FoxNews.com recently published a web article accusing Jay-Z’s legal team of using scare tactics and harassment to forcibly remove tenants out of a luxury condo building that his real estate firm purchased in Philadelphia.  The hype of this article, as well its outrageous allegations against Jay-Z’s lawyers, caught my attention.  Thus, I am compelled to comment.

According to the article, SCC North American Realty, LLC (of which Jay-Z is part owner) purchased a 24-unit condo complex at 603 N. American Street in the trendy Northern Liberties section of Philadelphia, and immediately instituted a plan to vacate the property of tenants in order to sell the units.  In my experience as a real estate lawyer, this approach is as common as sunrise and sunset.  Let me share a bit of real estate information that most people may not know.  When the units of a new condo building are slow in selling, the developer may begin to rent units in order to generate cash.  This is generally not a good thing to do.  In fact, this is a usually a last ditch effort on the part of the developer in desperation to pay the debt service (i.e. mortgage) on the property.   If the cash flow from rent is still insufficient to pay the debt service on the property, the financing bank will begin foreclosure proceedings against the developer and the property.   One of two things will happen next:  1) the developer will sell his/her interest in the property to a new owner who will take over the debt, or 2) the financing bank will foreclose on the property and then sell it to a new owner.   Either way, the new owner will almost always terminate those tenant leases as soon as possible in order to sell the units.    This is exactly what Jay-Z’s real estate firm did after they purchased the property.  This is legal to do and very often done by new owners of a condo building.  The caveat is that the new owner is subject to the lease terms of the existing tenants.

Unfortunately for Jay-Z, the Fox News report contains allegations from tenants of “relentless” harassment by his legal team in an effort to force them out.  I will concede that any such harassment, if it actually occurred, is improper for an attorney.  But the actual allegations in the Fox News piece did not appear to be harassing or scary.  You can read the article for yourself, but what I read simply described the typical approach of a new owner to take possession of the rented condo units.  Jay-Z himself did not have any direct contact with the disgruntled tenants.   Jay-Z’s legal team was only instructed to notify the tenants of the termination of their leases and to file eviction matters against tenants that they believed were behind on rent.  Point blank, this is not harassment.

In my opinion, these high-end tenants appear to be more embarrassed by the situation rather than actually being harassed by the conduct of Jay Z’s lawyers.  But then again, as Jay-Z’s predecessor Biggie Smalls once said, “the mo’ money you make, the mo’ problems.”

Link to article: Click here.

Photo of the First Labor Day Parade, 1900

Article by Sherman Toppin, Esq.

Most people think of Labor Day as a day off from work for no particular reason.   However, Labor Day was actually enacted in the aftermath of America’s bloodiest workforce strike.   Labor Day became a federal holiday in 1894, following the death and injury of numerous railroad workers at the hands of the U.S. military and U.S. Marshals during the renowned Pullman Strike.  If you Wikipedia the ‘Pullman Strike’ you will learn that the conflict began in the town of Pullman, Illinois  when about 3,000 employees of the Pullman Palace Car Company began a strike in response to reductions in wages and other unfair workplace issues.  The strike brought nationwide railroad traffic west of Chicago to a halt.  Then U.S. President Grover Cleveland acted swiftly to resolve the conflict with the labor movement.  In fear of further violent outbreak, President Cleveland pushed legislation to make Labor Day a national holiday.  The legislation was rushed through Congress unanimously and signed into law a mere six days after the end of the Pullman strike.

Today, labor unions are often criticized for increasing the cost of doing business.   In these challenging economic times, when everyone is looking for someone to blame for our recession, we must not forget the value of labor unions.   One of the principle reasons unions began was to address the horrendous working conditions that confronted industrial employees, such as: low wages, no benefits, dangerous machinery, long hours, no rest, oppressive supervisors and the list goes on.   Countless lives have been saved because these employees with the aid of labor unions banded together and demanded fair wages, treatment and other positive workplace changes.  In fact, the 40-hour workweek and ‘minimum wage,’ which are both foundations of the American workplace, stem from union activism.

Most importantly, unions help support and promote the dignity of labor.  Although each one of us at some point in our lives has lamented having to go to work, there is actually nothing more dignifying, fulfilling and American than earning your living and supporting your family through work.  The ideal of hard work is at the very foundation of this country.  America has become a global superpower because of the labor of its citizens.  In my opinion, labor unions exist only to protect that ideal.

This weekend as we celebrate Labor Day, let us truly honor Americans that labor each week for their families.  As President Lincoln once said “Labor is the superior of capital and deserves much the higher consideration.”

Happy Labor Day Everyone!

Sherman Toppin, Esq.

  SHERMAN TOPPIN LAW FIRM LLC
2112 Walnut Street, 4^th Floor
Philadelphia, PA 19103
Office (215) 564-3600
Fax (215) 564-1555
Email: sct@shermantoppin.com
Website: www.shermantoppin.com

By Sherman Toppin, Esq.

It’s like a financial horror film that keeps getting scarier.   In the first quarter of 2007, U.S. financial markets crashed due to subprime and other loosy-goosy bank lending behaviors.  A widespread foreclosure epidemic with no immediate cure left dead mortgages lying everywhere.  But before the victims can all be found and buried, a second wave of carnage is about to be unleashed because of the recent U.S. credit downgrade from AAA to AA+.

Let’s be honest, AAA to AA+ still looks like a good credit rating to the average person.  So why is loping off of the last “A” so problematic?  After all, AA+ is still 9 places above the bottom credit ranking of “D.”  What’s so frightening about this?

According to financial experts, even a small downgrade in credit rating is a huge problem.  This is because a credit downgrade is interpreted as a downward trend in credit, which results in lower profits and potential losses for stock investors, who use credit ratings to make their investment decisions.

Now, before you conclude that this is all esoteric paranoid histrionics projected by analytical talking heads, just ask Fannie Mae and Freddie Mac how they’re doing.  The one-degree credit downgrade has already produced alarm in the form of immediate short-term losses in U.S.-backed stocks and has projected even more long-term losses.  This is also why the stock market fell over six hundred (that’s right, 600) points within days of the downgrade.  The reason for the harsh reaction is simple: stocks are valued based on their short and long-term potentials.  The downgrade has comprised the potential of U.S.–backed stocks.

How far will the damage spread?  There’s the old adage about running around like a chicken with its head cut off.  Well, eventually the chicken stops moving about helter-skelter and collapses dead, headless.  Grimly picturesque, but this is the very consequence that I predict we’ll be seeing by 2012 as the result from the U.S. credit downgrading.  And as consequences go, this one will affect the real estate market on a nationwide level.

Here’s what it will look like:

1.              Downgraded U.S. credit will cause stock investors to divest, or sell off, U.S.-backed stocks (like Fannie Mae and Freddie Mac), and those entities in turn will have less money to buy mortgages.  (This has already started to happen.)

2.              Since Fannie and Freddie will have less money, they will buy fewer mortgages on the secondary market from banks around the country.  When Fannie and Freddie do buy mortgages, they will eventually only buy the safest and best-documented mortgages (i.e., A-paper), which currently accounts for only a small fraction of the consumer lending that occurs.

3.              Banks will discover that secondary market mortgage purchasers, like Fannie and Freddie, will only buy the safest and best-documented mortgages.  As such, their lending guidelines will fall in line, becoming more stringent, rigid, less-risky and conservative.   The will lead to the altogether depressing result of . . .

4.              Fewer individuals and families will qualify for residential mortgages.   If that’s not bad enough, interest rates will have nowhere to go but up, which, not surprisingly, tends to deter consumers from pursuing a mortgage.

So, fast-forward to 2012 and what will we see?  The lowest number of real estate transactions occurring throughout the country because so many buyers will not be able to qualify for a traditional bank mortgage.   In almost every region, the transaction pie will be so small that only a handful of real estate professionals and related companies will be able to withstand the famine, while fighting each other for slivers of commissions and fees from the shrunken industry.   The truly ironic part is that in 2012, due to the continuing foreclosure crisis, will see a massive oversupply of available homes for sale from private individuals, bank REO departments and HUD at record low prices.

If you add the number of families unable to obtain a mortgage to the total number of families losing their homes through mortgage foreclosure, it equates to the fall of traditional home ownership in the United States.  This is the dark reality brimming on the horizon of our great nation.

Is there any solution to our predicament? Well, maybe.  One solution to our current predicament is the creation of a “rent-to-own” mortgage product that will still function as an assignable, transferable, asset-based security interest.   The bad news is no such mortgage model exists at this time because it is so risky.  Nevertheless, out of sheer necessity, more creative and risky mortgage products will eventually have to emerge from the financial sector in response to our ongoing national fiscal crisis.  Something will have to give if we are to survive this financial quagmire.  If we do nothing and remain on our current course, we may become a nation where only the government, banks, corporations and a small number of private citizens will own property.

Professor: Sherman Toppin, Esq.
School: Temple University Real Estate Institute
Semester: Fall 2011
Course: Real Estate Law (REI008)
Dates: 14 Tuesdays, September 13-December 13
Course Times: 5:30pm – 8:30pm
Course Cost: $420.00
Text: Real Estate Law, 7th Edition
Registration: To register call Temple Real Estate Institute at (215) 204-1539

Register through the following link below.

www.pbi.org

The implications of property being in receivership is that possession and control is removed from its original owner, and invested in the Receiver as it is defined in the court’s Order. However, all ownership rights of property in Receivership still remain withits

owner. Only possession and control is removed from that owner in the manner specifically defined by the court’s Order. Thus, the court-appointed Receiver is the only person/entity that can handle, manage, administer, discuss, operate and/or facilitate any action in connection with the property subject to the court’s Order.

Who can be a Receiver?

A Receiver can be an individual (usually an attorney) or an entity (usually a property management company or law firm).

A Receiver is not an employee, agent, contractor or vendor of the court system itself. Upon appointment, a Receiver is an officer of the court engaged for the specific purpose(s) defined in the Order to act affirmatively in connection with the subject property. Likewise, Receivers are not employees, agents, contractors or vendors of the plaintiff, petitioner or creditor who may have requested that the court appoint a receiver. Receivers are independent third parties who may have to communicate and interact with all parties, but are only obligated to answer to the court.

When can a Receiver be Appointed?

There are many instances where a court might appoint a Receiver, but they generally fall within one of the following categories, 1) to enforce a court judgment, to provide interim corporate management or property management, or 3) to collect rent (i.e. Rent Receiver).

How is a Receiver Appointed?

A Receiver is appointed at a hearing before the court at which time an Order is entered that defines the scope of powers, duties and responsibilities of the Receiver. Most courts expect that litigants will have attempted other means for enforcement prior to requesting the appointment of a Receiver. Should the appointment of a Receiver be necessary, it is accomplished by filing a motion or a complaint under one of the prescribed statutory provisions.

What is a Rent Receiver?

Pursuant to most commercial mortgage contracts, a lender may petition the Court for the appointment of a “Rent Receiver’” who is empowered to intercept tenant rent payments from delinquent borrowers. The Rent Receiver must also provide interim property management and stabilization pending foreclosure proceedings.

Sherman Toppin redefines Receivership

As mentioned above, Receivers are usually attorneys or property management companies, but seldom both. However, there are many instances where both capabilities are needed by the Receiver to address the needs of a given property or situation.

Our law firm and real estate brokerage work in concert to provide a broad range Receivership services which encompass all actions, reporting and managerial functions generally requested by parties seeking the appoint of a Receiver.

Receivers that are either law firms or property management companies are incapable of performing tasks of the other discipline that may arise unexpectedly during the course of an appointment. Therefore, it is advantageous for parties seeking the appointment of a Receiver to engage our company because we can seamlessly attend to issues that may cross service disciplines.

We offer a variety of integrated services for receivership appointments that range from single asset rent collection to mass portfolio management.

Our integrated company model and method of execution has redefined traditional role and scope of services generally expected of Receivers.

For more information about our Receivership practice please visit www.shermantoppin.com