Contract for Sale of Real Estate in New Jersey:

Here’s a contract question I was recently asked.  The contract states the buyer is to apply for a mortgage of $600,000 deposit $11,000 into escrow upon contract signing and pay $250,000 cash down at closing.

The buyer applies for a mortgage of $685,000 and is rejected by his bank.

The buyer then claims that he cannot get mortgage so he attempts to cancel the contract.

Is the buyer in breach of this contract since he did not apply for the mortgage amount stipulated in the contract?

Does the seller have a cause of action?

If the seller now sells his house for less than the contracted amount can he sue the buyer for this difference plus other losses he has sustained?

I believe the answer is yes and the buyer’s actions are breach of contract because the buyer applied for a mortgage greater than $600,000.  The mortgage contingency provision is a material term of the contract.  That provision having been breached the seller has a cause of action and the buyer may very well have to pay damages.

If you have any questions regarding contracts, particularly real estate contracts, contact Fredrick P. Niemann, Esq. toll free at (888) 800-7442 or e-mail him at fniemann@hnlawfirm.com.

Foreclosures are at record numbers.  The term short sale in a foreclosure proceeding is often used.  But what is a short sale?  This is a term which is being used with increasing frequency in today’s real estate market.

A short sale is when the proceeds from the sale of a home are not sufficient to fully pay off all outstanding debts which are secured by the property (mortgages) after first deducting the homeowner’s costs of selling the property.  In such instances, the selling homeowner can either bring funds to closing to make up the difference, or obtain approval from his mortgage holders to accept a reduced amount to satisfy his outstanding loans. 

Unless a homeowner is able to pay off all of the mortgages which are secured by his property, the homeowner will not be able to convey good title to a buyer.  If the homeowner is unable to obtain a sales price which enables him to pay off all loans and closing costs, and he does not have the funds to make up the difference, then he may want to try to obtain approval from his current lender(s) to accept an amount less than the full amount due on its mortgage.  For a lender, this may be acceptable to obtain repayment of a substantial amount of its loan and to avoid the costs and delay of foreclosing on the loan.  This will generally mean that the Seller will not receive any funds from the sale of his home.

In order to obtain such approval from a lender – which may or may not be granted – the homeowner needs to contact his lender(s) to determine what information they will need to make their decision.  This usually includes a financial statement of the homeowner, copy of a contract of sale, appraisal, and other pertinent documents.  Generally, a lender will not consider approving a short sale without a clear economic hardship on the part of the homeowner and an existing default or pending foreclosure.

Until recently, forgiveness of a debt under these circumstances could trigger a taxable event according to the IRS.  This means that if a lender forgave a part of the mortgage debt by accepting a reduced amount in full satisfaction of the loan, then the amount forgiven could be deemed taxable income to the homeowner.  This was so even though the homeowner received nothing from the sale.  However, in December 2007 Congress passed the Mortgage Forgiveness Debt Relief Act of 2007.  This Act amends the Internal Revenue Code to exclude from gross income amounts attributed to a discharge of indebtedness incurred to acquire a homeowner’s principle residence.  The amount of the debt forgiveness can be up to $2.0 million.  Thus, a homeowner is now able to sell his home for less than what is owed on it without incurring an additional tax liability.   This exemption for forgiven debt, however, is only temporary and expires within three years.

At Hanlon Niemann, our experienced real estate foreclosure and loan modification lawyers can fully explain the details and requirements of a “short sale” or if a short sale is not possible in your case, then protecting your rights during a foreclosure proceeding.

Contact me personally today to discuss your foreclosure matter.  I am easy to talk to, very approachable and can offer you practical, legal ways to handle your concerns.  You can reach me toll free at (855) 376-5291 or e-mail me at fniemann@hnlawfirm.com.

The intelligent alternative to bankruptcy or to a New Jersey foreclosure action by your lender

We all want to know about the unprecedented explosion in demand for attorneys who specialize in representing homeowners who must get rid of their homes through “short sales”.

Short sales in New Jersey are generally understood to be a sale where one or more mortgage holders agree to discount their debt so that the property can be sold at its current market value to a willing buyer.  Currently, short sales account for a significant percentage of residential transactions in New Jersey and across the nation and the numbers appear to be increasing.

Short Sales a Market Force in the New Jersey Residential Market Place

More and more homeowners find themselves underwater caused by their mortgage debt.  For owners who can no longer afford to keep mortgage payments current, a short sale is the intelligent alternative to bankruptcy or to foreclosure proceedings.  Short sales can preserve a homeowner’s creditworthiness and can help homeowners avoid the harsh long-term consequence of a foreclosure.

Banks and mortgage holders have become extremely interested in offering short sale discounts in an effort to minimize their own potential losses and to avoid the protracted process of foreclosing, almost two plus years in New Jersey.  Qualified New Jersey buyers, many of whom are prepared to invest significant down payments, are holding out for the lowest possible price.  Mortgage holders agree to absorb the short sale discounts, enabling such qualified buyers to buy “discounted deals”.

For a seller in a short sale, the process tends to be both unique and complex.  It usually involves intermediation between first and second mortgagees as well as the need for extensive drafting of agreements and releases.  Real estate agents can often act most effectively as the preliminary negotiators.  They initiate the short sale process by opening communication with loss mitigation officers, which in itself, is often a cumbersome process.  Agents can provide property specific data to the lender and they can arrange for the homeowner to provide proofs of hardship which are required by mortgagees before they will consider the terms of short sale.  While it is the real estate agent’s work that positions the loan for discounting  by the lender, it is ultimately a skilled short sale attorney, representing the seller, who secures meaningful protection for his clients and who brings the short sale to a successful conclusion.

In a market where an increasing number of homes are no longer worth as much as the liens which encumber them, many consumers are no longer able to afford their scheduled monthly mortgage payments, and judicial foreclosures are taking longer and longer to complete, ultimately increasing the number of short sales transactions.

Loss mitigation officers, who negotiate short sales on behalf of the lenders, are besieged with applications for short sales, from all over the country without having adequate knowledge of the differences among applicable state laws.  As a result, bottlenecks in the negotiation process occur and negotiations extend for several months.  It is among these bottlenecks that attorneys with intimate knowledge of the “workout” process find themselves able to bring order out of chaos and to propose practical and effective short sale formats that can satisfy the needs of both the loss mitigation officer and the homeowner.

Looking Forward

The trend in short sales is expected to continue well into 2010.  This is attributable to the recent failures of major mortgagees and to the fact that more adjustable mortgagors will experience the shock of payment “resets” in the first half of 2009.  Reportedly, more such resets will occur in the first six months of 2009 than have occurred in any one full year period in American history.  These resets are expected to generate a tidal wave of short sales.  In response to the current number of defaults, and in anticipation of even more in coming months, the holders of securitized mortgages are increasingly opting for loan discounting as their alternative to protracted, and ultimately costly, judicial foreclosures.  Simply put, short sales are cheaper and faster.

The increasing willingness of residential mortgage holders to grant discounts shows a preference for short sales as a practical means to cut their losses and to quickly purge their portfolios of at-risk loans.  Homeowners and real estate agents find a shortage of attorneys who are specifically trained in the specifics of short sales – including the ability to make a case for mortgagees to discount their loan balances – enabling the homes to be sold.  Eroding home prices have left many owners with mortgage debt that far exceeds selling prices of the mortgaged properties.  While institutional mortgages have redeployed personnel into newly created, massive loss mitigation departments, there has not been a corresponding expansion among attorneys who clearly understand the protocol.

Hanlon Niemann and Fredrick P. Niemann, Esq. have developed real experience to become aggressive short sales negotiators and are currently in strong demand as residential real estate values continue to decline.  The short sale attorney’s role is pivotal to the success of most short sales.  For more information, contact our managing partner, Fredrick P. Niemann at fniemann@hnlawfirm.com. Or call him toll-free at (888) 800-7442.  For more information, go to http://www.youtube.com/user/NJBusinessLaw#p/search/1/KqQkGNkCrco to learn more.

The executor of a New Jersey Estate is selling a single family home owned and occupied by the decedent until she died.  The home has never been used in any way as a business.  The executor is selling the house at a price far below the value reported to the New Jersey inheritance tax bureau.  The Bulk Sales section and the taxation section of the NJ Dept. of the Treasury are taking the position that the house is a business sale even though New Jersey regulations exempt withholding tax for a New Jersey based estate. 

My response starts with a question.  Was the property ever used for rental to others?  The Dept. of Revenue takes the position that if so, then the owner was a landlord in the business of renting property, so that the sale of that business’s asset (the property) is subject to the Bulk Sale requirements (notice and escrow, etc.)   Another example of greedy New Jersey taxing anything it can think of.

If you have any questions regarding New Jersey Bulk Sale Law, please contact Fredrick P. Niemann, Esq. today. He can be reached at toll free 1-888-800-7442 or by email at fneimann@hnlawfirm.com. Mr. Niemann will be happy to meet with you to answer any questions you may have.

New Jersey courts protect the right of a person to advance one’s own business free from the undue influence our courts recognize that  “wrongful and malicious conduct may be grounds for [legal action].”  For example, New Jersey courts protect the rights of real estate brokers whose clients cut them out of a transaction to avoid paying a brokerage commission.  Our courts now call this an action for tortuous interference with New Jersey business dealings.

Tortious Interference With a Contract in New Jersey
There are two claims for tortuous interference:  tortious interference with contract and tortious interference with prospective economic advantage.  The primary distinction between the two is the existence of an enforceable contract.  Each claim is intended to protect business relationships.

To establish a claim for tortious interference with contractual relations, a plaintiff must prove: (1) actual interference with a contract; (2) that the interference was inflicted intentionally by a defendant who is not a party to the contract; (3) that the interference was without justification; and (4) that the interference caused damage.

One acts “intentionally”, if they have known of the existence of a contract,” but are not a party to that contract.  Thus, this claim does not involve a breach of contract case.  Rather, this claim addresses the injury caused by a third party inducing a party to a contract to breach that contract.  Viewed from the perspective of plaintiff’s counsel, having a claim against a party for inducing that breach provides two potential claims to recovery.

The law in New Jersey governing this claim is relatively straightforward, that is the protection of a relationship between parties under contract.

Tortious Interference 
To prevail on a claim for tortious interference with prospective economic advantage, you must prove: a reasonable expectation of advantage from a prospective contractual or economic relationship; that the defendant interfered with this advantage intentionally and with malice – that is, without justification or excuse; that the interference caused the loss of the expected advantage; and that the injury caused economic damage.

Summing up the standard for determining the existence of a reasonable expectation of economic advantage, one group of commentators has concluded:

[I]t is vital for the plaintiff – when pursuing a claim – to make certain that there is a bona fide and reasonable expectancy of a continuing and reasonable expectancy of a continuing and prosperous relationship, not just the mere desire or possibility for one.  In a prospective advantage case, the plaintiff must demonstrate that expected benefit with a reasonable degree of specificity.  More than a mere hope or optimism is needed; although the law does not require reasonable probability of economic benefit from a valid prospective relationship.

The Absolute Requirement of Malice to Prove a Claim
New Jersey courts describe malice in a variety of ways.  First, the courts make clear that malice does not mean ill will.  Rather, malice means that the conduct was engaged in without justification or excuse.  In the typical business case, competition between parties may constitute justification.  The courts, however, require more than competition:  A defendant must have a legitimate business/economic motive, such as success in the marketplace, and employ legitimate means to obtain that goal.

The New Jersey law has addressed malice when competition is invoked as a justification.  The law holds that there is nothing wrong with targeting a competitor, and that targeting a competitor by offering lower prices is, in fact, “the very essence of competition.”

New Jersey law does not permit a competitor to use wrongful means.  New Jersey courts use the term “malice” to describe conduct that is “injurious and transgressive of generally accepted standards of common morality or of law.”

The New Jersey courts have reduced this inquiry to whether the conduct was sanctioned by the “rules of the game.”  The rules of the game standard have become the standard for determining malice in tortious interference cases. 

The tort of tortious interference with prospective economic advantage requires that business competitors act within the moral and ethical framework required by society, as well as their own industry.  The rules of the game standard depend on the customs, practices or code of ethics of the industry, which have typically been vetted time and again by what is necessary to achieve efficiency in the marketplace.

New Jersey courts have articulated several examples of what may constitute fraudulent, dishonest or illegal conduct, but the list is by no means exhaustive.  For example, liability will ensue where a competitor uses “violence, fraud, intimidation, misrepresentation, criminal or cruel threats, and/or violations of the law.”  Moreover, the conduct complained of must be independently actionable.  For example, one case addressed whether the defendant had violated the antitrust laws through the use of extremely low pricing.  Absent a violation of the antitrust laws, a claim of tortious interference should not be based on “extremely low, or unprofitable prices” because that conduct was not independently actionable.”

If you have any questions regarding tortious interference with a New Jersey contract, contact Fredrick P. Niemann, Esq., toll-free at (888) 800-7442 or e-mail him at fniemann@hnlawfirm.com.  He will be happy to assist you.  For further information, please go to http://www.youtube.com/user/NJBusinessLaw#p/search/0/GGPeM8HxHHE to learn more.

There is an extensive array of possible forms of ownership.  They include individual ownership, tenancy in common, joint venture, general partnership, limited liability, limited partnership, corporation, S Corporation, limited liability company (LLC).

Here is a brief summary of the most common types of ownership entities:

Outright Ownership

Simply holding the business in the name of an individual buyer gives maximum control and flexibility in calling all the shots, assuming the individual has the financial resources to go it alone in making the investment.  In this situation, having adequate liability insurance should be a high priority.

Joint Ownership

Married couples especially may like the option of joint ownership.  When one spouse dies, the property can pass directly to the surviving spouse, avoiding the expense and time involved in going through probate.  Of course, the other side of the same coin is that the business cannot be inherited by another heir when a spouse dies.

General Partnership

Using a collection of partners increases buying power and, with it the range of properties that be bought.  As with any general partnership, there may arise some discord and disagreement among the partners concerning all manner of decisions that need to be made, and each partner’s personal assets could be at risk to satisfy partnership debts.

Limited Partnerships

The legal statues of limited partners may appeal to some real estate investors.   Limited partners have no say in the management of partnership assets, but they also have potential liability only for any notes they sign.  Any real estate losses are allocated to the limited partners, for tax purposes.

Limited Liability Companies (LLC’s)

An LLC offers some of the best features from all of the possible choices.  An LLC member benefits from the “pass through” of any income or loss from the real estate to his or her tax return, LLC members also enjoy the same kind of limited liability that a corporation’s shareholders have, thus safeguarding their other personal assets.

Any determination of this kind should always involve careful balancing of the specific competing tax, financing, and legal attributes that characterize each entity.  What is otherwise suitable from a legal standpoint is often a nonstarter from a tax prospective, or vice versa.  Given the sums of money that can be in play, prospective investors are well advised to spend some additional money on professional advice when choosing the ownership vehicle as they take on the role of a new business ownership.

For information on NJ partnerships, please go to http://www.youtube.com/user/NJBusinessLaw#p/u/12/GECCmnmbcNY. For further information please contact Fredrick P. Niemann, Esq. at (888) 800-7442 or email him at fniemann@hnlawfirm.com

Joseph and Kimberli bought a building lot in a subdivision and then engaged an architect and a contractor to design and build the home of their dreams on it.  The lot and finished home together would cost them about $731,000. They borrowed most of the sales price from a bank, which sought and obtained an appraisal from an appraiser regularly used by the bank.  Conveniently enough, the appraisal came in at about $731,000 when conducted under both a cost approach and a sales comparison approach.

After the couple had been in their new house about a year, Kimberli lost her job and the couple went back to the bank to reapply for a home equity line of credit.  This required another appraisal from a new appraiser.  To the shock and consternation of the homeowners, the property was appraised this time at only $510,000.  To use a term which has come to describe so many, Joseph and Kimberli were “underwater.”  Denied the home equity loan and unable to pay the mortgage, they managed to sell the property for $660,000.

When Joseph and Kimberli sued the first appraiser for intentional misrepresentation, the claim was upheld by a state supreme court, which ruled that the couple had presented enough evidence to warrant a jury trial.  A plaintiff suing for intentional misrepresentation must prove that:

1. The defendant made a false representation of an existing or past material fact;
2. The defendant made the representation recklessly, with knowledge that it was false or without belief, that the representation  was true; and
3. The plaintiff reasonably relied on the representation, causing him damage.

The gist of the suit was that the appraiser, to please everyone involved at that moment, intentionally misrepresented the value of the property the value of the property when he appraised it at a dollar amount substantially higher than its true value.  The defendant appraiser contended that an appraisal is one sense an opinion, rather than a simple statement of fact. However, for purposes of a claim for fraud, an appraisal can be regarded as a representation of fact.

On the issue of recklessness, there was evidence for both sides, but the issue needed to be resolved by a jury.  Favoring Joseph and Kimberli was evidence that the appraisal request from the bank was for a “Rush.” The appraisal value matched the sales price virtually down to the dollar. Joseph and Kimberli would get their chance in court to prove that, to their detriment to come up with the “right” appraisal to make the deal happen, even if the truth of the property’s actual value was a casualty in the transaction.

Noncompliance with HUD

When a home loan is insured by the U.S. Department of Housing and Urban Development (HUD), regulations impose some loan servicing responsibilities on the lender, while also granting certain forms of relief for borrowers facing the prospect of foreclosure.  For example, under certain conditions, the lender must initiate face –to –face contact with the borrower before starting foreclosure proceedings.  Before a borrower falls behind by four full monthly installments on a mortgage, the lender must evaluate all of the loss mitigation techniques provided for the regulations.

These regulations have an obvious bearing on the relationship between lenders on HUD-insured loans and the federal government, but it is a closer question of law as to whether a borrower can raise a lender’s failure to comply with regulations as a defense when the borrower defaults and the lender sues to foreclosure on the mortgage.

Recently, a state court agreed with a borrower who had defaulted on her HUD-insured mortgage that a foreclosure action by her mortgage company could not go forward until it was shown that the mortgage company first had complied with the servicing responsibilities imposed by HUD.

The main point of contention in the case concerned the face – to – face contact requirement.  This regulation applies only if the mortgaged property is within 200 miles of the lender.  The mortgage company in this case was established under the laws of a distant state that was more than 200 miles from the property, but the borrower countered that the company had an office within the 200 mile range, in a neighboring state.

The court ruled that the HUD loan servicing requirements had such importance that the failure to comply with them should be an affirmative defense for a defaulting borrower.  Families who receive HUD-insured mortgages generally do not qualify for conventional mortgages.  It would make no sense to create a program to aid families for whom homeownership would otherwise ne impossible without promulgating mandatory regulations for HUD- approved mortgages to ensure that the objectives of the HUD program are met.  The goal of preventing foreclosure in HUD mortgages wherever possible cannot be attained if HUD’s involvement begins and ends with the purchase of the home and the receipt of a mortgage by a low-income family.
  
For more information please contact Fredrick P. Niemann, Esq. at (888) 800-7442 or email him at fniemann@hnlawfirm.com

Land use rules in New Jersey can be complicated and complex. Many people have visions of building or improving property, but are unsure as to what steps to take. Sure, it’s easy to hire an architect and contractor, but as you will find out, each municipality in New Jersey has ordinances pertaining to building regulations. The Planning Board and Zoning Board of your town must approve the construction as well as any variances you may need to build on your land. Unfortunately, this is the area where complications occur, as individuals looking to build are often unfamiliar with local land use regulations. Hiring an experienced Land Use and Zoning Law attorney can make all the difference in obtaining the proper approvals to build on your property.

A recent municipal land use regulation that was challenged in New Jersey related to a second approval given to a proposed development that was different from the previous development project approved on the same land.  The landowner obtained approval for one development project on his property. He then sought and was granted approval for a separate development project on the same property, but was told the second approval meant the first was no longer valid. The New Jersey Supreme Court ruled that both development project approvals were valid and that just because a second approval was given, did not mean that the original development project was void. 

Planning Board and Zoning Board resolutions in New Jersey  are frequently challenged in New Jersey Courts. The Courts allow an unbiased forum for landowners to challenge the rulings of the Planning Board and Zoning Board when they feel the respective Board has not followed the law. It is important to have a knowledgeable Real Estate and Land Use Attorney by your side whether you are appearing before a Board or challenging a Board’s ruling before the Court. Call Fredrick P. Niemann, Esq., an experienced Real Estate Attorney, toll-free today at 855-376-5291 or email him at fniemann@hnlawfirm.com. He would be more than happy to discuss your matter with you.  For more valuable information, go to http://www.youtube.com/user/NJBusinessLaw#p/search/0/KP-m7MZTz_c to learn more.

In this New Jersey Eminent Domain Case, the Court stated that adequate compensation must be paid. They stated that adequate compensation includes the present value of the property plus the possibility of future improvements. The decision found that New Jersey Courts are allowed to consider future improvements to the property according to certain standards. Determining the value of future improvements, the Court said, was to be established by considering a number of factors. These factors include looking at the reasonable probability of future renovations to improve the property to its highest value, as well as the probability of gaining the approvals necessary to complete such renovations.  Courts must also however, factor in the cost of making those improvements and the risk associated with them as well. These cases are often determined based on the unique factual circumstances presented to the Court, so it is imperative that you have a knowledgeable Condemnation Attorney who knows what evidence to show the Court to put you in the best possible position to receive the compensation you deserve.

Land Use and Real Estate issues are often complicated. Eminent Domain is no exception. While the government can seize your land for a public purpose, they are required by law to compensate you adequately. Please contact Fredrick P. Niemann, Esq. toll-free today at 855-376-5291 or email him at fniemann@hnlawfirm.com. He would be happy to meet with you to discuss your eminent domain matter with you.

It is very common that individuals must obtain variances when construction is involved on their property. For some, they may be building a house that doesn’t meet a height requirement set forth by the town. Others may want to build an addition on their home, but they do not meet the set back requirement as stated in the town ordinance. Whatever the reason, lots of people must obtain a variance in order to build something on their property that does not meet the master building plan of the city/municipality that they live in. In order to obtain such a variance, the property owner must present their case to receive such a variance in front of the Zoning Board or Planning Board, depending on the type of variance they are seeking. For some, this process is easy and straightforward, as the Board hearing their request grants the variance with little hassle. Others, however, are met with resistance and denials of their variance request.

Planning Boards and Zoning Boards are made up of citizens of the municipality. This can bring a lot of positives to the process, as local citizens are undoubtedly more familiar with their city and can evaluate properties and variances in relation to their true impact on the community. Unfortunately, however, along with the local expertise often comes peer pressure. Many Planning Boards and Zoning Boards deny variances based purely on the wishes of certain members of the community, even when the variance should have been granted. New Jersey law sets forth specific guidelines as to when a variance should and should not be granted. Unfortunately, members often ignore these guidelines, especially when the variance request is met with heavy resistance from the community.

Fortunately, New Jersey laws state that all decisions by Planning Boards and Zoning Boards can be appealed to the NJ Courts. The Courts are not influenced by public opinion and their job is strictly to apply the law. They will look at the facts of the variance application and determine whether the decision of the Board should be overturned, upheld, or if the Board should look at the application again. This provides a check on Zoning Boards and Planning Boards, ensuring that the law is enforced and that those who follow the law pertaining to variances can count on their application being granted.

Appealing a variance denial by a Zoning Board or Planning Board to the Courts can be a complicated process. Courts often give deference to the Boards seeing as though they are made up of members that live in the community. It is important you seek the representation of an experienced Real Estate Attorney that can show why the Board’s decision was wrong and why your variance should be granted. It is important your attorney present sufficient evidence that shows why your property meets the guidelines that satisfy the requirements for a variance.

If you have any questions regarding a variance or the appeals process, please do not hesitate to contract Fredrick P. Niemann, Esq. today at 855-376-5291 or email him at fniemann@hnlawfirm.com. Mr. Niemann is an experienced Real Estate Attorney and has appeared before various Zoning Boards, Planning Boards, and Courts throughout New Jersey to fight for his clients’ rights to receive a variance.  He would be more than happy to discuss your matter with you.  For more valuable information, go to http://www.youtube.com/user/NJBusinessLaw#p/search/0/KP-m7MZTz_c  to learn more.