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retreat center

The Dharmakaya Center for Wellbeing Opens Its Doors in Ulster County

Located in the Town of Wawarsing in southern Ulster County, the Dharmakaya Center for Wellbeing has now opened its doors in Cragsmoor, New York, to provide a place of retreat, wellbeing and learning focused on the Buddhist teachings of the Tibetan Vajrayana tradition. The center is situated on a 90-acre parcel and includes a large meditation hall with a 10-foot Buddha statue, residential rooms, kitchen, dining and related facilities. The Center is the vision of Trungram Gyaltrul Rinpoche PhD, and its opening was the culmination of a more than decade-long effort by the Dharmakaya organization’s development team including Cuddy & Feder’s Jennifer Van Tuyl as lead attorney and the late Phillip Cerniglia, AIA, project architect, of Lothrop Associates, LLP.

The inclusion of natural buffers also serves to protect a habitat for wildlife, and maintain the existing setting of contributing features within the Cragsmoor Historic District.

The size and location of the project required the development of significant engineering, architectural and environmental plans. At the local level, Planning Board review included both site plan review as well as issuance of a special permit for a house of religious worship.

The project also required a full Environmental Impact Statement examining the potential impacts in numerous areas including water, air, traffic, visibility and historic and municipal resources. Based on detailed studies of water supply, a water monitoring protocol was incorporated into the project. The project also incorporates an extensive vegetated buffer around the Hermitage perimeter, protected by a Conservation Easement held by the Town of Wawarsing. The inclusion of natural buffers also serves to protect a habitat for wildlife, and maintain the existing setting of contributing features within the Cragsmoor Historic District.

In 1986, New York’s highest court ruled that the function of religious institutions supports the public welfare and morals, and such institutions should not be excluded from communities even in residential zoning districts. Such institutions must nevertheless provide an analysis of potential impacts, which required significant analysis over multiple years to complete.
The approval process for a project of this scope and nature is rarely straightforward and required immense coordination by the principals of the project and their professional team. But today the Dharmakaya Center for Well Being is open and actively pursuing its mission.

Elderly man with cane walking with nurse

New Development in Guardianship Law: Supreme Court Won’t Compel Neuropsychological Exam

An Article 81 guardianship proceeding is a lawsuit in which an individual or entity seeks the appointment of a guardian for an “alleged incapacitated person” (the “AIP”). A common misconception about Article 81 guardianship proceedings is that medical evidence is of primary importance to the court’s determination of whether an alleged incapacitated person is, in fact, incapacitated.

But practitioners know that medical evidence and diagnoses are, at most, a secondary consideration of the court in its determination of incapacity. Indeed, although the AIP’s medical condition may strongly affect his or her functional level and functional limitations – the key factors in a finding of incapacity – medical records are usually excluded from evidence as privileged, subject to certain limited exceptions.

In Matter of S.B., 2018 N.Y. Misc. LEXIS 2413 (Sup. Ct. Chemung Cty. June 15, 2018), the court encountered what it dubbed a “novel” question “of first impression” further touching on the use of medical evidence in a guardianship proceeding. The court framed the issue as follows: “[C]an the Court order a neuropsychological evaluation of the AIP despite her objection?” The court answered in the negative – even though the court evaluator recommended that the AIP undergo such an evaluation.

In simply objecting to the petitioner’s petition and opposing the medical examination, the court found that the AIP had not placed her medical condition at issue to warrant waiver of the privilege.

In reaching its decision, the court relied on a potpourri of statutory citations and caselaw. First, the court stated that although the Mental Hygiene Law requires a court evaluator to meet with the AIP, “there is no concomitant statutory duty imposed upon the AIP to meet with the” court evaluator. The court held that forcing an AIP to submit to a medical examination is analogous to compelling an AIP to be interviewed by a court evaluator – a requirement not contained in the law.

Second, the court cited the AIP’s objection to the examination, and noted that the “AIP enjoys the doctor-patient privilege that precludes admission of her medical records into evidence unless she affirmatively placed her medical condition at issue.” In simply objecting to the petitioner’s petition and opposing the medical examination, the court found that the AIP had not placed her medical condition at issue to warrant waiver of the privilege.

Third, the court noted that the “law of the Second and Third Departments” is that an AIP cannot be forced to testify at trial. The court found that a court-mandated medical examination may be analogous to ordering an AIP to testify, and declined to “potentially enter[] an unenforceable Order.”

Lastly, the court highlighted the practical consideration that regardless of any Court Order, the AIP would not cooperate in a medical examination. So any Court Order would likely be futile.

The holding of Matter of S.B. appears to significantly narrow the function of any independent medical expert the court evaluator may retain (with the approval of the court) under MHL § 81.09(c)(7). But that topic is for another blog post.

Ultimately, in Matter of S.B. the court found that the AIP was not incapacitated. And, as is usually the case, its determination was based upon its interactions with the AIP – and not upon the results of a medical examination or medical records.

The experienced Litigation team at Cuddy & Feder LLP is available to help you in the areas of trusts & estates litigation, including will and trust contests and accountings, and contested and uncontested Article 81 guardianship proceedings.

The Quarter Point Tax NY: Obligations and Exceptions

The Quarter Point: Obligations and Exceptions

I. Mortgage Recording Tax

New York State imposes an excise tax on the privilege of recording a mortgage. Known simply as the “mortgage recording tax,” the tax actually consists of several distinct taxes with rates ranging from $0.25 to $1.75 for each $100 of principal indebtedness secured, of which at any time may become secured, by the mortgage. The total tax rate for any given mortgage depends upon which, and how many, of these taxes apply in the county where the property is located.
Of the various taxes that together constitute the mortgage recording tax, there are three that apply almost universally: (i) the basic tax of $0.50 for each $100 of indebtedness, imposed by section 253(1) of the Tax Law; (ii) the special additional tax of $0.25 for each $100 of indebtedness, imposed by section 253(1-a)(a) of the Tax Law; and (iii) the additional tax of $0.25 ($0.30 if the property is located within the metropolitan commuter transportation district) for each $100 of indebtedness, subject to a $10,000 deduction for residential properties, imposed by section 253(2)(a) of the Tax Law (the “metropolitan commuter transportation district” includes New York City and the counties of Dutchess, Nassau, Orange, Putnam, Rockland, Suffolk and Westchester).

Nevertheless, it is not uncommon for the quarter point, and the responsibility to pay it, to become a point of discussion during certain types of mortgage loan transactions.

In addition to these three taxes are those imposed by local governments, specific to the county or, where applicable, city in which the mortgaged property is located. For example, Westchester County imposes an additional tax of $0.25 for each $100 of indebtedness pursuant to section 253-g of the Tax Law. Accordingly, the total mortgage recording tax in Westchester is $1.30 for each $100 of indebtedness, or 1.3%. In New York City, the additional tax is 1% to 1.75% depending on the property type and mortgage amount, resulting in a total mortgage recording tax of 2.05% to 2.80%, the highest in the state.

II. The Quarter Point

Of the various taxes that constitute the mortgage recording tax, only the special additional tax imposed by section 253(1-a)(a) of the Tax Law, commonly referred to as the “quarter point,” must be paid by a particular party. Specifically, section 253(1-a)(a) provides that the special additional tax is payable by the mortgagee in cases where the property covered by the mortgage is “principally improved or to be improved by one or more structures containing in the aggregate not more than six residential dwelling units, each dwelling unit having its own separate cooking facilities.” The section goes on to state that, subject to certain exceptions, “such tax shall not be paid or payable, directly or indirectly, by the mortgagor” if the mortgaged property is as described above. In other words, unless an exception applies, the quarter point must be paid by the lender where the mortgage encumbers a residential property with six units or less.

So, what are the exceptions?

1. Statutory Exceptions

a. Payment to Facilitate Release:

Section 258 of the Tax Law provides that a mortgage shall not be recorded unless the required mortgage recording tax is paid. Similarly, section 258 provides that a mortgage which is subject to the tax shall not be, among other things, released, discharged of record, modified or extended unless such tax is paid. If, for example, a mortgage is mistakenly recorded without collection of recording tax, or if it is later determined that a greater tax was due than was actually collected, such amount must be paid in order to compel the county clerk to record a satisfaction or assignment of the mortgage, even if the appropriate instrument of satisfaction or assignment is successfully tendered and all other requirements have been satisfied. To account for scenarios in which the portion of the recording tax due is the special additional tax payable by the lender, Section 258 provides that a mortgagor may bypass the lender and pay the special additional tax directly to obtain a release or discharge of record and then either apply for a credit or maintain an action against the party responsible for such payment.

b. Trust Mortgages:

When a mortgage is made by a corporate trust to secure payment of bonds or other obligations and, at the time the mortgage is recorded, the principal indebtedness which is or may become secured by such mortgage has not been fully advanced, the mortgage tax payable at that time is based only on the amount of the initial advance, provided that amount, among other things, is stated at the end of the mortgage document (Tax Law section 259). This allows the trust, as borrower, to postpone payment of the recording tax and to ensure that such tax is paid only on the total amount actually advanced. However, balancing this privilege is the requirement that, after the recording of the mortgage, the recording tax due in connection with any subsequent advance, including the special additional tax that would otherwise be payable by the bondholders or other mortgagees, is payable by the borrower.

c. Non-Profits:

253(1-a)(b) provides that a non-profit organization exempt from federal income taxation pursuant to subsection (a) of Section 501 of the internal revenue code is exempt from the special additional tax. The exemption applies both to mortgagees and mortgagors. Where the mortgagee is exempt as a qualifying non-profit under this section, the mortgagor is obligated to pay the tax. Where the mortgagor is exempt, mortgagee must pay the tax. Where both the mortgagor and mortgagee are qualifying non-profits, the mortgage is exempt from the special additional tax altogether.

2. Case Law

Federal Savings and Loan Associations:

In Dime Savings Bank of New York, FSB, v. The State of New York, 174 AD2d 173 (2nd Dept. 1992), the Appellate Division, Second Department, held that the anti-pass through provision in Section 253(1-a)(a) conflicts with a federal regulation (12 CFR 545.32 (b)(5)), which permits federal savings institutions to require the borrower “to pay necessary initial charges connected with making a loan, including the actual costs of title examination, appraisal, credit report, survey, drawing of papers, loan closing and other necessary incidental services and costs.” Therefore, the Court concluded, section 253(1–a)(a), insofar as it prohibits the lender from passing the cost of the recording tax on to the borrower, is unenforceable as against federal savings and loan associations. Accordingly, federal banks are entitled to require the borrower to pay the special additional tax that would, under section 253, otherwise be payable by the lender.

III. In Practice

The rule stated in section 253(1)(a) seems straightforward: if the mortgage secures a residential property with six units or less, each with its own cooking facilities, the lender must pay the quarter point, subject only to a limited set of exceptions, as set forth above. Nevertheless, it is not uncommon for the quarter point, and the responsibility to pay it, to become a point of discussion during certain types of mortgage loan transactions. Sometimes, this is the result of the lender’s unfamiliarity with this rule and other times the borrower’s. For example, a bank, or a particular bank office, may generally issue loans secured only by commercial properties or properties outside of New York State. On the other hand, a borrower may be investing in a commercial property for the first time, having only had experience investing in one to six family residential properties in the past. In either of these examples, the allocation of the special additional tax may come as a surprise to one or both parties. There are also instances in which the parties are generally aware of the rule but unsure of its application given the nature of the transaction – for example, a commercial loan secured by a single-family residence. In the eyes of the bank issuing such a loan, the property is an investment and the loan is evaluated and papered accordingly. So, why, the bank may ask, should the mortgage recording tax be treated any differently? Why should the bank have to pay the quarter point on a commercial loan? The answer is because the law is based on the type of property, not the type of loan. If the collateral is a residential property with six or less units, the bank is obligated to pay the quarter point.

Of course, there are ways for lenders to pass the tax on to borrowers or other parties – for example, by increasing fees to offset the anticipated tax or openly requesting that the borrower or another party pay the tax. No matter the particulars, however, any such arrangement is impermissible under section 253(1)(a). While it is unlikely that the recording of the mortgage would be jeopardized as a result, assuming the full mortgage recording tax is paid, the lender’s obligation with respect to the tax survives the recording of the mortgage. In State v. Intercounty Mortgagee Corp., 87 AD2d 748 (1st Dept. 1982), the court required lenders who had passed the cost of the tax on to sellers to make restitution to those sellers in the amount of the tax improperly collected from them. In so doing, the court stated: “[T]he fair interpretation of Tax Law § 253 subd. 1–a(a) is that the special additional mortgage recording tax with respect to such improved real property must be paid by the lender and cannot be passed on to the seller, real estate broker or other third person. Nor do we think that this statutory provision denies these mortgagees the equal protection of the laws, or is invalid under the supremacy clause of the United States Constitution.”

It is important for all parties to any New York mortgage loan transaction to be aware of their respective recording tax obligations, including the quarter point, and to get it right. In the end, it is to the benefit of both the borrower and lender (not to mention sellers and other parties who might otherwise agree to pay the tax) to ensure that the tax is paid in accordance with the Tax Law. For the borrower, the recording tax often constitutes a substantial portion of closing costs. Simply paying attention to the amount and allocation of the tax can create opportunities for cost savings. If the borrower is entitled to an exemption, the opportunity is even greater. For lenders, strict compliance with the Tax Law can eliminate the risk of future liability for misallocated recording tax. Whether by paying the quarter point or, in certain cases (for example, where the borrower is exempt) paying the entire recording tax, lenders can ensure they will not be ordered to make restitution or face other penalties down the road in connection with their recording tax obligations.

The experienced Real Estate team at Cuddy & Feder are available to help you in a variety of real estate transactions, both commercial and residential. Founded on the strength of our real estate practice, the firm has played a key role in shaping the real estate landscape throughout Westchester, Fairfield, Long Island and the Hudson Valley.

New Local Laws Address Climate Change Issues. How to Be Prepared.

New Local Laws

Whether it be new construction or substantial alternations to existing buildings, there is never any shortage of development in Westchester County. Some developers proactively keep changing climate conditions in mind in their planning process, but many don’t think to do so. In some localities, that’s no longer an option. According to Westchester County’s Action Plan for Climate Change and Sustainable Development, by 2100 “destructive 100-year floods are predicted to occur on average every 10 years in the vicinity of Westchester County.”

Many municipalities are updating local laws to reflect the changing climate conditions and improve the community’s resilience. For permit administrators and municipal staff, adapting to the changing times is necessary to ensure resilience of new projects, mitigate the adverse impacts new development will have on neighboring properties, and prevent substantial damage to municipal systems and private property.

How to Be Prepared

Applicants should be prepared to address these issues. Being aware of the concerns the legislative amendments are intended to mitigate and the purpose in enacting them prevents code-compliance issues from being raised during the land use approval process. Additionally, reviewing these requirements before starting the local application process demonstrates to land use boards that diligence and careful consideration have gone into planning the project, which will earn the appreciation of board members.

Aside from creating additional restrictions on new construction, some municipalities are amending their code to include incentives for incorporating green components.

These updated local laws target concerns such as increased stormwater runoff resulting from more frequent and severe storms and adverse temperature and flooding impacts caused by additional impervious surface. These requirements are typically located in the sections of your municipality’s local law that concern flood damage prevention, zoning and wetlands.

While general compliance with these standards is preliminarily evaluated by the local building department staff, full compliance with specific code sections, such as a flood damage prevention code, is often not assessed until after planning and zoning approvals when a final building permit application is filed. Compliance with the local flood damage prevention code, for example, is mandated in many municipalities by their eligibility in Federal Emergency Management Agency’s (FEMA) National Flood Insurance program. As such, noncompliance discovered after planning and zoning approvals can create extreme issues for the applicant, especially since variances from flood guidelines are rarely granted and re-designing portions of a project can require amended planning and zoning approvals.

Aside from creating additional restrictions on new construction, some municipalities are amending their code to include incentives for incorporating green components. In New Rochelle, for example, an applicant in the Downtown Overlay Zone is eligible for height bonuses equating to additional permitted stories for incorporating additional “meaningful green elements” into their project, such as LEED certification and microgrid.

Conclusion

Aside from a potential expedited approval process or flexibility with zoning requirements, incorporating green elements into your proposal – e.g. permeable pavement, blue roofs, bio-filtration swales, rain gardens, green roofs, green parking and microgrid or renewables – will also result in long term economic benefits including energy savings.

The experienced Land Use & Zoning and Energy & Environmental teams at Cuddy & Feder are available to help you review the local requirements with your design team prior to formalizing a site plan. Incorporating some of these green elements will likely result in a faster approval process for a project that municipal staff and board members are enthusiastic to approve.

GDPR Day

Happy GDPR Day!

Europe’s sweeping privacy law creates opportunities to improve compliance and business practices.

GDPR Day is Here

After a two year grace period, countless articles and presentations analyzing its content and impact, millions spent on compliance and legal consultants, and last minute scrambling, the General Data Protection Regulation (GDPR) is here. Today, a sleepy Friday before the unofficial kick off of summer in the US, EU member countries will begin enforcing the vast privacy law.

The GDPR builds on EU privacy law, dating back more than twenty years, by (among other things) granting specific rights to individuals to control their personal data and by adding some serious teeth to European privacy law in the form of penalties of up to the higher of 4% of a firm’s global annual revenue or €20 ($23.4 million) for violations.

The GDPR is remarkable for its reach, applying not only to firms operating in the EU, but to any business that targets EU customers. Many American firms have been slow to appreciate the law’s impact on them, thinking that they are American company and this is a European law. Not so. For example, an American restaurant, which serves European tourists (and naturally collects data on those EU citizens when taking reservations and recording credit card transactions), must comply with GDPR.

At least in the abstract everyone recognizes the value of data, but many firms, big and small alike, will readily admit that at a minimum they are not efficiently using that data, or worse they do not fully understand what data they have or how to use it at all.

As one would expect with such a disruptive legal requirement, GDPR has caused great angst amongst firms of all sizes in all industries, with many reporting that even as of today, when enforcement of the law commences, they are noncompliant or only partially compliant. But, smaller firms, and particularly smaller firms in the US who serve few European clients (like the aforementioned restaurant), need not sweat too much – at least not yet. EU regulators have consistently stated that early enforcement will focus on what they deem are the biggest risks and biggest violators.

Still, GDPR is here and firms have to comply. But, beyond mere compliance with the law’s specific requirements, GDPR presents an opportunity for firms to improve not only their data collection and management practices, but to reassess how they are using data.

The reaction to GDPR among American firms has been mixed. But, many of the smart ones have noted that they have used today’s impending deadline as a reason to reassess the data they collect, how they store it, and how they use it. At least in the abstract everyone recognizes the value of data, but many firms, big and small alike, will readily admit that at a minimum they are not efficiently using that data, or worse they do not fully understand what data they have or how to use it at all.

GDPR demands that firms map the data they collect and how they use it. This, in turn, should demand that firms look how they can collect, store, and use that data, not just from the legal/compliance lens, but for business purposes as well. Many firms have acknowledged that this is a positive side effect of GDPR.

Such an approach need not be a one off. Compliance and regulatory burdens on small and mid-sized firms are real and despite some of the deregulation push in Washington, they are not going away. Yet, there can be benefits to focusing on compliance, including a push for efficiency and implementation of best practices in sometimes ignored areas. The GDPR provides such an example.

Cuddy Feder White Plains – Westchester Lawyers – White Plains Law Firms

Benefitting from the Suburban Office Leasing Boom

There are numerous articles and studies suggesting that the suburban office leasing market is strong and attracting large-scale and mid-sized tenants away from the traditional urban core. These new suburban tenants are motivated by the desire to attract and retain aging Millennial employees that are settling down in the suburbs, starting families and looking to cut down on commute time. However, research suggests that not just any suburban office building will accomplish this goal. In order for employees to view suburban office spaces as suitable replacement spaces for urban working environments, these spaces must have certain modern characteristics such as, in-building amenities and proximity to restaurants, retail, housing and transit.

A suburban landlord looking to attract tenants traditionally drawn to the urban core may want to focus on developing or rehabbing buildings in areas that contain many of the same benefits as their urban counterparts, such as walkable downtowns with easy access to restaurants, transit and retail. Some landlords not located within walking distance of these types of amenities can offer tenants shuttle services in order to create a similar sense of convenience. A shuttle service to and from nearby transit hubs may also have the benefit of assisting tenants in attracting employees that wish to reside in urban areas by providing these employees with an option to counter-commute.

Tenants looking to personalize their office space may also find landlords more than willing to provide tenant improvement allowances or direct space build outs to help tenants accomplish their goals.

The neighborhood surrounding a suburban office building may play an important role in attracting tenants, but the shared amenities located within an office building are also a key factor. Landlords have been constructing amenities such as eateries, cafés, fitness centers, communal tenant spaces and rooftop lounges to attract new tenants for several years now. These amenities coupled with the conveniences discussed earlier help create the same live-work-play environment that attracts many tenants and employees to urban areas.

Although every community is different, tenants considering a relocation to a suburban area may find that they are able to provide certain coveted benefits and amenities to their employees, while obtaining additional square footage and paying less in rent per square foot. Tenants looking to personalize their office space may also find landlords more than willing to provide tenant improvement allowances or direct space build outs to help tenants accomplish their goals.

Whether you are a landlord looking to attract new tenants or a potential tenant looking to attract and retain cutting edge talent, it is clear that both landlords and tenants have a great deal to gain from the boom in suburban office leasing, and suburban communities within the tri-state area are uniquely poised to benefit from this trend due to their proximity to New York City.

At Cuddy & Feder LLP, we regularly assist both landlord and tenant clients in negotiating office leases.

New Development is Thriving on Beacon’s East Main Street and Along the Fishkill Creek

Have you been to “Brooklyn North,” “Bro-No,” or “Beaclyn” lately? New development is thriving down on Beacon’s East Main Street and along the Fishkill Creek amidst a sea of moratoria.

Much like the signal fires that once burned along the Hudson Highland mountaintops during the Revolutionary War, the City of Beacon has sparked a revolution of its own. Powered by dedicated developers and comprehensive planning efforts and effective leadership by the City, smart growth techniques have led to retail, commercial and hospitality business bustling on Main Street, while years of cleanup and revitalization efforts are now bringing new life to the Fishkill Creek – the same Creek that once drove the City’s rich industrial and manufacturing history.

The City of Beacon was formed from the Villages of Fishkill Landing and Matteawan just over a century ago, before New York City even adopted the first comprehensive zoning ordinance in the United States. Once the hat-making capital of New York, much of Beacon’s historic development preceded the enactment of the City’s incorporation in 1913 and later the development of its own zoning ordinance.

These developments toward the east end of Main Street and along the Fishkill Creek involve a variety of commercial, retail and residential mixed uses, including artist live/work spaces, workforce housing units, condominiums and rental apartments.

With the industrial history apparent in the existing building and development footprint along the Fishkill Creek, the City began by rezoning properties along the Fishkill Creek that were once zoned industrial, creating the “Fishkill Creek Development” zoning district. This district was designed to “[e]ncourage the development and/or redevelopment of undeveloped or underutilized industrial properties along the Fishkill Creek in a manner that provides a mix of residential and nonresidential uses.” 1

In keeping with the goal to revitalize the City, developers have worked to bring new life to former industrially and commercially zoned properties in the City including:

• Matteawan Manufacturing Company, later the H.N. Swift Machine Shop and Braendly Dye Works (now the Roundhouse, 2 East Main Street);
• Schrader Hat Company (now the Lofts at 1 East Main, 1 East Main Street);
• A brick textile mill (now The Lofts at Beacon, 18 Front Street/11-89 Mason Circle);
• Old factories and machines shops (now the Hudson Valley Brewery, 7 East Main Street);
• The Lofts @ Beacon Falls (50, 52, 54 Leonard Street);
• The Beacon Hotel, the oldest continuously operating hotel in beacon (now The Beacon Hotel and The Beacon Hotel Restaurant, 424 Main Street);
• The Beacon Theatre (now the Beacon, 445 Main Street); and
• A former brick factory (now Creek Drive Lofts and Apartments, 9-11 Creek Drive).

These developments toward the east end of Main Street and along the Fishkill Creek involve a variety of commercial, retail and residential mixed uses, including artist live/work spaces, workforce housing units, condominiums and rental apartments. At the same time, new projects proposed along Beacon’s waterfront – located north of the Fishkill Creek’s confluence with the Hudson River – involve conveniently located housing within walking distance to the Metro-North train station, which development both preserves open space and is supportive of the Smart Growth strategy of transit-oriented development. Together, these projects are leading the redevelopment renaissance and breathing new life and linkages into a City that was formed by the waterfront Village of Fishkill Landing and the landward Village of Matteawan.

Obtaining final approvals can sometimes be an intricate process. For example, the Creek Drive Lofts and Apartments required modification of applicable standards from the City Council as well as approvals from the planning board, zoning board and architectural review board. Additionally, such growth is not without its challenges, however, and the City of Beacon recently passed a six (6)-month moratorium on residential and commercial development not already in process to evaluate potential impacts of new development on the city’s water supply.

The City of Beacon is also currently in the process of reviewing the findings and recommendations in the City’s recent Comprehensive Plan Update (adopted in April of 2017) in order to consider how to implement its recommendations for properties along the Fishkill Creek, as well as the east end of Main Street and the downtown area and throughout the City. Such changes must be done in conformance with the City’s Comprehensive Plan. While the City’s Comprehensive Plan encourages new development along the Fishkill Creek and Main Street to incorporate office, retail and residential mixed uses, when combined with zoning requirements for workforce housing, Greenway Trails and other requirements, developers are encouraged to analyze the past before creating the future.

With great opportunity, comes great development responsibility and an understanding of the zoning and comprehensive planning strategies that are employed to lead to a successful development on the Fishkill Creek and along Beacon’s waterfront.

 

Title closing fee: How much do you tip a title closer?

Title Closer: To Tip or Not to Tip?

At a typical residential closing in New York, you can expect to see the seller, the seller’s attorney, the buyer, the buyer’s attorney and a representative from the title insurance company known as the title closer. Why do you need a title closer? This person plays an integral part in ensuring the success of the closing. The title closer ensures that the deed and any financing documents are in recordable form, confirms the pay-off of the seller’s existing loan, collects the amount needed to satisfy the seller’s existing loan and remits payment to the seller’s lender. Not very glamorous, but without these services, the title company would not be able to issue a policy of title insurance to the buyer or, perhaps even more importantly, to the buyer’s lender, as required by the lender to provide the loan to the buyer so they can purchase the home.

Given the importance of these services, it has been customary until very recently for buyers to provide title closers with a gratuity at the closing, anywhere between $100 to $200. Additionally, title closers would charge sellers a fee, called the “pick-up” fee, for taking on the responsibility of remitting the final payment to seller’s existing lender in satisfaction of seller’s existing mortgage. A typical pick-up fee would be $250 per mortgage being satisfied.

But on Dec. 18, 2017, new Part 228 of Title 11 of the Official Compilation of Codes, Rules and Regulations of the State of New York went into effect. Among other things, this regulation imposes an obligation on title insurance companies to prohibit their title closers from accepting any payment from the buyer, including gratuity. And if a title closer is an employee of the title insurance company, they may not charge a pick-up fee. If the title closer is an independent contractor, a pick-up fee may be charged, provided the fee is reasonable and the amount of the fee is provided to the seller no later than three days prior to the closing. It is unclear whether or not a separate pick-up fee may be charged for each mortgage being satisfied, and this, along with other provisions of the new regulation, are still being interpreted by title companies and legal practitioners.

How will this affect residential closings moving forward? For now, it’s too soon to tell, and we’ll have to wait and see.

Cuddy & Feder’s Real Estate team represents buyers, sellers and lenders in a variety of real estate transactions, both commercial and residential. Founded on the strength of our real estate practice, the firm has played a key role in shaping the real estate landscape throughout Westchester, Fairfield, Long Island and the Hudson Valley.

Arbitrability - New York arbitration clause – forum selection clause

Business Lessons From Recent New York Arbitrability Cases

(Note: This post from November 3, 2017 has been updated to reflect the May 21, 2018 decision by the U.S. Supreme Court confirming that class action waivers are not precluded by the collective bargaining provision of the National Labor Relations Act)

Many businesses fail to give forum selection clauses much thought, focusing instead on negotiating the material business terms when drafting or negotiating their agreements. However, a carefully-crafted and thoughtful forum selection clause can save businesses significant time and capital. Hastily consenting to “submit disputes to arbitration” is not the answer, as hundreds of businesses end up in court litigating about whether they should be there at all.

Arbitrability “is a term of art covering ‘dispute[s] about whether the parties are bound by a given arbitration clause’ as well as ‘disagreement[s] about whether an arbitration clause in a concededly binding contract applies to a particular type of controversy.’”2 Recent cases in New York highlight important takeaways that can improve companies’ bottom lines, whether by avoiding unnecessary litigation regarding where to litigate (due to conflicting forum selection clauses in multi-contractual disputes or ambiguous forum selection clauses), or by utilizing highly specific language in forum selection clauses and understanding the rules of the chosen forum.

Delegation Clauses and Their Implications

Generally, arbitrability (whether an agreement to arbitrate exists, and whether it covers the dispute) is an issue for the courts to decide.3 However, parties can specifically provide, in what is known as a “delegation clause,” that arbitrators not only have exclusive jurisdiction over a dispute, but also exclusive jurisdiction over “any question as to its arbitrability.”4 Further, even without an express “delegation clause,” if an arbitration agreement incorporates by reference a forum’s rules, the parties may have contracted away their right for the courts to determine the threshold issue of arbitrability.5

New York Courts have provided for a couple of small carveouts to this rule. Incorporation by reference of a forum’s rules reserving arbitrability to itself does not constitute “clear and unmistakable evidence” that the parties intended to delegate arbitrability to an arbitrator where the arbitration agreement is narrow.6 Moreover, where a party claims that they never assented to the agreement containing the arbitration clause, courts will determine whether the parties assented to the agreement notwithstanding the delegation clause.7

Takeaway: Know the applicable rules in the selected forum and the implications of those rules. Consider supplementing or changing those rules to address specific business concerns, such as the time within which arbitration must be commenced, the arbitrator selection process, and any discovery parameters.

Enforcement By Or Against Non-Signatories

There are only five recognized theories to bind a non-signatory to an arbitration agreement: 1) incorporation by reference;8 2) assumption;9 3) agency;10 4) veil-piercing/alter ego;11 and 5) estoppel.12 In Katsoris, the Southern District of New York held that a corporate parties’ successor-in-interest (non-signatory) was bound by an agreement to arbitrate, as was the plaintiff (non-signatory) who had negotiated the work-for-hire agreement for his yet-to-be formed foundation;13 however, a non-signatory entity which clearly benefitted from the work-for-hire agreement but did not receive a “direct benefit” therefrom could not be compelled to arbitrate.14

Third-party beneficiaries may enforce arbitration agreements, but whether a non-signatory is a third-party beneficiary entitled to enforce arbitration is a threshold issue of arbitrability for the courts to decide.15

Takeaway: Know the rules for binding non-signatories to arbitration agreements, and carefully consider the parents, subsidiaries, and third-party beneficiaries of the parties and agreement(s). Specifically name such parties and, if possible, require their signatures on the arbitration agreement(s), and incorporate the arbitration clause into related agreements.

Class Action Waivers

Class action waivers in arbitration agreements have long been upheld by the United States Supreme Court.16 In a May 21, 2018 5-4 decision, SCOTUS resolved a Circuit split to side with the Second, Fifth and Eighth Circuits by holding that class action waivers in arbitration agreements are not precluded by the rights to collective action granted by the National Labor Relations Act (NLRA).17  While there are a few legislative prohibitions of pre-dispute arbitration agreements and/or waivers of rights and remedies in the employment context,18 class action waivers are otherwise valid and might operate to preclude the assertion of smaller claims by foreclosing the economies of a class action.

Takeaway: Including class action waivers in arbitration agreements could prevent the assertion of smaller claims against your business.

19

Internet-Based Agreements and Consent

Internet contracts have been found valid where “the user takes some action demonstrating that [she has] at least constructive knowledge of the terms of the agreement, from which knowledge a court can infer acceptance.”20

“Clickwrap” or “click-through” agreements require users to click “I agree” after users are presented with terms and conditions of use, in contrast with “browse-wrap” agreements which post terms and conditions via “hyperlink” on a website.21  “Scroll-wraps” require users to scroll through terms before clicking “I agree,”22 and “sign-in wraps” advise users that they are agreeing to terms of service when registering or signing up for services. While Clickwrap agreements are routinely upheld because users must affirmatively assent to terms of an agreement, browse-wrap agreements receive closer scrutiny.23 Nevertheless, the Second Circuit has held that “a reasonably prudent user knows that the text that is highlighted in blue and underlined is a hyperlink to another webpage where additional information will be found.”24

Takeaway: Language and consent buttons in web-based agreements should be very clear, and best practices should include using clickwrap (rather than hyperlinks) to disclose the terms of consent to arbitration.

Multi-Contractual Disputes

Arbitrability is frequently contested where a case involves multiple contracts, particularly when the contracts present conflicting forum selection clauses. Generally, “’a broad arbitration clause in an agreement survives and remains enforceable for the resolution of disputes arising out of that agreement subsequent to the termination thereof and the discharge of obligations thereunder’ unless a merger clause in a subsequent agreement serves to supersede the prior agreement to arbitrate.”25 “Where a later contract includes only…general language in its merger clause, the clause does not terminate a requirement to arbitrate issues that arose under a prior agreement.”26 However, where there is “a showing of specific intent for a subsequent contract to supersede a prior agreement to arbitrate, the later contract’s language controls.”27

In Mumin v. Uber Techs., Inc.,28 the Court compelled arbitration notwithstanding that two separate agreements provided that courts in San Francisco would have “exclusive jurisdiction” over disputes arising out of the parties’ agreement, citing the rationale that “it may be necessary to file an action in court to enforce an arbitration agreement, or to obtain a judgment enforcing an arbitration award, and the parties may need to invoke the jurisdiction of a court to obtain other remedies.”29

Mere choice of law provisions are not considered forum selection clauses, let alone “mandatory” or “all-inclusive” forum selection clauses, for the purposes of overriding arbitration clauses.30 Moreover, settlement agreements which settle arbitrable claims but contain merger clauses and conflicting forum selection clauses are not subject to arbitration in actions for breach of the settlement agreement.31

Takeaway: Ensure that forum selection clauses are consistent across contracts most likely to be implicated in a single dispute. For example, employment agreements, NDAs, Confidentiality Agreements, and Work-For-Hire Agreements all may be implicated if an employee steals trade secrets.

Conclusion and Takeaways

While this article does not address the pros and cons of arbitration versus litigation, businesses are well-advised to carefully consider those advantages and disadvantages when drafting and/or negotiating forum selection clauses. To the extent that businesses have decided to use arbitration clauses in their agreements, they should at a minimum:

  • Know the applicable rules in the selected forum and the implications of those rules;
  • Expressly provide whether court(s) or the arbitrator(s) should address threshold issues of arbitrability, rather than rely upon incorporation by reference of a forum’s rules as determinative of that issue;
  • Confirm that forum selection clauses are consistent across contracts likely to be implicated in a single dispute;
  • Ensure that the language and consent buttons in web-based agreements are very clear, and use clickwrap rather than hyperlinks to disclose terms;
  • Consider including class action waivers.

Forum selection clauses are powerful tools which, if carefully considered and crafted, can save businesses significant time and money. Because such provisions are usually noncontroversial when the parties are negotiating material business terms, that is the best time to consult with litigation counsel to ensure that the clause is properly drafted, consistent with related agreements, and makes good business sense.

SLAPPs: When to Turn the Other Cheek

Introduction

Strategic lawsuits against public participation, or SLAPPs, are a tool commonly used by developers and others to deter community opposition to projects. By threatening opponents with the burden of protracted and expensive litigation, SLAPPs work to intimidate critics into abandoning – and even foregoing initially – their opposition to projects under review. In response to the widespread use of SLAPPs, many states, including New York, have enacted so-called Anti-SLAPP statutes. These laws are designed to prevent what is perceived as abusive litigation aimed at silencing community expression while not eliminating judicial recourse for those with meritorious claims.

Anti-SLAPP laws provide developers and others seeking to improve real property with serious issues to consider before commencing a suit that could potentially run afoul of them. In New York, these considerations are both pecuniary and procedural in nature, and taken as a whole, often militate against commencing action against opponents of development. By refraining from engaging the legal system in these circumstances, developers and others can avoid potentially significant monetary penalties and, more importantly, deprive opposition groups of a significant platform from which to espouse their views. Nevertheless, some circumstances will involve opposition that warrants legal action, and in these cases it is important to ensure that the claims are hardy enough to withstand inevitable attack and worthwhile in light of the added voice given the opposition.

New York’s Anti-SLAPP Law

New York’s Anti-SLAPP provisions are set forth in sections 70-a and 76-a of New York’s Civil Rights Law. In adopting this legislation, it was declared to be the policy of the State

that the rights of citizens to participate freely in the public process
must be safeguarded with great diligence. The laws of the state
must provide the utmost protection for the free exercise of speech,
petition and association rights, particularly where such rights are
exercised in a public forum with respect to issues of public concern. 26

Sections 70-a and 76-a of the Civil Rights Law create a right of action for defendants – either individually or as organizations – in suits “involving public petition and participation,” whereby a “public applicant or permittee” commences suit that is “materially related to any efforts of the defendant to report on, comment on, rule on, challenge or oppose such application or permission.”32 Public applicants and permittees include “any person[s] who [have] applied for or obtained a permit…to act from any government body…” 33

In addition to these potential pecuniary pitfalls, a client’s decision to bring suit against an individual or group opposing its application can also have other, unintended consequences with far-reaching effect.

Turning the Other Cheek

Successfully invoking New York’s Anti-SLAPP laws can entitle a party to costs and attorney’s fees (“upon a demonstration that the action…was commenced or continued without a substantial basis in fact and law and could not be supported by a substantial argument for the extension, modification or reversal of existing law”), compensatory damages (“upon a demonstration that the action…was commenced or continued for the purpose of harassing, intimidating, punishing or otherwise maliciously inhibiting the free exercise of speech, petition or association rights”), and/or punitive damages (“upon an additional demonstration that the action…was commenced or continued for the sole purpose of harassing, intimidating, punishing or otherwise maliciously inhibiting the free exercise of speech, petition or association rights”). 34 However, even if a party successfully proves that a SLAPP has been filed against her, it is still within the sole discretion of the trial court to award damages. 35

In addition to these potential pecuniary pitfalls, a client’s decision to bring suit against an individual or group opposing its application can also have other, unintended consequences with far-reaching effect. Oftentimes, opposition groups or individuals opposed to a project have limited access to the formal decision-making process as it relates to an application and are relegated to a more tertiary role. Comments and complaints are made, public meetings are packed, and the press can even be rallied by such groups, but they are not entitled to much else beyond that. However, when suit is filed by a developer in response to such opposition activity, a new platform is presented to opposition groups that can provide them with a soapbox from which to have a much greater impact on the approval process.

In this regard, opposition groups and individuals who are made part of a judicial proceeding due to their opposition become entitled to notice of every step of the process going forward and can participate in myriad ways. For instance, once made part of an action, they then have the opportunity to engage in full scale discovery with respect to all of the issues relevant to the litigation, including by seeking responsive documents and taking depositions of key party and nonparty witnesses. This could place developers and other clients in a worse position than before commencing suit without providing much in the way of strategic benefit.

Defending Against SLAPP Allegations

That being said, if a client insists upon filing suit against an individual or such a group, because individuals have standing to invoke the protections of New York’s Anti-SLAPP laws, 36 the best recommendation to protect a client’s interests is to ensure that any cause of action they decide to maintain is substantially based in fact and law or supported by a substantial argument for the extension, modification, or reversal of some existing law. Crucially, the burden will be on the claimant to prove by clear and convincing evidence – a more stringent standard than would otherwise apply – that their claims have such a basis. 37

A property owner did just that and defended himself against an anti-SLAPP claim in Giorgio v. Pilla, supra. There, the Appellate Division, Second Department upheld the Supreme Court’s denial of Defendants Steven and Deborah Pilla’s motion for summary judgment on their counterclaims alleging that Plaintiff Dominick Giorgio’s suit against them was a SLAPP. Prior to the dispute, Giorgio had obtained a permit from the Westchester County Department of Health to construct a well and sewage system, along with a home, on his unimproved property. After construction began, the Pillas – who owned property immediately adjacent to Giorgio’s lot – successfully lobbied the Department to revoke the permit it had granted Giorgio. As a result, Giorgio sued the Pillas for nuisance and negligence, claiming that when they had updated and relocated their own septic system several years earlier, they had done so in a careless manner. The Pillas counterclaimed against Giorgio pursuant to Civil Rights Law § 70-a, claiming the suit Giorgio filed against them constituted a SLAPP and should therefore be dismissed with damages being awarded to the Pillas. In affirming the Supreme Court’s denial of the Pillas’ motion, the Second Department concluded that Giorgio “tendered proof sufficiently demonstrating that [his] action has a substantial basis in fact and law.” 38

While the Appellate Division did not provide further guidance as to what constitutes a substantial basis in fact and law, CPLR 3211 and 3212, which, respectively, set forth the standards for dismissal and summary judgment in New York, also make use of the phrase. Subsection (g) of CPLR 3211 and subsection (h) of CPLR 3212 shift the burden on motions for dismissal and summary judgment to the nonmoving party – who, in these cases, is the party alleged to have commenced a SLAPP – to demonstrate that the action has a substantial basis in fact and law. Therefore, it is reasonable to conclude that being able to plead a prima facie claim and show that the other party is not entitled to judgment as a matter of law – such as would successfully defend against both a motion to dismiss and a motion for summary judgment – will suffice. In other words, if a claim can withstand either type of motion, it is likely to be deemed substantially based in fact and law for purposes of defending against allegations of a SLAPP.

Conclusion

Ultimately, there will be many instances when it is strategic to counsel a developer-client to refrain from engaging members of the opposition in a formal legal proceeding. In avoiding the potential monetary penalties associated with being deemed a SLAPP and withholding a vital platform from opposition groups and individuals, more benefit may ultimately inure to the client. Nevertheless, in those circumstances where the manner of opposition to a project warrants legal action, it is crucial that any claim have such a basis in fact and law that it would ultimately withstand an attempt at summary disposition.