1. City of Mount Vernon Real Estate Transfer Tax.

The imposition of the additional transfer tax by the City of Mount Vernon has been amended. The City Mount Vernon has adopted Local Law No. 3, 2000. Effective January 1, 2001 the Mount Vernon Transfer Tax shall be paid the Grantor (Seller) instead of the Grantee (Buyer) as the current law indicates. This change will not apply to a deed delivered pursuant to a contract made prior to January 1, 2001.

2. Recent legislation has amended the method by which the mailed notices of tax foreclosure under Article 11 of the Real Property Tax Law are to be sent to the owner of the property. Chapter 358 of the laws of 2000 now require that the mailed notice be sent to the owner by Certified Mail rather than by First Class Mail as required under the original enactment. The mailed notice to any other person must continue to be done by ordinary first class mail.

3. Lien Law - Chapter 324 of the Laws of 2000 effective January 1, 2001 amends Sections 17 and 18 of the Lien Law to provide that a mechanic's lien and a lien under a contract for a public improvement may be extended for one year by court order for only two successive years. The law, as amended, provides that "a new order and entry may be made in each of two successive years". Existing law only provides that "a new order and entry may be made in each successive year". In addition, Section 18 was amended so that a public improvement lien is effective for

one year instead of six months from the date on which the notice of lien was filed, unless within that period either an action is commenced to foreclose the lien or an extension is filed.

4. New York City Water Charges - Guidelines were adopted in October by the New York City Water Board for the "Conservation Program for Multiple Family Residential Buildings". This program enables owners of housing consisting of six or more dwelling units being billed for water usage on a metered or frontage basis the option to elect billing based on a fixed charge per unit in lieu of metered billing if the owner has meters installed, invests in low water consumption plumbing fixtures and otherwise undertakes conservation efforts in cooperation with the Water Board. For the fiscal year beginning July 1, 2001, the fixed charge will be $424.00 per dwelling unit. Applications for the program can be obtained through the City's Department of Environmental Protection and must be submitted no later than December 31, 2003. The Guidelines are at www.titlelaw-newyork.com/Mans/waterguidelines.pdf .

5. New York State Property Conditions Disclosure Legislation Vetoed - The Governor has vetoed legislation that would have added a "Property Conditions Disclosure Act" as new Real Property Law Article 14-A. Assembly Bill A01173. would have required the seller of a one-to-four family dwelling, prior to the seller accepting a purchase contract, to provide the buyer with a Property Condition Disclosure Statement setting forth all defects in the condition of the property of which the seller had actual or constructive knowledge or actual notice.

6. Safe Harbor Established for Reverse Exchanges

A "like-kind exchange" offers an attractive alternative to sale of real property held for investment or used in a business. By exchanging the property for other similar property, the owner {"exchanger") defers any capital gains taxes until the new property is sold. To qualify, the new property must be similar in type (e.g., commercial real estate), though it doesn't necessarily have to be comparable in size or quality.

In some cases, a property owner can enjoy the benefits of a like-kind exchange even if the properties aren't exchanged simultaneously. In a "deferred exchange," for example, the exchanger transfers property {the "relinquished property") before identifying or acquiring replacement property.

Typically, the relinquished property is sold and the proceeds are held by a qualified intermediary, such as a title company, which uses the proceeds to purchase the replacement property. To qualify as a nontaxable exchange, the exchanger must identify replacement property within 45 days after selling the relinquished property and must close the purchase of the replacement property within 180 days after selling the relinquished property (or, if earlier, by the due date of the owner's tax return for the year the property was sold).

Until recently, the treatment of "reverse exchanges" was uncertain. In a reverse exchange, the replacement property is acquired before the exchanger disposes of the relinquished property. Reverse exchanges are often accomplished through "parking transactions," in which an intermediary purchases the replacement property on behalf of the owner and holds it until the exchanger sells the relinquished property.

In a recent Revenue Procedure, the IRS established a safe harbor for reverse exchanges, effective September 15, 2000. Under the new guidelines, the IRS won't challenge an exchange that is structured as a qualified exchange accommodation arrangement {QEAA). To be a QEAA, an arrangement must meet the following requirements:

A qualified intermediary (the exchange accommodation titleholder, or "EAT") must receive legal title to the replacement property or other qualified indicia of ownership. The EAT must be a qualified party other than the exchanger and must also be subject to federal income tax (Special rules apply to organizations treated as partnerships or S corporations for federal tax purposes). It must also be the exchanger's bonafide intent that the property held by the EAT represent replacement or relinquished property in a like kind exchange.

Within five business days after indicia of ownership is received, the exchanger and the EAT must sign a qualified exchange accommodation agreement stating that the EAT is holding the property for the exchanger's benefit to facilitate a like-kind exchange. The agreement must also state that the parties agree to comply with certain reporting requirements, and that the EAT will be treated as the beneficial owner of the property for federal income tax purposes.

Within 45 days after indicia of ownership is received by the EAT, the relinquished property must be properly identified.

Within 180 days after indicia of ownership is received by the EAT, the property must either be transferred to the exchanger as replacement property or transferred to a qualified person other than the exchanger as relinquished property.

The combined time period that the relinquished property and the replacement property are held in a QEAA cannot exceed 180 days.

As always, if you should have any questions or comments please feel free to contact our legal staff at your earliest convenience.

Very truly yours,

David Gorenstein