from The New York Times
October 29, 2009
Clauses Aimed at Keeping the Heirs Quiet
By DEBORAH L. JACOBS
TO deter lawsuits, many estate plans include a no-contest clause, which provides that anyone who formally challenges the plan gets nothing. Brooke Astor, the New York philanthropist, had one in her will. Michael Jackson reportedly used one in his living trust, a private document that disposed of most of his assets.
While some lawyers recommend the clauses for all wills and living trusts, others include them only when they see red flags for disputes, as when a parent favors one child over others or when there are tensions between someone’s spouse and children from an earlier marriage.
These clauses are becoming more important as people live longer, said Dana G. Fitzsimons Jr., a lawyer with McGuireWoods in Richmond, Va., who handles will contests. The decline in mental faculties that sometimes accompanies old age and the reliance on one child as caretaker are common patterns in court cases, he said.
The provisions that rein in lawsuits by disappointed heirs are known in legal jargon as “in terrorem” clauses, and that Latin term is certainly apt. They threaten to disinherit anyone who sues — for example, asserting that there was some impropriety surrounding the will.
With or without such a clause, if a will is found to be invalid, assets are distributed according to the terms of a previous will or state law, depending on the circumstances, said Howard M. Zaritsky, a lawyer in Rapidan, Va. With a no-contest clause, those who lose a case to have the will thrown out, or bring one on lesser grounds, forfeit what they otherwise would have received.
After Michael Jackson’s death, questions arose about whether his mother, Katherine Jackson, would lose her 40 percent share of the trust assets if she opposed the people named as executors in his will. Ms. Jackson applied to California’s Superior Court for a ruling on this limited issue, as state law permitted her to do. Judge Mitchell Beckloff ruled that she could challenge the executors’ authority without running afoul of the no-contest clause.
A common misconception is that a no-contest clause can turn back heirs who have been disinherited. But the clause has no teeth if they have been left nothing, because “there’s no downside to contesting the plan,” said Paul N. Frimmer, a lawyer with Irell & Manella in Los Angeles. He recommends leaving disfavored heirs enough money so that they will not risk bringing a case.
Although no-contest clauses are usually aimed at relatives, the one in Mrs. Astor’s 2002 will specifically refers to any “entity” — clearly meant to dissuade the charities named in the document from challenging it, said Lisa M. Stern, a lawyer with Proskauer Rose in New York. A 2003 codicil, or amendment, to the will reduced the charities’ share of the estate. But if they participate in a will contest, now expected in Westchester County Surrogate’s Court, and the case fails, they risk getting nothing, Ms. Stern said.
(The fate of Mrs. Astor’s estate has been complicated by the recent conviction of her son, Anthony D. Marshall, and one of her lawyers, Francis X. Morrissey Jr., on charges that they conspired to steal from her by tricking her into changing her will. This might support the charities’ argument that an earlier version of her will is the valid one. Andrew M. Cuomo, the state attorney general who by law represents charities, is not affected by the no-contest clause.)
Most states permit some form of no-contest clause, but Florida specifically prohibits them. If you sign a will while living in another state and it contains a no-contest clause, and then move to Florida and die there without changing your estate plan, the clause would be invalid for most of your assets, said Julie Ann Garber, a lawyer with the Andersen Firm in Key West. One exception might be real estate owned in the state where you lived previously, she said.
In states that permit no-contest clauses, standards for applying them vary and their wording is subject to interpretation, said Matthew P. Matiasevich, a lawyer with Evans, Latham & Campisi in San Francisco, who represents clients in estate lawsuits.
A classic example involved the will of William Randolph Hearst, the newspaper tycoon who died in 1951. More than half a century later, several relatives who were receiving income from a trust established by the will wanted to sue the trustees for investment decisions that they claimed favored future beneficiaries. Court papers show that in 2005 each current beneficiary was to receive an $8.3 million payout from the trust, financed with a portion of the dividends from Hearst Corporation stock.
In a Dec. 19, 2006, decision, the California Court of Appeal affirmed a 2005 trial court order and found the suit would violate the no-contest clause.
GIVEN the complications that can arise, estate planners said the best defense against will contests was to take steps during life to preserve the peace. For example, rather than leaving relatives guessing about the motives behind your decisions regarding who gets what, you may want to spell out your reasoning in your estate-planning documents — or have a frank discussion beforehand.
Other strategies anticipate the two most common grounds for contesting a will or trust. One is undue influence, which refers to efforts by someone to coerce you to sign estate-planning documents that favor him over others. Another is the argument that you lacked capacity when you signed the document, meaning that you didn’t know what assets you had, what you wanted to do with them and who your relatives were.
When one child plays an active role in caring for an elderly parent, others may worry that their sibling is pressuring the parent for a larger share of the inheritance, and that can lead to a claim of undue influence, Ms. Stern said. In such situations, she asks that the child be out of earshot during phone calls or meetings about estate planning. To document a client’s mental state, lawyers sometimes rely on doctors’ exams and videotapes that show a client signing the document and discussing its contents.
For extreme cases there’s another tactic. It involves setting up barriers to will contests by signing a series of documents, each only slightly different from the one it replaces, over a period of years. Those who want to contest the plan must then have each of these documents found invalid before they get to the one they want to apply. And that can be a daunting task.
Sunday, November 1, 2009
Friday, August 14, 2009
LIVING WILLS ARE NOT DEATH PANELS.
Living Wills, also known as Advance Directives, are an important part of anyone's life planning and estate documents. Contrary to falsehoods being spread during the current healthcare reform debate, a living will actually puts the PATIENT in control to dictate what specific care the patient desires to be administered or withheld in the event of an end of life condition. In the absence of such, the default mechanism is to keep the patient alive, even if the patient would indefinitely be in a persistent vegetative state. 99.9% of my clients, in fact, do not want to be kept on a ventilator or other life sustaining measures indefinitely - which would occur in the absence of a living will. Living Wills should be executed to prevent such a scenario, along with Healthcare Proxies and Powers of Attorney.
Tuesday, July 14, 2009
NEW YORK GOVERNOR WILL DELAY SAME-SEX MARRIAGE BILL
FROM THE NEW YORK TIMES
July 11, 2009
With Senate Astir, Governor Will Delay Same-Sex Marriage Bill
By DANNY HAKIM
ALBANY — Gov. David A. Paterson will delay his plan to force a vote on a bill to legalize same-sex marriage until early September because the Senate is too unsettled now to take it up, his spokesman said on Friday.
The governor had vowed three weeks ago to force the senators to take up the matter before they left for their summer break. But the Democrats were struggling to reorganize themselves on Friday, a day after they reclaimed control of the Senate and ended a bitter leadership feud that had halted action in the chamber for more than a month.
“Governor Paterson believes that marriage equality is an important civil rights issue and will be working with Senate leaders to move the process forward,” said the spokesman, Peter E. Kauffmann, adding that the governor was more immediately focused on the state’s dwindling tax revenues.
Mr. Kauffmann said the governor would probably call a special legislative session in early September so lawmakers could close an anticipated hole in the state’s budget.
“At that time,” Mr. Kauffmann said, “he will also work with legislative leaders to include additional issues that were not addressed in regular session, such as unemployment insurance, marriage equality and ethics reform.”
Senate Democrats are unlikely to take up the marriage bill on their own. They remain deeply divided and, in many cases, estranged from one another, after the infighting and personal attacks of the nearly five-week leadership battle.
Democratic leaders said they would return to the capital next Wednesday and Thursday to conclude the legislative session but would avoid the most divisive issues.
“There was a general consensus that we wouldn’t take on extremely controversial bills in the next week,” said Pedro Espada Jr., who was named Senate majority leader on Thursday. He added, “There’s a point that was reached and exceeded in terms of the exhaustion factor for the institution as a whole.”
Notable bills whose fate remains unclear include a measure that would allow Mayor Michael R. Bloomberg to retain control over New York City’s public schools and legislation to expand the city’s rent control laws.
Lawmakers were negotiating with the city on Friday to amend mayoral control legislation supported by Mr. Bloomberg. Senator John L. Sampson, the leader of the Democratic caucus, supports a greater role for parents in the school system.
Mr. Espada said that he expected the Senate to take up the mayoral control measure next week, and that bills intended to bolster rent control laws were likely to be shelved, at least for now. Mr. Espada and other top Democrats have forged close ties to the real estate industry.
On same-sex marriage, several senators said privately that the caucus was reluctant to take it up because of the strident opposition of Senator Rubén Díaz Sr., a Bronx Democrat and Pentecostal minister. With the caucus holding a tenuous single-seat majority, there is a focus on keeping members happy.
“We just got unity,” Mr. Díaz said in an interview when asked about the marriage issue. “Don’t start to un-unify us. Let us have some kind of honeymoon.”
Last month, the governor, a champion of same-sex marriage rights, vowed to make sure that the Senate voted on the issue before breaking for the summer. “It has always been my intention to see same-sex marriage come to the floor,” he said on June 21, adding, “I don’t want there to be any confusion.”
Mr. Paterson declined to be interviewed about his shift in plans.
The Senate stalemate ended on Thursday after Mr. Espada, of the Bronx, abandoned an alliance with the Republicans. He returns to a caucus bitterly divided along racial lines and in the throes of reorganization.
Under a new leadership deal, Mr. Sampson, of Brooklyn, is the effective leader of the Senate and Mr. Espada has the vaguely defined title of majority leader. Malcolm A. Smith of Queens, the former Democratic leader, will remain as Senate president for what senators describe as a transition period.
Other bills that may be taken up include measures to overhaul the state’s embattled ethics oversight panel, the Commission on Public Integrity, and to provide less generous pension benefits to new public workers. Democrats are also negotiating with Republicans, in fits and starts, over rule changes to make the Senate operate more fairly.
“I don’t think we’re going to have a very ambitious agenda,” said Senator Eric T. Schneiderman, a Manhattan Democrat. He added, “Under the present circumstances, with all of the breakdowns in the system and the traumatized personal relationships, I think most of the senators would like to pass the things we have to pass and get out of town.”
The Senate resumed business late Thursday, and senators stayed until about 2 a.m. Friday to pass largely uncontroversial bills.
Senators were in a feisty mood. Some criticized the governor as taking an unusually hard line against them over the last month. And they took the rare step of voting down, by a 35-to-27 vote, a measure backed by Comptroller Thomas P. DiNapoli that would have allowed local governments to borrow state money to pay their pension bills.
The vote was widely seen as a rebuke to Mr. DiNapoli, who had withheld the paychecks and travel vouchers of senators in recent days to try to prod them to end their standoff. There was broad laughter in the chamber after the bill was defeated.
Senators concluded by approving a sales tax increase for New York City, raising the tax by one-half of a percentage point, to 8.875 percent. The stalemate delayed passage of the bill, costing the city an estimated $60 million.
A number of Democrats criticized the measure as unfairly burdensome to the poor. Senator Liz Krueger, a Manhattan Democrat, said the Senate should let the city balance its own budget.
“We, as we know, have our own headaches here running our state government,” Ms. Krueger said. “I’m not sure we’re up to taking on, solving the problems of, every local government.”
Jeremy W. Peters contributed reporting.
Wednesday, June 3, 2009
THE IMPORTANCE (AND RISKS) OF A POWER OF ATTORNEY
from the New York Times
May 21, 2009
Putting Your Faith in a Power of Attorney
By DEBORAH L. JACOBS
TRUST and estate lawyers routinely tell their clients about the importance of signing a durable power of attorney. Often written at the same time as a will, it appoints a family member, friend or adviser as an agent to act on your behalf in financial and legal matters — even if you become incompetent.
But as essential as these documents are, they face new — and continuing — obstacles. One is using them amid the disruptions in the financial services industry. Another is an old problem that may have grown more acute after recent scams and frauds: Many people mistrust these documents, which give unbridled power to your agent. So some people sign them to appease their lawyers but never give them to the person designated to handle their affairs.
“A power of attorney is a license to steal,” said Bernard A. Krooks, a specialist in elder law at Littman Krooks in New York who nonetheless encourages clients to sign a power of attorney. “You have to be careful who you appoint as your agent.”
Some states have tried to reduce abuses. In New York, for example, a new law requires that as of Sept. 1 all new powers of attorney be signed not only by the principal (the person granting the power) but also by the agent — a reminder of his or her obligation to put the principal’s welfare first.
In addition, if the power of attorney includes the authority to make total annual gifts of more than $500 to one person or charity, that power must be included in a separate rider that, like a will, must be signed in the presence of two witnesses.
The law, enacted Jan. 27, may deter some people from signing a power of attorney, Mr. Krooks said.
He and other lawyers remind their clients that even if signing a power of attorney makes the client feel vulnerable, it’s far better than living without one. If you become incompetent, you lack the capacity to make legally binding commitments. Without a power of attorney, your family might have no choice but to ask a court to appoint a guardian to oversee your finances. This can be an expensive and sometimes embarrassing ordeal and can involve unpleasant, even acrimonious, exchanges.
Although the two are sometimes confused, a durable power of attorney, which deals only with financial matters, and a health-care proxy, which authorizes an agent to make medical decisions on your behalf, are distinctly different. And when thinking about signing a durable power of attorney, it is important to consider the following issues:
WHOM CAN YOU TRUST? The best person to put in charge, lawyers say, is a close family member — preferably one who lives nearby. Most financial advisers do not want this responsibility, nor is it cost effective to pay their hourly fee to handle routine tasks like paying bills.
Naming joint agents, which is allowed only in some states, is one way to provide checks and balances. Or you can appoint another person, like an attorney, an accountant or a family friend, to supervise the arrangement.
Before appointing an agent, it is important to determine whether that person is willing to take on the duties. If you’re nervous about giving the signed document to your designated agent right away, you could leave it with your lawyer with instructions on when to turn it over, said Gloria S. Neuwirth, a lawyer with Davidson, Dawson & Clark in New York. In that case, remember to tell your agent whom to contact.
WHAT POWERS SHOULD BE INCLUDED? You ought to authorize your agent to take any financial action you could take yourself, said Lawrence P. Katzenstein, a lawyer with Thompson Coburn in St. Louis. This could include estate-planning strategies like financing college savings plans for children or grandchildren, prepaying charitable bequests and converting traditional I.R.A.’s to Roth I.R.A.’s.
If you have set up a living trust — a way to provide for yourself financially and to transfer assets to friends or family after your death instead of having them distributed under the terms of a will — you should carefully distinguish between the responsibilities of the trustee and those of the agent, Mr. Katzenstein said. He recommends that you indicate whether the agent may take money out of the trust, and that you give the agent the authority to transfer assets into it if you become incompetent.
Even if most assets are ultimately held by the trust, you still need the agent to perform quasi-personal functions like signing a nursing home contract or tax return and accessing a safe-deposit box.
This is not always easy, and the digital world has made it harder, in some ways.
Wendy S. Goffe, a lawyer with Graham & Dunn in Seattle, relied on a power of attorney that her husband, Scott Schrum, had given her to piece together his paperless financial life after it was found that he had cancer. While he was disabled, the form gave Ms. Goffe access to electronic records, including those for her husband’s rollover I.R.A. and 401(k) and the 529 college savings plan he had managed for their daughter Maya, 7.
The biggest chore was tracking down shares of stock that Mr. Schrum, also a lawyer, had purchased by exercising employee options online. Because of “a string of bad luck,” Ms. Goffe said, the financial institution holding the options and the couple’s brokerage company had been sold, their Web sites eliminated and the records put into storage. The shares, worth $7,500, had been credited to a stranger’s account. In dealing with each institution, she needed to present the power of attorney.
WHEN DOES THE DOCUMENT TAKE EFFECT? You can choose to make it effective from the moment you sign it, or specify that it be activated by a specific event, for instance, if you become incompetent.
The problem with the second approach, known as a springing power, is that someone must decide when you have reached that state, said Ms. Neuwirth, the New York lawyer. Traditionally, this has required a medical opinion and can lead to disputes.
Even when powers are effective immediately, the agent may not be sure when it’s necessary to take control. That is what happened to Dr. Mark Segall, a surgeon in Los Gatos, Calif., who said his elderly parents gave him power of attorney in 1996.
Knowing that they were private about financial matters and valued their independence, he did not use it until last year, when he said they seemed relieved to have his help. He then discovered that they had been shredding all their mail, including bills, for many months and had accumulated about $1,100 in finance charges on their credit card (at Dr. Segall’s request, the company waived the late fee).
WHERE IS A POWER OF ATTORNEY VALID? Because state laws vary, you cannot assume that a power of attorney signed in one state will be honored in another. Howard M. Hujsa, a lawyer with Cummings & Lockwood in Bonita Springs, Fla., recalled a client whose son was unable, under his mother’s power of attorney, to sell her house after she became incompetent.
Her power of attorney was signed in Massachusetts, which at the time required only one witness; his mother had moved to Florida, where the property was located, and Florida law says an agent with power of attorney cannot sell real estate on behalf of the principal unless the document is signed by two witnesses.
The family had to go to court to have the son appointed as guardian. He continued in this role until his mother died several years later and he had to file annual reports to the court, something an agent under a power of attorney is not required to do. The process wound up costing the family more than $30,000 in additional legal fees, Mr. Hujsa said.
Likewise, if you plan to spend time overseas and buy or sell real estate, conduct business or open a bank account there, you need to find out what the law in that country requires, said Anne J. O’Brien, a lawyer with Arnold & Porter in Washington. Very few countries will honor durable powers of attorney from other jurisdictions, she said.
While some countries have an equivalent form, others permit the arrangements only under court supervision, said Mark Summers, a lawyer with Speechly Bircham in London. In Britain, you must use a power of attorney that is 25 pages long.
Many Americans are surprised to find out that a British power of attorney can cost several thousand dollars, he said, about 10 times what a lawyer would charge in the United States to prepare a much shorter document.
May 21, 2009
Putting Your Faith in a Power of Attorney
By DEBORAH L. JACOBS
TRUST and estate lawyers routinely tell their clients about the importance of signing a durable power of attorney. Often written at the same time as a will, it appoints a family member, friend or adviser as an agent to act on your behalf in financial and legal matters — even if you become incompetent.
But as essential as these documents are, they face new — and continuing — obstacles. One is using them amid the disruptions in the financial services industry. Another is an old problem that may have grown more acute after recent scams and frauds: Many people mistrust these documents, which give unbridled power to your agent. So some people sign them to appease their lawyers but never give them to the person designated to handle their affairs.
“A power of attorney is a license to steal,” said Bernard A. Krooks, a specialist in elder law at Littman Krooks in New York who nonetheless encourages clients to sign a power of attorney. “You have to be careful who you appoint as your agent.”
Some states have tried to reduce abuses. In New York, for example, a new law requires that as of Sept. 1 all new powers of attorney be signed not only by the principal (the person granting the power) but also by the agent — a reminder of his or her obligation to put the principal’s welfare first.
In addition, if the power of attorney includes the authority to make total annual gifts of more than $500 to one person or charity, that power must be included in a separate rider that, like a will, must be signed in the presence of two witnesses.
The law, enacted Jan. 27, may deter some people from signing a power of attorney, Mr. Krooks said.
He and other lawyers remind their clients that even if signing a power of attorney makes the client feel vulnerable, it’s far better than living without one. If you become incompetent, you lack the capacity to make legally binding commitments. Without a power of attorney, your family might have no choice but to ask a court to appoint a guardian to oversee your finances. This can be an expensive and sometimes embarrassing ordeal and can involve unpleasant, even acrimonious, exchanges.
Although the two are sometimes confused, a durable power of attorney, which deals only with financial matters, and a health-care proxy, which authorizes an agent to make medical decisions on your behalf, are distinctly different. And when thinking about signing a durable power of attorney, it is important to consider the following issues:
WHOM CAN YOU TRUST? The best person to put in charge, lawyers say, is a close family member — preferably one who lives nearby. Most financial advisers do not want this responsibility, nor is it cost effective to pay their hourly fee to handle routine tasks like paying bills.
Naming joint agents, which is allowed only in some states, is one way to provide checks and balances. Or you can appoint another person, like an attorney, an accountant or a family friend, to supervise the arrangement.
Before appointing an agent, it is important to determine whether that person is willing to take on the duties. If you’re nervous about giving the signed document to your designated agent right away, you could leave it with your lawyer with instructions on when to turn it over, said Gloria S. Neuwirth, a lawyer with Davidson, Dawson & Clark in New York. In that case, remember to tell your agent whom to contact.
WHAT POWERS SHOULD BE INCLUDED? You ought to authorize your agent to take any financial action you could take yourself, said Lawrence P. Katzenstein, a lawyer with Thompson Coburn in St. Louis. This could include estate-planning strategies like financing college savings plans for children or grandchildren, prepaying charitable bequests and converting traditional I.R.A.’s to Roth I.R.A.’s.
If you have set up a living trust — a way to provide for yourself financially and to transfer assets to friends or family after your death instead of having them distributed under the terms of a will — you should carefully distinguish between the responsibilities of the trustee and those of the agent, Mr. Katzenstein said. He recommends that you indicate whether the agent may take money out of the trust, and that you give the agent the authority to transfer assets into it if you become incompetent.
Even if most assets are ultimately held by the trust, you still need the agent to perform quasi-personal functions like signing a nursing home contract or tax return and accessing a safe-deposit box.
This is not always easy, and the digital world has made it harder, in some ways.
Wendy S. Goffe, a lawyer with Graham & Dunn in Seattle, relied on a power of attorney that her husband, Scott Schrum, had given her to piece together his paperless financial life after it was found that he had cancer. While he was disabled, the form gave Ms. Goffe access to electronic records, including those for her husband’s rollover I.R.A. and 401(k) and the 529 college savings plan he had managed for their daughter Maya, 7.
The biggest chore was tracking down shares of stock that Mr. Schrum, also a lawyer, had purchased by exercising employee options online. Because of “a string of bad luck,” Ms. Goffe said, the financial institution holding the options and the couple’s brokerage company had been sold, their Web sites eliminated and the records put into storage. The shares, worth $7,500, had been credited to a stranger’s account. In dealing with each institution, she needed to present the power of attorney.
WHEN DOES THE DOCUMENT TAKE EFFECT? You can choose to make it effective from the moment you sign it, or specify that it be activated by a specific event, for instance, if you become incompetent.
The problem with the second approach, known as a springing power, is that someone must decide when you have reached that state, said Ms. Neuwirth, the New York lawyer. Traditionally, this has required a medical opinion and can lead to disputes.
Even when powers are effective immediately, the agent may not be sure when it’s necessary to take control. That is what happened to Dr. Mark Segall, a surgeon in Los Gatos, Calif., who said his elderly parents gave him power of attorney in 1996.
Knowing that they were private about financial matters and valued their independence, he did not use it until last year, when he said they seemed relieved to have his help. He then discovered that they had been shredding all their mail, including bills, for many months and had accumulated about $1,100 in finance charges on their credit card (at Dr. Segall’s request, the company waived the late fee).
WHERE IS A POWER OF ATTORNEY VALID? Because state laws vary, you cannot assume that a power of attorney signed in one state will be honored in another. Howard M. Hujsa, a lawyer with Cummings & Lockwood in Bonita Springs, Fla., recalled a client whose son was unable, under his mother’s power of attorney, to sell her house after she became incompetent.
Her power of attorney was signed in Massachusetts, which at the time required only one witness; his mother had moved to Florida, where the property was located, and Florida law says an agent with power of attorney cannot sell real estate on behalf of the principal unless the document is signed by two witnesses.
The family had to go to court to have the son appointed as guardian. He continued in this role until his mother died several years later and he had to file annual reports to the court, something an agent under a power of attorney is not required to do. The process wound up costing the family more than $30,000 in additional legal fees, Mr. Hujsa said.
Likewise, if you plan to spend time overseas and buy or sell real estate, conduct business or open a bank account there, you need to find out what the law in that country requires, said Anne J. O’Brien, a lawyer with Arnold & Porter in Washington. Very few countries will honor durable powers of attorney from other jurisdictions, she said.
While some countries have an equivalent form, others permit the arrangements only under court supervision, said Mark Summers, a lawyer with Speechly Bircham in London. In Britain, you must use a power of attorney that is 25 pages long.
Many Americans are surprised to find out that a British power of attorney can cost several thousand dollars, he said, about 10 times what a lawyer would charge in the United States to prepare a much shorter document.
CALIFORNIA HIGH COURT UPHOLDS GAY MARRIAGE BAN
FROM THE NEW YORK TIMES
May 27, 2009
California High Court Upholds Gay Marriage Ban
By JOHN SCHWARTZ
The California Supreme Court upheld a ban on same-sex marriage Tuesday, ratifying a decision made by voters last year. The ruling comes at a time when several state governments have moved in the opposite direction.
The court’s decision does, however, preserve the 18,000 same-sex marriages performed between the justices’ ruling last May that same-sex marriage was constitutionally protected and voters’ passage in November of Proposition 8, which banned it.
The court’s opinion, written by Chief Justice Ronald M. George for a 6-to-1 majority, noted that same-sex couples still had a right to civil unions. Such unions, the opinion said, gives those couples the ability to “choose one’s life partner and enter with that person into a committed, officially recognized and protected family relationship that enjoys all of the constitutionally based incidents of marriage.”
Justice George wrote that Proposition 8 did not “entirely repeal or abrogate” the right to such a protected relationship. Instead, he said, it “carves out a narrow and limited exception to these state constitutional rights, reserving the official designation of the term ‘marriage’ for the union of opposite-sex couples as a matter of state constitutional law.”
The 18,000 existing marriages can stand, he wrote, because Proposition 8 did not include language specifically saying it was retroactive.
Heated reaction to the decision began immediately, with protesters blocking traffic near the Supreme Court building in San Francisco and advocates for same-sex marriage making plans for their own ballot initiative.
In Los Angeles, Jennifer C. Pizer, marriage project director for the gay rights organization Lambda Legal, said the decision “puts it to us to repair the damage at the ballot box.” One of the state’s largest gay rights groups, Equality California, sent an e-mail message to supporters pleading for contributions to raise $500,000 toward “a massive campaign to put an initiative on the ballot and win.”
Shannon Minter, legal director of the National Center for Lesbian Rights, called the decision “a terrible blow to the thousands of gay and lesbian Californians who woke up this morning hoping and praying their status as equal citizens of this state would be restored.”
Those who backed Proposition 8 were elated. Andrew P. Pugno, general counsel for ProtectMarriage.com, the leading group behind last year’s initiative, said he and his allies were “very gratified” by the decision.
“This is the culmination of years of hard work to preserve marriage in California,” Mr. Pugno said in an e-mail message.
Kenneth W. Starr, dean of the Pepperdine University School of Law, who had argued before the justices in favor of Proposition 8, said the ruling “represents a ringing judicial affirmation of the right of the people of California to amend the State Constitution at the ballot box.”
The California court ruled last May that same-sex couples enjoyed the same fundamental “right to marry” as opposite-sex couples. That sweeping 4-to-3 decision provoked a backlash from opponents that led to Proposition 8, which, after a bitter campaign fight, garnered 52 percent of the vote in November.
Tuesday’s opinion focused on whether the use of a voter initiative to narrow constitutional rights under Proposition 8 went too far.
Supporters of same-sex marriage, who filed several suits challenging the proposition after its adoption, argued that the change to the state’s Constitution was so fundamental that the initiative was not an amendment at all but instead a “revision,” a term for measures that rework core constitutional principles.
Under California law, revisions cannot be decided through a simple signature drive and a majority vote, as with Proposition 8. Instead, they can be placed on the ballot only with a two-thirds vote by the Legislature.
But the justices said the proposition was an amendment, not a revision. It has been historically rare for the state’s courts to overturn initiatives on the ground that they are actually revisions, and many legal scholars had deemed the challenge to Proposition 8 a long shot.
During oral arguments, in March, the justices’ questions clearly anticipated the reasoning of Tuesday’s majority opinion, with Justice Joyce L. Kennard suggesting then that even if the initiative took away the “label of marriage,” it did not undermine the substantive rights involved. Mr. Minter, representing the plaintiffs, disagreed, arguing that without the word “marriage,” same-sex couples would find “our outsider status enshrined in our Constitution.”
Chief Justice George’s opinion dealt directly with that point, stating that the court understood the importance of the word and was not trying to diminish that importance. But, he wrote, the legal right of people to call themselves married is only one of the rights granted to same-sex couples in the decision last May, and so “it is only the designation of marriage — albeit significant — that has been removed by this initiative measure.”
Karl M. Manheim, a professor at Loyola Law School Los Angeles who had filed a brief with the court opposing Proposition 8, called the decision a “safe” one from justices who can be recalled by voters. The change wrought by Proposition 8 was anything but narrow, Professor Manheim said, and claiming that the word “marriage” is essentially symbolic is like telling black people that sitting in the back of the bus is not important as long as the front and the back of the bus arrive at the same time.
In nearly three months since the case was argued, three other states have legalized same-sex marriage, joining Massachusetts and Connecticut, which had already done so. On April 3, the Iowa Supreme Court, repeatedly citing California’s decision of last May, struck down a state statute that limited civil marriage to the union of a man and a woman.
Less than a week later, the Vermont legislature narrowly overrode Gov. Jim Douglas’s veto of a bill that allowed same-sex couples to marry.
Then, on May 6, Maine’s legislature, too, passed a bill allowing same-sex marriage, and Gov. John Baldacci promptly signed it.
Initiatives legalizing same-sex marriage are also moving forward in New York and New Jersey. A similar measure stalled by a slim margin in the New Hampshire legislature this month but could come up for a new vote in June. In addition, opinion polls of Americans’ attitude toward same-sex marriage indicate that they favor allowing it.
The sole dissenting vote in Tuesday’s decision came from Justice Carlos R. Moreno, previously mentioned as a possible choice by President Obama for the United States Supreme Court.
Justice Moreno wrote that Proposition 8 means “requiring discrimination,” which he said “strikes at the core of the promise of equality that underlies our California Constitution” and, he added, “places at risk the state constitutional rights of all disfavored minorities.”
Saturday, April 18, 2009
NY GOV PATERSON INTRODUCES SAME-SEX MARRIAGE BILL
April 17, 2009
Paterson Introduces a Same-Sex Marriage Bill
By JEREMY W. PETERS
Gov. David A. Paterson introduced a bill on Thursday to legalize same-sex marriage, vowing to personally involve himself in the legislative debate at a level that is rare for a chief executive in New York.
Throwing the weight of his office behind legislation that still faces considerable obstacles in Albany, Mr. Paterson said he would leverage the personal relationships he developed over two decades in the State Senate to see the bill voted on — and passed. The vote is expected to turn on the thinnest of margins in the Senate, and some advocates say Mr. Paterson’s direct involvement could prove pivotal.
At a news conference in Manhattan on Thursday, Mr. Paterson, a Democrat, invoked the abolitionist movement of the 1800s, the writings of Harriet Beecher Stowe and the Supreme Court’s Dred Scott decision to argue that New York had neglected civil rights for gays and lesbians for too long. “I’m putting a stop to it,” he said. “We have a duty to make sure equality exists for everyone.”
The announcement came amid growing activity around the country on same-sex marriage: Iowa and Vermont have legalized the practice in the past month, and the New Hampshire State Senate has been debating it this week. Massachusetts and Connecticut already have gay marriage, and a campaign is under way to extend it across New England by 2012.
In New York, the State Assembly passed a same-sex marriage bill in 2007 by a vote of 85 to 61, a margin expected to widen when the measure is reconsidered this spring. But the path in the Senate is less clear: 32 votes are needed, and Democrats say about 25 of their 32 members now support it. So the outcome will most likely hinge on whether Mr. Paterson and other advocates can persuade Republican senators reluctant to break ranks with their leaders to back the bill.
Gay-rights advocates expressed confidence on Thursday that Governor Paterson’s personal involvement could make a difference, despite his dismal approval ratings and struggle to advance other aspects of his agenda. They said lawmakers sometimes feel less confined by partisan loyalty on civil rights issues like same-sex marriage.
“This isn’t something that hinges on his popularity — it’s too personal of an issue,” said Alan Van Capelle, executive director of the Empire State Pride Agenda, the gay-rights group pushing same-sex marriage. “It defies ordinary Albany political logic.”
Mr. Van Capelle and other advocates pointed out that in 2002, 13 Republicans joined 21 Democrats to pass a law that specifically banned discrimination based on sexual orientation. The outcome of that vote was in doubt until the last minute — an uncommon occurrence in Albany, where the leaders of the Senate and the Assembly rarely allow bills to reach the floor without being sure they will pass.
Some supporters of same-sex marriage, most notably Mr. Paterson, are pushing for a similar approach now. By forcing a vote without knowing its result, the logic goes, dubious senators might feel pressured to support the bill for fear of appearing hostile to gay rights.
Gay advocacy groups are a powerful force in Albany. The Human Rights Campaign, Gill Action Fund and Empire State Pride Agenda funneled hundreds of thousands of dollars into a handful of competitive campaigns last year, helping Democrats pick up two seats to capture a majority in the Senate for the first time in more than four decades.
“It’s sort of a carrot and stick argument,” said Daniel J. O’Donnell, an assemblyman from the Upper West Side who is leading the effort in that house to shore up support for Mr. Paterson’s bill. “If you move ahead with the bill, you could use the stick and say, ‘You’re not our friend if you vote against us, and we’re going to find someone to replace you.’ ”
But Austin Shafran, a spokesman for the Senate majority leader, Malcolm A. Smith, said on Thursday that the bill would “be brought to the floor as soon as there are enough votes to pass it.”
Mr. Paterson’s role in steering the bill through Albany, which is still being worked out among his aides, legislative officials and lobbyists, is the latest in a list of personal campaigns on gay-rights issues throughout his career.
As a rank-and-file state senator in the 1980s, Mr. Paterson led the first effort to establish hate crimes laws in New York. Years later, when a hate-crimes bill passed, in 2000, it included protections for gays and lesbians at Mr. Paterson’s urging.
In 2002, as the Senate minority leader, Mr. Paterson led Democrats in rounding up enough votes to pass the law prohibiting discrimination against gays and lesbians. He has frequently attributed his passionate advocacy of gay rights in large part to his close relationship with a gay couple who were friends with his parents in Harlem. He still affectionately refers to the couple, now deceased, as Uncle Stanley and Uncle Ronald.
His emotional investment in the issue was on display Thursday in a 15-minute speech that placed gay marriage in the historical context of slavery, disenfranchisement of women and shunning the disabled.
“We have all known the wrath of discrimination,” said Mr. Paterson, New York’s first black governor. “We have all felt the pain and the insult of hatred. This is why we are all standing here today.”
Surrounded by some three dozen members of the state’s political establishment, including members of Congress, senior state legislators and Mayor Michael R. Bloomberg, he added: “We wish to fulfill the dreams of those Americans, both the living and the dead, who struggled unremittingly and courageously over the past two centuries to expand those freedoms to more Americans. Often we have fallen short, but the marvel and the miracle of America is that we keep marching forward for justice.”
Monday, April 13, 2009
GAY VOWS, REPEATED FROM STATE TO STATE: WILL THE US SUPREME COURT STEP IN?
From the New York Times
April 12, 2009
Gay Vows, Repeated From State to State
By ADAM LIPTAK
WASHINGTON — And now there are four. In the space of a week, the number of states allowing same-sex marriage has doubled, with Iowa and then Vermont joining Massachusetts and Connecticut. In California, gay and lesbian couples were exchanging vows for five months before voters put a stop to the practice in November. Californians are still talking it over, though, and loudly. New York and New Jersey may be next to debate the question.
In other contexts, this sort of turmoil might amount to an invitation for the United States Supreme Court to step in. But there are all sorts of reasons the court is likely to keep its distance, and a central one is the endlessly debated 1973 decision that identified a constitutional right to abortion.
“The concern about creating another Roe v. Wade looms large,” said Nathaniel Persily, who teaches law and political science at Columbia. “At least five members of this court, if not more, would probably be reluctant to weigh in on this controversy, especially given the progress that is being made in state legislatures, state courts and public opinion.”
Court decisions on issues like school desegregation, abortion and same-sex marriage can raise questions about the judicial branch usurping the democratic process. But there are strategic issues as well. The Supreme Court not only decides cases but also decides which cases to decide. In jurisprudence as in life, timing is everything.
Even some strong supporters of abortion rights believe, for instance, that Roe went too far too fast and may have been counterproductive. One of them is Justice Ruth Bader Ginsburg.
“The court bit off more than it could chew,” Justice Ginsburg said in remarks after a speech at Princeton in October. It would have been enough, she said, to strike down the extremely restrictive Texas law at issue in Roe and leave further questions for later cases.
“The legislatures all over the United States were moving on this question,” she added. “The law was in a state of flux.”
Roe shut those developments down and created a backlash that lasts to this day.
“The Supreme Court’s decision was a perfect rallying point for people who disagreed with the notion that it should be a woman’s choice,” Justice Ginsburg said. “They could, instead of fighting in the trenches legislature by legislature, go after this decision by unelected judges.”
Until the Vermont Legislature acted on Tuesday, victories for same-sex marriage also came only from courts, but they were state courts. These courts based their decisions on state constitutions, which, moreover, means that the United States Supreme Court almost certainly could not review those particular rulings, even if it were inclined to.
Successive state court lawsuits from supporters of same-sex marriage reflect a strategy that is pragmatic about building local support, said Andrew Koppelman, a law professor at Northwestern. “The Iowa decision,” he said, “is the product of a very smart legal team researching every state supreme court and every state legislature.” The Iowa Supreme Court ruled in favor of same-sex marriage a little over a week ago.
“It’s courts that started this,” Mr. Koppelman said of the same-sex marriage movement. “The courts are able to make a difference if there is a social movement that could go either way.”
Patrick J. Egan, who teaches politics and public policy at New York University, said the aftermath of controversial court decisions tended to follow a pattern. Immediately after a decision, he said, the mere fact of judicial endorsement of a position increases public acceptance slightly. Then politicians’ initial reactions can help sway public opinion.
The pattern on same-sex marriage, Professor Egan said, is that “Republicans react very opposed and Democrats react very, very neutrally.” As a consequence, he said, “opposition to same-sex marriage shoots up a bit in the month or two or three after a big court decision.”
Later, though, unless the decision is overturned, the public lives with the consequences and decides for itself. “Over time,” Professor Egan said, “people’s experience with the policy changes their attitudes.”
Professor Koppelman said Roe followed that general pattern.
“On the one hand, Roe certainly triggered an enormous backlash,” he said. “On the other hand, it created a generation of American women who grew up with the right to abortion assumed.”
In “Public Opinion and Constitutional Controversy” (Oxford, 2008), Professors Egan and Persily, along with Kevin Wallsten, tracked public opinion about gay rights after several court decisions.
When the Supreme Court, in Lawrence v. Texas in 2003, struck down a Texas law making homosexual sex a crime, public support for same-sex marriage — a question not directly implicated by the decision — dropped sharply. “Even that case actually provoked a major backlash,” Professor Persily said.
Five months later, the Supreme Judicial Court of Massachusetts issued its decision allowing same-sex marriages, causing public support for such marriages to fall further. It did not recover to pre-Lawrence levels until 2005.
But since then there has been remarkable movement in support of same-sex marriage.
“The most recent CNN poll put it at 44 percent,” Professor Persily said. “More important, the opposition has gone down. And people who are opposed are much more likely to favor civil unions,” as opposed to no rights at all for gay couples.
“There has been a shift of about 10 percentage points in five years” in public support for same-sex marriage, Professor Persily added. “On a deep moral issue like this, that’s very rare.” Public opinion about abortion, by contrast, “has been largely frozen for years.”
The trend toward greater support for same-sex marriage is likely to continue, Professor Egan said. Part of it is generational: younger people are far more apt to support gay rights than older people. And part of it is a product of changing social attitudes.
Since the Vermont Legislature decided to allow same-sex marriages, legal scholars have been debating whether that political victory could have been secured without the judicial decisions that preceded it.
“Without the activist decisions on same-sex marriage,” Professor Persily said, “there might not have been a fire lit under the legislature that passed it.”
April 12, 2009
Gay Vows, Repeated From State to State
By ADAM LIPTAK
WASHINGTON — And now there are four. In the space of a week, the number of states allowing same-sex marriage has doubled, with Iowa and then Vermont joining Massachusetts and Connecticut. In California, gay and lesbian couples were exchanging vows for five months before voters put a stop to the practice in November. Californians are still talking it over, though, and loudly. New York and New Jersey may be next to debate the question.
In other contexts, this sort of turmoil might amount to an invitation for the United States Supreme Court to step in. But there are all sorts of reasons the court is likely to keep its distance, and a central one is the endlessly debated 1973 decision that identified a constitutional right to abortion.
“The concern about creating another Roe v. Wade looms large,” said Nathaniel Persily, who teaches law and political science at Columbia. “At least five members of this court, if not more, would probably be reluctant to weigh in on this controversy, especially given the progress that is being made in state legislatures, state courts and public opinion.”
Court decisions on issues like school desegregation, abortion and same-sex marriage can raise questions about the judicial branch usurping the democratic process. But there are strategic issues as well. The Supreme Court not only decides cases but also decides which cases to decide. In jurisprudence as in life, timing is everything.
Even some strong supporters of abortion rights believe, for instance, that Roe went too far too fast and may have been counterproductive. One of them is Justice Ruth Bader Ginsburg.
“The court bit off more than it could chew,” Justice Ginsburg said in remarks after a speech at Princeton in October. It would have been enough, she said, to strike down the extremely restrictive Texas law at issue in Roe and leave further questions for later cases.
“The legislatures all over the United States were moving on this question,” she added. “The law was in a state of flux.”
Roe shut those developments down and created a backlash that lasts to this day.
“The Supreme Court’s decision was a perfect rallying point for people who disagreed with the notion that it should be a woman’s choice,” Justice Ginsburg said. “They could, instead of fighting in the trenches legislature by legislature, go after this decision by unelected judges.”
Until the Vermont Legislature acted on Tuesday, victories for same-sex marriage also came only from courts, but they were state courts. These courts based their decisions on state constitutions, which, moreover, means that the United States Supreme Court almost certainly could not review those particular rulings, even if it were inclined to.
Successive state court lawsuits from supporters of same-sex marriage reflect a strategy that is pragmatic about building local support, said Andrew Koppelman, a law professor at Northwestern. “The Iowa decision,” he said, “is the product of a very smart legal team researching every state supreme court and every state legislature.” The Iowa Supreme Court ruled in favor of same-sex marriage a little over a week ago.
“It’s courts that started this,” Mr. Koppelman said of the same-sex marriage movement. “The courts are able to make a difference if there is a social movement that could go either way.”
Patrick J. Egan, who teaches politics and public policy at New York University, said the aftermath of controversial court decisions tended to follow a pattern. Immediately after a decision, he said, the mere fact of judicial endorsement of a position increases public acceptance slightly. Then politicians’ initial reactions can help sway public opinion.
The pattern on same-sex marriage, Professor Egan said, is that “Republicans react very opposed and Democrats react very, very neutrally.” As a consequence, he said, “opposition to same-sex marriage shoots up a bit in the month or two or three after a big court decision.”
Later, though, unless the decision is overturned, the public lives with the consequences and decides for itself. “Over time,” Professor Egan said, “people’s experience with the policy changes their attitudes.”
Professor Koppelman said Roe followed that general pattern.
“On the one hand, Roe certainly triggered an enormous backlash,” he said. “On the other hand, it created a generation of American women who grew up with the right to abortion assumed.”
In “Public Opinion and Constitutional Controversy” (Oxford, 2008), Professors Egan and Persily, along with Kevin Wallsten, tracked public opinion about gay rights after several court decisions.
When the Supreme Court, in Lawrence v. Texas in 2003, struck down a Texas law making homosexual sex a crime, public support for same-sex marriage — a question not directly implicated by the decision — dropped sharply. “Even that case actually provoked a major backlash,” Professor Persily said.
Five months later, the Supreme Judicial Court of Massachusetts issued its decision allowing same-sex marriages, causing public support for such marriages to fall further. It did not recover to pre-Lawrence levels until 2005.
But since then there has been remarkable movement in support of same-sex marriage.
“The most recent CNN poll put it at 44 percent,” Professor Persily said. “More important, the opposition has gone down. And people who are opposed are much more likely to favor civil unions,” as opposed to no rights at all for gay couples.
“There has been a shift of about 10 percentage points in five years” in public support for same-sex marriage, Professor Persily added. “On a deep moral issue like this, that’s very rare.” Public opinion about abortion, by contrast, “has been largely frozen for years.”
The trend toward greater support for same-sex marriage is likely to continue, Professor Egan said. Part of it is generational: younger people are far more apt to support gay rights than older people. And part of it is a product of changing social attitudes.
Since the Vermont Legislature decided to allow same-sex marriages, legal scholars have been debating whether that political victory could have been secured without the judicial decisions that preceded it.
“Without the activist decisions on same-sex marriage,” Professor Persily said, “there might not have been a fire lit under the legislature that passed it.”
Wednesday, April 1, 2009
NEW YORK HIGH COURT TO HEAR APPEALS ON OUT OF STATE SAME-SEX MARRIAGE CASES
From the New York Times.
April 1, 2009
State Court of Appeals to Hear Two Same-Sex Marriage Cases
By JEREMY W. PETERS
ALBANY — The state’s highest court agreed on Tuesday to hear arguments in two cases that challenge New York’s recognition of same-sex marriages legally performed elsewhere.
Lower courts have already sided with two government entities that revised their policies to honor the marriages, but those decisions were appealed by the Alliance Defense Fund, a Christian group that is waging multiple legal battles in New York to stop state and local entities from recognizing marriages of same-sex couples who were wed in places, like Massachusetts and Canada, where the ceremony is legal.
Neither case involved Gov. David A. Paterson’s directive last May that ordered state agencies to recognize legal same-sex marriages performed outside New York State.
One case, Godfrey v. Spano, stems from the Westchester County executive’s 2006 decision to begin officially honoring out-of-state marriage licenses for gay couples the same way it did for heterosexual couples.
The other case, Lewis v. New York State Department of Civil Service, was filed after the department agreed in 2007 to begin recognizing out-of-state, same-sex marriages for the purpose of extending health insurance to spouses of public employees.
Brian Raum, senior legal counsel for the Alliance Defense Fund, said Tuesday that the group believed that the Court of Appeals would reverse the lower courts in both cases.
“We’re confident that we’re on the right side of the law,” he said. “The law in New York states it will not recognize marriages that conflict with public policy in New York. Since New York only recognizes marriage between one man and one woman, for any court to recognize same-sex marriage would be to recognize marriages that run contrary to New York law.”
Susan Sommer, senior counsel from Lambda Legal, a gay rights group that is representing Westchester County and the civil service department, said she had hoped the court would decide not to hear the cases, but added that she was optimistic it would not rule against same-sex couples.
“I think the rulings in the lower courts were correct and consistent with all the other prevailing decisions in the state,” she said. “I’m looking forward to making the same arguments to the high court so we can ask it to affirm those same arguments that have prevailed in all other cases.”
April 1, 2009
State Court of Appeals to Hear Two Same-Sex Marriage Cases
By JEREMY W. PETERS
ALBANY — The state’s highest court agreed on Tuesday to hear arguments in two cases that challenge New York’s recognition of same-sex marriages legally performed elsewhere.
Lower courts have already sided with two government entities that revised their policies to honor the marriages, but those decisions were appealed by the Alliance Defense Fund, a Christian group that is waging multiple legal battles in New York to stop state and local entities from recognizing marriages of same-sex couples who were wed in places, like Massachusetts and Canada, where the ceremony is legal.
Neither case involved Gov. David A. Paterson’s directive last May that ordered state agencies to recognize legal same-sex marriages performed outside New York State.
One case, Godfrey v. Spano, stems from the Westchester County executive’s 2006 decision to begin officially honoring out-of-state marriage licenses for gay couples the same way it did for heterosexual couples.
The other case, Lewis v. New York State Department of Civil Service, was filed after the department agreed in 2007 to begin recognizing out-of-state, same-sex marriages for the purpose of extending health insurance to spouses of public employees.
Brian Raum, senior legal counsel for the Alliance Defense Fund, said Tuesday that the group believed that the Court of Appeals would reverse the lower courts in both cases.
“We’re confident that we’re on the right side of the law,” he said. “The law in New York states it will not recognize marriages that conflict with public policy in New York. Since New York only recognizes marriage between one man and one woman, for any court to recognize same-sex marriage would be to recognize marriages that run contrary to New York law.”
Susan Sommer, senior counsel from Lambda Legal, a gay rights group that is representing Westchester County and the civil service department, said she had hoped the court would decide not to hear the cases, but added that she was optimistic it would not rule against same-sex couples.
“I think the rulings in the lower courts were correct and consistent with all the other prevailing decisions in the state,” she said. “I’m looking forward to making the same arguments to the high court so we can ask it to affirm those same arguments that have prevailed in all other cases.”
Sunday, March 8, 2009
WHAT CONTRACT?
from the New York Times
March 8, 2009
What Contract?
By MICHAEL M. GRYNBAUM
COULD the days of the iron-clad contract be numbered?
It used to be that once a buyer went to contract on an apartment, the terms of the deal were all but set in stone. Sales prices never budged, and if the buyer balked, the down payment went bye-bye.
But double-digit price declines and the lending drought have started to threaten this once near-inviolable pillar of New York real estate. Buyers are demanding concessions from developers on apartments that they say have lost up to 30 percent in value. Others are hoping to back out of their contracts entirely, while keeping their down payments in the process.
The sudden demand has sent lawyers scurrying to uncover avant-garde legal tactics for ducking out of a deal. Downtown conversions like 75 Wall Street and new developments like One Hunters Point in Long Island City are facing suits from buyers seeking to break contracts on the basis of a once-obscure consumer protection law.
The number of New Yorkers filing claims with the attorney general’s office to claw back their down payments has more than tripled in the last two years, although most disputes don’t reach this step. In 2007, 57 claims were filed; in 2008, 168. By Feb. 20 of this year, the office had already recorded 74 claims.
The ultra high end is not immune. At the Brompton, a heavily marketed Upper East Side condominium designed by the architect Robert A. M. Stern, lawyers say some buyers are calling on the project’s developer to pay closing costs, cover taxes and relocation expenses, and, yes, even retroactively drop the price of apartments.
It remains unclear whether these efforts will be convincing, whether at the negotiating table or in a court of law. On the developer’s side is the legal strength of a signed contract and the financial leverage of a buyer’s deposit.
But the incentives have realigned in a market where many apartments are now worth less than their purchase prices. It may make financial sense for buyers to cut their losses and leave their deposit on the table rather than move into a money pit. And while developers would pocket the down payment, they might be stuck with a unit that eventually sells for much less — or even worse, just sits. This new math may put some developers in a negotiating mood.
“Behind this, the big elephant in the room is the price,” said Adam Leitman Bailey, a real estate lawyer who says he is representing unhappy buyers from nearly 50 buildings.
The traditional method for a buyer to break a contract is to prove that some element of the completed unit differs from the developer’s offering plan. This is why lawyers have been known to use lasers to measure square footage to within a millimeter and to debate descriptions of views and amenities.
But if the issue is more financial than material, buyers may be forced to “in essence, throw themselves at the mercy of the developer,” said Peter Graubard, a real estate lawyer.
“They are saying, ‘Hey, listen, I’m in a financial hardship and the loss of this 10 or 15 percent deposit is going to be devastating to me right now,’ ” said Mr. Graubard, explaining that every one of his clients who went to contract before October 2008 — about 30 in all — is trying to renegotiate or abandon a deal.
Officials at the attorney general’s office said they were seeing more appeals based on such emotional pleas.
But these arguments may not fly. Unless a contract includes a mortgage contingency, nothing in the law allows for a change in financial circumstances or the lending market to constitute a “right of rescission.”
Sometimes, though, a bit of saber-rattling can shake loose concessions.
“Threatening not to close, threatening legal action, maybe the threat of an attorney general’s action, all can bring a developer to negotiate,” Mr. Graubard said.
Some lawyers are looking beyond the traditional methods of arguing breach of contract.
A Web site called No-Condo.com opened in December and immediately received nearly 100 queries from New York residents who want their deposits back. It is the brainchild of Lawrence Weiner, a lawyer at Wilentz, Goldman & Spitzer in Woodbridge, N.J., whose arsenal includes the Interstate Land Sales Full Disclosure Act, a 41-year-old consumer protection law rarely applied in the city.
Created to protect against speculators selling uninhabitable plots, the act requires developers of condominiums or conversions with more than 100 units to provide buyers with a particular type of property report containing information like proof of ownership and the availability of public utilities.
“I wouldn’t categorize it as a technicality,” Mr. Weiner said. “A lot of developers, in a rush to bring things to market, chose not to comply, or maybe they didn’t even realize they needed to comply.” Since December, Wilentz has filed lawsuits on behalf of buyers at 20 Pine Street, 75 Wall Street, One Hunters Point, One Brooklyn Bridge Park and 111 Fulton Street. The developers of these buildings all declined to comment or did not return calls.
The law has its limits as a negotiation device: a developer is exempt from the act if he or she has pledged to complete the unit within two years. But for distressed buyers in certain buildings, the Land Sales Act may offer a way out.
Cynthia Ehrlich, a self-employed tax accountant in her early 50s, made an $85,000 down payment — “all the money I had” — last March on a small one-bedroom at 75 Wall Street, a full-service condominium converted from an old bank building.
The problems began almost immediately. Ms. Ehrlich said she had been attracted to the property by a 10-year tax abatement, but soon learned that the development had not yet qualified for the abatement program. In May, she lost a major source of revenue, and was consequently turned down for a mortgage. Because her contract did not have a contingency clause, she said, the developer declined to return her deposit.
She plans to file suit this month for a return of her deposit on the grounds that the property violated the Land Sales Disclosure Act by not providing the proper property report. Ms. Ehrlich said she had regained hope after learning of the existence of the act.
“It’s the only good news I got,” Ms. Ehrlich said. “It’s a lot of money to lose, and I don’t make a lot.”
The developer of 75 Wall Street, the Hakimian Organization, declined to comment.
At the Brompton, with its “Stylishly Proper” slogan, luxe location on East 85th Street and prices to match, several buyers said they were in financial straits. A group of nearly 30 buyers recently organized over the Internet and held a meeting to discuss their options.
“We just feel this is not primarily a real estate issue,” said Patricia Congiu, 45, an Upper East Sider who went to contract on a 1,900-square-foot three-bedroom in September 2007. “This is not a situation where someone signed a contract and the price went down. It’s a global recession, like nothing seen since the Great Depression.”
Ms. Congiu said she and her husband had “wanted the building to be our final home. We were looking forward to raising our family there.” But now she is not sure whether her income can support the property. Like several other buyers in the Brompton, she said she hoped the developer, the Related Companies, would sympathize with their situation and provide relief so they can move in. “If they gave us a concession,” she said, “we can have a cushion. I don’t want to hurt the building.”
Other unhappy buyers at the Brompton say financial concerns are not the issue. Marc Rossell, 54, went to contract with his wife in August 2007 for a 3,600-square-foot spread, combining three ninth-floor apartments.
He said he was told by the developer that his southern view would clear an adjacent building, but on a walk-through inspection, he found “a water tank right there outside of our windows, and an ugly rooftop.” Mr. Rossell did not think the view matched the description in the offering plan, and believed the discrepancy could help him get free of his contract.
“It didn’t seem to be of the same quality that they basically represented in the showroom,” he said. “We definitely have the money. It’s not that at all.”
Through a spokeswoman, Related declined to comment.
As buyers become more cautious, contracts may begin looking more like they did before the housing boom of the last 15 years.
“You’re going to see a shift back toward an inclusion of mortgage contingencies,” predicted Jay B. Solomon, a partner at Klein & Solomon, a real estate law firm. Such contingencies provided an out for buyers when financing was not available, but they fell out of favor in the last 15 years as buyers faced more competition for apartments.
Under New York state law, buyers in a new development have the right to get out of their contracts if the developer does not close at least one unit within a year of the originally projected start date. Developers almost always find a way to meet this requirement, but lawyers say that buyers are now putting those initial deals under a microscope.
“If you see one unit that’s closed and nothing else for three months, that seems sort of suspect,” said Meg Goble, a partner at the real estate law firm Hanley & Goble. “If you see the unit has closed and there’s no certificate of occupancy, that also looks sort of suspect.”
Ms. Goble said evidence that the sponsor had spun some sort of sweetheart deal for the unit, like giving it away to a friend, could provide a legal ground for breaking a contract.
Of course, not everyone in the industry has sympathy for the buyer who wants concessions or money back.
“I think it is the height of audacity,” said Stuart Saft, a partner in the real estate division of Dewey & Leboeuf, which represents several large developers in contract disputes. “The buyer calls and says, ‘The apartment is not worth as much as when we signed for it.’ My response for that is, if the market went up 20 percent, would you have given us 20 percent more because the market improved?”
And for his part, Mr. Graubard, primarily a buyers’ lawyer, is skeptical of efforts to undo purchase agreements. “You really can’t get that creative; there’s only so far you can go,” he said. “Without the enforceability of a signed contract — well, really, what do we have?”
Sunday, March 1, 2009
STUDY ESTATE PLANS BEFORE LAWS SHIFT
FROM THE NEW YORK TIMES
February 26, 2009
Study Estate Plans Before Laws Shift
By DEBORAH L. JACOBS
BARRING a Congressional logjam, there is likely to be a new estate tax law by the end of 2009. The Obama administration has said that making the tax permanent, avoiding a one-year repeal starting next year, is a high priority. Yet details of the proposal the White House will support are unclear.
For people who are setting up estate plans, or updating existing ones, not knowing what proposal will emerge might be temptation to take a wait-and-see approach. But that could be a mistake.
Estate plans should be reviewed at least every five years, more often if there’s a change in finances or circumstances — if health or marriage takes a turn for the worse, or if there’s a birth or death in the family.
Under the existing law, the current 45 percent tax would be repealed for 2010. Then, after a year with no estate tax, the tax would return in 2011 but at a higher rate, 55 percent.
Meanwhile, the amount of an estate that is exempt from taxes has gone up gradually during the past eight years, and took a big jump to $3.5 million this year, from $2 million in 2008. But in 2011 it is due to drop to $1 million.
Most tax experts think that, whatever law Congress passes, it will keep the $3.5 million exemption and 45 percent rate. But uncertainties remain. That, coupled with the financial crisis that lowered many people’s net worth, makes a review more urgent.
“With people having a lot less money than they used to, you really need to look at your documents and see if they do what you intended,” said Joshua S. Rubenstein, a lawyer with Katten Muchin Rosenman in New York. A review will allow you to use tax-planning tools that Congress may soon curtail or eliminate.
Here are things to consider:
Formula clauses in wills “Although people hate reading these documents because they don’t exactly read like Jacqueline Susann,” Mr. Rubenstein advised skimming them for buzzwords that could be problematic, given the increased exemption and perhaps a drop in net worth. He said terms like “that portion,” “that fraction” or “that amount” (without saying what it is) are signs of lawyers trying to take maximum advantage of the exemption. Be sure that’s what you want.
Instead of naming a specific sum that will go into a trust, many wills refer to an amount up to the exemption or express the sum as a percentage of whatever the limit happens to be when the person dies. This is good standard practice, but with the exemption at $3.5 million, make certain it reflects your intent.
Bypass or credit-shelter trusts These tools, used to preserve the estate-tax exemption for both spouses, are an area in which formula clauses may lead to undesirable results. Here’s how bypass trusts (often called family trusts) work: assume your will includes a formula clause that would allocate up to the $3.5 million exemption to the trust if you die before your spouse. The trust distributes income and principal to your spouse and family members while your spouse is alive, then distributes what is left to family.
Since money in the bypass trust is covered by the exemption amount, it will not be taxed when you die. Putting the funds in trust, rather than leaving them to your spouse outright, ensures that neither the assets nor any appreciation on them will be considered part of your spouse’s estate. Therefore, they are not subject to tax when he or she dies.
If the rest of your assets go to your spouse, the tax on this portion, called the marital share, is not eliminated, but rather will be postponed until that person’s death. Assuming the assets pass outright or through another special kind of trust, no tax will be assessed when you die, because assets inherited from a spouse are entitled to an unlimited marital deduction. But if your spouse doesn’t spend all that money, what remains of the marital share will be taxed when he or she dies. (Special rules apply to spouses who are not United States citizens.)
The current exemption creates this situation: if your estate plan is structured to take full advantage of the estate tax exemption, more than ever before will go into a bypass trust and less will go to your spouse. For instance, if you die with $3.5 million of your own, your spouse’s entire inheritance would go into the bypass trust. And that could seriously limit her access to the funds.
There are a number of solutions, said David A. Handler, a lawyer with Kirkland & Ellis in Chicago. One is to put the full exemption amount into the family trust while making sure that your spouse is a major beneficiary of the trust who can receive distributions liberally for broad purposes.
State estate tax About half the states, including New York, Connecticut and New Jersey, impose an estate tax, and many of these have an exemption smaller than the federal one. This poses a dilemma for married people who have divided their estates between a bypass trust and a marital share, said Lloyd Leva Plaine, a lawyer with Sutherland, the Washington-based firm.
For example, in New York, where the state exemption is only $1 million, fully funding the bypass trust to take advantage of the federal exemption would require your estate to pay a 16 percent state tax when you die on the $2.5 million not covered by the state exemption.
This presents a tough choice. If you allocate more to the marital share, your estate avoids federal and state estate tax when you die, but could pay more federal tax if assets appreciate, as well as state tax, when your spouse dies.
If you put more in the bypass trust, there’s no federal tax on this sum when you die, but your heirs must immediately pay state estate tax. Consult your lawyer about ways to allow your executor — the person who puts your will into action — the flexibility to resolve these issues after you die.
Grantor retained annuity trust (GRAT) This is a strategy designed to avoid or minimize the gift tax that applies to lifetime transfers of more than $1 million. To do that, you put appreciating assets into a short-term irrevocable trust (two years is typical) and retain the right to receive an annual income stream for the term of the trust.
This annuity is based on the Section 7520 rate, which is set each month by the I.R.S. If you survive the trust term — a condition for this tool to work — any appreciation above this set rate can go to family members or to trusts for their benefit when the term ends. If you die during the term, a portion of the trust will be included in your estate.
Under current law, it is possible to set up a GRAT that will result in no taxable gift, or a nominal one. There is talk that Congress might change that, requiring that the gift equal at least 10 percent of the initial trust value.
In that case, new GRATs would be less appealing, but those created before the law took effect are likely to be grandfathered, said Gideon Rothschild, a lawyer with Moses & Singer in New York. Meanwhile, low asset values and an extremely low Section 7520 rate — 2.4 percent for March — make GRATs especially attractive right now, he said.
Family limited partnerships This tool involves two steps. First, you put assets, like marketable securities, real estate or shares of an operating business, into a partnership. Then you sell or give away shares in the entity that holds the assets — not the assets themselves. Since these shares cannot readily be sold outside the family, they are discounted for both lack of marketability and lack of control (typically a total discount of about 35 percent).
Congress may put a stop to this technique, which has been under attack from the I.R.S. for more than a decade. The first estate tax bill of the year, introduced in the House of Representatives on Jan. 9, proposed closing the loophole, and would take effect when the bill is signed into law. If you use discounts before then, you would not be affected if the law changes.
Beneficiary designation forms Money in individual retirement accounts or employer-sponsored retirement plans, like 401(k)’s and 403(b)’s, will not normally be covered by a will. Instead, the money goes to the people, trusts or charities designated in beneficiary forms for the account. With all the consolidation in the financial industry lately, it’s a good idea to make sure that the financial institution where you have the account has a copy of your beneficiary designation form on file, said Natalie B. Choate, a lawyer with Nutter McClennen & Fish in Boston. If it does not, fill out a new one, keep a copy with your will and have your lawyer coordinate it with the rest of your estate plan.
GOOD PLANNING MAKES ALL THE DIFFERENCE IN ESTATE PLANNING
From the New York Times
February 26, 2009
Good Advice Makes All the Difference in Estate Planning
By DEBORAH L. JACOBS
IT’S always been painful to spend money on estate planning, because you don’t live to reap the benefits even if you know your heirs will. Amid the current financial duress, you may be tempted to eliminate what might seem like a discretionary expenditure.
Yet your estate plan may urgently need a tuneup or a total overhaul because of the increase in the federal tax-free amount or changes in your personal circumstances. To find the best person for the job and pay for only what’s essential, consider these issues:
DO YOU NEED A NEW LAWYER? After a brief conversation by phone or in person, the professional who created your last plan might be able to make any necessary changes at little cost. On the other hand, if you hope to use sophisticated techniques like avoiding the generation-skipping transfer tax, achieving valuation discounts through family limited partnerships or protecting assets from creditors, be prepared to pay for expert guidance. And don’t be afraid to ask, “How many of these kinds of transactions have you done?” If the answer isn’t dozens, consider finding someone else.
HOW DO YOU FIND A GOOD LAWYER? Start with referrals from people you know who are in similar situations or from professionals whose judgment you trust, like accountants, financial advisers or other lawyers. State and local bar associations can direct you to lawyers in your area but can’t vouch for their skills. Other names can also be found on Martindale.com, the nationwide lawyers’ directory that you can search by location and area of practice, and on www.actec.org the Web site of the American College of Trust and Estate Counsel, a group of trust and estate lawyers.
Depending on where you live, you may have a choice between large national firms with many practice groups or estate-planning boutiques — small firms that specialize in trusts and estates work. The latter tend to be less expensive because their overhead is lower.
Meet with the lawyer before you decide to work together (most professionals charge for this initial consultation only if you go forward). Pay attention to chemistry.
Barbara E. Shiers, a lawyer with Frankfurt Kurnit Klein & Selz in New York, said it’s important to consider this question: would you feel comfortable revealing highly personal information that bears upon your estate plan? This might include not only your finances but also the state of your marriage and relationships with other family members, and whatever might keep you awake at night, like children’s substance-abuse problems or spending habits.
“Everyone would write the best possible will for themselves if only they had the knowledge,” said Pam H. Schneider, a lawyer with Gadsden Schneider & Woodward in Radnor, Pa. You want a lawyer who can listen to your concerns and put herself in your shoes when she drafts the necessary documents, Ms. Schneider said.
HOURLY RATE OR FLAT FEE? While most lawyers charge an hourly rate, some offer flat fees for a package of basic estate planning documents, like a will, living trust, power of attorney, living will and health-care proxy. John L. Berger, a lawyer with Lowenstein Sandler in Roseland, N.J., bills by the hour but gives clients an estimate of the total cost. If clients require more changes or explanations than he factored in, he gives them a heads-up before they incur additional charges.
SHOULD YOU AND YOUR SPOUSE HAVE SEPARATE LAWYERS? This adds to the cost, because two people will need to get up to speed on your situation and draft documents, rather than having one lawyer produce his-and-hers versions of the same wills and trusts. But under most state laws, when couples are jointly represented, everything you tell the lawyer, even privately, is not confidential from your spouse
Separate representation may be desirable in second marriages between those who already have children, said Stephanie E. Heilborn, a New York lawyer. It’s even more important for people in troubled marriages or when one spouse has skeletons in the closet — like a secret companion or an out-of-wedlock child.
You may dread the day when that bill comes, but look at it this way, Ms. Heilborn said: A good estate plan is a surefire way to save taxes, and that’s money in the bank for your heirs. Few investments can make the same promise.
Sunday, August 3, 2008
A GLUT OF ONE BEDROOM APARTMENTS
August 3, 2008
from the New York Times
By CHRISTINE HAUGHNEY
OWNERS of one-bedroom apartments in Manhattan may be surprised if they put their homes up for sale anytime soon.
Price appreciation for one-bedrooms — long a bastion for singles and newly married couples who want to stay in Manhattan and live close to work — is sluggish compared with other types of apartments.
Buyers, many of whom are having difficulties getting mortgages, are unwilling or unable to pay the prices sellers still expect. And by one estimate one-bedrooms have been taking nearly three weeks longer to sell than bigger, or smaller, apartments.
Although the average sale price for a one-bedroom apartment grew by 7 percent in the last year, overall apartment prices in Manhattan jumped by 21 percent — not including condo sales at the ultra-expensive 15 Central Park West and the Plaza Hotel — according to Halstead Property.
“If you want to look at what area is experiencing the least amount of growth, it’s one-bedrooms,” said Gregory J. Heym, the chief economist who works for Halstead and for Brown Harris Stevens. “It is the lowest increase of any size category.”
That is a notable change from the situation a year earlier. From the second quarter of 2006 to the second quarter of 2007, prices for one-bedrooms rose by 10 percent, while overall apartment prices rose by only 7 percent.
Now that has changed. One-bedrooms are sitting on the market largely because the buyers most likely to purchase them can’t get mortgages. “Getting financing is very challenging,” said Diane M. Ramirez, the president of Halstead Property. “It can be difficult if the buyer of the one-bedroom is a first-time buyer. Some of the buyers who were able to get financing when the banks were throwing things at them are gone, and the requirements are stiffer.”
The number of studios available for purchase is not piling up in the same way because there are fewer of them, Ms. Ramirez said.
Brokers say that many people who bought their apartments at or near the top of the market and now must sell are often simply trying to avoid losing money on the deal.
In May 2007, John and Wendy Penn bought a one-bedroom on West 72nd Street for $650,000. The couple, whose main residence is on Long Island, wanted an office and a pied-à-terre in Manhattan to expand their insurance business.
They bought the apartment as a long-term investment and quickly completed about $30,000 in renovations, including the restoration of the apartment’s prewar details. But when Mr. Penn became an independent insurance agent, he no longer needed space in Manhattan.
So in February, the couple put the apartment up for sale, pricing it at $769,000. Three price cuts later, the apartment is listed at $725,000 and still has not sold.
Their broker, Danica Cordell-Reeh of Halstead, said that the Penns have the burden of finding a buyer who will pass the co-op board when most buyers’ assets have shrunk in value because of Wall Street declines. She has shown the apartment to about three dozen prospects and received three offers.
Looking back, the Penns wish they had negotiated more with the first prospect, because the second and third bidders’ finances were not solid. Ms. Cordell-Reeh advised them not to accept offers from buyers who might ultimately face rejection from the co-op board.
The Penns never thought they would have such a hard time. While their apartment is on a less-desirable low floor (the first), it is newly renovated and has a flexible floor plan, giving new owners the ability to change the location of the kitchen and the bathroom if they choose. “Hopefully, we’ll get close to breaking even,” Mr. Penn said.
But sellers of one-bedrooms might be even worse off, if not for changes in recent years in the Manhattan apartment mix. In the 1980s, developers built one-bedrooms for a market dominated by professionals and young couples, and investors who planned to rent out their units.
But by the time the latest construction boom started, the mix of buyers had changed. Developers found that building large apartments for wealthy families was more profitable in many neighborhoods, because more families were willing to pay a premium to stay in the city.
On the Upper East Side, the Worldwide Group built only five one-bedrooms in its 77-unit building at 255 East 74th Street, choosing to focus mainly on three- and four-bedrooms.
Even around Madison Square Park, a neighborhood that attracts many singles, the Clarett Group included a relatively low number of one-bedrooms in its new building at 11 East 29th Street. Veronica Hackett, the firm’s managing partner, said there were only 23 one-bedrooms in the 139-unit building. “I tend to believe that when people buy, they stretch to buy a two-bedroom instead of a one-bedroom,” she said.
But even though developers have not concentrated on building smaller apartments, there are more one-bedrooms on the market now than there have been in at least 20 years, according to Jonathan Miller, chief executive of Miller Samuel Inc., a real estate research company.
There are also more one-bedrooms available than apartments of other sizes. As of July 30, there were 3,390 one-bedrooms or sale in Manhattan compared with 3,229 two-bedrooms and 1,063 studios, according to data tracked by StreetEasy.com.
Mr. Miller has found that one-bedrooms sit on the market longer than any other size of apartment. He sees “a drag in demand on one-bedroom units, which is allowing inventory for one-bedrooms to be disproportionate to others.”
This is a tough time for sellers who are moving for job-related reasons. Rabbi Tom Gardner, who recently accepted a job at a synagogue in Baton Rouge, La., needs to sell his one-bedroom on Riverside Drive at 101st Street. Because he has sublet the apartment before, he cannot do so again under his co-op’s rules.
He bought the apartment for less than $400,000 in 1998, and last year, he was told he could sell it for $750,000. But by the time he put it on the market at the end of April, he set the asking price at $695,000, based on advice from his broker, Susan Faber of Barak Realty. Since then, the number of similar one-bedrooms for sale in his neighborhood has grown sixfold, Ms. Faber’s colleague Antonio del Rosario said.
After getting few offers, Rabbi Gardner cut the price to $650,000. When a buyer offered him less than $600,000, the rabbi made a counteroffer of $630,000. The buyer said no.
Despite the time pressures he faces, Rabbi Gardner is reluctant to yield on what he believes is the inherent strength of the unit he owns. “I think there’s still a certain value to an apartment in a full-service building on the Upper West Side,” he said.
Other sellers are even more determined to wait for the price they want.
Three years ago, Kenneth Kuo, a concert cellist who owns music schools in Manhattan and in Greenwich and Westport, Conn., and his cousin bought a one-bedroom at 120 Riverside Boulevard at Trump Place, the building where Mr. Kuo lives in a one-bedroom penthouse. They paid about $675,000.
They have been trying to sell the investment apartment for the last six months, but they are determined not to accept less than $1 million.
Mr. Kuo has a list of other sales in his building through the middle of 2007 that indicate the asking price for his apartment is in line with the building’s sales history. He also says that last year, he sold another one-bedroom he owned in the building for $790,000 after buying it in 2005 for about $550,000. He thinks he was justified in waiting for a high price.
But he was willing to consider a slightly lower bid. “Even if I could get $999,999, I would be happy,” he said. “There are just so many one-bedrooms out there on the Upper West Side.”
Late last month, he cut the price to $1.015 million. He also listed it for rent at the same time, on the advice of his friend Andy Kim, a broker at Nest Seekers. He had a tenant in a week willing to pay $3,400 a month, and plans to try to sell the apartment again in a few years.
For buyers, the growing inventory of one-bedrooms is enabling them to negotiate good deals.
When April Hartstein shopped for a new one-bedroom condo in Williamsburg, Brooklyn, in April, she asked brokers whether developers would negotiate. By the time Ms. Hartstein found her ideal condo at the Jacksonia at 131-145 Jackson Street, she had learned that many costs were negotiable. She persuaded the developer to pay her $7,000 transfer tax, build a second larger closet in her bedroom and cut the price by about 3 percent. (Apartments like hers are priced at $495,000 to $499,000.)
Ms. Hartstein stresses that she had to push, but that she found many developers would work with buyers. “No one just offered,” she said. “No one was like, ‘This is a slashed price.’ ”
Christine Blackburn, the Prudential Douglas Elliman broker overseeing sales at the Jacksonia, acknowledges that there are many one-bedrooms for sale right now in Williamsburg and relatively few larger apartments available. In Brooklyn, developers built more smaller units than in Manhattan to cater to younger first-time buyers.
She said that developers realized they had a lot of competition. “They built a lot of one-bedrooms, and there’s heavier competition in that market,” she said. “It’s a supply-and-demand thing.”
In this market, some buyers are finding that they can get apartments that would have been out of reach before.
Adam and Zena Rudzki had been searching for a one-bedroom near their daughter‘s home in Washington Heights for the past year. They found a one-bedroom at Cabrini Terrace, 900 West 190th Street, for $350,000. The apartment, listed by Simone Song Properties, has river views. They negotiated a $5,000 reduction in the price and closed on the apartment last week. “We had the luxury of looking and waiting for something that is reasonable in price” and attractive, Mr. Rudzki said. “We are very pleased.”
Bargain-hunting one-bedroom buyers are finding that the longer they wait, the more opportunities they are offered.
In March, Bruce and Eva Forrest started looking for a one-bedroom near Madison Square Park. The couple, who live in Rockland County, weren’t in a rush to buy. They intended to use the apartment as a pied-à-terre, and they wanted to make sure they found an apartment big enough for their 4-year-old son, Alexander, to run around in.
By June, they had a contract for a one-bedroom at the Stanford, 45 East 25th Street. The Forrests negotiated the price down to $867,500 from $875,000 with the help of Jenet Levy of Coldwell Banker Previews International.
But when the sale was delayed, Mr. Forrest looked at the market again. He noticed that prices for one-bedrooms had dropped 5 to 8 percent and that more sellers of one-bedroom co-ops were advertising that they would accept buyers interested in pieds-à-terre.
Although he is happy with the deal he had negotiated on his apartment and plans to close on Aug. 11, he notes that there are even more one-bedrooms to choose from today than when he found his apartment.
“It was amazing how much property was on the market, and it was amazing that it was sitting there,” he said.
Wednesday, July 16, 2008
Rich But Rejected
from the New York Times
By Rebecca McAlpin
ALMOST overnight, investment bankers and others on Wall Street have gone from being Manhattan’s most aggressive apartment buyers to real estate pariahs
As financial services companies continue to cut jobs and bleed billions of dollars, their employees have far less cash to spend on high-priced apartments, and very little optimism about taking a risk right now anyway.
Those in the financial industry who still want to buy real estate are often unable to persuade lenders and co-op boards to work with them.
The biggest problem is that buyers who work on Wall Street no longer have the guarantee of huge bonuses to bolster their financial status. And even those who continue to get bonuses are finding that banks and co-ops will not let them count all that money as part of their income, because unlike a salary, it can fluctuate wildly.
Workers in financial services-related businesses make up roughly 25 to 30 percent of Manhattan buyers, according to estimates by Halstead Property. Although some lenders and building boards are accepting these buyers after tightening requirements, others are becoming far more interested in buyers outside the financial industry.
“They’re looking for people who have stable incomes that are not so market dependent,” said Melissa Cohn, the president of the Manhattan Mortgage Company, who has noticed the changing standards regarding bonuses in the last month.
Lenders, she said, fear that “bonus levels won’t be the same in 2009 as they were in 2008” and will no longer take any risks.
Read the full article here http://www.nytimes.com/2008/07/13/realestate/13cover.html?_r=1&ref=realestate&oref=slogin
Thursday, May 8, 2008
COVETING THY NEIGHBOR'S CONDO
from The New York Times
May 4, 2008
Coveting Thy Neighbor’s Condo
By TERI KARUSH ROGERS
BOTOX. The iPod. Arugula. Each in its own way ushered in an era of heightened expectations — for brow lines, personal music players and salad courses, respectively.
Then there is New York City’s recent condominium boom: Its in-your-face ubiquity and fantasy-minded marketing have raised the bar for apartment seekers exposed to an excess of spa bathrooms, Zen gardens and Boffi kitchens. That’s fine for those willing to pay new-construction prices and wait up to a year or two for the keys.
But buyers lacking patience or money are finding their tastes have gotten more expensive, as apartments that might have thrilled them five years ago have come to resemble throwbacks to an age of portable CD players.
In other words, said one real estate agent frustrated by her frustrated clients, it can be hard to shop at Bloomingdale’s after visiting Barneys.
“What happens is buyers go to new construction and see the health club, the Pilates and yoga classes, the swimming pools, the libraries, the meditation rooms — along with the oversized bathrooms and the high ceilings,” said Kathryn T. Higgins, an associate broker at DJK Residential. “They can’t afford that and the rational part of them knows that, but the emotional part of them hasn’t accepted it. It makes them disappointed and envious and influences their attitude toward the older apartments and buildings.”
These buyers are angry on a lot of levels, Ms. Higgins said, and they hold it against the seller by negotiating harder and simply being more selective about what to bid on in the first place.
Just ask Peter Sicilia, a 37-year-old renter in Park Slope, Brooklyn, who is torn between new and used. Since last summer, he and his broker, David Austin of Halstead Property, have been touring two-bedroom apartments of every vintage in Brooklyn’s brownstone neighborhoods.
“The bar has absolutely been raised by new construction,” said Mr. Sicilia, whose kitchen consciousness has ascended to the point that he won’t even look at resales that can’t accommodate a new-condo-style kitchen. “You just can’t compare it to resales.”
“A huge yoga room doesn’t necessarily appeal to me,” said Mr. Sicilia, “but I do like it when some careful planning and interior design has gone into a unit — like a granite countertop in a thought-out kitchen as opposed to just slapping a stove in the middle of the room, which is what I see on the resale side.” He is willing to spend up to $750,000, including any renovations that he might have to make.
The economic slowdown has certainly helped create more of a buyer’s market in New York, giving home shoppers the chance now to be choosier.
Yet some brokers say it’s not just the prevailing gloom that is making buyers more skittish and hard-driving.
“Their eyes have been trained differently,” said Sherry Matays, a senior vice president at the Corcoran Group, of buyers exposed to new construction. “They feel something’s being stolen from them, even though they can’t afford it. So if they’re going to live without a gym, a pool, radiant heat on the bathroom floors or whatever, they want to know the sacrifice is worthwhile and they’re getting more space for their money.”
These days, it can be hard to find buyers untouched by the new construction ethos. The number of new Manhattan condos available has risen over the last five years, to one-third of the total unsold inventory today from 15 percent in 2003, according to Miller Samuel, a Manhattan appraisal firm.
Most, if not all, buyers kick off their searches by trolling new developments online or window-shopping at sales centers. By the time they start working with a broker, it is, in a sense, too late. Their paradigms have been upgraded.
“As the old line goes, once you’ve been to Paris, it’s hard to go back to the farm,” said Grant McCracken, a cultural anthropologist affiliated with the Massachusetts Institute of Technology and the author of eight books on consumer culture.
“Once our choice set has been expanded to include things that we never dreamed of that are gloriously better than what we have, it’s very tough for us to be content with the things that used to give us pleasure. And in Manhattan, where people have always had to kind of hold their noses and learn to live with constrained circumstances, I guess this is almost a natural impatience waiting to happen.”
Ms. Higgins of DJK ticked off a few of the telltale signs of new construction envy.
“When people used to say, ‘Does it have any outdoor space,’ they were generally talking about a terrace,” she said. “Now they mean a common garden or Zen meditation space. They want to go do their yoga or tai chi outside and they want to know why doesn’t the building have some sort of space where they can do this? I’m ready to dig them a Zen garden. Please. I had one buyer who said, ‘This one has a garden, but the other one had a garden with a waterfall.’
“Or, we’re standing in a prewar building and they’re in the lobby looking around. And I say, ‘What are you looking for?’ They say, ‘Does it have a library,’ like in some of the newer buildings that have a common reading room with a faux fireplace.”
Inside the apartments, buyers influenced by new construction are feeling a number of other painful absences, none of which make their hearts grow fonder.
One of the biggest voids is where the washer-dryer ought to be.
“Anything that’s been built in the last 10 to 15 years has a washer-dryer, so giving up on one is really one of the biggest difficulties for people,” said Joan Sacks, an associate broker at Stribling & Associates. “I have one client who lived on the Upper East Side for 20 years without a washer-dryer in her apartment. We started looking at new condos as well as established buildings and as soon as she saw the washer-dryer in the new units she said, ‘Oh, that is something I absolutely have to have.’ ” Ms. Sacks’s client bought a new condo in Chelsea with en suite laundry.
Buyers looking at resales in buildings built before five or so years ago are increasingly minding the absence of central air-conditioning, tall ceilings and expansive double-glazed soundproof windows. They are also expecting a lot more from kitchens and bathrooms.
“A kitchen with ’80s cabinets is a deal breaker,” said Darren Sukenik, an executive vice president for luxury sales at Prudential Douglas Elliman. “Everybody wants to think of a Boffi or Dada kitchen even if it’s not.”
And compared with the new-condo “spa” bathroom (typically replete with double sinks, glass shower, soaking tub and gorgeous finishes), earlier versions can appear almost cruelly stunted.
“The small prewar bathroom used to be charming, and now it’s just a small bathroom that’s going to cost $50,000 to blow out,” Ms. Higgins said.
Jan Boyle, a lifelong renter shopping for a Manhattan apartment, can pinpoint the moment her standards shifted.
While visiting friends in Harlem last October, Ms. Boyle paid an impromptu visit to a newly built condominium at 50 West 127th Street.
“There was a limestone facade on the outside and mahogany tilt-and-turn windows and full marble bathrooms from floor to ceiling that were very spalike,” said Ms. Boyle, 49, a marketing consultant, recalling her kid-in-a-candy-store reaction. “It was beautifully finished and the fitness center was brand new with Bang & Olufsen speakers wired throughout.”
And just like that, she said, “I got caught up in this new construction thing.”
Working with Robert Cabrera, a senior vice president at Halstead Property, she began touring new condos in Harlem and the financial district. She hasn’t yet made up her mind between new and old, but said the resales she has seen suffer dreadfully by comparison.
In addition to having proletarian bathrooms and communal laundry rooms, “they’re just dreary,” Ms. Boyle said, “and even if they’re renovated, I feel like you’d need to redo it anyway.”
Too frequently, she said, sellers have spent “a gazillion dollars on some mosaic weirdness tile, and they’ve put down this ugly floor they’ve also spent a gazillion dollars on, and they think it’s a redone apartment and they’re passing along the cost.”
Indeed, brokers say, new construction envy is prompting buyers like Ms. Boyle to recoil from renovations that fall short of the new-condo aesthetic. Buyers are also increasing the amount of money they deem necessary to bring a resale closer to new-condo status.
Ms. Matays counsels her buyers to figure $300 per square foot for a basic “upper end” renovation, all the way to $450 per square foot for a gut job that would essentially mimic new construction. Using those figures, a 1,200-square-foot two-bedroom priced at $1.5 million might cost another $360,000 to $540,000 to redo in style.
Ms. Matays said that the yearning for “hybrid” apartments (resales renovated in the new-condo fashion) has become so widespread that when listing an apartment, she no longer touts renovations that fall short of the new baseline.
“You can’t get away with that anymore,” she said. “I’m selling a prewar apartment with original 1920s bathrooms and I told them short of being done up to the standard of a high-end condo —which can still be traditional as long as it has really high-end finishes — it’s better to keep the bathrooms like they are.”
Just who should foot the bill for making new-condo-style improvements to a resale is a matter of some contention.
“I’ve had people buy into postwars with perfectly nice bathrooms that have maybe been done in 1987 when the building was new,” Ms. Higgins said, adding “They’re looking at the sellers saying we need a new bathroom and it’s going to cost $50,000. This is where it gets very, very tense.”
“I sort of drag the buyer away and say that’s a perfectly good bathroom — they’ve priced the apartment with that bathroom, not with your vision,” she said.
Buyers don’t necessarily agree.
Tom Julian, a 40-something homeowner in Battery Park City, started looking a year ago for a two-bedroom two-bath apartment in the neighborhood, with the help of Pierre Moran, an agent at DJK Residential. Though he is considering both new construction and resales, Mr. Julian, who owns a one-bedroom condo, is keenly cognizant of the ways in which resales fail to measure up.
“I envy the central air,” he said. “All of the new buildings have it. And granite and stone and stylish wood choices, whether it be bamboo or elm — parquet floors are over.”
And if the choice was between a $2 million new condo and a $1.5 million resale that needed a $500,000 renovation, Mr. Julian said, he would opt for new.
He has lots of company. When it comes to buying older apartments, buyers increasingly “put in a lowish offer to see if they can make a deal, and if they can’t, they’ll go back to new construction,” Mr. Cabrera said.
Brokers try their best to recalibrate what they consider unrealistic expectations.
“We’ll take the best three or four properties that meet their budget, and then we’ll show them a couple of things that specifically meet their criteria but not their budget,” said Michael Signet, the director of sales at Bond New York. “Then we sit them down over a cup of coffee and say it’s your decision whether to increase your budget or come off your wish list a little bit. A lot of times they’ll say, ‘We’ll wait another six months until we can afford something we really want.’ That’s not what we want to hear, but we’d rather hear it the first day than after working with them for six months.”
Rather than feel embittered about being unable to afford it, some buyers become empowered by their brush with new development.
“We didn’t visit a lot of new construction,” said Alan Iny, 31, a management consultant, who went shopping for an apartment with his wife, Roberta Griff, two years ago. “We reasonably quickly realized from a price and timing perspective that we didn’t want to go there if possible — we had kept hearing horror stories about people who were delayed by two years.”
But the universe of possibilities persuaded the couple not to compromise on their own smaller list. With the help of their broker, Julie Friedman of Bellmarc Realty, Mr. Iny and Ms. Griff persevered until they found a two-bedroom two-bath prewar apartment in the West 60s that had been freshly renovated à la new.
“I knew it would conceivably be possible to find something with a doorman, gym, terrace, modern amenities, etc.,” Mr. Iny said, “so I wasn’t really willing to settle for something that didn’t.”
Coveting Thy Neighbor’s Condo
By TERI KARUSH ROGERS
BOTOX. The iPod. Arugula. Each in its own way ushered in an era of heightened expectations — for brow lines, personal music players and salad courses, respectively.
Then there is New York City’s recent condominium boom: Its in-your-face ubiquity and fantasy-minded marketing have raised the bar for apartment seekers exposed to an excess of spa bathrooms, Zen gardens and Boffi kitchens. That’s fine for those willing to pay new-construction prices and wait up to a year or two for the keys.
But buyers lacking patience or money are finding their tastes have gotten more expensive, as apartments that might have thrilled them five years ago have come to resemble throwbacks to an age of portable CD players.
In other words, said one real estate agent frustrated by her frustrated clients, it can be hard to shop at Bloomingdale’s after visiting Barneys.
“What happens is buyers go to new construction and see the health club, the Pilates and yoga classes, the swimming pools, the libraries, the meditation rooms — along with the oversized bathrooms and the high ceilings,” said Kathryn T. Higgins, an associate broker at DJK Residential. “They can’t afford that and the rational part of them knows that, but the emotional part of them hasn’t accepted it. It makes them disappointed and envious and influences their attitude toward the older apartments and buildings.”
These buyers are angry on a lot of levels, Ms. Higgins said, and they hold it against the seller by negotiating harder and simply being more selective about what to bid on in the first place.
Just ask Peter Sicilia, a 37-year-old renter in Park Slope, Brooklyn, who is torn between new and used. Since last summer, he and his broker, David Austin of Halstead Property, have been touring two-bedroom apartments of every vintage in Brooklyn’s brownstone neighborhoods.
“The bar has absolutely been raised by new construction,” said Mr. Sicilia, whose kitchen consciousness has ascended to the point that he won’t even look at resales that can’t accommodate a new-condo-style kitchen. “You just can’t compare it to resales.”
“A huge yoga room doesn’t necessarily appeal to me,” said Mr. Sicilia, “but I do like it when some careful planning and interior design has gone into a unit — like a granite countertop in a thought-out kitchen as opposed to just slapping a stove in the middle of the room, which is what I see on the resale side.” He is willing to spend up to $750,000, including any renovations that he might have to make.
The economic slowdown has certainly helped create more of a buyer’s market in New York, giving home shoppers the chance now to be choosier.
Yet some brokers say it’s not just the prevailing gloom that is making buyers more skittish and hard-driving.
“Their eyes have been trained differently,” said Sherry Matays, a senior vice president at the Corcoran Group, of buyers exposed to new construction. “They feel something’s being stolen from them, even though they can’t afford it. So if they’re going to live without a gym, a pool, radiant heat on the bathroom floors or whatever, they want to know the sacrifice is worthwhile and they’re getting more space for their money.”
These days, it can be hard to find buyers untouched by the new construction ethos. The number of new Manhattan condos available has risen over the last five years, to one-third of the total unsold inventory today from 15 percent in 2003, according to Miller Samuel, a Manhattan appraisal firm.
Most, if not all, buyers kick off their searches by trolling new developments online or window-shopping at sales centers. By the time they start working with a broker, it is, in a sense, too late. Their paradigms have been upgraded.
“As the old line goes, once you’ve been to Paris, it’s hard to go back to the farm,” said Grant McCracken, a cultural anthropologist affiliated with the Massachusetts Institute of Technology and the author of eight books on consumer culture.
“Once our choice set has been expanded to include things that we never dreamed of that are gloriously better than what we have, it’s very tough for us to be content with the things that used to give us pleasure. And in Manhattan, where people have always had to kind of hold their noses and learn to live with constrained circumstances, I guess this is almost a natural impatience waiting to happen.”
Ms. Higgins of DJK ticked off a few of the telltale signs of new construction envy.
“When people used to say, ‘Does it have any outdoor space,’ they were generally talking about a terrace,” she said. “Now they mean a common garden or Zen meditation space. They want to go do their yoga or tai chi outside and they want to know why doesn’t the building have some sort of space where they can do this? I’m ready to dig them a Zen garden. Please. I had one buyer who said, ‘This one has a garden, but the other one had a garden with a waterfall.’
“Or, we’re standing in a prewar building and they’re in the lobby looking around. And I say, ‘What are you looking for?’ They say, ‘Does it have a library,’ like in some of the newer buildings that have a common reading room with a faux fireplace.”
Inside the apartments, buyers influenced by new construction are feeling a number of other painful absences, none of which make their hearts grow fonder.
One of the biggest voids is where the washer-dryer ought to be.
“Anything that’s been built in the last 10 to 15 years has a washer-dryer, so giving up on one is really one of the biggest difficulties for people,” said Joan Sacks, an associate broker at Stribling & Associates. “I have one client who lived on the Upper East Side for 20 years without a washer-dryer in her apartment. We started looking at new condos as well as established buildings and as soon as she saw the washer-dryer in the new units she said, ‘Oh, that is something I absolutely have to have.’ ” Ms. Sacks’s client bought a new condo in Chelsea with en suite laundry.
Buyers looking at resales in buildings built before five or so years ago are increasingly minding the absence of central air-conditioning, tall ceilings and expansive double-glazed soundproof windows. They are also expecting a lot more from kitchens and bathrooms.
“A kitchen with ’80s cabinets is a deal breaker,” said Darren Sukenik, an executive vice president for luxury sales at Prudential Douglas Elliman. “Everybody wants to think of a Boffi or Dada kitchen even if it’s not.”
And compared with the new-condo “spa” bathroom (typically replete with double sinks, glass shower, soaking tub and gorgeous finishes), earlier versions can appear almost cruelly stunted.
“The small prewar bathroom used to be charming, and now it’s just a small bathroom that’s going to cost $50,000 to blow out,” Ms. Higgins said.
Jan Boyle, a lifelong renter shopping for a Manhattan apartment, can pinpoint the moment her standards shifted.
While visiting friends in Harlem last October, Ms. Boyle paid an impromptu visit to a newly built condominium at 50 West 127th Street.
“There was a limestone facade on the outside and mahogany tilt-and-turn windows and full marble bathrooms from floor to ceiling that were very spalike,” said Ms. Boyle, 49, a marketing consultant, recalling her kid-in-a-candy-store reaction. “It was beautifully finished and the fitness center was brand new with Bang & Olufsen speakers wired throughout.”
And just like that, she said, “I got caught up in this new construction thing.”
Working with Robert Cabrera, a senior vice president at Halstead Property, she began touring new condos in Harlem and the financial district. She hasn’t yet made up her mind between new and old, but said the resales she has seen suffer dreadfully by comparison.
In addition to having proletarian bathrooms and communal laundry rooms, “they’re just dreary,” Ms. Boyle said, “and even if they’re renovated, I feel like you’d need to redo it anyway.”
Too frequently, she said, sellers have spent “a gazillion dollars on some mosaic weirdness tile, and they’ve put down this ugly floor they’ve also spent a gazillion dollars on, and they think it’s a redone apartment and they’re passing along the cost.”
Indeed, brokers say, new construction envy is prompting buyers like Ms. Boyle to recoil from renovations that fall short of the new-condo aesthetic. Buyers are also increasing the amount of money they deem necessary to bring a resale closer to new-condo status.
Ms. Matays counsels her buyers to figure $300 per square foot for a basic “upper end” renovation, all the way to $450 per square foot for a gut job that would essentially mimic new construction. Using those figures, a 1,200-square-foot two-bedroom priced at $1.5 million might cost another $360,000 to $540,000 to redo in style.
Ms. Matays said that the yearning for “hybrid” apartments (resales renovated in the new-condo fashion) has become so widespread that when listing an apartment, she no longer touts renovations that fall short of the new baseline.
“You can’t get away with that anymore,” she said. “I’m selling a prewar apartment with original 1920s bathrooms and I told them short of being done up to the standard of a high-end condo —which can still be traditional as long as it has really high-end finishes — it’s better to keep the bathrooms like they are.”
Just who should foot the bill for making new-condo-style improvements to a resale is a matter of some contention.
“I’ve had people buy into postwars with perfectly nice bathrooms that have maybe been done in 1987 when the building was new,” Ms. Higgins said, adding “They’re looking at the sellers saying we need a new bathroom and it’s going to cost $50,000. This is where it gets very, very tense.”
“I sort of drag the buyer away and say that’s a perfectly good bathroom — they’ve priced the apartment with that bathroom, not with your vision,” she said.
Buyers don’t necessarily agree.
Tom Julian, a 40-something homeowner in Battery Park City, started looking a year ago for a two-bedroom two-bath apartment in the neighborhood, with the help of Pierre Moran, an agent at DJK Residential. Though he is considering both new construction and resales, Mr. Julian, who owns a one-bedroom condo, is keenly cognizant of the ways in which resales fail to measure up.
“I envy the central air,” he said. “All of the new buildings have it. And granite and stone and stylish wood choices, whether it be bamboo or elm — parquet floors are over.”
And if the choice was between a $2 million new condo and a $1.5 million resale that needed a $500,000 renovation, Mr. Julian said, he would opt for new.
He has lots of company. When it comes to buying older apartments, buyers increasingly “put in a lowish offer to see if they can make a deal, and if they can’t, they’ll go back to new construction,” Mr. Cabrera said.
Brokers try their best to recalibrate what they consider unrealistic expectations.
“We’ll take the best three or four properties that meet their budget, and then we’ll show them a couple of things that specifically meet their criteria but not their budget,” said Michael Signet, the director of sales at Bond New York. “Then we sit them down over a cup of coffee and say it’s your decision whether to increase your budget or come off your wish list a little bit. A lot of times they’ll say, ‘We’ll wait another six months until we can afford something we really want.’ That’s not what we want to hear, but we’d rather hear it the first day than after working with them for six months.”
Rather than feel embittered about being unable to afford it, some buyers become empowered by their brush with new development.
“We didn’t visit a lot of new construction,” said Alan Iny, 31, a management consultant, who went shopping for an apartment with his wife, Roberta Griff, two years ago. “We reasonably quickly realized from a price and timing perspective that we didn’t want to go there if possible — we had kept hearing horror stories about people who were delayed by two years.”
But the universe of possibilities persuaded the couple not to compromise on their own smaller list. With the help of their broker, Julie Friedman of Bellmarc Realty, Mr. Iny and Ms. Griff persevered until they found a two-bedroom two-bath prewar apartment in the West 60s that had been freshly renovated à la new.
“I knew it would conceivably be possible to find something with a doorman, gym, terrace, modern amenities, etc.,” Mr. Iny said, “so I wasn’t really willing to settle for something that didn’t.”
Friday, April 25, 2008
FINDING YOUR FIRST APARTMENT
from the New York TimesApril 20, 2008
Finding Your First Apartment
By VIVIAN S. TOY
THE dream: finding a one-bedroom, one-bath apartment in an elevator building with a doorman in Greenwich Village for $2,000 a month. The reality: nearly impossible.
Finding Your First Apartment
By VIVIAN S. TOY
THE dream: finding a one-bedroom, one-bath apartment in an elevator building with a doorman in Greenwich Village for $2,000 a month. The reality: nearly impossible.
Spring is the season when newly minted college graduates flock to
But that determination only goes so far when it comes to Manhattan real estate.
“Almost every single person I’ve worked with thinks there’s a golden nugget of an apartment waiting right for them,” said Paul Hunt, an agent at Citi Habitats who specializes in rentals. “They all want to be in the Village, and they all want the ‘Sex and the City’ apartment.” The first shock for a first-time renter will probably be the prices.
Consider that the average monthly rent for a one-bedroom in the Village is more than $3,100 and that the average for a studio is just over $2,200. Or that the average rent for a one-bedroom in a doorman building anywhere in Manhattan is close to $3,500. Mr. Hunt said that when he shows prospective renters what their budget really can buy, they are sometimes so appalled that “they think I’m trying to fool them or something, and they run away and I don’t hear from them again.”
Alternatively, the renter checks his or her expectations and grudgingly decides to raise the price limit, look in other neighborhoods or get a roommate. “When expectations are very high, the process can be very frustrating,” Mr. Hunt said. The thousands of new graduates who will be driving the engine of the city’s rental market from now until September will quickly learn that renting in New York is not like renting anywhere else.
The second shock is likely to be how small a Manhattan apartment can be. It is not uncommon in New York, for example, to shop for a junior one-bedroom or a convertible one-bedroom, neither of which is a true one-bedroom at all but really a studio that already has or can have a wall put up to create a bedroom.
Aside from the realities of price and space, the requirements set by New York landlords are also bound to help turn a bright-eyed first-time renter’s outlook grim. To start with, landlords want only tenants who earn at least 40 times the monthly rent, which means an $80,000 annual salary for a $2,000 apartment. According to census data, more than 25,000 graduates ages 22 to 28 moved to the city in 2006, and their median salary was about $35,600. Those who don’t make 40 times their monthly rent need a guarantor, usually a parent, who in turn must make at least 80 times the monthly rent. In addition to a security deposit, some landlords also want the first and last month’s rent. Tack on a broker’s fee and a prospective renter for that $2,000 apartment is out of pocket nearly $10,000 just to get the keys to the place.
“There’s a lot of stuff that doesn’t happen in other markets,” said Gary Malin, the president of Citi Habitats. “On top of that, every owner also has their own requirements, so just because you qualified here doesn’t mean you’ll qualify there. And there’s no rhyme or reason to it.” So the key to finding that first apartment is to learn as much as possible about the market before arriving in the city and also to know that keeping an open mind will make the search easier. “People who walk in with blinders on and can only say, ‘I want, I want, I want,’ when their budget doesn’t allow for it, they create this anxiety,” Mr. Malin said. “You have to be flexible and you have to come to the city armed with information and financial paperwork.”
Mr. Malin said that the volume of calls his agency has fielded in the last few weeks would suggest the city is headed for another strong rental season. The market was so tight last year that the vacancy rate hovered under 1 percent, but the rate has now inched a little over 1 percent, he said, so there will be slightly more inventory and prices may stay stable. Daniel Baum, the chief operating officer of the Real Estate Group New York, a brokerage in Manhattan, said he felt the market had softened enough that there might be room for negotiation, particularly in areas that recent graduates would consider better suited for their parents, like the Upper East Side.
In certain neighborhoods, he said, “there may be opportunity to get concessions from landlords; maybe one month’s free rent or a chunk of the brokerage commission.”
To understand the rental market, brokers and recent first-time renters recommend searching the Internet for listings and getting recommendations from friends who already live in the city. That elusive $2,000 one-bedroom apartment, for example, can be found in neighborhoods like
Most real estate agency Web sites have guides that explain the intricacies of New York’s rental world. Citi Habitats sends agents to about 20 universities nationwide to offer seminars on what it takes to get an apartment.
Cullen Hilkene, an agent who ran a Citi Habitats seminar at Princeton University last week, said that prospective renters need to know the limitations the market might impose on them. “I give them information so they can figure out how they’re going to be able to live in New York,” he said. “It’s better to know sooner rather than later that they need to bring in a roommate because they won’t be able to rent a studio on their own.”
Alex Sooy, who moved into a two-bedroom near Union Square last June with his roommate, David Isaacs, said he knew the first thing they had to decide was whether to use a broker. For placing you in an apartment, brokers typically charge 15 percent of the annual rent or 1.8 times the monthly rent, which means $3,600 on a $2,000 apartment.
Mr. Sooy said he tried looking online for no-fee apartments, “but we would have to go to all these places on our own and work individually with the landlords and that was an overwhelming process.” Like many recent graduates, Mr. Sooy and Mr. Isaacs planned to travel after graduation and they had only three days to hunt for an apartment. “We hated to pay the fee, but it was the easiest way to look at a number of places in a row without having to do so much legwork ourselves,” Mr. Sooy said.
Their goal was to find a $3,000 two-bedroom downtown. They visited eight apartments with brokers from two firms before choosing one near Union Square with two real bedrooms, as opposed to ones carved out of a living room, for $3,600. They did not need guarantors because Mr. Sooy works for a consulting firm and Mr. Isaacs works for an investment bank and their combined income satisfied the landlord.
Mr. Sooy says his rent is much more than the $400 a month he paid when he was in school and it eats up more than 50 percent of his after-tax income. “I would prefer to have more disposable income,” he said, “but it’s a good apartment and the location is great.”
Alicia Schwartz, a former Citi Habitats agent and director of howtorentinnyc.com, said that trolling the Internet for no-fee apartments had become easier in recent years. The Web site Craigslist, for example, offers no-fee listings by owners, no-fee broker listings where the landlord will pay the broker’s commission and fee-based broker listings.
There are also listing services that charge a fee for providing no-fee listings. Ms. Schwartz said, though, that those Web sites can be outdated. “At the height of the rental season, landlord listings change from hour to hour,” she said. “And the only ones who talk to landlords hour to hour are brokers, not listing services.”
It’s also possible to search for management companies directly. Ms. Schwartz’s Web site lists some 300 management companies and posts uncensored reviews of many of them. “So many management companies have gone online that you can get an apartment without a broker, especially if you have a friend who’s rented through a company and can recommend it,” she said.
Some management companies represent only high-end buildings that would be too expensive for a typical new hire, but others offer a range of apartments.
For instance Jakobson Properties, which manages some 2,000 apartments in about 30 buildings in Manhattan and Queens, offers what it describes as middle- and upper-middle-income housing. Peter Jakobson Jr., a principal, said, “Our clientele is in school, going back to school, first job, second job, and not from New York.”
He says that Jakobson leases most of its apartments through its Greenwich Village office and its Web site, nofeerentals.com, but that brokers bring in about 35 percent of its business. Ms. Schwartz said, however, that some management companies work exclusively through brokers.
Lindsey Zuckerman, who has moved twice and found renters to take over her leases by advertising on Craigslist, knows that first hand. She said that the first time she listed an apartment, she had trouble getting through to her leasing company on behalf of prospective renters, but the company would take calls from brokers.
She also said Craigslist might work better for people who aren’t first-time renters. She recently sublet her $2,400 alcove studio in NoLita to someone who responded to her listing on Craigslist. “I got a ton of responses,” she said, “but they tended to be from people who already know the market. Students who wanted to see it a week from when I posted it would have been too late.”
Because the competition for desirable apartments can be intense, brokers and renters say that having all the necessary documentation in hand when apartment hunting is crucial.
Leslie Lazarus, the agent for DJK Residential who helped Mr. Sooy find his apartment, said that because landlords have such different policies, prospective renters should have guarantors lined up even if they don’t think they will need them. For people in the financial industry, she said, some landlords will accept bonus potential as part of their income and others won’t.
And while some landlords will accept the combined incomes of two or three roommates, some don’t and will require one guarantor who can cover the rent for all the roommates.
Many landlords require the same level of financial documentation for both a renter and the guarantor, which means a sheaf of personal records that includes tax returns, pay stubs, bank statements, proof of income for stocks or other investments and reference letters. “That can be a difficult thing for parents to understand because it is so invasive,” Ms. Lazarus said.
Brokers agree that being upfront about credit problems is also important because the $25 to $150 application fee that landlords charge goes toward a credit check. “Some people won’t have a credit history or they’ll have ruined it already with that $30 nonpayment to the cellphone provider,” said Senad Ahmetovic, a vice president at Halstead Property. “You would be surprised to see how many of those cases I’ve had, and they do not realize how damaging that can be to their credit score.”
The best time to plan a visit to the city to view apartments is four to six weeks before an expected move-in date. Brokers say that while most recent graduates want to stay downtown and want to look in the Village or in Murray Hill, more reasonably priced apartments can be found on the far east and west sides of town and on the Upper East Side, where there are more large apartment buildings, including Normandie Court on East 95th Street, a building so popular with recent graduates that it is known as Dormandie Court.
But Ms. Lazarus said that many 20-somethings consider anything above 86th Street to be the suburbs. “It all boils down to the money,” she said. “If you can afford what you initially say is your dream apartment, then great, let’s go out and get it.”
For others, the suburbs aren’t so bad.
How to Prepare for an Apartment Search
FINDING the right apartment in New York City is a challenge for anyone, but for recent graduates who are first-time renters, meeting the landlord’s financial requirements and coming up with enough cash to get in the door can be even more daunting.
This is documentation that many landlords want to see from prospective tenants and their guarantors:
A letter from an employer stating position, salary, length of employment or anticipated start date.
Pay stubs if already working.
Tax returns for at least two years.
Recent bank statements.
Proof of other income, like revenue from stocks, securities, real estate or trust funds.
Contact information for previous landlords.
Personal reference letters.
Business reference letters.
An estimate of the money that renters might need to have on hand to get a $2,000 apartment (* = not always required):
Nonrefundable application fee — $25 to $150
First month’s rent — $2,000
Last month’s rent* — $2,000
Security deposit — $2,000
Broker’s fee (15 percent of the annual rent)* — $3,600
TOTAL — $4,025 to $9,750
Monday, March 31, 2008
THEY JUST DON'T UNDERSTAND: BANKS AND WALK-UPS AND STUDIOS
from New York Magazine
In a tight market, banks look askance at walk-ups and studios. What’s a New Yorker to do?
ByS. Johanna Robledo
Published Mar 24, 2008
In a tight market, banks look askance at walk-ups and studios. What’s a New Yorker to do?
ByS. Johanna Robledo
Published Mar 24, 2008
Refinancing was tough for the candidate, but not for the usual reasons. On paper, he was a dream: good job, great credit score, tons of equity in a big, well-renovated Inwood apartment. But many banks refused, for one simple, though confusing, reason: He lived in a fifth-floor walk-up. Never mind that in his neighborhood, Inwood—indeed, all over the city, even in the best neighborhoods—walk-ups are everywhere.
Never mind, also, that most of the big banks are headquartered in New York, and that their bean-counters might be expected to understand our peculiar landscape. The fact is, broad national rules often put ridiculous constraints on New York deals. Paul Cole, of the mortgage-brokerage firm Trachtman and Bach, notes that New Yorkers who are neither subprime borrowers nor financially dicey are often confounded by arcane house rules that are incompatible with our urban landscape. “The business of mortgages and common sense don’t necessarily mix,” says Cole.
Take four-unit co-ops. While they’re standard-issue in well-off brownstone neighborhoods like Park Slope, Cole says they’re practically untouchable for some lenders. So are apartments with window bars; if an appraiser photographs them, a red flag will sometimes go up. Some banks won’t fund co-op deals at all, says Jeffrey Guarino, managing director of Gotham Capital Mortgage—and cooperatives constitute 75 percent of New York’s salable housing stock. Small properties can also be suspect. One magazine editor was stunned to discover that JPMorganChase wouldn’t write him a home-equity loan because his West Village studio, worth more than many suburban houses, was under 600 square feet. Cole gets agitated just talking about it: “You and I know you can sell a ten-by-ten storage unit in the city and get a bidding war!” he says. (Reached for comment, Chase’s Mike Fusco says that “the dimensions of a co-op do matter when applying for a home-equity loan.”)
The solution, fortunately, is not difficult. If you find yourself up against one of these rules, find another bank. You may have to settle for the second-best interest rate, say, or a lender that’s less convenient. If you’re working on your own, this may require more shopping; if not, most New York mortgage brokers know the game inside out, and will do the screening for you.
So why don’t the banks just wise up? Even though the city is thickly speckled with Chase branches—and those of other banks—lending rules are often hatched in far-off places, where walk-ups are considered slums and 500-square-foot apartments are hard-to-sell oddities. “Here’s the thing: We forget sometimes that New York City is a small piece of a lender’s portfolio,” says Guarino. Today’s suspicious mortgage climate doesn’t help, either. “No one’s in the mood to make exceptions,” explains Cole. “You may think you’re qualified, but that may not matter.
Never mind, also, that most of the big banks are headquartered in New York, and that their bean-counters might be expected to understand our peculiar landscape. The fact is, broad national rules often put ridiculous constraints on New York deals. Paul Cole, of the mortgage-brokerage firm Trachtman and Bach, notes that New Yorkers who are neither subprime borrowers nor financially dicey are often confounded by arcane house rules that are incompatible with our urban landscape. “The business of mortgages and common sense don’t necessarily mix,” says Cole.
Take four-unit co-ops. While they’re standard-issue in well-off brownstone neighborhoods like Park Slope, Cole says they’re practically untouchable for some lenders. So are apartments with window bars; if an appraiser photographs them, a red flag will sometimes go up. Some banks won’t fund co-op deals at all, says Jeffrey Guarino, managing director of Gotham Capital Mortgage—and cooperatives constitute 75 percent of New York’s salable housing stock. Small properties can also be suspect. One magazine editor was stunned to discover that JPMorganChase wouldn’t write him a home-equity loan because his West Village studio, worth more than many suburban houses, was under 600 square feet. Cole gets agitated just talking about it: “You and I know you can sell a ten-by-ten storage unit in the city and get a bidding war!” he says. (Reached for comment, Chase’s Mike Fusco says that “the dimensions of a co-op do matter when applying for a home-equity loan.”)
The solution, fortunately, is not difficult. If you find yourself up against one of these rules, find another bank. You may have to settle for the second-best interest rate, say, or a lender that’s less convenient. If you’re working on your own, this may require more shopping; if not, most New York mortgage brokers know the game inside out, and will do the screening for you.
So why don’t the banks just wise up? Even though the city is thickly speckled with Chase branches—and those of other banks—lending rules are often hatched in far-off places, where walk-ups are considered slums and 500-square-foot apartments are hard-to-sell oddities. “Here’s the thing: We forget sometimes that New York City is a small piece of a lender’s portfolio,” says Guarino. Today’s suspicious mortgage climate doesn’t help, either. “No one’s in the mood to make exceptions,” explains Cole. “You may think you’re qualified, but that may not matter.
Tuesday, March 25, 2008
'YOU SAY RECESSION. I SAY RESERVATIONS!"
From the New York Times
You Say Recession, I Say ‘Reservations!’
By MICHAEL BARBARO and CHRISTINE HAUGHNEY
THE collapse of a major financial institution is usually an occasion for hand-wringing and tut-tutting over potential job losses, lower consumer spending and missed mortgage payments.
In New York City, it’s also seen as an opportunity.
For many of the city’s middle class, especially those in the creative class, who have felt sidelined as the city seemed to become a high-priced playground for Wall Street bankers, the implosion of the brokerage house Bear Stearns raises a tantalizing possibility: participation in an economy they have been largely shut out of.
Few romanticize the nearly bankrupt New York of the 1970s or the recession of the late 1980s. But if the city suffers an economic downturn, as many now predict, there are fantasies of New York returning to a pre-Gilded Age, before the average Manhattan apartment cost $1.4 million, SAT tutors charged $500 an hour and dinner entrees crossed the $40 threshold.
Andre Anderson, 34, an account executive at TheDeal.com, a financial news Web site, would like to buy a Manhattan apartment with his girlfriend, but he said their combined incomes still make it nearly impossible to afford one.
Like many, he is rooting for what could be called a Bear Stearns discount, as newly unemployed financiers cut back on the buying binges that inflate the cost of life in the city.
“If there is greater good for everyone, is it worth a few people losing their jobs?” Mr. Anderson asked. “I think so. I hate to see people lose their jobs, but prices in the city have become ridiculous.”
From the Bronx to Staten Island, the disintegration of a bank known for its seven- and eight-figure salaries seemed to expose just how eager many New Yorkers are to release a little air from the city’s wealth bubble. Corey K. Cox, 32, who works at an equity research firm, hopes that the troubles for Bear Stearns workers may make it easier to buy a three-bedroom apartment or even a house in Brooklyn. His wife is expecting their second child in April.
“The environment right now is definitely more favorable to people who don’t make those Wall Street bonuses,” Mr. Cox said.
On Web sites devoted to New York, there was a healthy dose of schadenfreude.
“I am willing to risk a recession if it means tons of ibankers will be gone,” wrote one anonymous poster on Curbed.com, a Web site about real estate.
New York City has always been defined by the yawning gap between its haves and have-nots. But the last 15 years have witnessed the rise of a class of financiers whose salaries and bonuses have reached staggering heights. Over the last five years, the median compensation for a managing director working in investment banking rose from $650,000 to $1.37 million, according to Johnson Associates, a compensation consulting firm.
That is a pittance compared with hedge-fund managers. The highest-paid managers earned at least $240 million a year in 2006, according to the Institutional Investor’s Alpha magazine, nearly double the amount of 2005 (and up from a minimum of $30 million in 2002).
Their pay — and eagerness to spend it — has encouraged the growth of a luxury market in everything from groceries to restaurants to spas to specialty boutiques. Witness the Marc Jacobs-ization of the West Village, the surging average price of a two-bedroom apartment in Harlem to $1.1 million, and the rise of $15 tubs of ice cream in, of all places, the Lower East Side, at Il Laboratorio del Gelato.
In a city where the median household income in 2006 was $46,480, it’s no wonder that many people are bitter.
Robert H. Frank, an economics professor at Cornell, has written about the phenomenon of Americans who feel impoverished because of the towering wealth of those above them. In New York City, he said, those feelings are compounded by the sense that much of the wealth at the top is derived from financial instruments that merely move money around.
“It’s one thing if people are adding value to society,” Professor Frank said. “But there is skepticism that this is all a shell game and these guys are not adding value, at least to the extent that justifies their salaries.”
Kathryn Lyon, 62, who works at a legal staffing firm, and her husband, who works for the city, have wanted to buy an apartment in Manhattan for the last seven years, but have felt priced out by the wealthy.
“The city has been so damaged by this wealth, and the middle class has been forced out,” Ms. Lyon said. “You’re holding on by your fingernails to stay in the city.”
“I love New York,” she added, “But there’s always the risk of the city being swallowed up by wealth.”
At the same time, the troubles at Bear Stearns and the rest of Wall Street may well create hard times for New Yorkers. Many of the 8,000 Bear Stearns workers in the city are expected to lose their jobs. Citigroup announced that it will lay off 2,000 employees, and more job cuts are likely at companies like Merrill Lynch and Goldman Sachs.
The trickle-down effect may allow people like Ms. Lyon to buy an apartment, but it could also make the city a far less desirable place to live. During the last prolonged slump on Wall Street, after the crash of the stock market in 1987, a combination of large job losses at banks, trouble in the credit markets and a glut of new commercial and residential real estate on the market (sound familiar?) battered the city .
Office vacancies soared. Housing prices fell, with bad loans leaving some buildings worthless. Crime surged. And tourism plunged.
Jonathan Miller, the president and chief executive of Miller Samuel, a Manhattan real estate appraisal company, remembers appraising a studio co-op apartment in the now-exclusive Tudor City for $11,000 in 1990.
Even though he could afford to charge the studio on his Visa, he decided that it wasn’t worth the risk. “There was great concern whether many of these co-ops would remain solvent,” he said.
That’s why the troubles at Bear Stearns are a mixed blessing for New York’s lower ranks. The same masters of the universe who have made housing so expensive have beefed up the tax base, its sanitation services and its police force. They have, in many ways, underwritten the “new” New York City of the late 1990s and 2000s, defined by pristine parks and low murder rates.
Some Bear Stearns executives already are unloading homes. One of them called a Manhattan broker last week to put his town house up for sale. Ray Schmitz, an associate broker at Coldwell Banker Previews International who stood outside of Bear Stearns on Monday morning handing out business cards, said he received calls from two employees interested in selling.
But, at least so far, New York real estate prices show few signs of declining. The weak American dollar is encouraging thousands of foreigners to buy what seem like bargain apartments. “The condo market is not negotiable because we have Europeans throwing so much money at it,” said Darren Sukenik, an executive vice president for luxury sales at Prudential Douglas Elliman.
And don’t count on suddenly getting a next-day reservation at New York’s most popular restaurants. Waits for prime-time tables at Nobu are still four weeks, said Drew Nieporent, the force behind more than a dozen restaurants, including Rubicon and Tribeca Grill.
Even at the height of the ’80s economic downturn, Mr. Nieporent did not lower prices at his restaurants. But he did make one big concession: a B.Y.O.B. Monday at Montrachet.
Still, many New Yorkers hope prices decline. Even some on Wall Street.
Michele Kleier, the president of Gumley Haft Kleier, a Manhattan brokerage, received a call from a giddy client, a financier. The bidding war over a seven-room $4 million apartment had suddenly turned in the client’s favor. His rival, it turned out, was an executive at Bear Stearns, a once-glittering credential that might now hurt his chances with the seller and the co-op board.
“It’s like an old Western movie where the vultures are gathering,” Ms. Kleier said between showings for multimillion-dollar listings.
By MICHAEL BARBARO and CHRISTINE HAUGHNEY
THE collapse of a major financial institution is usually an occasion for hand-wringing and tut-tutting over potential job losses, lower consumer spending and missed mortgage payments.
In New York City, it’s also seen as an opportunity.
For many of the city’s middle class, especially those in the creative class, who have felt sidelined as the city seemed to become a high-priced playground for Wall Street bankers, the implosion of the brokerage house Bear Stearns raises a tantalizing possibility: participation in an economy they have been largely shut out of.
Few romanticize the nearly bankrupt New York of the 1970s or the recession of the late 1980s. But if the city suffers an economic downturn, as many now predict, there are fantasies of New York returning to a pre-Gilded Age, before the average Manhattan apartment cost $1.4 million, SAT tutors charged $500 an hour and dinner entrees crossed the $40 threshold.
Andre Anderson, 34, an account executive at TheDeal.com, a financial news Web site, would like to buy a Manhattan apartment with his girlfriend, but he said their combined incomes still make it nearly impossible to afford one.
Like many, he is rooting for what could be called a Bear Stearns discount, as newly unemployed financiers cut back on the buying binges that inflate the cost of life in the city.
“If there is greater good for everyone, is it worth a few people losing their jobs?” Mr. Anderson asked. “I think so. I hate to see people lose their jobs, but prices in the city have become ridiculous.”
From the Bronx to Staten Island, the disintegration of a bank known for its seven- and eight-figure salaries seemed to expose just how eager many New Yorkers are to release a little air from the city’s wealth bubble. Corey K. Cox, 32, who works at an equity research firm, hopes that the troubles for Bear Stearns workers may make it easier to buy a three-bedroom apartment or even a house in Brooklyn. His wife is expecting their second child in April.
“The environment right now is definitely more favorable to people who don’t make those Wall Street bonuses,” Mr. Cox said.
On Web sites devoted to New York, there was a healthy dose of schadenfreude.
“I am willing to risk a recession if it means tons of ibankers will be gone,” wrote one anonymous poster on Curbed.com, a Web site about real estate.
New York City has always been defined by the yawning gap between its haves and have-nots. But the last 15 years have witnessed the rise of a class of financiers whose salaries and bonuses have reached staggering heights. Over the last five years, the median compensation for a managing director working in investment banking rose from $650,000 to $1.37 million, according to Johnson Associates, a compensation consulting firm.
That is a pittance compared with hedge-fund managers. The highest-paid managers earned at least $240 million a year in 2006, according to the Institutional Investor’s Alpha magazine, nearly double the amount of 2005 (and up from a minimum of $30 million in 2002).
Their pay — and eagerness to spend it — has encouraged the growth of a luxury market in everything from groceries to restaurants to spas to specialty boutiques. Witness the Marc Jacobs-ization of the West Village, the surging average price of a two-bedroom apartment in Harlem to $1.1 million, and the rise of $15 tubs of ice cream in, of all places, the Lower East Side, at Il Laboratorio del Gelato.
In a city where the median household income in 2006 was $46,480, it’s no wonder that many people are bitter.
Robert H. Frank, an economics professor at Cornell, has written about the phenomenon of Americans who feel impoverished because of the towering wealth of those above them. In New York City, he said, those feelings are compounded by the sense that much of the wealth at the top is derived from financial instruments that merely move money around.
“It’s one thing if people are adding value to society,” Professor Frank said. “But there is skepticism that this is all a shell game and these guys are not adding value, at least to the extent that justifies their salaries.”
Kathryn Lyon, 62, who works at a legal staffing firm, and her husband, who works for the city, have wanted to buy an apartment in Manhattan for the last seven years, but have felt priced out by the wealthy.
“The city has been so damaged by this wealth, and the middle class has been forced out,” Ms. Lyon said. “You’re holding on by your fingernails to stay in the city.”
“I love New York,” she added, “But there’s always the risk of the city being swallowed up by wealth.”
At the same time, the troubles at Bear Stearns and the rest of Wall Street may well create hard times for New Yorkers. Many of the 8,000 Bear Stearns workers in the city are expected to lose their jobs. Citigroup announced that it will lay off 2,000 employees, and more job cuts are likely at companies like Merrill Lynch and Goldman Sachs.
The trickle-down effect may allow people like Ms. Lyon to buy an apartment, but it could also make the city a far less desirable place to live. During the last prolonged slump on Wall Street, after the crash of the stock market in 1987, a combination of large job losses at banks, trouble in the credit markets and a glut of new commercial and residential real estate on the market (sound familiar?) battered the city .
Office vacancies soared. Housing prices fell, with bad loans leaving some buildings worthless. Crime surged. And tourism plunged.
Jonathan Miller, the president and chief executive of Miller Samuel, a Manhattan real estate appraisal company, remembers appraising a studio co-op apartment in the now-exclusive Tudor City for $11,000 in 1990.
Even though he could afford to charge the studio on his Visa, he decided that it wasn’t worth the risk. “There was great concern whether many of these co-ops would remain solvent,” he said.
That’s why the troubles at Bear Stearns are a mixed blessing for New York’s lower ranks. The same masters of the universe who have made housing so expensive have beefed up the tax base, its sanitation services and its police force. They have, in many ways, underwritten the “new” New York City of the late 1990s and 2000s, defined by pristine parks and low murder rates.
Some Bear Stearns executives already are unloading homes. One of them called a Manhattan broker last week to put his town house up for sale. Ray Schmitz, an associate broker at Coldwell Banker Previews International who stood outside of Bear Stearns on Monday morning handing out business cards, said he received calls from two employees interested in selling.
But, at least so far, New York real estate prices show few signs of declining. The weak American dollar is encouraging thousands of foreigners to buy what seem like bargain apartments. “The condo market is not negotiable because we have Europeans throwing so much money at it,” said Darren Sukenik, an executive vice president for luxury sales at Prudential Douglas Elliman.
And don’t count on suddenly getting a next-day reservation at New York’s most popular restaurants. Waits for prime-time tables at Nobu are still four weeks, said Drew Nieporent, the force behind more than a dozen restaurants, including Rubicon and Tribeca Grill.
Even at the height of the ’80s economic downturn, Mr. Nieporent did not lower prices at his restaurants. But he did make one big concession: a B.Y.O.B. Monday at Montrachet.
Still, many New Yorkers hope prices decline. Even some on Wall Street.
Michele Kleier, the president of Gumley Haft Kleier, a Manhattan brokerage, received a call from a giddy client, a financier. The bidding war over a seven-room $4 million apartment had suddenly turned in the client’s favor. His rival, it turned out, was an executive at Bear Stearns, a once-glittering credential that might now hurt his chances with the seller and the co-op board.
“It’s like an old Western movie where the vultures are gathering,” Ms. Kleier said between showings for multimillion-dollar listings.
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