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Friday, November 18, 2016

New York Franchisors: Start Thinking About Filing Your NYS Tax Documents

NY Franchise Law, NY Tax Law
With the new year fast approaching, franchisors in New York should beginning focusing on updating their franchise disclosure documents, renewing their franchise registrations. However, NY franchisors should not forget that it is required to file certain tax documents.

The reporting requirement applies where the franchisor-franchisee relationship falls within the broad franchise definition under the New York franchise statute. The statute was created so that New York tax authorities can verify state tax filings submitted by New York franchisees so that the franchisor's filing matches what the franchisee disclosed.

Franchisors in New York that have at least one franchisee doing business in New York are required to register as a sales tax vendor and must file information returns with the New York State Department of Taxation and Finance. The reporting period is from March 1 to February 28 of the subsequent year. The returns are due on March 20. You must file even if the franchisee made no sales in New York during the filing period.

New York franchisors must report specific information, including the identity of, and payments made to, each of your franchisees doing business in New York and certain sales and payment related information. For example, New York franchisors must include the name of each franchisee and the gross sales in New York State for each franchise location as reported to you.

The New York State Department of Taxation provides online filing capability to New York franchisors through its website. Franchisors need only create an online filing account to access the system and follow the instructions provided on the website.

Penalties of up to $10,000 may be imposed for failure to comply with the reporting and information requirements.

If you are unsure of the requirements inposed by the NYS Department of Taxation and Finance onto franchisors in New York, we strongly suggest contacting our attorneys who can help you navigate the process.
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*Sean Hayes may be contacted at: SeanHayes@ipglegal.com. Sean Hayes is co-chair of the Korea Practice Team and Chair of International Practice Group at IPG Legal.  He is the first non-Korean attorney to have worked for the Korean court system (Constitutional Court of Korea) and one of the first non-Koreans to be a regular member of a Korean law faculty.  Sean is ranked, for Korea, as one of only two non-Korean lawyers as a Top Attorney by AsiaLaw.  He has, also, received the highest rating by AVVO and other legal rating services.

*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.

Thursday, November 17, 2016

How To Effectively Draft A Clear Statement of Work That Meets Your Needs

NY Business Law, Business in NY
When hiring a business in connection with a project, it is important that all parties create and agree to a clear and precise Statement of Work so there is no misunderstanding about the necessary benchmarks and deadlines involved.

A Statement of Work (SOW) is a formal document entered into by parties involved in a project that specifies in clear, understandable terms the work to be done in developing or producing the goods or services to be delivered or performed by a contractor. It captures and defines the specific work to be performed for a client, deliverables, and a timeline that a vendor or contractor must execute.

A SOW needs to contain the material terms of what needs to be done in as definitive and precise a manner as possible. The purpose of a SOW is to detail the work requirements for projects and programs that have products, deliverables and/or services performed. The SOW also includes detailed requirements and pricing, along with standard industry terms and conditions.

Generally, there are the following three major types of SOWs:
  • Design Based SOW – This type of SOW tells the supplier how to do the work. The statement of work defines buyer requirements that control the processes of the supplier.
  • Level of Effort SOW – This SOW type can be written for almost any type of service. The deliverable in this type of SOW are the number of hours of work performed; and
  • Performance Based SOW – In this kind of SOW, the seller is given the freedom to determine how to meet the buyer’s requirements. This generally includes 3 parts:
    • Scope of work
    • Applicable Documents 
    • The arrangement of technical tasks and sub-tasks required
Typically, every type of SOW will contain:
  • Who pays the costs;
  • The timeline for payment;
  • A description of all deliverables and when they are expected;
  • The tasks and sub-tasks required by the project;
  • Who will perform those tasks and sub-tasks;
  • The project’s governance process and management structure;
  • The resources and materials required for the project; 
  • The facilities to be used; 
  • The equipment needed; and
  • A timetable with different benchmarks covering when each deliverable, task or sub-task should be completed. 
Often, payment information is made contingent upon successful completion of certain tasks and / or benchmarks. Full payment is not be made until both sides agree that the project is complete and all deliverables meet agreed-upon specifications.

When writing a SOW, we recommend the following:

Be clear. Specificity in describing the project’s scope and requirements is key. Make sure benchmarks are clearly connected to completion of necessary tasks. This not only clarifies your expectations, but will helpful to an attorney should a breach occur that needs to be litigated.

Keep it simple.  Keeping the language of the SOW as simple as possible will promote the clarity we just discussed. Avoid using legal terms and technical jargon. Use drawings, illustrations, diagrams, charts, pictures, tables, and graphs if they clearly improve the communication in describing the requirements.Your goal should be to create a document everyone can understand.

Utilize Expertise Around You. When distilling technical matters into simple terms, check with your technical and legal experts to make sure you are expressing what you mean to the utmost. Ultimately, the task of writing a SOW should fall to those experts working as a team.

Following these steps increase the likelihood of successfully completing a Statement Of Work that best reflects your needs.
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*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.

Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.

Wednesday, November 16, 2016

Important Legal Considerations When Terminating A Franchise Agreement In New York

NY Franchise Law, Business in NY
The termination or cancellation of a franchise relationship requires planning, a thorough understanding of your particular franchise agreement and, in certain instances procedural steps that must be followed.

Preparation begin before signing a franchise agreement. Before signing, a would-be franchisee should reconsider the written terms outlining your right to terminate the franchise agreement. Typically, a franchisor will lay out several conditions it would consider to be breaches of the agreement that trigger termination if committed. These conditions will not afford an opportunity for either party to cure or correct the condition. Thus, when you and your attorney review that section dealing with termination‚ you should both identify these circumstances.

Additionally, you and your attorney should identify conditions that may result in termination unless you cure them. These conditions typically include a clear time period to cure and correct that would avoid termination.

Examples of triggering events that may or may not be curable are: :

  • failing to fulfill minimum purchase requirements;
  • misuse of the franchisor's intellectual property;
  • unauthorized sales; and
  • the violation of ancillary agreements, such as a non-compete agreement.

When reassessing the terms of your franchise agreement‚ you may want to get the help of an experienced New York franchise lawyer. A New York franchise lawyer can review the terms of your existing agreement‚ and identify opportunities for improvement.

Also, it helps for franchisees to understand what  New York franchise laws as they relate to termination. Franchisors operating in New York  must properly register the Franchise Disclosure Document with the Office of the Attorney General prior to execution and disclosure of the franchise agreement that you are canceling. Next, you should determine what, if any, triggering event occurred and what period to cure may or may not exist. If the triggering event is curable, formal correspondence should be exchanges giving notice of the triggering event and the time period to cure, if any, and the necessary curable action. Notices should also include an admonition for continued compliance with all contracted obligations during the notification period. These formalities are crucial, as a dispute over termination could lead to litigation later on.

If the clauses of the franchise agreement governing termination have not been triggered, but the franchisee may just "want out"of an un-expired franchise agreement, then a franchisee should plan an "exit plan" before signing the agreement. As discussed in previous blogs, many franchisors have structure succession plans that will help franchisees avoid future liability, or will even buy-out franchisees under terms set in the franchise agreement. Additionally, if the exiting franchisee wants to run a competing "non-franchised" business, you and your attorney should take a hard look at any non-compete agreements.

As you can see, managing franchise relationships can be highly complex and require advance planning and foresight that an attorney can offer. We highly recommend seeking out legal advice from knowledgeable attorneys who are experienced in managing such relationships.
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*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.

Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.

Tuesday, November 15, 2016

Types of Investors That Can And Cannot Participate in SEC Regulation D Private Offerings

NY Securities Law, NY Corporate Law
Start-up companies looking for investment capital must understand the classification of investors that can and cannot partake in private offerings.

Under the Securities and Exchange Commission's Regulation D, an organization may issue a private offering of stock to raise funds without officially registering to “go public." We discussed the nature of Regulation D offerings, which are also called "private placements" in an earlier blog post.

As will be discussed below, only certain types of investors may participate in a Regulation D offerings. To understand why the SEC encourages certain kinds of investors over others, it is important to understand the different types of investors in the market:

Accredited Investor: This is defined as an individual that has made $200,000 or more on an annual basis for the past two out of three years and is likely to make that same amount this year. Alternatively, an accredited investor can fail to meet the income threshold, but qualify if s/he has a net worth of over $1 million, excluding any primary residence. The investor can “self-certify” that they are accredited in most circumstances, but in the case of a private offering using Rule 506(c), the investor must be certified by the issuing company or a qualified third party.

Non-Accredited Investor: A non-accredited investor is simply everyone else that is not an accredited investor. In many cases, start-up companies want to accept investor dollars from friends and family that are interested in supporting the owners who are, often, non-accredited but still want to participate. Rule 506 (c) forbids such investment outright, but another Regulation D rule, Rule 506(b), allows non-accredited investment as long as the investors are "sophisticated" and the start-up raising the money has no more than 35 of them investing in the offering.

Sophisticated Investor: A sophisticated investor is a non-accredited investor that has superior knowledge of business and financial matters. For example, it could be a CFO, CPA, accountant, business owner, banker or some other financial professional. This definition leaves room for interpretation by the offering company, so it is important to define what "sophisticated" means to you and to be able to back up your own definition in case the SEC were to ask why you thought a certain investor was "sophisticated."

The reason why start-up businesses need to understand these definitions is because, under Regulation D, there are several rules under which your private offering can be issued. The SEC encourages or, in some cases, requires companies to work with accredited investors when raising capital through a private offering.  However, the rules also give room for a certain number of non-accredited investors to participate so long as disclosure requirements are met. As discussed earlier, in Rule 506, any non-accredited investor must be a sophisticated investor.

Private offerings are  an excellent source of capital, but make sure you are following the guidelines carefully so that you can stay within compliance. Hiring an experienced attorney will manage your investment rounds expertly.
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*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.

Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.

Monday, November 14, 2016

The Three Types of Franchises Available To Entrepreneurs

NY Franchise Law, Business in NY
If you are serious about investing in a franchised business, then you should educate yourself on the types of franchises that exist in the market.

There are many ways to differentiate between different types of franchises, such as size and geographic location, but there are also different types of franchises that entrepreneurs should know:
  • Business Format Franchises: In business format franchises, a company expands by supplying independent business owners with an established business, including its name, products, rules and trademarks. The franchisor generally assists the independent owners in launching and running their businesses. In return, the business owners pay fees and royalties to the franchisor. In most cases, the franchisee also buys its business supplies from the franchiser or from approved vendors. Fast food restaurants are good examples of this type of franchise. 
  • Product Franchises: Also called a "trade name franchise," product franchises involve the sale and / or manufacture of products and the business model covers the overall management of the sale of these products. A franchisor supplies a product family to a franchisee who may also take on the identity, branding and intellectual property of the franchisor. To obtain these rights, store owners must pay fees or buy a minimum amount of products regularly. Exclusive brand-name stores are usually product franchisees.
  • Manufacturing Franchises: A manufacturing franchise is any business that uses components, parts or raw materials to make a finished good. These finished goods can be sold directly to consumers or to other manufacturing businesses that use them for making a different product. This type of franchise is common among food and beverage companies where the franchisor supplies the ingredients and the manufacturers mixes and packages the final product and / or distributes it for sale. For example, soft drink bottlers often obtain franchise rights from soft drink companies to produce, bottle, and distribute the final product. 
There also exists various franchise types depending on the level of franchise opportunities provided, but, all in all, these three basic types comprise the vast majority of the type of franchise opportunities available.

Obviously, most entry-level budding entrepreneurs gravitate towards business format franchises, as both product and manufacturing franchises require significant established infrastructure in place to manage the franchise. No matter what type of franchise type you may be considering, it is best for whatever business you are building to contact a lawyer in the formative stage of your business plan. 
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*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.

Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.

Friday, November 11, 2016

Purchase A Franchise Or Start Your Own Business: Six Factors For Your Consideration

NY Franchise Law, Business in NY
Choosing between purchasing a franchise and starting your own business is one with promise and peril on both sides that must be considered.

Weighing the pros and cons of purchasing a franchise against starting a non-franchised business begins with some self-reflection. If you are an independent person that likes to experiment or wants to blaze your own trail, a franchise with rigorous systems and proscribed rules is probably not for you. If you want to run a business, but do not know where to begin, a franchise with its own infrastructure established may be the right move for you. Of course, your initial budget is another factor to weigh.

Beyond the above introspection, the pros and cons of franchise business versus non-franchised business in terms of both investment and goals for starting a business must be considered:
  1. Branding: The reason consumers are guaranteed a consistent product when walking into a fast food franchise regardless of location is because franchises demand uniformity and are often structured to be replicated. These traits allow business owners to have a built-in customer base that is familiar with the products and brands through the franchise's past years of marketing. On the other hand, non-franchised businesses must create its brand awareness and identity from the ground up. 

  2. Control: Prospective non-franchised small business owners tend to want control over every detail of their burgeoning business. That means developing branding, products, operating systems and intellectual property - and doing so on a trial-and-error basis. When starting a franchise, the prospective franchisee signs an agreement with rules laid out by the franchisor that must be followed. That is because franchisees are awarded a license to use the franchisor's brand name, system, equipment and intellectual property that is a "business-in-a-box" perfected over many years. 

  3. Competitive Edge: For non-franchised small business owners, all that trial-and-error development costs time and money. For franchisees, your franchisor has refined the business model and operations, which passes savings down to you. Franchises have established hundreds of units in the marketplace, which allow franchisees to open the business faster than non-franchised business owners. Also, vendors may feel more comfortable doing business with McDonald's than they would with Joe's Burgers because vendors are more likely to do so as well. This also translates to faster ROI (return on investment) for franchisees, who benefit from the ready-made customer base. 

  4. Start-Up Costs: All new businesses require startup capital for space, equipment and personnel. While starting your own non-franchise business can cost less than buying a franchise, many franchisors have established relationships with lenders that look more favorably upon the brand than an independent business owner with an unproven track record.

  5. Support: When you start your own business, you must learn all these things on your own, with "rookie mistakes" part of the learning curve. Franchisors provide new franchisees with extensive training in every aspect of their new business, from flipping burgers to which point-of-sale system to buy. And many offer advanced training to help you stay on top of your business as it grows. That is not to say that non-franchised business owners is left alone. Small business owners can join their local Chamber of Commerce or other local business organizations and associations.  

  6. Exit Plan: Starting a non-franchised business has high risk, but also high reward. Selling a successful non-franchised business can be very lucrative, but the pool of potential buyers may be more limited than an known quantity like a franchise business. However, as discussed in our blog about succession rights in a franchise business, franchisors may have a structured system that must be followed in order to groom a potential buyer. However, franchisees should also be able to sell the business back to the franchisor. 
Whether you are buying a franchise or starting your own business, going into business for yourself is a major life decision that you should consult a business attorney that can guide you through these and other considerations. 
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*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.

Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.

Thursday, November 10, 2016

New York Franchisees Should Keep Franchisors In The Loop On Succession Planning

NY Franchise Law
New York franchisees interested in succession planning must be made aware of the effect a lifetime transfer of a business has on estate planning.

Transfers without consideration during one’s lifetime are considered gifts under federal and state tax law. From an estate tax perspective, gifts reduce the estate tax threshold of the person making the gift and after death, that person’s estate would have to pay taxes on the amount of the estate that exceeds the estate tax threshold. However, with advanced preparation, a franchisee interested in succession planning can implement a plan to minimize tax burdens.

Franchisees are responsible for finding a buyer when they want to sell their franchises. Succession planning may involve a franchisee identifying a successor such as a family member or key employee. In these circumstances, and depending upon the terms and conditions of the particular franchise agreement, the franchisor may be granted limited time and opportunity to evaluate and approve the buyer or successor.

After approving the transaction, it is advisable for both franchisor and franchisee to work jointly to educate and train the successor in operating a successful franchise. The franchisee should make sure the successor understands the customer base and market area.

Having a franchisor work with its existing franchisees on succession planning, rather than merely reacting to a pending transaction help avoid complications. If, for example, a franchisor has its own succession program, this may be an indication that the franchisor is willing to working with franchisees to their mutual benefit. Any franchise succession plan considers how best to accomplish a transfer in accordance with the franchisor’s requirements. Typically, franchise agreements limit a franchisee’s ability to transfer the franchise and in many instances give the franchisor an option to acquire the franchise. That option, if exercised, would defeat the franchisee’s goals of passing on the franchise to the next generation.

A smart succession plan involves getting the franchisor on board early in the process so that the franchisor can become comfortable with the future operators of the franchise. Proper planning includes grooming successors for management and facilitate relationships between them and the franchisor, creditors, vendors and employees. That planning should start sooner rather than later.

A business operator interested in planning for the next generation would be wise to consult with a knowledgeable attorney early on in the process so that all interested parties undertake a smooth transition.
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*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.

Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.

Wednesday, November 9, 2016

Maximum Rates Of Interest Allowed On Private Loans In New York

NY Business Law, Business in NY
New York business owners on the lookout for financing should know how much interest they can be charged on private loans made by persons or entities other than banking institutions or credit card companies.

Charging interest rates that exceed the state maximum allowed by law is called usury (also commonly referred to as "loansharking"), which is illegal. When it comes to determining at what rate a particular interest charge becomes actionable on a civil basis (where a borrower can object to the terms of the loan), and at what rate the charge may actually expose the lender to criminal liability, New York law can be a little complicated. Usury laws in New York, regulate the maximum interest rate a person or entity may be charged on a money loan. The applicable laws are the General Obligations Law and the Banking Law, which set civil law limits, and the NY Penal Law, which sets criminal law limits.

Under these laws, if a private loan exceeds the maximum "civil" usury rate, then the entire loan is considered void, and the lender may be denied the right to recover interest as well as principal. Additionally, the borrower may maintain an action for the return of interest payments previously made. If the loan exceeds the maximum "criminal" usury rate under New York law, then the lender may be prosecuted for committing a felony.

New York laws create a tiered system based upon the nature of the borrower and the size of the private loan:

  • For private loans made to individuals that do not exceed $250,000, the maximum annual "civil" interest rate is 16%.  The maximum "criminal" interest rate is 25%. 
  • For private loans made to individuals that are between $250,000 and $2.5 million, there is no maximum "civil" rate. There is a 25% maximum "criminal" rate. 
  • For private loans that exceed $2.5 million, there is no maximum "civil" or "criminal" interest rate. 
  • For private loans made to corporations that do not exceed $2.5 million, there is no maximum "civil" interest rate, but there is a 25% maximum "criminal" interest rate.  For loans that exceed $2.5 million, there is no maximum "civil" or "criminal" interest rate.  

States other than New York may have their own statutory and common-law rules and standards for usury. Therefore, we suggest that you obtain advice from a knowledgeable attorney in the event that a legal question arises concerning that the interest charges in a particular private loan transaction is usurious,
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*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.

Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.

Tuesday, November 8, 2016

Validity and Enforceability of Electronic Signatures

NY Business Law, Business in NY
Federal law governs when the use of an electronic signature is valid and enforceable.

The Electronic Signatures in Global and National Commerce Act (also called ESIGN Act) defines an electronic signature as “an electronic sound, symbol, or process attached to or logically associated with an electronic record and executed or adopted by a person with intent to sign the record.”

This definition covers a lot of ground, as businesses use different means, methods and technologies that create electronic signatures, including:
  • Check boxes or buttons that state you agree to certain terms and conditions;
  • PIN numbers or passwords;
  • Signing an electronic keypad; or
  • A graphical representation, image or a scan of a handwritten signature.

The ESIGN Act protects the validity and enforceability of signatures made electronically, including:
  • A signature, contract, or other record relating to such transaction may not be denied legal effect, validity, or enforceability solely because it is in electronic form; and
  • A contract relating to such transaction may not be denied legal effect, validity, or enforceability solely because an electronic signature or electronic record was used in its formation.

The ESIGN Act does not apply to:
  • Wills, trusts, and codicils;
  • Termination of utility services;
  • Termination of health or life insurance;
  • Family matters, such as adoption and divorce;
  • UCC transactions, unless allowed by other statutes;
  • Notices of default, foreclosure or eviction;
  • Product recalls; and
  • Documents related to the transportation of hazardous materials.

The laws of electronic signatures also apply to email. Parties can create enforceable agreements through email if the email sets forth the material terms of the agreement and clearly shows that both parties intended to agree to those terms. In order to have a valid electronic signature in an email, the signature should show a manual input entered by a person who intended to agree.

Examples of electronic signatures in emails are:
  • The use of the symbols "/s/" in addition to a person's name; 
  • Using a unique method to enter the signer’s name, such as an uncommon cursive font or script; or
  • A graphic representation or image of the signer’s name or signature.

Under the ESIGN Act, parties are not compelled to accept electronic signatures if the parties prefer traditional methods of signatures. Thus, the ESIGN Act requires that the parties consent to enter into the transaction through electronic means.

The ESIGN Act  requires the signer show an intent to sign the record. That means whoever signs electronically should be able to confirm his identity and the “intent to sign.” Since the ESIGN Act requires intent to sign the record, any evidence that shows lack of intent helps the signer avoid liability in the event of unauthorized use of the electronic signature.

New York businesses must carefully control and monitor the use of electronic signatures. They should only be available to a limited number of persons that are authorized to bind the business to an agreement. Those persons should clearly state in any electronic communication that they do indeed have such authority. There should be a business record that confirms who has such authority created so that there is no confusion down the road should there be an unauthorized use of an electronic signature.
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*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.

Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.

Monday, November 7, 2016

Using Partition Actions To Settle Disagreements Between Co-Owners of Property In New York

NY Real Estate Law, NY Property Law
When co-owners of property in New York have disputes and cannot agree on what to do with their property, the parties can obtain a partition.

Under New York Law, a partition is a remedy available to any person who is a co-owner of property. Specifically, under N.Y. Real Prop. Acts. Law § 901, the following people may lawfully apply for a partition:
  1. A person holding and in possession of real property as joint tenant or tenant in common, in which he has an estate of inheritance, or for life, or for years, may maintain an action for the partition of the property, and for a sale if it appears that a partition cannot be made without great prejudice to the owners.

  2. A person holding a future estate as defined in sections forty, forty-a or forty-b of the real property law or a reversion as joint tenant or tenant in common may maintain an action for the partition of the real property to which it attaches, according to his respective share, subject to the interest of the person holding the particular estate, but no sale of the premises in such an action shall be made except with the consent in writing, to be acknowledged or proved and certified in like manner as a deed to be recorded, of the person owning and holding such particular estate. If partition or sale cannot be made without great prejudice to the owners, the complaint shall be dismissed; dismissal shall not affect the right of any party to bring a new action after the determination of such particular estate.

  3. A person entitled as a joint tenant or a tenant in common by reason of his being an heir of a person who died holding and in possession of real property, may maintain an action for partition, whether he is in or out of possession, notwithstanding an apparent devise to another by the decedent, and possession under such a devise. The plaintiff shall establish that the apparent devise is void.

  4. In the event the estate of a decedent is the owner of an estate in common in real property, the executor or administrator may bring a partition action or intervene in a pending partition action on behalf of the estate if, upon application duly made, the surrogate approve
There are two ways to effectuate a partition of real estate in New York:
  1. the parties can come to an agreement for voluntary partition with the aid of their lawyers, or 
  2. they can file a partition action in NY to get a judicial ruling on the division of land. 
A partition can be effectuated in two different way. A partition in kind physically divides the property so that each party has their own portion which they hold as sole owner. A partition by sale, which is the most common form of partition in New York, is when the property at issue is sold at auction and the co-owners divide the proceeds among them.

A partition action must divide the premises according to the type of tenancy that the parties originally had when they took ownership of the property. There are two main types of joint tenancies in New York. If the parties petitioning for a partition were tenants in common, then they can divide the property according to the percentage that each party contributed to the original acquisition of the property or according to the contractual agreement governing the ownership.

In a tenancy in common, the parties each own the property with interests according to the amount that they contributed to its purchase. In a joint tenancy, two or more tenants own the property in equal shares and, depending upon the language in the deed, may have rights of survivorship. If the parties petitioning for a partition were joint tenants, then they must divide the property equally between the owners.

Regardless of the type of tenancy, any mortgagor or lender with a lien on the property in the amount of the outstanding loan must be satisfied before the parties can divide, transfer, or sell the property because New York is a lien theory state.

In a judicial proceeding for a partition, a joint tenant or tenant in common establishes his / her entitlement to a partition by demonstrating his / her ownership and right to possess the property at issue. The remaining issue to determine is whether the equities favor the defendant's refusal to partition the property. It goes without saying that a judicial proceeding for a partition is an action that must be handled by an experienced property attorney.

Although voluntary partitions require far less litigation and court time than a judicial partition, the parties still need New York partition action lawyers to represent their interests and ensure that their property rights are protected throughout the partition negotiation process with the other owners.

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*Gene Berardelli may be contacted at: GeneBerardelli@ipglegal.com.

Gene is a New York street-smart attorney with an extreme passion for success. Gene specializes in litigation, arbitration and general corporate law for New York-based and international clients. He, also, is the host of a popular New York talk radio program.