All Forum Posts by: Peter Walther

I see several problems with this model.  First, who collects the rents and distributes payments? The owner, the lender or a third party?  Second, what priority does your lender's claim to rents have?  Taxes have to be paid, so does insurance, what about maintenance?  Who gets to decide if a repair that appears to be needed is real or fictious, created to reduce the net available to the lender?  Next, what sort of lien on the net proceeds do you envision?  With a mortgage the borrower signs a Note and a mortgage creates a lien on the property to secure the debt which must be recorded in the public records to provide notice to third parties.  In your explanation nothing is recorded to notify the world of your claim to the income.  I suspect the owner could sell the property to a third party free and clear of your lender's claim to the income stream.  I'm pretty sure if the owner filed bankruptcy the Trustee would have your claim to the income disallowed and since the owner does not have personally liability for the "debt" you're not even an unsecured creditor.  Also, I think this could not be used as secondary financing.  I suspect in most mortgages the Borrower entering into this type of agreement without the written consent of the prior lender would be a default.

What debt coverage ratio do you think would be fair considering the risk?  $1 lent for $10 of income?  $1/$50, $1/$100?  While this kind of investment might be of interest to someone who "invests" in crypto, I don't see this going mainstream.

 This decision gives an excellent explanation of when specific performance might be denied.

EMF Gen. Contr. Corp. v Bisbee (2004 NY Slip Op 02288)

 This has been my experience: 

"As to the remedy plaintiffs seek, the case law reveals that "the equitable remedy of specific performance is routinely awarded in contract actions involving real property, on the premise that each parcel of real property is unique" (EMF Gen. Contr. Corp. v Bisbee, supra at 52). Although certain defenses do exist including, insofar as is relevant here, unreasonable hardship, " 'the court's discretion to grant or deny specific performance of a contract for the sale of realty is not unlimited; unless the court finds that granting a decree of specific performance would be a drastic or harsh remedy, or work injustice, the court must direct specific performance' " (id., quoting 91 NY Jur 2d, Real Property Sales and Exchanges § 204). Moreover, "[v]olitional unwillingness, as distinguished from good faith inability, to meet contractual obligations furnishes neither a ground for cancellation of the contract nor a defense against its specific performance" (Meisels v 1295 Union Equities Corp., 306 AD2d 144, 145 [2003]).  

Richard D. Alba v Jean-claude Kaufmann :: 2006 :: New York Appellate Division, Third Department Decisions :: New York Case Law :: New York Law :: US Law :: Justia

Can you point me to a reported decision where a court ordered money damages in lieu of specific performance when real property was the subject of the dispute?

In my experience, a suit for specific enforcement of a real estate purchase contract is not particularly complex or fact intensive that would lead to extensive time needed for discovery.  Assuming the contract is valid, enforceable, and the buyer can prove (s)he was ready, willing and able to close, a summary judgment might be awarded granting the request.

While every litigant has a right to appeal an adverse judgment, not every request for the appeals court to hear the matter will be granted.  They appellant must show the trial court made an error, either of law or procedure; an insufficiency of evidence; or an abuse of discretion.  If one of those can't be shown, the request for appeal may be denied or the court may hear the appeal and return a per curium affirmed (PCA) based simply on the briefs, both of which will shorten the length of time to conclusion.

I looked at the CO promulgated real estate contract, and it has a provision that the prevailing party will be awarded their costs and expenses including attorney's fees, so the parties better be sure of the strength of their positions.

If it were me, I'd probably push for mediation as soon as possible.  I've found that a good mediator will identify strengths and weakness for both parties and help them resolve their differences.  I would also ask my attorney about the advisability recording a copy of the contract or an affidavit of interest as I think it's possible the seller may have found someone willing to pay more for the property and I'd want a third party to be aware of my contract interest in the property.

Lastly, I'd make sure the attorney I hired specializes in real property law, particularly in the county where the property lies.

 My thought exactly.

An uncontested foreclosure is often the best way to resolve issues with subordinate lien holders though I've also contacted some and explained they were about to be named in a foreclosure and suggested that could be avoided if they just released the property from their judgment/lien.

I had more than one title claim because a title examiner wasn't aware of the difference between a foreclosure and a DIL.

Thanks. To expand a little on what is mentioned the underwriter's guideline, a DIL does not extinguish subsequent liens, so if the borrower has judgments against him/her/it that attach to the property, the DIL grantee takes title subject to them and may have difficulty getting them released later without payment. In addition, a DIL does not automatically satisfy the underlying mortgage/DOT so if you accept a deed from the DIL grantee you may find a title insurer will require a release or sat of it before insuring.

I think you'll find most, if not all title insurers, will require the DIL to be dated and executed subsequent to default in order to insure.  In addition, the Grantor will probably be required to sign the same seller's affidavit that are needed for a non DIL closing.  Here's a short treatise by a title insurer:

A deed in lieu of foreclosure is a deed given by the owner of mortgaged property to the holder of the mortgage or its designee where the mortgage is in default and foreclosure is a possibility. A deed is given and accepted as an alternative to ("in lieu of") foreclosure. Unlike a foreclosure, a deed in lieu of foreclosure does not extinguish any of the liens and encumbrances affecting the property.

Most courts recognize the execution of a deed in lieu of foreclosure in a transaction subsequent to the original mortgage transaction as a legitimate alternative to foreclosure proceedings. However, deeds in lieu of foreclosure can be subject to judicial attack by their grantors and their grantors' creditors.

Grounds for attacks on deeds in lieu of foreclosure include the following:

• That the deed was an equitable mortgage - that the parties intended the deed to be given as security for a debt and that the deed was not an absolute conveyance.

• That the deed is either a preferential or fraudulent transaction within the purview of the provisions of the federal Bankruptcy Act or any other related state law.

• That the deed is a device to clog a mortgagor's right of redemption.

• Unfairness of the consideration.

• Coercion, fraud, oppression, duress, and undue influence.

• That the deed is not subsequent to the execution of the mortgage but contemporaneous with it.

• That the grantor/mortgagor was insolvent at the time of the execution of the deed.

An estoppel affidavit (executed and acknowledged by the grantor/mortgagor, attesting to the fairness of the transaction, the consideration exchanged, the value of the property, and other factors showing an intention to make a genuine transfer) or a recital (inserted directly in the deed) are supporting documents used to forestall challenges to these transactions.

State law and local title standards must be consulted in regard to the consideration and treatment of deeds in lieu of foreclosure.