For professionals who have worked or advised clients in other areas, real estate transactions are different in New York. Because New York was one of the first areas to be developed, some parts have Byzantine regulations, restrictions, covenants, and processes that date back centuries.
It can get complicated.
Here’s what professionals who aren’t well-versed in New York real estate need to know.
New York vs. Other Places
Few other places have restrictions that date back 200 years as New York does. In some cases, those restrictions may be difficult to find and work around or may not even make sense today.
In one case, a developer had a project with a setback requirement of 50 feet from Third Avenue. This restriction was written in script from the 1830s. Did New York City really not allow owners or developers to build within 50 feet of their property line in the 19th century? As small as some parcels are, that would make some land undevelopable.
A deep dive into 19th century documents offered a ray of hope: The restriction said that anything built within 50 feet of the property line had to be built of stone or brick, not wood. That clarification made development possible.
The key takeaway is that an attorney who understands New York real estate laws and customs is critical to buying and selling both residential and commercial real estate in New York.
(Legal) Knowledge Is Power
In many jurisdictions, a real estate attorney might only be needed for a final review of contracts and at closing. Many of the preliminary duties are often handled by a real estate agent or broker. To expedite the deal, a broker will often prepare a bare-bones, non-binding (binder agreement) document. That document may contain as little information as a price offer and a contingency that the transaction depends on successfully obtaining financing and an acceptable inspection.
In New York, it makes sense to involve a knowledgeable attorney earlier in the process to iron out the details of a transaction. This is especially true for developers because so many aspects of a potential deal need to be reviewed, such as zoning, land use, development potential, air rights, and other factors that could affect development. An attorney should also review any existing leases or contracts that could come into play in the future.
Because an attorney is so critical in New York, that attorney should be identified before a developer begins looking at sites. There’s often a due diligence period, which starts early on, making it critical to have an attorney available immediately. You want to have your partners identified before even looking.
Benefits vs. Costs
Involving an attorney earlier in the process, which isn’t the usual strategy outside of New York, will cost a bit more than using an attorney toward the end of the transaction. But there are benefits as well.
First, for sellers, prospective buyers who already have an attorney on board are clearly serious. Sellers know the buyer has the right experts involved in the transaction, so they’re not wasting anyone’s time by looking at a property that doesn’t fit their needs.
If your clients are buyers, they benefit from having an expert sitting with them at the table, knowing what’s needed and what to look out for, with a deep understanding of potential pitfalls based on prior experience in New York. The attorney will understand the nuances of New York zoning and what development is and isn’t possible on a site. The attorney can also help your clients move quickly when the right opportunity presents itself.
Two caveat: When evaluating or recommending an attorney, make sure your client will have direct access to the attorney, and not have to work through a paralegal.
The Cornerstone Value-Add
Cornerstone has skilled, experienced attorneys on staff who act as de facto, unpaid co-counsels for your clients. With the experience gained from over 16,000 transactions, we can connect you and your clients with other real estate professionals who meet the same high standards you do for customer service, expertise, and integrity. Those professionals can also be excellent referral sources. In addition, we host regular events for the real estate community, which are excellent social, professional, and networking opportunities.
Most importantly, we have an unparallelled understanding of the New York real estate market and all its major players. We know the background and history of the civil practice law and rules in New York.
There’s a reason why Cornerstone has a five-star rating from Google reviews. And because title insurance rates are set by the government, when your clients use Cornerstone, they don’t pay more. But they certainly get more. The earlier your clients are in the buying process, the more we can help. If the American Dream of property ownership is important to your clients, please let us help you make their dream a reality.
