sales of "unimproved real property upon which such dwellings
are to be constructed."
Records may be stored in either paper or electronic form.
Please note that the Regulation contains a "safe harbor"
provision, which recognizes that a Broker will not be found to
have violated the Regulation if he or she was not provided with
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Bergson, LLP

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the required documents or information in a particular
transaction.
Important Tips:
The Regulation does not apply to leasing transactions (due, in
my opinion, to an omission when the Regulation was
drafted). However it is recommended that, in connection with
leasing transactions, Brokers always keep a record of (i) the
names and addresses of the landlord and tenant, (ii) the terms
of the transaction, including the rental amount and the term, (iii)
the amount of commission paid to the real estate broker, and
(iv) the listing agreement, fee agreement or representation
agreement. The obligation to maintain a copy of the Agency
Disclosure Form for leasing transactions is required under
Section 443.
Although the Regulation sets a three year period for record
retention, you should maintain digital versions of records for an
unlimited period of time. The cost associated with scanning,
digitizing and storing electronic records is nominal and the
ability to locate past records, potentially beyond three years,
can be invaluable.
Friday 9:00 a.m. - 5:00 p.m.
3 24 16

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"Ours Alone" Listings
I am a REBNY member and I recently came across a listing
labeled as "Ours Alone." What is an "Ours Alone" listing and may
"Ours Alone" listings be listed on the REBNY Listing Service?
"Ours Alone" is a term used to describe exclusive listing
agreements entered into verbally. This designation
distinguishes "Ours Alone" listings from "Exclusive" and "Co-
Exclusive" listings, which are terms that may only be used to
describe written exclusive listing agreements. If a REBNY
member enters into a verbal exclusive listing agreement, the
member must label the agreement as being "Ours Alone"
whenever "transmitted … in any communication with other
REBNY firms." (REBNY Code of Ethics, Article V B(3)(b)).
According to the RLS Universal Co-Brokerage Agreement
Rules and Regulations (the "UCB"), "Ours Alone" listings may
not be listed on the REBNY Listing Service ("RLS"). The UCB
states: "The RLS will accept Exclusive Listings, and shall not
accept Open Listings or oral exclusive listings commonly
referred to as ‘ours alone’ listings." (UCB, Article I, Section 4).
Neil B. Garfinkel,
Bergson, LLP
Friday 9:00 a.m. - 5:00 p.m.
3 17 16

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Restoration and Removal Obligations in
REBNY Leases
I am a licensed real estate salesperson and I am representing a
commercial tenant who is concerned about her potential removal
and restoration obligations as they are stated under Article 3 of
the REBNY commercial lease form. What exactly does Article 3
state and are there any fair modifications that a tenant may
suggest to alleviate the tenant's concerns regarding the
language of this provision?
Article 3 of the REBNY commercial lease form ("Article 3")
provides, in part, that a landlord may, by notice to the tenant of
not less than twenty (20) days prior to the lease termination
date, elect to have the tenant’s improvements (the
"Improvements") removed from the premises by the
tenant. Accordingly, the tenant must repair and restore the
premises to the condition that existed prior to installation of the
Improvements and the tenant must repair any damage to the
premises or the building caused by the removal of the
Improvements.
Tenants will frequently request an opportunity to negotiate
Article 3 and there are several compromises that a landlord
may find acceptable in order to reach an agreement on an
amended Article 3. These compromises may include:
1. An agreement that tenant is not required to restore the
premises to their condition prior to the construction of
the Improvements.
2. An agreement that the tenant shall not be liable for any
minor damages to the carpet, ceiling and/or walls
caused by the tenant's removal of the Improvements.
Neil B. Garfinkel,
Bergson, LLP

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3. An agreement that the tenant shall not be required to
remove the Improvements unless the landlord requests
that the tenant does so when the landlord approves the
Improvements. If the landlord fails to notify the tenant at
the time of the approval of the Improvements, then the
landlord waives the right to require removal of the
Improvements.
4. An agreement that the tenant shall only be responsible
to remove "Specialty Alterations" made to the premises,
as opposed to the removal of all Improvements. A
"Specialty Alteration" is generally defined as those
alterations, installations, additions or improvements
consisting of raised floors, vaults, filing systems, internal
staircases, dumbwaiters, pneumatic tubes, vertical and
horizontal transportation systems, any alterations which
are structural in nature or penetrate or otherwise affect
any floor slab and any textured, mirrored and/or
decorative walls, ceilings, floors and other alterations of
like character or nature.
5. An agreement that the tenant shall not be required to
remove any Specialty Alterations unless the landlord
requests that the tenant does so when the landlord
approves the Specialty Alterations. If the landlord fails to
notify the tenant at the time of the approval of the
Specialty Alterations, then the landlord waives the right
to require removal of the Specialty Alterations.
Important Tips: Please contact legal counsel if you have any
questions regarding how these provisions can be negotiated
from a landlord and tenant perspective.
1. For additional insight, please watch the following video:
http://agmblaw.com/media/larryhaber/off-the-wall-aka-
tenant-restoration-and-removal-obligations-at-lease-
termination/

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Friday 9:00 a.m. - 5:00 p.m.
2 26 16
gal Line Question of the Week
ansion Tax (Revised)
I am a licensed New York state real estate broker and I am representing a purchaser
who is considering buying an apartment for $999,999.00. My purchaser is worried that
she will be required to pay the Mansion Tax on the sale. Can you please tell me what
the Mansion Tax is and whether she will have to pay the Mansion Tax if the apartment
closes at $999,999?
The Mansion Tax is a fee paid by the purchaser of residential real property in New York
State, when the total consideration is One Million ($1,000,000.00) Dollars or more.
Residential real property is defined as "any premises that is or may be used in whole or
in part as a personal residence at the time of conveyance, and includes a one-, two-, or
three-family house, an individual condominium, or a cooperative apartment unit." The
Mansion Tax is equal to 1% of the total "consideration." New York State Tax Law
defines "consideration" as the price actually paid or required to be paid for the real
property. This amount corresponds with the "amount of consideration for conveyance"
listed on Schedule B, Part II, Line 1 of the New York State Real Property Transfer Tax
Form TP-584 ("the TP584"). See the illustration below for the relevant portion of the TP-
584.
Neil B. Garfinkel,
REBNY Broker Counse
Partner-in-charge of rea
and banking practices a
Abrams Garfinkel Marg
Bergson, LLP

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If the total consideration for the property (as it appears on the TP-584) is for anything
less than $1,000,000.00, the purchaser will not have to pay the Mansion Tax. Thus, if
the total consideration for the apartment is $999,999.00 the purchaser does not have to
pay the Mansion Tax on the sale.
Nonetheless, determining whether the Mansion Tax applies to a particular transaction is
not as simple as ascertaining the purchase price for the property. If the purchase price
of residential property is less than $1,000,000.00, a purchaser may still have to pay the
Mansion Tax because of what is known as "grossed up consideration." In New York, the
consideration in a real estate transaction is "grossed up" (increased) if a purchaser
agrees to pay the seller’s transfer taxes on the transaction. In this scenario, the transfer
taxes that the purchaser has agreed to pay are added to the purchase price as part of
the total consideration.
Accordingly, real estate brokers should be aware of the transfer tax implications when
the purchase price approaches $1,000,000.00 and the purchaser agrees to pay the
seller’s transfer taxes. In such a scenario, the grossed up consideration could increase
the total consideration to exceed $1,000,000.00, thereby implicating the Mansion Tax.
In New York City, real estate transactions are subject to both New York State and New
York City transfer taxes. The New York State transfer tax is .4% of the total
consideration. The New York City transfer tax is 1% of the total consideration if the sale
is for $500,000.00 or less and 1.425% of the total consideration for sales greater than
$500,000.00.
For example, if the purchase price of an apartment is $999,999.00 and the purchaser
agrees to pay the seller’s transfer taxes, then the purchaser will be responsible for
$3,999.99 in New York State transfer taxes and $14,249.99 in New York City transfer
taxes. The combined $18,249.98 of transfer taxes is added to the purchase price and
the total grossed up consideration amount is $1,018,248.98. Thus, the purchaser would

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have to pay the Mansion Tax on this transaction because the total consideration
exceeds the $1,000,000.00 threshold.
Furthermore, if the purchaser agrees to pay the seller’s transfer taxes, the transfer taxes
will be re-calculated using the "grossed up" consideration amount, rather than the
original purchase price. Thus, in the example above, the transfer taxes would be
recalculated using the grossed up amount of $1,018,248.98. This equates to
$18,583.04 in combined New York State and New York City transfer taxes.
Important Tip: Please note that because these calculations are complex, you should
always consult with an attorney and an accountant when commencing a transaction in
which the Mansion Tax may be implicated.
mation contained in the REBNY Legal Line Question of the Week is copyrighted material owned exclusively by the Real Estate Board of New York ("REBN
egal Line Question of the Week, and the information contained therein, shall not be reproduced or published, in whole or in part, without the express prio
of REBNY. The REBNY Legal Line Question of the Week, including the information contained above, is for general informational purposes only and is n
construed as the rendering of legal or tax advice. Real estate licensees are not permitted to provide legal or tax advice.
ve any questions regarding this Memo or any other matter, please contact the REBNY Legal Line at (212) 201-1178 Monday-Friday 9:00 a.m. - 5
2 18 16

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Ground Leases
I am a licensed real estate salesperson and I am representing
a purchaser who is considering a co-op apartment in a building
that has a Ground Lease. Can you please clarify exactly what a
Ground Lease is? Also, are there any particular considerations
that should be made before purchasing a co-op apartment in a
building that has a Ground Lease?
If a co-op building has a Ground Lease (also known as a Land
Lease) it means that the co-op corporation does not own the
land under the building. Rather, the co-op corporation leases
the land from the owner of the land. About 100 buildings in
Manhattan have Ground Leases, many of which are co-ops.
Generally the terms of Ground Leases are quite long, varying
from terms of 50 to 99 years.
Several important considerations should be made before
purchasing a co-op apartment in a building with a Ground
Lease:
1. Can the rent payable by the co-op corporation increase
during the term of the Ground Lease?
2. If the rent can increase during the term of the Ground
Lease, how is the increase calculated? Is the increase
in rent a set amount or is it based on a formula that
requires a determination in the future (for example, the
rent increase could be tied to the fair market value of the
property).
3. If the rent increases in the future, how does the increase
affect the maintenance paid by the co-op shareholders?
4. Does the Ground Lease restrict the co-op corporation in
making structural changes to the building?
5. What are the "events of default" under the Ground
Lease and does the Ground lease provide for the co-op
corporation to cure such defaults.
Neil B. Garfinkel,
Bergson, LLP

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