Lawsuits by homeowners against their own insurance companies for failing to pay on damage claims that homeowners believe and argue are covered by their policies of insurance are quite common in Florida.  Frequently these involve claims for water-related damages—a typical example being a slow leak from piping in a kitchen or bathroom sink that is unknown to the homeowner but that occurs over an extended period of time and that ultimately causes damage to adjoining cabinets or perhaps even flooring.  As a plumber who came to inspect such damage in my own house once remarked, when I asked him what all this meant, “Water has to go somewhere.”

A homeowner’s insurance policy is, in its most basic form, a contract of insurance.  Each party to any contract has certain rights, duties and obligations under the contract.   If a party breaches his or her contractual obligations, the other party may have a claim for damages.  Under these circumstances, while other claims may exist, the homeowner’s primary claim against her own insurance carrier, resulting from the carrier’s refusal or failure to pay for damages that the homeowner maintains are covered by her insurance policy, is a claim for breach of contract.

From a homeowner’s perspective, one of the advantages that perhaps minimizes the risk of a lawsuit against her own insurance company is the one-way attorney’s fee provision set forth in Florida Statutes Sec. 627.428.  Subsection (1) of this statute provides:

Upon the rendition of a judgment or decree by any of the courts of this state against an insurer and in favor of any named or omnibus insured or the named beneficiary under a policy or contract executed by the insurer, the trial court or, in the event of an appeal in which the insured or beneficiary prevails, the appellate court shall adjudge or decree against the insurer and in favor of the insured or beneficiary a reasonable sum as fees or compensation for the insured’s or beneficiary’s attorney prosecuting the suit in which the recovery is had.

Thus, if a homeowner sues her insurance company for failing to pay for a loss that the homeowner feels is covered by her policy and wins that lawsuit, she will be awarded her reasonable attorney’s fees.  If, however, the homeowner loses that lawsuit, she will not be required to pay the company’s attorney’s fees.  That is why Florida Statutes Sec. 627.428 is a one-way attorney’s fee statute.

If attorney’s fees are awarded, those fees become part of the actual judgment under subsection (3) of Florida Statutes Sec. 627.428.   In addition, if an appeal is filed and the homeowner prevails in that appeal, the attorney’s fees associated with the appeal are recoverable.

In today’s tax dollar hungry environment, municipalities are consistently searching for ways to increase their ratable base and in this regard are viewing tax exemption claims even more critically.  Real property tax exemptions are a creature of statute and run against the Constitutional mandate that all property is to be taxed uniformly, with all property owners required to shoulder their fair share of the local property tax burden.  As such, these exemptions are to be strictly construed and it is the burden of the applicant to prove entitlement to the exemption.  Abunda Life Church of Body, Mind & Spirit v. Asbury Park City, 18 N.J. Tax 483, 485 (1999) and Teaneck v. Lutheran Bible Inst., 20 N.J. 86, 90 (1955).

In a recently decided case, the New Jersey Tax Court held that although the municipality may have been correct in rejecting an exemption on the grounds that the property did not constitute a religious parsonage, it erred in denying the exemption as the property was deemed to be essential to the religious use and actually used in conjunction with the religious operations.  Mikvah Association v. Township of Teaneck, Docket Nos 015784-2014; 012594-2105; 010909-2016; and 012807-2017.

The relevant exemption statute, N.J.S.A. 54:4-3.6, provides an exemption for:

[A]ll buildings actually used in the work of associations and corporations organized exclusively for religious purposes, including religious worship, or charitable purposes, provided that if any portion of a building used for that purpose is leased to a profit-making organization or is otherwise used for purposes which are not themselves exempt from taxation, that portion shall be subject to  taxation and the remaining portion shall be exempt from taxation … the buildings, not exceeding two, actually occupied as a parsonage by the officiating clergymen of any religious corporation of this State, together with the accessory buildings located on the same premises; the land whereon any of the buildings hereinbefore mentioned are erected, and which may be necessary for the fair enjoyment thereof, and which is devoted to the purposes above mentioned and to no other purpose and does not exceed five acres in extent ….

In Mikvah, the Tax Court rejected the availability of an exemption under the “parsonage” provision holding that the resident of the home, who was responsible for supervising the mikvah, did not qualify as an “officiating clergyperson.”  There the court found that the resident in question did not perform the expected duties of an officiating clergyperson in the context of the Jewish faith in that she did not perform such critical “officiating” tasks as teaching, leading, participating in religious services, providing sermons, or officiating at Congregation weddings, funerals and bar mitzvahs.  See City of Long Branch v. Ohel Yaacob Congregation, 20 N.J. Tax 511, 519 (2003).

Even though the court precluded exemption under the parsonage provision, it nonetheless found exemption of the residential structure to be appropriate in this instance because the resident of the property, which is located on the same street as the recognized exempt facility where religious bathing rituals are performed, was deemed to be the Ritual Director, responsible for maintenance and operation of the mikvah, and on call 24 hours a day, seven days a week.

Because the religious organization property owner required the resident of the property to be physically proximate to the mikvah and readily accessible to ritual participants, the court found her to be a necessity for the proper and efficient operation of the mikvah and not simply residing in the residence as a matter of convenience for the resident.   Consequently, the Tax Court concluded that the residential property in which the Ritual Director resided with her family, was “actually used” in the operation of the mikvah and qualified for exemption pursuant to N.J.S.A. 54:4-3.6

The Opportunity Zone program enacted as part of the 2017 federal Tax Cuts and Jobs Act is designed to spark long-term capital investment into low-income and urban communities. The 169 Opportunity Zones (or tracts) designated in New Jersey by Governor Murphy are a complete game changer and contain attractive investment incentives for developers and investors.

Via the Opportunity Zone program, developers and investors can tap into and reinvest their unrealized capital gains without paying capital gains for a period of time, if at all. For example, capital gains invested or reinvested in an Opportunity Fund will receive a step up in basis of 10 percent if held for at least five years and by an additional 5 percent if held for at least 7 years, excluding up to 15 percent of the original gain from taxation.

An even greater savings is realized if the investment in the Opportunity Fund is held for at least 10 years. The gain accrued while invested is permanently excluded from taxable income of capital gains upon the sale or exchange of the investment.

With these tax incentives in place, Senator Corey Booker (NJ) believes the barriers between communities and the capital needed to generate economic growth and opportunity will be broken down.

The Opportunity Zones were designated based on key economic indicators in certain neighborhoods and communities such as income, unemployment rate and property values but also consideration was given to accessibility to mass transit and the value of existing investments. The 169 tracts were approved by the US Department of the Treasury on April 9, 2018. You can view the interactive map of designated Opportunity Zones for New Jersey by clicking here.

The ability to obtain a “Yellowstone” injunction has long been a saving grace for commercial tenants faced with a disputed default under their lease. A recent decision of the New York State Appellate Division, however, could shift the balance of power in commercial landlord/tenant relationships.

Typically, when a landlord notifies a tenant of an alleged default, the notice provides an opportunity to cure, the timeframe for which can be anywhere from a few days to a month, based on the terms of the lease. If the default is not cured prior to expiration of the relevant time period, the lease and the tenant’s rights to the property can be terminated, which cannot be undone as a matter of law.  If the tenant disputes the basis for the default and seeks a determination from the court, it is essentially impossible for the court to resolve the dispute before the cure period expires.  In addition, the timeframes provided to cure alleged defaults offer little flexibility for a tenant to investigate the facts, come to a conclusion, and take corrective action. The Yellowstone injunction, so-named for the seminal case in which one was issued, is designed to protect tenants in these circumstances.

A Yellowstone enables a tenant to toll the expiration of the default notice until a determination is made as to whether a default exists and whether it is the tenant’s responsibility to cure. The threshold for granting a Yellowstone injunction is not a stringent one; the tenant need only show (1) it is a party to a commercial lease, (2) the tenant’s landlord has provided it with a notice alleging default, which provides a timeframe for the tenant to cure, (3) the expiration of the timeframe has not passed, and (4) if it is determined that a default exists, the tenant is ready, willing and able to cure the default. 159 MP Corp. v. Redbridge Bedford, LLC, No. 2015-01523 (N.Y. App. Div. Jan. 31, 2018).

This is a lower standard than what a party must typically demonstrate to obtain injunctive relief under New York law, making the issuance of Yellowstone injunction fairly commonplace in commercial lease disputes. This lower barrier to entry demonstrates New York’s longstanding public policy against the forfeiture of property interests. Vil. Ctr. for Care v Sligo Realty and Serv. Corp., 95 AD3d 219, 222 (1st Dept 2012). As with any contractual negotiation, the parties to a commercial lease can utilize their negotiating positions to preserve or waive certain legal rights. However, courts rarely enforce waivers of a right when the right is a matter of public policy, as the preservation of property rights by a Yellowstone injunction has long been held to be by the courts.

The recently decided case, 159 MP Corp. v. Redbridge Bedford, LLC, involved a commercial lease that included a provision whereby the tenant waived its right to declarative relief, e.g. the issuance of a Yellowstone injunction. The Appellate Division, Second Department affirmed the lower court’s ruling enforcing the waiver provision, on the basis that the Legislature had not enacted any legislation prohibiting such waivers. Absent such legislation, the court stated, the notion of barring the waiver of a right based on public policy “does violence to the notion that the parties are free to negotiate and fashion their contracts with terms to which they freely and voluntarily bind themselves.” This decision marks a departure from existing case law declaring such waivers void based on public policy. See Sligo Realty.

In light of this apparent conflict between the First and Second Departments, which govern the five boroughs of New York City and surrounding counties, this issue appears ripe for appeal to New York’s highest court, the Court of Appeals. In the 159 MP Corp. case, the tenant must make a motion for leave to appeal to the Court of Appeals, and the Court can then exercise its discretion in granting or denying such a motion. The Court of Appeals may very well view the discrepancy between these neighboring courts as too divergent to remain unreconciled, and hear a further appeal. The decision on such an appeal would then provide guidance on the issue statewide.

Until then, however, New York commercial landlords should consider including provisions waiving a tenant’s right to declaratory relief in their commercial leases, whether the property is located in the Second Department (Kings (Brooklyn), Queens, Richmond (Staten  Island), Nassau, Suffolk, Westchester, Rockland, Putnam, and Orange counties) or not. Tenants, on the other hand, should take the Second Department’s decision into account when considering their negotiating positions and, if their lease contains a waiver of Yellowstone rights, determining how to respond to a notice of default. Landlords and tenants should consult with their legal counsel so as to stay abreast of such developments of the law, including the rights the courts can be relied on to protect and, more importantly, the rights they will not.

 

The New York City Building Code, Chapter 33, requires a developer to safeguard adjoining property during the conduct of all construction and demolition operations. Accordingly, a developer and an adjoining property owner may enter into a license agreement, whereby the adjoining property owner provides the developer with access to its property to install Code-required protections.  In return, oftentimes the developer, among other things, pays compensation to the adjoining property owner for such access.  If the parties cannot reach an agreement, the developer may seek to compel such access through the courts pursuant to Section 881 of the Real Property Actions and Proceedings Law.

While the Building Code does not explicitly provide a right to compensation, when these issues have been brought before them, New York courts have awarded compensation to adjoining property owners.  However, whether compensation is mandated and the amount of compensation is within the courts’ discretion.  Courts often consider the length of time for which access is necessary and the intrusiveness of the developer’s work on the use and enjoyment of the adjoining property by its owner and occupants.  Without clear guidance from the courts, a developer and an adjoining property owner need to give due consideration to the issue of compensation as illustrated below.

In her ruling released late last month, Manhattan Judge Arlene Bluth denied any license fee to the Condominium Board of the Fifth Avenue Tower, an adjoining property owner to the New York Public Library.  The Library will conduct a $200 million overhaul of its main Fifth Avenue branch.  In her decision, Judge Bluth specifically rejected the Condominium Board’s request for a $15,000 / month license fee.  It has been separately reported that the Condominium Board rejected the Library’s offer of a $3,500 / month license fee.  It appears that Judge Bluth may have denied any license fee to the Condominium Board based, at least in part, on the excessiveness of its demands.

In view of the lack of clear guidelines, developers and adjoining property owners should consult with their legal counsel and should be sure not to overplay their hands when negotiating license fees.