LEGAL CORNER: An Amazing Look Back and the Exciting Journey Ahead

Since January 1996, “Legal Corner” columnists in Real Estate In-Depth (and the Westchester Realtor prior to that) have had the honor and privilege of providing critical insights, guidance, legal updates, and general information for real estate licensees, attorneys, other real estate professionals, and the entire real estate industry. Since this is going to be the final physical paper print edition before moving to the fully digital, online version of Real Estate In-Depth (and along with it, the Legal Corner), I thought it would be only fitting to take this opportunity to review our firm’s archives (dating back to 1990), and revisit some of the amazing topics and developments covered over the past 33 years.

Over 400 Articles in the ‘Legal Corner’

I could not believe that there were more than 400 articles authored spanning over three decades. From 1990 to 1996, prior Board Counsel, Edward I. Sumber, Esq., wrote many articles (68 to be exact) in the Westchester Realtor, the predecessor to Real Estate In-Depth. In January 1996, the first issue of the Real Estate In-Depth newspaper was published and since then more than 330 Legal Corner articles have been published.

The Beginning of An Amazing Journey in the Legal Corner

January 2001 marked the beginning of my amazing journey. My voyage began with Edward Sumber who opened the door for me to the incredible world of real estate and agency law. One of the first tasks Ed asked me to assist him with was to conduct legal research for his Legal Corner column.

In June 2001, only a few short months after I was first hired, I assisted with the actual preparation of an article entitled, “Usury: What Is the Maximum Legal Interest Rate?” I remember Ed asking me what I thought would be an interesting topic for the June article. I thought that it would be important for real estate agents and private lenders to know about the legal principle of “usury” and the maximum legal rate of interest permitted by law, especially with regard to private (or “hard money”) financing. Ed agreed and asked me to help him jointly author the article.

When it was ready to be sent to the Editor John Jordan, Ed included the following notation at the end of the article: “John Dolgetta an associate in the law offices of Edward I. Sumber, P.C., assisted in the preparation of this article.” It was truly an amazing surprise. I immediately realized the importance of that momentous occasion, and to this day, I remain forever grateful. As they say, the rest is history.

Enactment of New York’s Agency Disclosure Law

In reviewing some of these early articles, it was clear to me that many of the important issues that exist today, not only existed back then but were also born out of that period. On Jan. 1, 1992, “New York's highly regarded Disclosure Law requiring written disclosure about the nature of Agency relationships and who the real estate broker is representing, became effective.”

Sumber wrote, “The law has been effective. Buyers and sellers in New York State do seem to have a much clearer understanding of who the broker represents. Moreover, brokers have been forced to focus on the nature of agency relationships and seem better able to articulate the nature of their representation and the limits of the scope of what they can do for a buyer or seller.” The passage of the Agency Disclosure Law still remains one of the most important legislative developments in the real estate industry in New York.

The Stigmatized Property Law

In 1995, another article reported on the new “Stigmatized Property Law,” which was signed into law by Gov. George Pataki. The new Section 443-a of the Real Property Law finally gave “…brokers and owners firm footing regarding their obligations to make disclosure about homicides, suicides, accidental or other deaths, crimes committed on the premises and the existence of a person having AIDS who has resided in the property.” This law was enacted more than 28 years ago, and yet, it remains a topic that is written about frequently to this day.

Strict Liability for Oil Spills and Rights To Recovery From Prior Owner

In the September 1995 article, it was reported that “the New York State Court of Appeals in the matter of White v. Long affirmed the doctrine of strict liability under the Navigation Act for cleanup costs arising from an environmental spill against a seller….” The court held that the Navigation Act of the State of New York imposes strict liability on any owner regardless of whether that person caused the spill. However, a subsequent owner had the right to seek reimbursement of costs from a prior owner.

‘Can a Co-op Board Discriminate’

While the recent passage of the Co-op Transparency and Disclosure legislation has been heralded, this subject has been a matter of focus for many years. In October 1994, an article entitled “Can a Coop Board Discriminate” focused on the decision In the Matter of Levandusky v. One Fifth Avenue Apartment Corp. (75 N.Y.2D 530), where the New York State Court of Appeals set forth the rules for examining a co-op board's decisions. The article discussed the corporate “Business Judgment Rule” and explained that “judicial inquiry is prohibited regarding action of corporate directors ‘taken in good faith and in the exercise of honest judgment in the lawful and legitimate furtherance of corporate purposes.’”

Nevertheless, Chief Justice Judith Kaye noted that the courts may review “improper decisions…when the challenger demonstrates that the board's action has no legitimate relationship to the welfare of the cooperative, deliberately singles out individuals for harmful treatment, is taken without notice or consideration of the relevant facts, or is beyond the scope of the board's authority.” Racial and other unlawful discrimination is not a matter of the “business judgment” of the corporate board and exposes its board members to challenge and liability.

The First Legal Corner Article: NAR’s Update to Code of Ethics

The first Legal Corner article published in Real Estate In-Depth in January of 1996 entitled “Ethical Standards Easily Forgotten” focused on the major changes of the previous decade, which were reflected in NAR’s Realtor Code of Ethics, which underwent major restructuring in 1995. The article reviewed the Code of Ethics Standards of Practice in light of accepted offers, the importance of the duty of confidentiality, obligations of cooperating brokers, disclosure of business relationships under RESPA regulations, advertising requirements and the duty to arbitrate.

The Establishment of the Real Estate Board of New York

In November 1996, the Legal Corner discussed the establishment of the Real Estate Board of New York (the “State Board”) which became effective Jan. 1, 1996. The State Board, comprised of 15 members (consisting of both licensed and non-licensed individuals), was granted the authority to promulgate rules and regulations affecting brokers and salespersons. It still exists to this day.

Legal Updates, Review of DOS Decisions, Increased Interaction With the DOS

It also became an annual custom to review the major legislation that went into effect the previous year. Many articles focused on the decisions and consent orders issued by the Department of State regarding real estate licensees and interpretations of new rules and regulations. The articles provided invaluable insight and analysis of the legislation and DOS decisions so that licensees were made aware of the issues and pitfalls in their day-to-day interactions with clients and other licensed professionals. In the mid-2000s, it became commonplace to meet with DOS counsel at the semi-annual legal conferences hosted by NYSAR.

The Property Condition Disclosure Act of 2002

In February 2003, the Legal Corner reported on the first legal decision (Malach v. Cheung) issued by the courts relating to the newly enacted Property Condition Disclosure Act (PCDA). The judge in that case was harshly critical of the new law. As recently discussed in the October 2023 article [see https://bit.ly/3GyRxi6], the first major amendments to the original PCDA will be going into effect on March 20, 2024.

Licensees’ Obligations with Regard to Megan’s Law

Another important article in April 2003, touched upon the obligations of the buyer’s and seller’s agents with respect to disclosure obligations of registered sex offenders. The article discussed the decision in Glazer v. Lopreste (717 NY2d 256).

The Electronic and Internet Age: The Advent of SPAM

The Legal Corner provided updates and insights on a variety of new legislation in the 2000s, such as the CAN-SPAM Act (2004), the Junk Fax Protection Act (2005), the Do-Not-Call Registry, and their relationship to the Telephone Consumer Protection Act of 1991. The “opt-out” provisions that are part of all present-day communications all originated from the above-mentioned legislation.

The 2008 Economic Crisis, the Rise of ‘Short Sale’ Experts, & Changes to the 443 Disclosure Form

In 2008, and for many years to follow, the economic crisis took its toll on the real estate industry. In 2007, the Legal Corner reported on the Mortgage Debt Relief Act (enacted in December 1997), which did not require homeowners to realize mortgage debt forgiveness as income. With the rise of foreclosures and short sales, real estate agents became experts on short sales and the Legal Corner provided several articles addressing the issues and challenges relating to short sale transactions and distressed properties.

Another major change, that was reported on, was the introduction of new Section 443 Disclosure Forms. In 2010, the Legal Corner reported that co-ops and condos would now be included under the 443 Agency Disclosure requirements.

Major Developments in 2009 and After

Everyone in the real estate industry recalls the litigation between the Department of Justice and NAR regarding Virtual Office Websites (VOWs). In 2009, NAR resolved its litigation with the DOJ. A major element of the settlement was the requirement that NAR create a Virtual Office Website Policy for all MLSs. The settlement agreement was for a 10-year term and it expired in 2019. Additional major developments covered in the Legal Corner in 2009 included the passage of the Commission Escrow Act, the Home Valuation Code of Conduct and changes to the adverse possession law.

From 2016 to the Present

In 2016, I took over the full-time preparation of the monthly Legal Corner articles and it has been an incredibly satisfying experience. I have authored nearly 100 articles. In keeping with the past custom, each month the Legal Corner has tried to address all aspects of the real estate industry, and covered topics such as current market developments, new legislative initiatives, discrimination, fair housing and ADA issues, online fraud and cyber security, the implementation of data security and privacy policies, best practices, and much more.

In 2018, I sadly reported on the passing of one of the most important members and leaders of the real estate and HGAR community, and my mentor and former partner, Edward I. Sumber. Each article I write is a tribute to him and to what I learned from him. In looking back, I am sure he would be surprised, to say the least, as to what has transpired since his passing.

‘Long-Island Divided’—Fair Housing; New Rental Laws

In 2018, the entire real estate industry was impacted by the Newsday article entitled “Long Island Divided,” which was the product of a three-year investigation, uncovering far-reaching instances of discrimination and fair housing violations. The piece sparked a focus on curtailing such illegal behavior through the commencement of state agency-initiated investigations, changes in the laws and the addition of continuing education requirements for real estate licensees.

In June 2019, extensive tenant protection legislation was enacted in the form of the Statewide Housing Security and Tenant Protection Act of 2019. The Legal Corner followed and addressed these important developments.

The COVID Pandemic and Remote Closings

In early 2020, the world was struck by the COVID pandemic and its impact on real estate, including government-imposed shutdowns. The individual death toll was devastating. Businesses and individuals were negatively impacted. However, unexpectedly, the real estate industry in New York and across the nation, eventually experienced a significant increase in transactions and home values. Critical government assistance and stimulus helped to support the industry, which could have experienced a fate similar to what occurred during the 2008 economic crisis.

The Legal Corner reported on legislative initiatives from the Cares Act (including the Paycheck Protection Program and the Pandemic Unemployment Assistance Program) to the daily Executive Orders issued by then Gov. Andrew Cuomo. Several Legal Corner articles also focused on the ability to utilize remote closings and electronic signatures to proceed with transactions in what was an unprecedented environment.

The Last Two Years: From Terrific to Turbulent

In 2022 and 2023, the Legal Corner closely followed the events that led to the significant downturn in the real estate market. Legal Corner reported on the increases in inflation in mid-2022 (to 9.1%) and interest rates to multi-decade highs in November 2023 (to 8.01% for 30-year fixed mortgages). The near collapse of the regional banking system in early 2023 arising from a new form of “bank-run” taking place primarily on the Internet was also a topic of focus. The current year has been a very difficult period. The recent legal antitrust attacks on NAR and real estate firms have also left the entire real estate industry rattled.

A New Digital Era is Upon Us

While this may be the last Legal Corner article that will be published in a physical print edition, Legal Corner and Real Estate In-Depth will continue to provide the latest updates and information on developments in the industry for many years to come. We will continue to take our responsibility to all real estate licensees and real estate professionals very seriously. In 2023, the Legal Corner discussed topics such as the use of digital currencies, the metaverse, and the utilization of artificial intelligence in the real estate industry. These new technologies will certainly shape the future of real estate and we will be there to report on these and other important developments.