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Pawling Public Radio: This Side of the Law:The Simple Truth, Dangers of Guaranteeing a Loan in the State of New York

This Side of the Law:The Simple Truth, Dangers of Guaranteeing a Loan in the State of New York

Pawling Public Radio: This Side of the Law: Berlandi Nussbaum & Reitzas LLP Hudson Valley | New York | Attorneys

By: Joshua T. Reitzas
Partner – Berlandi Nussbaum & Retizas LLP
April 28, 2013
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Thinking about signing a personal guarantee? Perhaps on behalf of a corporation because the company cannot afford to stand on its own without your assistance?  Or on behalf of a family member whose credit is terrible?  Or even a friend? Well, definitely think again.

Last week, I had the unique privilege of actually arguing in Court the exact opposite sides of the same underlying issue: whether a guarantor has the right to assert a defense on a personal guarantee.  Two different clients, argued in two different types of courts (New York’s version of a “Business Court” and its regular Court), two different types of judges (different demeanor), and a couple of days apart.  In the end, there was only one decision rendered.  New York holds a guarantor strictly liable and defenses, almost always, will likely not be entertained.

What people really need to better understand is that signing personal guarantees may affect them both when the loan is considered in default, as well as when things are status quo (i.e. payments are being made timely).  In a default situation, it is more likely than not that a Lender will file suit.  Further, if the Guarantor sets forth a defense (i.e. answers the complaint), a summary judgment motion will presumably then be filed or at least one should be filed in my opinion (assuming the case was properly made out prior to suit).  This basically means that the Lender will ask the Court for a judgment immediately without having the expense of a trial.  All that would be needed is for the Lender to prove its prima facie case evidencing (a) that the loan was made, (b) that the unconditional and irrevocable Guarantee exists, and (c) the Borrower under the loan has defaulted (i.e. nobody paid the bill).

Assuming the Lender makes this showing, the burden would then shift to the party opposing the motion to produce evidentiary proof sufficient to establish the existence of material issues of fact remaining for trial. In sum, all a Lender needs to do is show the Court the underlying note (i.e. the actual loan document), the actual copy of the Guarantee (i.e. the physical document) and proof that the underlying loan was not paid back (i.e. account statements from the Lender’s financial records and supported by a proper affidavit).  This is a very tough obstacle for any Guarantor to overcome.  In fact, New York is so harsh that even if a Guarantor could assert a defense, it may be completely disregarded.

Now, keep in mind that Guarantees will often times include language in the document expressly mandating that Guarantors waive the right to any possible defense(s), offset(s), or counterclaim(s).  As mentioned earlier, even in the absence of specific waiver language, New York has held Guarantors liable.  So if you are thinking about signing that Guarantee, we suggest that you first analyze the gravity of the situation upon signing a Guaranty – do you really know what you are getting in for?

In one of our cases, the Guarantor purchased a $17,000,000 home and placed ownership into a corporate entity and then executed a Guarantee with respect to the mortgage.  We advised the Lender to pursue a money judgment and not to do a residential foreclose (so as to avoid any possible right to a modification of the loan that may exist otherwise). This is absolutely within the right of a Lender to select the type of remedy in New York.

Finally, Guarantors should be somewhat reticent about executing Guarantees, as the underlying obligation must be accounted for on all bank applications and/or personal financial statements.  Recently, we discovered that a client’s business credit line (which the client personally guaranteed) was not included on a recent bank loan application.  Thank goodness we caught it.  If we did not, the bank may have brought some serious allegations against our client for possible misrepresentation on the loan application.

We recommend that if you are thinking about signing a Guarantee, you first consult with an attorney to know exactly what you are getting in for.  And if you elect not to do so, we suggest reading this article again and again to make sure you completely understand what you may be faced with in the future.

Always feel free to call or write if you have any questions.

Berlandi Nussbaum & Retizas LLP

New York | Hudson Valley

Attorneys

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Berlandi Nussbaum & Reitzas LLP

Hudson Valley | New York | Attorneys

Pawling Public Radio:This Side of the Law: What is Your Home “Worth”?

This Side of the Law: What is Your Home “Worth”?

 Pawling Public Radio: BNR LLP – Law Firm NYC | Hudson Valley

By: Brian L. Berlandi
Partner – Berlandi Nussbaum & Retizas LLP

April 8, 2013

We all know the saying….”Your home is only worth what a buyer will pay for it.” That is ever-so-true in today’s market, where buyers appear to have more leverage than sellers. Those of us who bought homes 5-6 years ago, before the real estate bubble popped, now find ourselves struggling just to sell the same home at a 20-30% discount off our original purchase price. Buyers are being picky and negotiating hard for the prices they want to pay, and banks are employing far more stringent criteria on lending, making it harder and harder for buyers to even get loans.

Even when a buyer is otherwise qualified for a loan (i.e. has a good credit score, stable income, etc.), we are still seeing banks not approve the loan because the home to be purchased does not appraise high enough to meet the necessary loan-to-value ratio. Take a simple example that we see often at BNR:

  • Mr. and Mrs. Sellers want to sell their home in Dutchess County, which they purchased in 2005 for $400,000. They put it on the market with a real estate broker, listing it at $400,000.
  • 18 months go by with no offers, and the Sellers reduce the price 2 or 3 times such that it’s currently listed at $340,000.
  • Finally, Mr. and Mrs. Buyers come along.
  • The Buyers love the home and very much want to buy it, but not for any price near $340,000.
  • The Sellers are very eager to sell (because they already have their eye on a new condo in South Carolina), and after a lengthy negotiation, the parties agree on a $250,000 sales price and sign a Contract for Sale.
  • The Buyers then work with a mortgage broker who submits their loan application to XYZ Bank based out of Plano, Texas.
  • XYZ Bank agrees to make a loan the Buyers on an 80% loan-to-value ratio (or 80% LTV), meaning that, assuming the value of the house is $250,000, XYZ Bank will loan the Buyers 80% of the value (i.e. $200,000). The remaining 20% (i.e. $50,000) will have to be paid by the Buyers out-of-pocket.
  • As part of underwriting the loan, XYZ Bank then sends Mr. Real Estate Appraiser from Long Island to the property to appraise the value of the home and to ensure that it does, in fact, have a value of $250,000.
  • Mr. Appraiser has never heard of Dutchess County before, never mind been here. He has no knowledge of the local market, nor of the appropriate and relevant comparable sales in the neighborhood against which to compare the Sellers home.
  • Nonetheless, he plugs Dutchess County into his GPS, finds the home, does his walk-around, gets back in his car, and heads back to Long Island.
  • The next day, he provides a report to XYZ Bank that states, based on his opinion, the Sellers home has a value of only $235,000.
  • The Buyers then call the Sellers and tell them they have to lower the price (again) because the house is not “worth” $250,000, it’s only “worth” $235,000.
  • The Sellers have a fit and say “no way”.
  • The deal dies, and the Sellers are faced with the decision of either putting the home back on the market, or giving up and just staying put in the home (i.e. South Carolina will have to wait…..)

This scenario has become oh-so-typical. In the end, both parties are disappointed. The Sellers haven’t sold the home they want/need to sell, and the Buyers have not purchased the home they fell in love with.

In the end, it all came down to what the house was “worth.”

So what could have been done differently to create a better outcome? Here are a few tips to consider…

  1. If you are the Sellers, consider hiring a good, local real estate broker who really knows your market well and will price your home appropriately. While you may certainly suffer from the disappointment of selling your home for less than what you purchased it for, a good real estate broker will keep your expectations in line.
  2. If you are the Buyers, consider working with a local bank (and we have many in Dutchess County) who knows the market well and knows what homes in this area are “worth”. If you elect to use a large, national banking institution, at least consider using one that regularly makes loans to home buyers in this market (and there are a few of them out there too). Choosing XYZ Bank in Plano, Texas can be a recipe for disaster.
  3. Lastly, whether you are the Sellers or the Buyers, insist that the Buyers bank utilize an appraiser who knows the market well, who has done many appraisals in your local area, and who can competently assess what your home is “worth” by examining the appropriate and relevant comparable sales in the neighborhood.

Berlandi Nussbaum & Reitzas LLP | Hudson Valley | New York | Attorneys

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Pawling Public Radio: This Side of the Law

This Side of the Law (Listen to the Radio Broadcast)

October 24, 2012

By

Brian Berlandi

Partner – Berlandi Nussbaum & Retizas LLP

Pawling Public Radio: BNR LLP – Law Firm NYC | Hudson Valley

People have long and often said that the best thing about a small town is that “it’s a small town.” I have always found that to be the case with Pawling, where friends and acquaintances can be found on every street corner, at all times of the day, and where people truly care about their neighbors’ well-being. These are the biggest reasons why I was intent upon BNR maintaining an office in Pawling when we formed the firm in the summer of 2011.

BNR is a general practice law firm, which offers our clients a wide variety of legal services, including entertainment law, commercial litigation, congressional investigations, commercial and residential real estate, corporate law, election law, mergers and acquisitions, employment law, intellectual property, tax, and criminal defense (federal and state). As devoted as BNR is to providing high-quality legal services, we are equally committed to improving the way in which clients pay for legal services.  Therefore, we offer a variety of creative fee alternatives to better align our interests with those of our clients. I invite you to visit our website to learn more about our practice and our attorneys. www.bnrllp.com

Although headquartered in mid-town Manhattan, BNR maintains an office in Pawling at 527 Route 22 – across the lobby from Rose & Kiernan Insurance Agency, and in the northern section of the same building in which the Pawling Central School District offices are located.

Moving forward, BNR is delighted to be working with Pawling Public Radio to provide a monthly legal column about new and interesting legal issues on a variety of topics. We hope you will find them compelling. Of course, we welcome any suggestions or requests for topics that are important or relevant to you!

Please don’t hesitate to stop into our office any time to visit, or to have a cup of coffee, or to just say hello, or to discuss any legal needs you may have. We love seeing our friends, and we can never have enough of them! We have already had the pleasure and privilege of working with so many of you, and we would be delighted for the opportunity to help even more of you.

Pawling Public Radio: This Side of the Law |BNR Berlandi Nussbaum & Reitzas LLP Attorneys of New York, Hudson Valley& New Jersey

Pawling Public Radio: Our Town: BNR is AOK

Our Town: BNR is AOK

Pawling Public Radio: BNR – Law Firm NYC | Hudson Valley

August 15, 2012

By

There is nothing more inspiring for small town America than experiencing the renewed confidence that comes with new businesses or business expansions taking place within its borders. One such expansion is the new office location of the law firm of Berlandi Nussbaum & Reitzas LLP (BNR) at 517 Rt. 22, in the village of Pawling. Currently undergoing a complete renovation of their office space, which will accommodate several attorneys, they are a general practice firm offering legal services in corporate transactions, litigation, real estate, banking, media & entertainment, intellectual property, tax and trusts and estates, among other areas.

Brian Berlandi, a well known Pawling personality, will be situated in this new office space, having decided that the commute to his New York City office was too much wear and tear on a regular basis.  He described the new Pawling space as the Hudson Valley office of a firm that is national in scope with offices in several locations.  It is from this locale that regional and local clients will be serviced.

Berlandi,  a former partner with Daniels & Porco, decided that it was time to have his own name on the door…”be his own boss and control his own destiny,”…a move that occurred when the firm opened for business July 1, 2011. Brian is a corporate attorney, handling all corporate transactions, banking, IP, technology and health care. He grew up in Boston, attended Bowdoin College as an undergraduate and Boston College Law School, graduating in 1999 and working for many years in several big firms in New York City.

Along with his wife Katie, (granddaughter of the late Dr. and Mrs. Norman Vincent Peale) he currently resides in Sherman with their daughters Amelia and Eloise, and son John. Moving back to the area in 2004 was a “coming home” for Katie, but Brian, describing himself as  “a country boy at heart…just loves the Pawling area,” and donates his time to the community as Vice President of the Pawling Fire Department, and Captain of the Mizzentop Engine Company.

Following an open house celebrating BNR’s newest location Thursday, Aug 16, at Petite on East Main Street from 5-8 p.m., Brian may be reached at 212-804-6329 x501. The BNR website has wonderful information about the firm and the services they offer, and can be found at www.bnrllp.com

Berlandi Nussbaum & Reitzas LLP – Law Firm -Hudson Valley, New York, Manhattan, New Jersey, Connecticut and Washington DC


 

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Open House Page

 

 

Still Sitting on the Sidelines?

Commercial Real Estate, Mortgage Financing, Law

Jay Nussbaum

Berlandi Nussbaum & Reitzas LLP
July 13, 2012

Anecdotally at least, there seem to be a lot of commercial real estate investors, developers, etc., who finally like where prices are, like the way returns are penciling out, and are eager to move forward, but haven’t ripped off their warm-ups and gotten into the game because they don’t know where to access mortgage financing.

I’m thinking about this today because I just represented a very aggressive lender on a nice $5.5M loan secured by a 600-unit apartment building in the Southeast. The buyer was very savvy, and realized that conventional financing wasn’t going to be available for his deal because the property he was buying was only 60% leased at the time of acquisition. So instead of wasting his time and losing the deal—or worse, never going to contract at all out of fear of the mortgage market—he wisely found a bridge lender that jumped at the deal. Sure, that’s a more expensive way to go than conventional financing, but it enabled him to buy the property, and after he turns it around (he estimates 12 to 24 months) he’ll refinance out into a conventional loan.

Sure beats sitting around grumbling about the lack of available financing.

Kevin A. Denton
Phone: 212-804-6329 ext 513
527 Route 22, Suite 2, Pawling, NY 12564

The Honorable Kevin A. Denton serves as Of Counsel to the firm. In 1998, he was elected as Town Judge for the Town of Pawling, NY and in 2006, he has been acting Judge for the Village of Pawling, both of which he continues to serve as.

With over 36 years of legal experience, Judge Denton has been practicing law with an emphasis on trusts & estates, real estate, mortgage banking and municipal law. His broad experience includes representing banks and other mortgages in closings and foreclosures. His reputation is known for his prompt and efficient administration of decedent’s estates and effective dealings with Federal & State Estate Tax departments. He has experience in representing criminal defendants at the municipal court level.

Judge Denton has been actively involved in the community by providing pro bono legal services including local churches, the Pawling Fire Department, the Beekman Fire Department & district and the Pawling Historical Society. He has been a guest lecturer for the American Institute of Banking since 1998. In addition, he is the author and contributor to the regular column A Country Lawyer, dealing with legal issues of everyday interest and answering reader’s questions.

EDUCATION

  • Harpur College, Binghamton, NY, 1971, Major American History with emphasis on U.S. Foreign Policy in Far East, BA
  • New England School of Law, Boston, MA, 1974, JD

 PROFESSIONAL ASSOCIATIONS

  • New York State Bar Association
  • Estates & Trusts and International Law Sections
  • Dutchess Co. Bar
  • The Federalist Society
  • NYS Magistrate’s Association
  • Dutchess Co. Magistrate’s Association

Corporate

Media & Entertainment

Litigation