How’s this for some disturbing Proposed Legislation……….

February 26, 2021

How’s this for some disturbing Proposed Legislation……….

Assemblyman Jacobson has again introduced Assembly Bill A00360 in the 2021-2022 Legislative Session. This Bill requires that that certain Sellers of Real Property provide a Certificate of Occupancy to the Purchasers of the Real Property. The language of the Bill is recited below. The Bill has passed both the Senate as well as the Assembly and is awaiting delivery to the Governor for his consideration for either his signature or his veto.

SUMMARY OF SPECIFIC PROVISIONS:

§ 1 amends the Real Property Law by adding a new Section 259 to require disclosure to a Purchaser or prospective Purchaser, or the Agent of the Purchaser or prospective Purchaser, providing them with a copy of a Certificate of Occupancy for the Real Property that is the subject of the Deed of Sale. Such Certificate shall have been issued within 30 days of the date of transfer of ownership of the Real Property. The provisions of this Section shall not apply to transfers of Real Property: (a) to a relative of the Owner; (b) made pursuant to a Court Order, including but not limited to transfers by a Referee in a Foreclosure Action, to a party in a Divorce Proceeding or by a Bankruptcy Trustee in a Bankruptcy or Reorganization Proceeding; (c) by a Municipality; (d) by an Executor or Administrator of an Estate; (e) by a Beneficiary of an Estate provided such transfer is made within sixty (60) days of the date on which the Beneficiary acquired title to the Property; (f) by a Deed in Lieu of Foreclosure; (g) due to the Operation of Law pursuant to a Deed, including but not limited to a Tax Deed; or (h) of Real Property that does not have a dwelling located thereon. 

Any Agreement by a Purchaser of a Premises for dwelling purposes waiving or modifying his or her rights as set forth in this Section shall be void as contrary to public policy. 

§ 2. Effective date: 120 days after enactment.

JUSTIFICATION:

Code enforcement is generally a reactive not a proactive process. Unfortunately, in most Municipalities, Code Enforcement is spotty and infrequent due to lack of funding and the need to inspect so many properties. Usually, Code Enforcement officials act upon Tenants' complaints or visible violations rather than on a regular, continuing basis. Because transfers of Property occur based on old Certificates of Occupancy, Tenants and new Purchasers are unable to ascertain the exact status of the Property involved. While private inspections by prospective Purchasers are available, there is no requirement that the suggested repairs be made; due to the economics involved, repairs are either left unmade or made only to bring a home to a "working order" condition. Tenants are normally presented with a take-it-or leave-it situation with only minimal repairs (e.g. appliances, painting) being done.

Every Municipality has its horror stories. Tragically, in the City of Newburgh in March of 2015, three (3) people died due to carbon monoxide poisoning in a multi-family house which did not have carbon monoxide detectors.

By requiring a new Certificate of Occupancy upon transfer of Property, more buildings will be kept up to Code. Tenants and those purchasing Properties will be assured of Premises which are up to Code. This will mean better living conditions as well as safer Premises which should lead to a lower likelihood of fires due to old electrical or heating systems.

Possible net gain in proceeds to local governments through fees charged for Code inspections.

STATE OF NEW YORK

00360

IN ASSEMBLY

January 6, 2021

Introduced by M. of A. JACOBSON -- read once and referred to the Committee on Judiciary

AN ACT to amend the Real Property Law, in relation to requiring that certain Sellers of Real Property provide a Certificate of Occupancy to the Purchaser of the Real Property. 

The People of the State of New York, represented in the Senate and Assembly, do enact as follows:

Section 1. The Real Property Law is amended by adding a new Section 259 to read as follows:

§ 259. Certificates of Occupancy; required disclosure to Purchaser. 1. Prior to executing a Deed of Sale with a Purchaser or prospective Purchaser of Real Property, the Owner of the Real Property shall provide the Purchaser or prospective Purchaser, or the Agent of the Purchaser or prospective Purchaser, with a copy of a Certificate of Occupancy for the Real Property that is the subject of the Deed of Sale. Such Certificate shall have been issued within thirty (30) days of the date of transfer of ownership of the Property. 2. The provisions of this Section shall not apply to transfers of Real Property: (a) to a relative of the Owner; (b) made pursuant to a Court Order, including but not limited to transfers by a Referee in a Foreclosure Action, to a party in a Divorce Proceeding or by a Bankruptcy Trustee in a Bankruptcy or Reorganization Proceeding; (c) by a Municipality; (d) by an Executor or Administrator of an Estate; (e) by a Beneficiary of an Estate provided such transfer is made within sixty (60) days of the date on which the Beneficiary acquired title to the Property; (f) by a Deed in Lieu of Foreclosure; (g) due to the Operation of Law pursuant to a Deed, including but not limited to a Tax Deed; or (h) of Real Property that does not have a dwelling located thereon. 3. Any Agreement by a Purchaser of a Premises for dwelling purposes waiving or modifying his or her rights as set forth in this Section all be void as contrary to public policy.

Section 2. This Act shall take effect on the 120th day after it shall have become a Law.

EXPLANATION--Matter in italics (underscored) is new.

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This all seems like a great idea, right? Who would possibly object to wanting this? Then again, it also seems like a great idea when the Moderator at the Miss America Pageant asks the Contestant “what is your main goal if you win the contest?” And the answer, inevitably, is “to achieve world peace”. It seems easy, right? It isn’t; rest assured, especially in the City of New York. So let’s take a look at the history as it relates to Certificates of Occupancy.

Relevant dates and applications:

1.     Effective March 14, 1916, the Building Code was amended to provide that Certificates of Occupancy were required for multiple dwellings while permissive for non-multiple dwellings. Therefore, effective that date, Certificates of Occupancy exist for such structures if the Owner saw fit to voluntarily file an application with the Department of Buildings to obtain a Certificate of Occupancy for such non-multiple dwelling structures, although not deemed mandatory.

2.     In September of 1926, the City of New York saw fit to re-interpret the 1916 Law to deem it to have been mis-read for the past ten years, ruling that, in fact, in accordance with the 1916 Law, Certificates of Occupancy were required for ALL BUILDINGS erected after March 13, 1916. The aforestated then became Law, as opposed to an interpretation of existing Law as a Directive.

3.     The Building Code was then amended, once again, to provide that ALL BUILDINGS erected after January 1, 1938 require Certificates of Occupancy.

4.     To digress for a moment, the Department of Buildings issued a Memorandum, on December 13, 1979, as being their own interpretation of the Building Code to provide that a Certificate of Occupancy is not required for structures for which plans and uses were approved by the Department of Buildings prior to January 1, 1938.

5.     The current Building Code became effective on December 6, 1968. It was current, as amended, through June 30, 2008. The Building Code was then, once again, amended in 2008 and then again, in 2014, which is what may be considered the current Building Code. It thereby supersedes the 1938 Law, and the primary purpose behind its enactment was to adopt nationally accepted performance standards and specifications for materials and construction in the City of New York.

6.     The 1979 Memorandum further served to clarify Chapter 26 of the Building Code to parenthetically alert building Owners that if a pre-existing structure existed, for which a Certificate of Occupancy was not required by Law, and there was an alteration or change in the use or occupancy, in such event, a Certificate of Occupancy would now be required for such structure.

Exclusions:

1. By definition, minor alterations that do not in any way affect the health, fire or the structural safety of the building would be deemed excepted from requiring the procurement of a Certificate of Occupancy for a pre-existing building. Building Code Ch. 27-124 & 126.
2. By further definition, ordinary repairs which constitute replacement or renewals of existing work with the same or equivalent materials or equipment parts that are made in the ordinary course of maintenance that do not in any way affect the health or the fire or structural safety of the building or the safe use and operation of the service equipment would also be excluded from requiring the procurement of a Certificate of Occupancy for a pre-existing building. Building Code Ch. 27-125 and 126.

Chapter 27-126: Work Not Constituting Minor Alterations or Ordinary Repairs:

For purposes of the Building Code, minor alterations or ordinary repairs shall not include the cutting away of any wall, floor or roof construction, or any portion thereof, or the removal, cutting or modification of any beams or structural supports, or the removal, change or closing of any required means of egress, or the rearrangement or relocation of any parts of the building affecting loading or exit requirements or light, heat, ventilation, or elevator requirements, nor shall minor alterations or ordinary repairs include additions to, alterations of, or re-arrangement, relocation or removal of any standpipe, sprinkler piping water distribution piping, house sewer, private sewer, drainage system, including leaders, or any soil, waste or vent pipe, or any gas distribution system, or any other work affecting health or the fire or structural safety of the building.

** The Department of Buildings has promulgated rules dated January 14, 1993 <see herewith> defining what they consider to be “minor alterations” which are exempted from filing requirements. However, the fact that Department of Buildings filings may be exempted does not necessarily exempt the said improvement from meeting any relevant zoning requirements.

PRE-CERTIFICATE OF OCCUPANCY CONSIDERATIONS

1.     For all structures built, one may access the Docket Book on file at the Department of Buildings which will evidence the date on which a first filing was made to establish the date of construction, and oftentimes, the Docket Book further provides for the completion date. Accordingly, irrespective of the existence of a Department of Buildings file, or lack of same, the Docket Book will suffice as indicia of the age of the building for purposes of determining whether or not a Certificate of Occupancy is required by Law.

2.     Letters of No-Objection: For existing structures which may or may not be in compliance with the Building Code, as it relates to the status of whether or not a Certificate of Occupancy is required, and the Department of Buildings has no supportive documentation on record to either support or controvert the existing use, one may file an application for a Letter of No Objection with the Department of Buildings together with a $25.00 filing fee for a 1, 2 or 3 family dwelling. The application is filed with the Borough Commissioner’s Office, and the Department of Buildings will render a written Opinion commonly referred to as a “Letter of No Objection”. This Letter essentially states that, in the Opinion of the Department, it has no objection to the current and existing use of the structure. It is not, by any means, the equivalent of a Certificate of Occupancy, which would essentially be an “approval” of present use, but, conversely, is a restraining determination that the Department is stating that while not approving of the use, it is not disapproving of the use.

3.     If a Pre-Certificate of Occupancy structure exists, and the Department of Buildings file has sufficient documentation contained therein in the form of original plans, one would have the right, without physical structural alteration, to actually obtain a Certificate of Occupancy for the structure as it then historically existed, provided, again, that no changes were made to the structure other than minor alterations and/or ordinary repairs.

It should be noted parenthetically in this regard that, if such a structure exists, and, hypothetically, a commercial use exists, whereupon, a zoning change results in a conversion, for example, to an R-5 residential use, the said commercial use may so continue as a non-conforming use. However, if such non-conforming use is discontinued for a continuous period of two years, the pre-existing non-conforming use will then be lost to the owner.

4.     If the Department of Buildings file discloses records which evidence that the structure is, in fact, what would appear to be a “Pre-Certificate of Occupancy structure”, the file, however, oftentimes contains ancillary evidence of the historical use of the Premises, which evidence includes, but is not limited to, filings made by a myriad of Municipal Departments for matters such as: plumbing reports, garages, re-roofing, tax records. These ancillary proofs are not binding in and of themselves, but are, collectively, strong indicia of the allowable use. In a pecking order, the Department of Buildings views their own records as being paramount to the Tax Department records, without, however, counting such proofs as being worthless. It should be noted however, that if Department of Buildings ancillary records do exist which vary with field conditions, the burden is upon the homeowner to establish the legality of any such conditions. Any unexplainable inconsistencies between records and field conditions must be properly explained to the satisfaction of the Department of Buildings, and if unacceptable, it will then be incumbent upon the homeowner to legalize such inconsistent conditions.

5.     Private Maps referred to as Sanborn Atlases and Belcher-Hyde Atlases are privately created maps which serve a myriad of purposes. They define, from time to time, structures and improvements contained on a particular parcel, and oftentimes, in order to establish the existence of a structure as having been in place before 1938, for example, one can examine a 1937 Sanborn Map, which, if it discloses, for example, a structure which appears to mirror the existing structure as may be contained on a current Survey, this will oftentimes be acceptable to a prospective Purchaser and/or their Lender for purposes of rendering an Opinion as to whether or not to proceed with a transaction.

6.     It should be noted, parenthetically, that the only proper means by which one would be deemed to be exercising the utmost of due diligence in determining the legality of a structure, or the converse, for that matter, would be to instruct your Client to engage a Registered Architect or a Professional Engineer, prior to entering into a Contract, to render his or her professional Opinion, in writing, as to the status of a structure <or a removed structure> as it pertains to a particular Premises.  With such professional written Opinion being given to your Client in advance of your Client being bound by Contract to purchase a particular Premises, the Attorney is drawn out of the “mix” and not made part of a dialogue in which he or she is unable to render his or her professional Opinion. A particular improvement may appear to a layperson as being “legal” or “illegal”, to his or her naked eye. However, a layperson, or, for that matter, an Attorney, should exercise restraint in rendering such Opinions, inasmuch as such Opinions are best left to a Registered Architect and/or a Professional Engineer, since an Attorney neither possesses the professional license nor the legal expertise or acumen to render such Opinion. In doing so, he or she only potentially exposes himself or herself to liability in giving an answer to a question that is beyond the scope of his or her ability to answer. Note that within this venue, a “professional” is not intended to include a licensed home inspector (see next).

7.     It should be further noted that a Structural Inspector, in the State of New York, NOW does have to maintain a license by the State in order to perform home inspections. But, as such, these individuals do not rise to the level of either Registered Architects nor Professional Engineers, and your Clients should be cautioned that if they rely solely on the Opinion of a Structural Inspector, that they do so at their own peril, for a few reasons: a) Inspectors are legally constrained from opining as to the legality (or illegality) of structures or improvements to a Premises; and b) their Inspection Reports oftentimes clearly recite that their inspections are limited to what they see only from a visual inspection. In fact, the Reports further go on to recite that the prospective Purchaser should inquire with their Attorney as to the legality (or illegality) of structures or improvements. How is that? Attorneys, have your Errors and Omissions Policy available if you fail to put your foot down.

8.     Also, it appears that in the world of Real Estate Law, certain falsehoods take precedence in assisting with one’s determination as to the legality or illegality of improvements, these include: a) if I get a new Survey and it shows the improvement everything will then be acceptable. This is false; all this does is update the “SNAPSHOT” of the Premises and does nothing to legalize the improvement. It may suffice for purposes of fooling the Lender’s Underwriter in allowing the deal to close, but does nothing to correct the potential problem, and again, the problem does not go away; or b) if the Lender agrees to close, notwithstanding, this tells me that everything is acceptable as to the Premises. This again is a falsehood. A Lender’s only true concern is that they have sufficient equity in the Premises, which would allow for them to opine that it is fiscally prudent for them to lend Mortgage money for that particular transaction. All this tells the prospective Purchaser is that the Lender feels that, irrespective of the legality or illegality of structures contained on the Premises, if a foreclosure ever ensued, their equity was safe. This by no means is an absolution as to the legal condition of the Premises.

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Addressing the Proposed Legislation as it pertains to Real Estate located in the City of New York, the problem with the New York City Building Code is that it is “re-active” as opposed to being “pro-active”. What does that mean? It means that once a Final Certificate of Occupancy is issued for a particular Premises, then that’s it. Nothing else happens. There is no obligation for an Owner of Real Estate to have the Certificate of Occupancy brought up-to-date in order for the Owner to be able to sell or convey the Real Estate. This means that a Seller of Real Estate has the ability and authority to convey Real Estate containing a Certificate of Occupancy from 1970, for example, with there being nothing contained in the Public Records that would support the fact that the same Real Estate being sold or conveyed in 2021 is entirely compliant with the New York City Building Code, and the reason being is that the 1970 Certificate of Occupancy is a historical Instrument, or a “legal snapshot” of the Premises as it existed only in 1970. Therefore, once the Department of Buildings pro-actively issues the Certificate of Occupancy, the ink on the Instrument dries, and nothing happens with it unless and until someone takes an affirmative step to do something. And since Real Estate in New York City can be readily conveyed with this historical Instrument, then more often than not, nothing is done as it relates to this historical Certificate of Occupancy. Is this problematic? It certainly is.

And when is something done about it? When something “re-active” takes place. Like what? When the neighbor anonymously contacts the Department of Buildings and alerts them that the targeted Real Estate has an illegal deck, an illegal room, an illegal pool, and so on. Only then does the Department of Buildings look into the legality of what appears on the Premises.

And the Owner of the Real Estate now finds himself or herself burdened with violations which oftentimes carry with them tremendous fines and penalties, which are violations that are recurring, and reissued over and over and over, until corrected.

And the Owner’s response? I bought the Real Estate this way? How come I didn’t have an issue when I closed? Now that’s a very good question. Did your Attorney overlook the problem? Were you alerted of the potential problem by your Attorney but you were blinded by your enamoration with the Real Estate at that time that you went into denial mode? Did you believe that your Appraiser had you “covered”? Did you believe that it was up to your Home Inspector to bring any potential problems to your attention? Did you believe that you were covered by your Title Insurance Policy? Did you believe that because the pool and the deck appeared on the Survey, that this alone rendered everything on the Premises as being legal? And the answer to all of the above queries is a resounding no, no, no no and no.

So now what? Enter the Proposed Legislation which would require that every Seller of Real Estate provides a Grantee of the Real Estate with a copy of the Certificate of Occupancy for the Real Estate that is the subject of the transfer. It goes on to require that such Certificate of Occupancy shall have been issued within 30 days of the date of transfer of ownership of the Real Estate. That sounds terrific, right? It sure does, except that: the New York City Building Code, unlike other Municipalities in other parts of New York as well as in New Jersey, does not have a mechanism in place that will allow for an expeditious issuance of an updated Certificate of Occupancy within 30 days of closing.

Furthermore, were the City of New York intent on adopting and putting into place a mechanism to mimic other Municipalities by issuing a Certificate of Continuing Occupancy which essentially would require an inspection by a Department of Buildings Inspector, who would then certify, as of the date of the Inspection, that the subject Real Estate is 100% Code Compliant. Again, that sounds terrific, except that with such a mechanism as never before being in place in the City of New York, this would, inevitably open a can of worms for every intended conveyance that is not Code Compliant. So then what? The deal dies, and an Owner of the Real Estate is now “stuck” with Real Estate that could potentially cost thousands of dollars to make it Code Compliant, or alternatively, the Owner of the Real Estate may be stuck with Real Estate that cannot, under any circumstances, ever be made fully legal. And since the proposed Legislation clearly states that it is “non-waivable”, if passed, it could potentially bring the sale of Real Estate in New York, and most pointedly, in the City of New York, to a grinding halt.

On a separate note, one should be mindful of the fact that the Bill is intended as Statewide Legislation. Certificates of Occupancy are under the jurisdiction and regulation of the respective cities and local municipalities within which the Real Estate is located. As such, the State of New York does not have the power or authority to regulate and oversee Certificates of Occupancy.

As such, the only possible way for the City of New York to even consider interposing this Legislation would be to first have fully in place, a mechanism with the Department of Buildings to be able to effectuate these “inspections”, in accordance with this proposed Legislation. And even with that, since the Department of Buildings, being historically “re-active”, and not “pro-active”, then they are the primary perpetrators in creating the potential shut down of all Real Estate sales in the City of New York. What may be a solution? Perhaps an amnesty provision for Real Estate that pre-dated the proposed Legislation, without taking away the “re-active” authority of the Department of Buildings. Because otherwise, the Department of Buildings may be staring down the barrel of an ex post facto defense by any Owner of Real Estate that may be burdened by this proposed Legislation.

So again, while this all seems like a great idea, it appears that this Proposed Legislation was drafted with blinders on, and as opposed to it having the ability to accomplish what it proposes to accomplish, it would appear that the Miss America Pageant contestant may have a better chance at achieving “world peace”.

Copyright ? 2021 Vincent J. Gallo, Esq., All Rights Reserved