Marc Fitapelli, a founding partner of Fitapelli Kurta, specializes in real estate law and commercial litigation in the New York area. Marc discusses when in the purchase or sale process to secure an attorney, important questions to ask a potential attorney and walks through timelines from accepted offer to close of a deal. Important information for the first or tenth real estate transaction that you may be embarking on now!

Marc Fitapelli is a founding partner of Fitapelli Kurta, where he specializes in all areas of real estate law and commercial litigation. Throughout his career, Marc has worked on billions of dollars’ worth of real estate transactions from small apartment purchases to complex billion-dollar acquisitions and financings. Marc also has extensive litigation and arbitration experience, focusing his practice on real estate and securities-related cases. Marc has a BA from St. Francis College in Brooklyn, where he graduated magna cum laude and earned his JD from Hofstra University. He is admitted to practice law in New York.

At what point in the buying process should a buyer secure a contract attorney?
I think a buyer should have an attorney as soon as they start looking. It is probably more important for a buyer to have an attorney immediately than a seller. The reason is, we get calls all the time at the very last minute about buyers who have an accepted offer and do not have an attorney. There are a bunch of problems with this. The person is not taken seriously, so if you have an accepted offer and you scramble for three or four days to try and find an attorney, you risk losing a deal because the seller is going to think that you’re not serious. And, you lose a little bit of credibility. Especially in this market, things happen quickly. Three days is an eternity now because people want contracts back in a few days. So, if you don’t have a lawyer lined up, then you’re going to lose a deal and have an upset buyer.

At what point in the buying process should a seller secure a contract attorney?
Sellers should probably have someone when they are marketing a property, especially if there are issues with a property, such as litigation in the building or general financial trouble. It is also critical that these issues be discussed and disclosed to a buyer upfront. The conventional wisdom is that a savvy buyer will eventually learn about major problems during due diligence. As a result, it will save the parties time, money and effort if problems are put on the table at the very start of the process.
Sellers also share a similar risk that “unrepresented” buyers have that there will be a protracted delay in sending out contracts while the seller looks for an attorney. Again, this harms the seller’s credibility and jeopardizes the entire deal. Certainly, however, this risk is much lower in this market.

When choosing an attorney, what are the most important questions to ask?
This is always my pet peeve for doing real estate. Before what questions you should ask, it is what attorneys you should not use. You shouldn’t use your cousin who is a lawyer from Connecticut who does divorces and who is going to help you and do a closing for free. It isn’t going to work and it is going to create problems for everyone. The whole idea with these transactions is that they are relatively simple transactions. They should go forward with very little effort and very smoothly. And, when you have people who don’t do them every day and don’t know anything about real estate, it mucks up the whole process. The questions you should ask are – how many real estate closings do you do every year? I think a decent real estate lawyer should probably do at least 20 closings a year. We do over 100 a year, but I only do real estate. Anyone who does at least 20 per year is probably fairly reputable. If you are buying and selling in NYC, you want someone who has experience in NYC and that has experience with co-ops and condos.

Is there any information that the buyer or seller should disclose to the attorney, upfront?
Sellers should disclose if there has ever been a flood in the building or unit. Along those lines, mold is always a serious concern for buyers. Equally as serious is work without building permits, especially in apartments that were combined. Lastly, any item that has the potential to cost a buyer money in the future, such as a major litigation that is not covered by insurance or major capital improvements. All of the things that a buyer would want to know – if we know about it upfront, the lawyer and the agent, then the sale goes smoother. If you find out about these things once the contract is out, it brings the whole process to a halt. People try to get credits and it just makes everything slower. So, the name of the game is always disclosure and transparency.
For buyers, you should always disclose finances upfront. If you can’t afford an apartment, if you are borrowing money from someone, especially if you are overseas and money is coming from overseas, that is always a big issue.

On the flip side, are there standard questions that you like to ask your clients or potential issues that you like to make them aware of, upfront?
There are things that first time buyers should always know and questions they should always ask. If you are financing, go to the bank right away and make sure that you know what you are able to borrow. Sometimes we get people who have no idea what they can borrow and think they can borrow a lot more than they actually can and they waste a lot of peoples time. They waste their lawyer’s time. They waste their agent’s time.

Other things like tax abatements. Make sure that you have a handle on your tax abatement. So, sometimes people will buy an apartment, especially downtown and in Brooklyn, where there are great tax abatements now and the taxes are de minimus. They think that the taxes will be $500 per year forever and one day they get a tax bill and the taxes have gone up dramatically and they are upset at everyone. It is important to know that upfront because otherwise you will have an unpleasant surprise years down the road and when you go to sell it. It is usually priced into the real estate, so it all nets out.

If relevant to the deal, how important is it to seek out attorneys specializing in certain aspects of the law such as new construction or sponsor sales, or in certain geographical areas, as we touched on before?
Both are important. Specific geographic areas are important because we always have problems with out-of-state attorneys who are not familiar at all with co-ops and condos. So, the first hurdle is getting someone who is familiar with co-ops and condos in New York City because they are not all created equally. Co-ops and condos in New Jersey and Long Island are different than co-ops and condos in New York.

The same applies with new construction. I don’t think you necessarily need someone that is familiar with new construction because if you generally do work with co-ops and condos, it is all more-or-less the same thing.

There is no magic to doing a sponsor sale.

Townhouses are a different animal. If you are buying a townhouse, you want to make sure that your attorney has experience buying and selling townhouses because there are a lot of different issues with townhouses that you wouldn’t get with co-ops and condos. When you have a co-op or condo, the likelihood that you will have a title problem is incredibly low because the sponsor had already bought title insurance. Possibly hundreds of people have bought and sold units in the building. So, the likelihood that there is a title issue is low. With townhouses, that is not the case. Townhouses are hundreds of years old, generally go decades without trading and you may have odd issues appear on a title report or survey. Attorneys that only do co-ops and condos never even look at a survey. They might not even know what it is. So, that is why it is important to have someone who knows a little bit about “dirt” law. There could also be environmental, landlord zoning or structural problems with townhouses – all issues that are not really relevant to a co-op or condo transaction.

Are there any standard changes that you suggest people make to a contract?
I am not big on riders and the reason is because we have a very fair, very good boiler plate contract that was developed by a committee of really bright lawyers and it is tested by courts. So, it has been litigated. Judges have seen this form and its terms have been litigated and interpreted over time. The forms are fair and everyone knows what they say. I don’t really like riders that much because they generally don’t add a lot to a contract. A lot of it is nervous lawyers or people trying to add value, but they are really making things worse for their clients because it causes, sometimes, confusion and problems, especially if things go wrong.

What is the typical timeline from accepted offer to closing, with and without financing?
I think it depends on the market. In this market, there is a lot of activity, but banks have slowed due to the decrease in refinances. Even though we are very busy right now, banks are slow, so financing deals are happening much, much quicker. Under 30 days [from contract signing]. This morning, I closed a sponsor sale. We signed the contract December 7th and we closed today [January 17th] with financing. And, we were ready to close last week! We were ready before the sponsor was ready.

So, typical, I would say, co-ops – 45 to 60 days only because you are dealing with the Board and that is with or without financing. Maybe a little bit closer to the 60 with financing. And, condos – anywhere from 30 to 45 days. But, a lot of it depends on the buyer. I always tell people when they come in and they want to know how quickly they are going to close. Don’t ask me, ask you. How quickly are you going to do your Board package? How quickly are you going to get documents to your bank? And, if you drag your feet, then the process is going to drag. Once you sign a contract, the buyer controls how fast things go because they can slow the process down.

From accepted offer, the signing of a contract should take about a week. In this market, I would say, it probably has to take a week because if you drag your feet for longer than a week, you are probably going to lose your deal, I think. And, we are seeing that more and more.

Can you walk through each party at a closing table?
Whenever I am at a closing with parties from out of state, the one question everyone seems to ask is – who are all these people and why are they here?! At a condo closing with financing, there are three attorneys, two brokers and a title closer. Of course, the buyer and seller will each have their own attorney, but the buyer’s bank will also have their own attorney. At a co-op closing with a payoff and financing, there are four attorneys, two brokers and a title closer. The extra attorney is the payoff bank attorney, whose job it is to collect the payoff and deliver documents to discharge the seller’s loan.

Final thoughts?
The process of buying an apartment is an emotional one and New York City is a unique city with special challenges. Above all else, it is important to have a cool head, a strong stomach and a good team!