KEEP YOUR CORPORATE BOOKS AND RECORDS UP TO DATE

It is essential that a small business keeps its corporate records current. All small businesses that are incorporated in the State of New York receive a “corporate book”. This corporate book is comprised of the corporate seal, basic by-laws and articles of incorporation.

Under the Business Corporation Law of New York, when you incorporate in the State of New York, you designate the Secretary of State to be authorized to accept service on behalf of your corporation

Today, most small businesses do not really understand what that means. Simply put, if someone wants to sue your business, all they have to do is send a Summons and Complaint to the Secretary of State,along with a small fee, and your corporation is deemed served under the Business Corporation Law.

Within properly prepared incorporation papers is an address, which you designate, where the Secretary of State will have a copy of the summons and complaint sent.

Do you know what address the Secretary of State has on file for your corporation? Many times the attorney who you retained to incorporate your entity is listed as the designated address. Sometimes it is your place of business. Other times it is your home address.

A real problem arises when that address is no longer valid. Your attorney may have moved his office. You may have changed attorneys. You may have moved your place of business. You may have moved and have a new home address.

The Secretary of State now mails a copy of the summons and complaint to an address that is no longer valid. You never receive a copy of the summons and the next thing you know, you have a judgment against your company “on default”. You run to your attorney and tell them you were never served; you never received the summons.

You want to vacate the default judgment but unfortunately, you may be out of luck. That is because one of the criteria for vacate a default is that you must show a “reasonable excuse” for the default.

Failure to receive the summons under these circumstances does not constitute a reasonable excuse. Under the Business Corporation Law, the courts have held that the failure of a corporation to receive service of process due to the breach of the corporation’s obligation to keep a current address on file with the Secretary of State does not constitute a reasonable excuse.

Let the Law firm of Michael B Schulman & Associates, P.C. review your corporate documents to insure that they are current.

BE A PROACTIVE CLIENT

You have retained an attorney to represent your interests and now you want to know how involved you should be. You don’t want to be a bother. You keep thinking about facts that may or may not be important to aid in your matter. You are concerned about the cost you may incur by taking the time to ask questions.

The best client is an actively involved client. No matter how competent your attorney may be, he/she will not know all the facts surrounding your need for legal representation without your input. A good attorney will know the law involved in your dispute. However, more often than not, the final outcome is determined more by the facts than by the law. Facts are important and essential to a proper and competent representation.

Make sure you are completely open and honest with your attorney. Do not try to spin your opinion on the facts. Remember, everyone is entitled to their own opinion, but there is only one set of facts. No attorney wants to hear from their client “I was too embarrassed to tell you”, “I forgot to tell you”, or “I did not think it was important to tell you”.Attorneys do not like surprises. A competent attorney can help present the facts in a light most favorable to you if he/she is aware of the facts. An attorney cannot properly represent a client if the client is withholding pertinent information.

The client should NOT be the one who determines the importance of the facts. What may seem unimportant or irrelevant to you may be an important and relevant fact to your attorney. One of theses facts may be a determining factor as to the outcome of your matter.

So to sum it up, be a proactive client. Do not assume that your attorney knows all the facts of your case. Help your attorney represent you and increase the odds of a successful outcome. Remember, you and your attorney are a team seeking the exact same outcome. Ask questions and make sure you get answers. If you do not understand the answer, ask it again and have the answer explained so that you do understand. Do not be embarrassed. You do not know the law and your attorney has an obligation to make sure you understand what is going on in your case.

We are not just attorneys; we are counselors at law. Take advantage of our counsel.

What Homeowners in Foreclosure Should Know

What Homeowners in Foreclosure Should Know… Part 6… My home has a foreclosure sale date, now what?

Once a foreclosure auction date has been set by the Referee, and properly published, most homeowners fear they must immediately pack their bags and move out. This is not the case.

Firstly, there are a few ways that the foreclosure auction date may be able to be cancelled or adjourned (postponed). If your financial circumstances have changed, and you believe you may be able to qualify for a loss mitigation option, you can submit a loss mitigation package for review, and if the loss mitigation department is reviewing it, the sale can be cancelled or adjourned, to give the review time to be completed. Alternatively, if you have put your home up for sale during the foreclosure process, and have found a buyer, you can attempt to have the foreclosure auction adjourned in order to give you time to complete this transaction. If you have consulted with an attorney and you believe that the best course of action at this point would be to file for bankruptcy, the sale will be cancelled when you file for bankruptcy. As discussed in previous blogs, bankruptcy rules are complicated and there are a lot of ramifications from filing, so you should consult with an attorney who specializes in this first.

Secondly, if none of these are options for you, and the foreclosure sale goes through. It will either be sold back to the servicer or bank who held the mortgage, or to some third party bidder at the foreclosure auction.

If it gets sold back to the servicer or bank who held the mortgage, certain documents, including a deed are prepared and executed by the Referee. Once the servicer or bank takes ownership through a deed, the property is then owned by the servicer or bank. If it gets sold to a third party at the foreclosure auction, a closing will be held where the third party purchases the property, and all necessary documents will be signed over to them.

If you still are residing in the property at this point, often times an attorney is retained to start a landlord tenant action against you in order to have you removed from the property. You will be served with documents allowing you time to vacate the property, and if you do not, a landlord tenant action will be commenced. Often times you can work with the attorney to give you some time to leave the property, or work out a “Cash for keys” agreement, whereby you receive money in order to vacate the property by a certain agreed upon date.

The most important thing to be taken away from this entire six part series is that if you have a foreclosure action against you, or believe one is imminent, you should consult with an attorney immediately so that you have the best chance at saving your home and preserving your rights.

What Homeowners In Foreclosure Should Know… Part 1

The Pre Requisites to Commencing

Homes are expensive. Most people save up for years before they can even think about purchasing a home. Life’s ups and downs can cause someone’s financial situation to change, and the home they’ve worked so hard to obtain may be in jeopardy. Many homeowners do not understand their rights when it comes to a foreclosure lawsuit against them.

There is a procedure that needs to be followed prior to a foreclosure lawsuit being commenced. It is imperative to consult with an attorney who can evaluate if the proper pre-foreclosure notices have been sent.  A default letter and notice of intent to foreclose are both prerequisites to commencing a foreclosure lawsuit.

There is a statute of limitations that applies once a lender has accelerated the debt. Legal counsel can evaluate whether this has been complied with and if the action has been commenced timely.

It should not be forgotten that if you have applied for and are currently being reviewed for a loss mitigation option including a loan modification, forbearance agreement or other such option, this review should be completed prior to the commencement of a foreclosure action.

What Homeowners in Foreclosure Should Know… Part 2

The Action has been commenced, now what?

Assuming that your legal counsel has reviewed all the relevant documents and advised that the foreclosure has been properly commenced, now what? Foreclosure actions are often lengthy, and it is imperative that you retain legal counsel with knowledge of the proper procedure and applicable laws and regulations.

First, make sure an answer is filed on your behalf to preserve your rights. This allows you (or your attorney) to get a copy of everything that plaintiff’s counsel files with the Court.

If you are interested in obtaining a loan modification, gather all applicable documentation regarding your income and assets, including but not limited to, pay stubs, bank statements, if you are self employed, profit and loss statements, tax returns, and the forms required to be completed by Plaintiff’s counsel. The sooner you can get the bank or servicer a complete loan modification application, the better. Additionally, make sure that Plaintiff’s counsel has a complete copy of your application for their records.

The Court will schedule a settlement conference where you have the opportunity to meet with counsel for the Plaintiff and the Court oversees the application process. You should attempt to be present at every one of these appearances, if you cannot attend, your attorney can appear on your behalf.

In the event that you are not approved for a loan modification and the Court is in agreement with this determination, there are other loss mitigation options available to you if you would like to attempt to stay in your home. You can apply and see if you qualify for a forbearance agreement or repayment plan, whereby you pay back the money that you owe to the bank over a set period of time.

What Homeowners In Foreclosure Should Know… Part 3

What is a Referee?

If you had applied for a loan modification or other loss mitigation option and did not qualify, and the Court agrees with the determination, the foreclosure then continues.  It should be noted that the Lender has an obligation, enforced by the Court, to negotiate in good faith during the loss mitigation review process. If the Court finds that the Lender did not do this, they can enforce penalties such as monetary sanctions, tolling of interest, or reductions in principal.

Most homeowners at this point are fearful they will lose their home any day. This is not the case. The lender still has a number of steps it must take before the home is set for auction. Depending on what county the property is located in, this can take months or even years.

The Court must first appoint a Referee to compute the amount owed and due to the Lender. If an answer was filed (which I already addressed in Part 2 of this series) the Lender must file a Motion for Summary Judgment. This is a motion where the Lender must address all of the affirmative defenses you or your attorney set forth in the answer, and argue why these are not valid defenses to the foreclosure action. Additionally, in this motion, the Lender asks the Court to appoint a Referee. You have the opportunity to oppose this motion and address all of the Lender’s points. The Lender can then reply to your opposition. This motion is submitted to the Court for decision. If this motion is granted, a Referee is appointed to compute the amount owed and due.  If this motion is denied, the Court usually advises the Lender as to what their reason for the denial was so that they have an opportunity to remedy same (if possible).

In the event that you or your counsel did not file an answer, you still have some options. If you have a reasonable excuse for your delay, and a valid claim against the foreclosure, you can file a motion to vacate your default and be able to file a late answer.

If, this is denied, or you choose to not file an answer in the action, the Lender proceeds by an Order of Reference to Appoint a Referee. These are granted by the Court more liberally, as the Lender does not have any affirmative defenses to address. Once granted, a Referee is also appointed here.

Many homeowners do not understand what a Referee is and what their role serves in the foreclosure. The Referee has no association with the Lender or the homeowner, and is an impartial third party appointed by the Court. They are often times attorneys, and are familiar with foreclosure actions. Their role is to compute how much the Lender is due based on the homeowner’s default, as well as conduct the foreclosure auction and sign all accompanying documents post sale.

What Homeowners in Foreclosure Should Know… Part 4

What other options do I have?

It is important to take a step back from the foreclosure to address any other options you may have. At this point, you are out of settlement conferences as no modification was able to be worked out, and a Referee has been appointed to compute the amount owed to the Lender. The foreclosure at this point is fairly far along.

One possible option is to put your home up for sale, and do a short sale. This is where the Lender agrees to take less than what is owed on the property. Every Lender has different criteria for short sales and often times it takes some time for a Lender to approve or deny a short sale offer. If your Lender approves a short sale they will accept the reduced amount as full payment of what is left to be paid on the mortgage, you will be released from any further obligation on the mortgage, and the foreclosure will be discontinued.

Another possible option is to file for Bankruptcy. This puts an automatic stay on the foreclosure. Bankruptcy rules are very complicated, and it is important to consult with an experienced Bankruptcy attorney if you are considering this option. Filing for Bankruptcy has an affect at many parts of your life, such as your credit. If your credit is affected this can impact many areas of your life including future purchases of cars or homes for an extended period of time. You should be made aware of all of the ramifications before you decide whether filing for Bankruptcy is the best option for you.

If you have a large sum of money, a forbearance agreement or repayment plan may be a possible option for you. With these options, you provide a large monetary down payment to the Lender, and then pay back the rest of your arrears in monthly payments for a set period of time, while at the same time picking back up your monthly mortgage payments. If you have been in default for an extended period of time, or have a large amount of arrears, this may not be an option, as the amount to cure the default may be too large.

If at any time you have a change in financial circumstances, such as gaining new employment with a higher salary, getting an additional job for extra income, taking on a tenant who is contributing, you have a family member or friend who is willing to make monthly contributions towards your mortgage payments, or your monthly obligations get reduced, you can and should apply for another loan modification review. Any of these could result in a change of circumstances, which now allows you to be approved for a loan modification. If you are being reviewed for a loan modification, often times Lender’s put the foreclosure action on hold as well to allow for the review to be completed.

What Homeowners in Foreclosure Should Know… Part 5

If you’ve come to the conclusion that no loss mitigation option is right for you, the foreclosure process in the Courts continues.

Either the Motion for Summary Judgment or the Order of Reference once granted will result in the Court appointing a Referee to compute the amount owed and due to the lender. As anuninterested third party, the Referee will take into account the principal, interest, escrow advances, and any other figures necessary to compute the total amount owed and due to the lender.

As the Defendant, you or your attorney on your behalf, has the ability to oppose the Referee’s computation and have a hearing with the Referee regarding the figures if you do not believe they are correct.

Once the Referee’s computation is completed and sent to the Lender’s attorney, they prepare a Judgment of Foreclosure and Sale to be submitted to the Court for signature. The Judgment of Foreclosure and Sale incorporates all of the previous documents in the foreclosure action, as well as the Referee’s computation. This is the final document that gets submitted to the Court for review and signature before a foreclosure auction of the property is scheduled.

Once a Judgment of Foreclosure and Sale is filed with the Court, you or your attorney on your behalf, have the opportunity to oppose this motion. You are able to bring up any reasons why the foreclosure has not been conducted properly, any issues with the foreclosure or underlying documents, any issues with the loss mitigation process, and any reasons why you are still in disagreement with the Referee’s computation.

Depending on what county the property is located in, this motion can take several months to be reviewed and signed by the Court. Often times due to the high volume of cases, properties located in the five boroughs take longer to review and execute. It is not uncommon for it to take anywhere from 12-18 months (and sometimes longer)for some counties to review and process these motions. Other times in counties such as Nassau or Suffolk the time can be as short as 3-6 months for the motion to be reviewed and signed.

Once the Court reviews the documents and it is signed by the Court, the Lender now has a signed Judgment of Foreclosure and Sale. With this document the Lender can contact the Referee and schedule a foreclosure auction. It is the Referee who conducts the foreclosure auction.

Once the Referee provides a date and time for the foreclosure auction, the Lender must publish a Notice of Sale. The Lender has certain specific rules for the number of times it must be posted and in how many publications. In the event the Lender does not appropriately publish the Notice of Sale, this can be grounds for you or your attorney to stop the foreclosure auction, and allow the Lender to publish the Notice of Sale.

What Homeowners In Foreclosure Should Know… Part 6

My home has a foreclosure sale date, now what?

Once a foreclosure auction date has been set by the Referee, and properly published, most homeowners fear they must immediately pack their bags and move out. This is not the case.

Firstly, there are a few ways that the foreclosure auction date may be able to be cancelled or adjourned (postponed). If your financial circumstances have changed, and you believe you may be able to qualify for a loss mitigation option, you can submit a loss mitigation package for review, and if the loss mitigation department is reviewing it, the sale can be cancelled or adjourned, to give the review time to be completed. Alternatively, if you have put your home up for sale during the foreclosure process, and have found a buyer, you can attempt to have the foreclosure auction adjourned in order to give you time to complete this transaction. If you have consulted with an attorney and you believe that the best course of action at this point would be to file for bankruptcy, the sale will be cancelled when you file for bankruptcy. As discussed in previous blogs, bankruptcy rules are complicated and there are a lot of ramifications from filing, so you should consult with an attorney who specializes in this first.

Secondly, if none of these are options for you, and the foreclosure sale goes through. It will either be sold back to the servicer or bank who held the mortgage, or to some third party bidder at the foreclosure auction.

If it gets sold back to the servicer or bank who held the mortgage, certain documents, including a deed are prepared and executed by the Referee. Once the servicer or bank takes ownership through a deed, the property is then owned by the servicer or bank. If it gets sold to a third party at the foreclosure auction, a closing will be held where the third party purchases the property, and all necessary documents will be signed over to them.

If you still are residing in the property at this point, often times an attorney is retained to start a landlord tenant action against you in order to have you removed from the property. You will be served with documents allowing you time to vacate the property, and if you do not, a landlord tenant action will be commenced. Often times you can work with the attorney to give you some time to leave the property, or work out a “Cash for keys” agreement, whereby you receive money in order to vacate the property by a certain agreed upon date.

The most important thing to be taken away from this entire six part series is that if you have a foreclosure action against you, or believe one is imminent, you should consult with an attorney immediately so that you have the best chance at saving your home and preserving your rights.

Co op Boards

Have you had an offer to purchase a co-op accepted by the seller, only to go before the Board and bedenied? Are you unsure as to why because you have some money in the bank, retirement accounts, and earn a good living? This happens more often then people think, and they are often left puzzled and wondering why. Co-op Boards have a lot of authority when it comes to making the decision as to who they accept and who they deny to become part of the Co-op. Remember, when you are buying a Co-op you are buying shares of the cooperative, so the Board wants to ensure that you are a good investment, just as much as you want to ensuring what you are buying is.

A Co-op Board has the authority to withhold approval without stating a reason, as long as it is not discriminatory in nature (i.e. race, sex, religion, gender, marital status, etc.). Boards want to ensure that they are furthering the corporate purpose of the Co-op before accepting anyone new. They look at your total financial picture- assets, liabilities, income to debt ratio, job history, bankruptcies, prior foreclosures, judgments, credit score- amongst other things. Additionally, you are required to complete a lengthy application where you must release a lot of personal information to the Board. Copies of your recent tax returns, and bank statements are usually requested. If you are someone who is more private, and does not want people knowing all of your personal and financial business, purchasing a Co-op is probably not for you.

Additionally, a lot of times Boards request a copy of the mortgage commitment letter from the bank, as well as multiple letters of reference from people who will vouch for you. It is important to get letters from a variety of sources- both business and personal.

Another factor Boards consider is your amount of liquid assets. Often times they want to see that you have enough cash in the bank to cover maintenance charges for a substantial period of time- up to a year sometimes, as well as enough cash to cover mortgage payments for a year. Along these lines is a person’s debt to income ratio, where the percentage is calculated, and Boards usually like to see it less than 30%.

Big picture here is that Co-op boards want to make sure that anyone they are approving to join the Co-op is a good investment and has the financial capability to keep the Co-op up to their standards- which is very often a subjective opinion of the Board, where they follow certain internal guidelines.

Before moving forward with putting an offer in on a Co-op be sure to ask yourself if you want to be subjected to all of this private information being made public to a Board you do not know.