Attorneys at Adam Leitman Bailey, P.C. represented the purchaser of a five-building portfolio totaling $16.9M in the Fleetwood-Concourse Village section of the Bronx. The properties, which contain approximately one hundred residential tenants subject to rent regulation, was in high demand given its location in one of New York City’s most developing neighborhoods.
Immediately upon being retained by the purchaser, Adam Leitman Bailey, P.C. began performing extensive due diligence on the properties to investigate the regulatory status of all tenants by reviewing records with the New York City Department of Buildings, Housing Preservation and Development, the New York State Division of Housing and Community Renewal, and any documents that were publicly available, including records related to pending and past litigation involving the seller, building, and tenants.
Effective due diligence on this multi-building acquisition required an analysis of an almost 30 year old regulatory agreement and how the terms of that single agreement together with the buildings’ participation in the J-51 tax benefit program affect the regulatory status of each building today. We determined how that agreement impacts and restricts the owner’s ability to maximize the future rental income in accordance with the laws and regulations that govern rent regulated buildings in New York City. We also gave our client a preview and guidance on how that regulatory agreement requires the owner to maintain a certain tenant profile in the building based on income and to comply with the agreement’s specific renewal leasing procedure.
We then investigated the history of litigation in the courts and before the State of New York Division of Housing and Community Renewal to ascertain the litigiousness of the tenants, to find red flags arising from inconsistencies in the seller’s administration of the building and compliance with rent registration requirements and to uncover exposure to rent overcharge liability and/or advise on the documents to demand of the seller before closing in order to substantiate the building’s rent roll.
Upon satisfactory completion of due diligence, attorneys at Adam Leitman Bailey, P.C. further engaged in extensive contract negotiations with seller’s counsel to ensure that purchaser’s contract deposit of $1.69m was adequately protected and that seller would fully comply with the terms of the contract. The contract, which did not contain a “mortgage contingency” provision, set forth a closing date that was designated “time of the essence” thereby prohibiting the buyer from adjourning the closing beyond the target closing date. Accordingly, our attorneys were tasked with quickly performing a review of title matters and providing the buyer’s lender with loan clearance documents to meet the stringent closing timeline. Our attorneys discovered creative ways to satisfy the rigorous underwriting demands imposed upon the purchaser by their lender without any delay in the closing.
Moreover, as part of the contract of sale, our team of attorneys successfully negotiated a Consolidation, Extension, and Modification Agreement (a/k/a CEMA), which saved our client, an experienced real estate investor and manager, approximately $125,000 in New York State and New York City Mortgage Recording Tax.
In addition to obtaining substantial savings on NYC and NYS Mortgage Tax, attorneys at Adam Leitman Bailey, P.C. ensured that litigation and due diligence matters affecting the property were properly assigned to the purchaser at closing, and that existing building permits filed by the seller to increase the numbers of units in several of the subject buildings seamlessly transferred to the purchaser.
Adam Leitman Bailey, P.C.’s tactical approach to contract negotiations and due diligence was key to a successful transaction.
Andrew C. Jorges, Esq. and Thomas Furst, Esq. of the Transactional Department handled the closing.
Dov Treiman, Esq. and Carolyn Rualo, Esq. of the Landlord/Tenant Department handled due diligence.