Question. I am a real estate agent and my husband is an attorney who handles real estate matters. Can my husband represent a lender, buyer or seller in a transaction in which I am participating as a real estate agent?

This month’s question actually comes from my wife Kleo, and some of her clients. While it would seem to be natural for attorney and real estate agent spouses to refer business to one another the New York State Bar Association has opined that it is not permissible for an attorney to represent any party in a real estate transaction in which he or she has a personal interest in the outcome. In Kleo’s situation her financial interest in seeing that the transaction be completed so that she may be paid her commission is imputed to me as her husband thereby preventing me from being able to represent any other party in the transaction. It is irrelevant whether Kleo would be representing the buyer and I the seller or vice versa. The same preclusion would apply for any other member or associate in my firm regardless of how impenetrable a “Chinese Wall” the firm can craft.

It is not clear based upon my research whether the conflict is one that can be waived by the potential client. However, I would suggest that the economics of the matter weigh against an attorney risking an ethical violation if the waiver is not permitted or is somehow ineffective.

If anyone would like to see the research upon which this month’s answer is based please feel free to contact me.

Question. What are liquidated damages?

Liquidated damages are a creature of contract, and are sometimes used when the exact amount of actual damages will be difficult to ascertain in the event of a breach. Liquidated damages clauses usually pertain to damages for failure to adhere to a contract schedule. Such liquidated damages are agreed to be a reasonable pre-estimate of damages a party will incur, as a result of delayed completion of work. Where liquidated damages run in favor of the Owner, they presuppose that

1. the Owner is entitled to full and beneficial occupancy and use of the completed work following expiration of the contract time; and
2. if the Contractor fails to complete substantially any portion of the work within the contract time, the Owner will sustain extensive damages and serious loss, as a result of such failure.

Liquidated damages are usually expressed in the form of a per diem amount, and are meant to fairly compensate the party assessing liquidated damages, and not to penalize the breaching party.

It may be preferable for contractors to liquidate the owner’s damages for delay, when a contractor fails to reach substantial completion by the completion date. If a valid liquidated damages provision is not established in the contract, the contractor may be liable for the owner’s actual damages. In a commercial or industrial situation, the owner’s actual damages could have been far in excess of what a contractor can economically absorb. Reasonable liquidated damages remain a better alternative than unspecified actual damages. Obviously, low liquidated damages are to the advantage of the contractor.

Question. Recently I completed a remodeling job on a private residence and the owner has failed to make final payment. What do I need to do in order to place a mechanics’ lien on their home?

A contractor, in order to secure his lien rights, must file a lien with the Clerk of the County in which the property is located within 8 months (or 4 months if it is single family residence) after his last day of work. The lien must be verified by the contractor. Within five days before or thirty days after filing the notice of lien, the contractor must also serve a copy of the lien upon the owner. Additionally, he must file proof of such service with the County Clerk within thirty-five days after the notice of lien is filed.

Pursuant to New York Lien Law the notice of lien must contain:

1. The name and residence of the contractor;

1-a. The name and address of the contractor’s attorney, if any.

2. The name of the owner of the real property, and the interest of the owner.

3. The name of the person by whom the contractor was employed, or to whom he furnished or is to furnish materials; or with whom the contract was made

4. The labor performed or materials furnished and their agreed price or value.

5. The amount unpaid.

6. The time when the first and last items of work were performed and materials were furnished.

7. The address of the property being liened together with its section, block and lot.

Subcontractors and vendors must follow similar, but slightly different, procedures. If properly served and filed the lien will be good for one year unless further extended.