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Keeping Current—Property offers a look at selected recent cases, literature, and legislation. The editors of Probate & Property welcome suggestions and contributions from readers.
COVENANTS: Restrictive covenant need not be mutual to be enforceable. The owner of three contiguous lots built a house on one of them. Being concerned that construction on the other two lots might block the view of the Caloosahatchee River from his house, when he sold his other two lots he imposed a covenant restricting the location of buildings on the conveyed lots. All three lots were subsequently sold to new owners. Despite the covenant, the new owners of the restricted lots started construction in the prohibited area. Plaintiffs sought an injunction against the construction, but the trial court granted summary judgment for defendants on the ground that the covenant did not bind both parties to the same restriction. The appellate court reversed, holding that mutuality of obligation is not necessary for a restrictive covenant. Mutuality is required only when restrictive covenants were designed to enforce a general scheme or plan, such as a subdivision plan. Fiore v. Hilliker, 993 So. 2d 1050 ( Fla. Dist. Ct. App. 2008).
DEEDS: Grantor's addition of his name to deed in handwritten block letters suffices as a "signature" to make deed legally effective. A warranty deed purported to convey grantor's one-third interest in certain land to his mother. Rather than sign his name in cursive writing, grantor printed his name in block letters on the deed, apparently at a location other than the end of the instrument where a signature normally is placed. The next day, grantor's mother similarly printed her name in block letters on a warranty deed purporting to convey that one-third interest to her grandson. Neither deed was notarized, but nevertheless both deeds were recorded. Ten years later the grandson died, and his interest went to a third party. Thereafter, grantor filed suit to set aside his original deed to his mother and her deed to her grandson, asserting that the lack of signatures made both deeds invalid to convey any interest. The court denied grantor's request for relief. A deed must contain the signature of the grantor, R.I. Gen. Laws § 34-11-1, but the court explained that a "signature" may consist of any mark adopted by the signer as his own. Such mark can be written by hand, printed, stamped, or even cut from one instrument and attached to another. Here, grantor admitted in a deposition that he intended to convey his interest to his mother. The same statute provides that an unacknowledged deed, if delivered, is binding as between the parties. This provision was adopted in recognition that transfers among family members, as here, tend to be informal but should nonetheless be upheld. As an alternative claim, grantor asserted acquisition to title to the land by adverse possession. This argument failed because the covenants of quiet enjoyment and future defense of title, found in the warranty deed, preclude a grantor from setting up any claim of adverse possession against the grantee or the grantee's successors. Carrozza v. Carrozza, 944 A.2d 161 (R.I. 2008).
EMINENT DOMAIN: Standard industrial woodworking tools are not fixtures for purposes of condemnation award. The city condemned premises containing a woodworking shop, and the owner sought additional compensation for 147 items (including table saws, drill presses, saber-saws, and pneumatic drill), asserting all were compensable trade fixtures. The owner conceded that the items were not machinery or equipment especially designed for the woodworking shop, that they were readily movable, that they could operate independently of each other, and even that they were adaptable to other businesses. Nonetheless, the owner's appraiser testified that removal of some items would cause a substantial loss in value in the secondhand market, and there would be additional costs to have the machinery removed, shipped, and stored until sold. The trial court accepted the appraiser's valuation and awarded $525,000, applying an "economic test of loss in value." The intermediate appellate court largely affirmed the trial court but excluded a few additional items that retained the characteristic of personalty because "despite their integral role in the woodshop's [operations], . . . they were not annexed to the property, the property was not adapted particularly to them, and there was no quality of permanence about their presence." The court of appeals largely reversed the appellate court. The traditional test for determining if an item is a fixture has three prongs: actual annexation to the realty, adaptability to the use or purpose of the realty, and the intention that the annexation be permanent. Later cases added a fourth element: "those improvements which are used for business purposes and which would lose substantial value if removed." The issue was the scope of the "lose substantial value" element. The court of appeals observed that the owner's list of fixtures contained everything, even the "kitchen sink." It held that the test for compensability in New York is not business use, nor efficiency of operation. Mindful of the need for a clear and workable test, the court believed that adoption of a test that mere diminution in use is sufficient would obliterate the distinction between fixtures and personalty altogether. Instead, the focus is devaluation of functional utility if the item is removed. In an "integrated shop," the removal of one item diminishes the utility of the remaining items, and it is not necessary that each item meet the traditional three-pronged test to be compensable in eminent domain. The court of appeals concluded that although the lower courts had correctly identified the test for fixtures, they treated the woodshop as integrated when it really was a "nonintegrated woodshop." The fact that equipment was placed in a certain order to maximize efficiency did not define an integrated operation for purposes of determining a loss of substantial value; nor did the fact that listed items would lose value if sold as secondhand goods qualify. The court remanded for consideration of which items met the traditional three-pronged test. In re City of New York (Melrose Commons Urban Renewal Area), 899 N.E.2d 933 (N.Y. 2008).
LANDLORD–TENANT: Acceptance of rent from assignee in possession may waive right to withhold consent to assignment. Two years into the five-year lease of a store, the original tenant went out of business and orally assigned the lease to a former employee. The lease prohibited assignments without the written consent of the landlord. Before taking over the premises, the assignee told the property manager of her intentions, but she did not contact the landlord directly. The property manager continued to address rent bills to the original tenant, but the assignee made at least six monthly rent payments in the name of her own company. Two years later, a major storm hit, flooding the leased space because of debris piled up outside the building by the upstairs tenant. The assignee filed suit against the landlord and the other tenant seeking recovery for flood damage to her inventory based on breach of contract, breach of the covenant of good faith and fair dealing, and negligence. The landlord asserted that it had not consented to the assignment and thus the assignee was a bare licensee or trespasser, who could not recover in the absence of proof of willful injury. The court of appeals found genuine issues of fact as to whether the landlord waived the consent requirement by accepting rent payments over a period of time, with knowledge of the assignment. Second, the court stated that an assignment might occur by operation of law when the parties form the common intent for the assignment to take place and then engage in acts that are "tantamount to a stipulation" to effectuate the assignment. In such cases, the landlord is estopped to challenge the transfer. In both cases, the assignee would be viewed as having stepped into the shoes of the original tenant. Moreover, the court found that the facts might also show the creation of a "common law tenancy," which can result from a surrender and acceptance, when the parties' conduct evidences a common intent to terminate an existing legal relationship and create a new one. Finally, the court ruled that even if the assignee was not deemed a tenant, she could still recover without a showing of willful injury because she was an invitee of the original tenant and as such could assert a cause of action against the landlord for breach of duty of care as to the areas within its control. La Belle Epoque, LLC v. Old Europe Antique Manor, LLC, 958 A.2d 269 ( Md. 2008).
RECORDING ACTS: Condominium association lien has priority over first mortgage that was recorded after home equity mortgage. A condominium unit owner obtained a $90,000 mortgage and two weeks later obtained a $22,500 home equity mortgage loan. The home equity lender recorded promptly, but the first lender did not record until the following year. Evidence showed that the home equity lender knew about the first mortgage, so under Minnesota's race-notice recording statute, the prior mortgage retained its priority over the home equity mortgage. Subsequently, the condominium association filed a lien for unpaid assessments. When the unit owner defaulted, all three foreclosed in separate judicial proceedings. The association bought the property at its own foreclosure and claimed second priority based on the Minnesota Common Interest Ownership Act, Minn. Stat. §§ 515B.1-101 to .4-118, which gives an association's lien priority except as to (1) a valid first mortgage or (2) liens arising before the filing of the Declaration of Condominium. The court ruled that the association had the right to rely on the sequence of recording of the mortgages in the recorder's office. It had no notice that the order of recording was not the order of priority between the original mortgage and the home equity loan mortgage. As an innocent purchaser for value without notice who had recorded, it was protected by the race-notice recording act from any order of priority that was inconsistent with the record. Thus, the association's foreclosure terminated the $90,000 mortgage because of the priority granted by the Act, and the association had a right of statutory redemption, allowing it to redeem the property by paying the persons who bought at the foreclosure of the home equity mortgage. Washington Mutual Bank v. Elfelt, 756 N.W.2d 501 (Minn. Ct. App. 2008).
Sales Contracts : Seller cannot retain deposit given under contract that specifies quantity of land but fails to indicate its location. A contract of sale described the land as "187.5 acres in Land Lot 170 Sumter County Georgia And containing 8,167,500 (187.5 a) square feet of land, more or less." The buyer failed to appear at the scheduled closing, and the seller refused to return the earnest money deposit, relying on a forfeiture provision in the contract. The trial court granted summary judgment for the seller, but the appellate court reversed, finding the land description to be insufficient. The buyer also claimed that the forfeiture clause was an unenforceable penalty, but the appellate court did not reach this issue. Courts in many states have struggled to articulate clear standards for the admission of extrinsic evidence to save flawed land descriptions. Georgia law allows the introduction of extrinsic evidence to supply the detail needed to satisfy the statute of frauds if the contract reveals the intent to sell "a particular tract of land." Such language is said to supply the "key" to the admission of the extrinsic evidence. The key may consist of "even a vague description of the property's location." The words in this contract, however, failed to comprise a "key" because they provided no clue as to the location of the property within the specified land lot. As the contract could not be enforced, neither could the forfeiture clause within the contract. O'Dell v. Pine Ridge Inv., L.L.C., 667 S.E.2d 912 (Ga. Ct. App. 2008).
SPECIFIC PERFORMANCE: Purchaser not entitled to specific performance without proof that he was ready, willing, and able to close. The parties entered into a contract for the sale of 756 acres of land for $40,000 per acre, contingent on rezoning the property. The contract limited the parties' remedies: in the event of the buyer's breach, the seller could keep the earnest money as liquidated damages; if the seller breached, the buyer could either seek a return of the earnest money or "seek to enforce" the contract. The parties failed to close and went to court. A jury found the seller in breach, and the trial court awarded specific performance. In a 5–4 decision the supreme court denied specific performance because the buyer failed to prove that he was "ready, willing, and able" to close the deal. This essential element is ordinarily met when a buyer actually tenders the purchase price at closing, but in this case the parties did not attend a closing and no such tender was made. The buyer argued that he was excused from tendering the money because the seller breached the contract before closing and that such tender would have been a "useless act." The court agreed that the buyer was excused from making an actual tender, but the buyer still had the burden to prove at trial that he met the "ready, willing, and able" element of the claim. In other words, the buyer had to show that had the seller not breached, he would have been able to deliver the money at the time of closing. The buyer's testimony at trial indicated that he neither had the money nor the investors available to cover the purchase price. The dissenting justices argued that because of the seller's breach, the buyer's ability to deliver the purchase price at the time of the anticipated closing was irrelevant. DiGiuseppe v. Lawler, 269 S.W.3d 588 ( Tex. 2008).
TAKINGS: A temporary moratorium on residential construction that had already lasted 30 years based on fear of personal injury or significant property damage is unenforceable. Plaintiffs owned vacant lots zoned for single-family dwellings in an area susceptible to dangerous landslides. In 1978, the city council enacted an "urgency ordinance" (that is, a moratorium) that prohibited further construction in the known landslide area because of the risk of personal injury and property damage. The ordinance stated that new construction would not be permitted until studies were performed, the stability of the landslide area determined, and the city decided what remedies to implement. Eventually, the city established an administrative process under which landowners could obtain exclusions to build on their lots. In 2002, however, while plaintiffs' exclusion application was pending, the city toughened the criteria for exclusions, making it impossible for the plaintiffs to obtain exclusions to build. The court held that the moratorium, which had lasted for 30 years, resulted in a permanent taking of plaintiffs' properties. The moratorium deprived the owners of all economically beneficial use of their lots, which was not justified by the city's fears of injury or property damage. At trial, the city failed to meet its burden "of proving that the construction ban was justified by 'background principles of the State's law of property and nuisance.'" In fact, the city's principal witness testified that the potential risk of injury at the subject area was "very low." Monks v. City of Rancho Palos Verdes, 84 Cal. Rptr. 3d 75 (Ct. App. 2008).
TAX FORECLOSURE: Tax foreclosure extinguished mortgage, which was not revived when, years later, mortgagor bought the land from buyer at foreclosure sale. Hartley owned property that was subject to a first mortgage. A tax foreclosure sale transferred the property to the County Forfeited Land Commission, a special entity created to buy tax foreclosure properties. See S.C. Code Ann. §§ 12-59-10 et seq. Both Hartley and the mortgagee claimed not to have received notice of the sale, but neither redeemed the property within the one year provided by statute. Likewise, neither brought an action to recover the land based on procedural irregularity within the applicable two-year statute of limitations. Three years after the tax sale, Hartley, the former owner, bought the land from the commission, financing the purchase with a mortgage loan. The new mortgagee brought a declaratory judgment action to establish the validity and priority of its mortgage. The court explained that a redemption of the property by Hartley would have preserved the first mortgage because the foreclosure would not have been completed. But Hartley did not take action until the redemption period had expired, and her action was not in the form of a redemption, that is, paying the collector of delinquent taxes, the party who was foreclosing. Instead, she bought the land from the commission, the buyer at the foreclosure sale. A mortgagor cannot defeat a valid mortgage by fraudulently or negligently allowing the property to go to tax foreclosure and then buying the property. There was no evidence, however, that Hartley was guilty of either fraud or negligence. She claimed not to know about the foreclosure sale. She had continued making mortgage payments on the first mortgage after the tax foreclosure sale, which supported her claim that she had not received notice of the tax foreclosure. Consequently, the tax foreclosure sale extinguished the first mortgage, which was not revived by Hartley's repurchase, and consequently Hartley's new mortgagee had the first (and only) lien on the property. Federal Financial Co. v. Hartley, 668 S.E.2d 410 (S.C. 2008).
ZONING: Owner who violates town order to cease and desist is liable for town's attorney's fees incurred to enforce order. Landowners resided in a residential zone but held a special exception that permitted the operation of a landscaping and property maintenance business, with specific restrictions. Several years later, based on complaints by an abutter, the town enforcement officer found substantial violations of the terms of the special exception and delivered a letter to the owners revoking it and ordering that business operations cease and desist within a month. In later talks, the town offered to extend the time to cease and desist by two months, which the owners refused to accept. Just before the time for the cessation of operations, the town attorney wrote to the owners reminding them of the need to cease all operations but also advising that if they did not reach an agreement with the town, and the town was compelled to act to enforce the order, they would be subject to a penalty for each day the offense continued, as well as liability for attorney's fees. The owners did not cease operations but brought suit challenging the zoning ordinance and the cease-and-desist order. The town prevailed and sought attorney's fees under a statute providing that in a zoning enforcement action "the municipality shall recover its costs and reasonable attorney's fees actually expended in pursuing the legal action if it is found to be a prevailing party." N.H. Stat. § 676:17(II). The supreme court found that the statute contained mandatory language and observed that the imposition of liability for attorney's fees was not unfair, because the landowners had notice of this possibility from the letter from the town attorney. Query whether the statute is good policy: Although these landowners were undaunted in making a challenge, others might be reluctant to challenge even unlawful acts by town officials for fear of the cost of litigation. Bennett v. Town of Hampstead, 953 A.2d 388 (N.H. 2008).
This issue's developments in property literature are devoted to the subject of mortgage loan securitization and the sub-prime meltdown.
Securitization and the Holder in Due Course Doctrine. Now that everyone is aware of the boom-and-bust cycle of sub-prime lending that was unleashed by securitization in the 1990s and that peaked in 2006, it is interesting to look back at recent scholarship to see if anyone saw the potential for disaster. In retrospect, Prof. Kurt Eggert's Held Up in Due Course: Predatory Lending, Securitization, and the Holder in Due Course Doctrine, 35 Creighton L. Rev. 503 (2002), was one of the most important and prescient law review articles in property in the last decade. Although a few scholars in real estate finance and consumer law took note of it, the shame is that so few championed its analysis and recommendations. Eggert built on a companion article published in the same law review in the same year in which he had reviewed centuries of common law development in negotiable instruments law and the eventual codification of the holder in due course doctrine in English and American law—a process he characterized as the victory of form over intent. In the Predatory Lending article he narrated how the practice of residential mortgage lending in the 1990s began to resemble the shady consumer finance lending that had occurred in the late 1960s and early 1970s until the Federal Trade Commission cracked down with regulation that eliminated the holder in due course rule for loans used to finance the purchase of consumer goods. Eggert then explained how the financial innovation known as securitization was leading to a remarkable "unbundling" and "atomization" of the residential mortgage industry. This unbundling and atomization was already producing, Eggert showed, a significant and disturbing rise in predatory lending, an increase in residential foreclosures, dramatic failures of fraudulent and thinly capitalized mortgage finance companies, and substantial collateral damage to borrowers and their communities. He also detailed how state and federal responses to predatory lending, particularly the Home Ownership and Equity Protection Act of 1994 (HOEPA), were insufficient to stop the tide of predatory lending fueled by securitization. At a theoretical level, Eggert's article revealed how our legal system allowed the risk of loss from fraud and deception in mortgage lending to be placed precisely on the party—the unsophisticated residential borrower targeted by sub-prime mortgage originators—least able to discern, prevent, mitigate, or spread that risk. At the heart of the legal system's failure was its attachment to a default rule—the holder in due course doctrine—that may well have made sense at the time of Lord Mansfield when merchants who used bills of exchange and promissory notes understood the implications of negotiability, but which, after its entrenchment in Article 3 of the U.C.C., gave all the specialized players in the vicious cycle of sub-prime lending and securitization a free pass (at least until recently) from risk. In the end, Eggert argued that Congress should abrogate the holder in due course rule in any case in which it would assign the risk of loss for fraud and other lender malfeasance from the ultimate holder of a promissory note to a noncommercial borrower. In its place, he urged, Congress should adopt a nonwaivable rule preserving borrower defenses against any assignees, bona fide or otherwise. As he put it, "the holder in due course rule should be reversed and the risk of loss because of the originator's fraud or deceptive practices should automatically be assigned to the purchasers of loans." This reassignment of the risk of loss, Eggert contended, would force the eventual purchasers of loans, Wall Street banks and other large financial institutions, to invest in the detection and dramatic reduction of predatory lending at its point of origin. If Congress, or other powerful players such as the government-sponsored entities, had acted swiftly on Eggert's recommendation, perhaps the worst of the sub-prime lending that occurred over the next four years—and the financial ruin it spawned—might have been avoided. Sadly, Congress never paid any attention to Eggert's plea. Just as sadly, American property law scholarship hardly paid much attention either.
Securitization and Doctrinal Uncertainty. "One cannot step into the same river twice, Heraclitus famously declared." So begins Prof. Kenneth C. Kettering in his recent article, Securitization and Its Discontents: The Dynamics of Financial Product Development, 29 Cardozo L. Rev. 1553 (2008). Downloaded more than a thousand times from SSRN, the online repository of recent legal scholarship, this article is widely recognized as a seminal critique of the process of financing and secured lending that has come to be known as "securitization." Kettering's critique is twofold—the first doctrinal and the second sociological. He begins by explaining how prototypical securitizations are structured and what is their fundamental purpose—to create special purpose entities (SPEs) that will issue securities that will continue to provide a stream of payments to investors that will be unaffected by a bankruptcy filing of the originator of the receivables underlying the securitization. In other words, the goal is to create a pool of assets that can obtain a credit rating better than that of their originator because they are isolated from the bankruptcy vulnerable assets of the originator. Kettering next questions whether this goal of "bankruptcy isolation," or avoiding the "Bankruptcy Tax" imposed on secured lenders under the Bankruptcy Code, is consistent with federal bankruptcy policy and basic legal principles. His conclusion is that the entire process of securitization could be successfully challenged in the right case by a party who points out that a transfer of the receivables to the SPE is not in fact a "true sale," but rather, if truth be told, a "fraudulent transfer" designed purposely to "hinder or delay" other creditors of the bankrupt originator and thus frustrate the goals of the Bankruptcy Code. A bankruptcy court could also defeat the purposes of securitization, Kettering claims, by ordering a "substantive consolidation" of the originator and the SPE. Kettering admits that only one bankruptcy court ruling has reached this kind of conclusion. See In re LTV Steel Co., 274 B.R. 278 (Bankr. N.D. Ohio 2001). Yet he argues that legal opinions serving the financial industry have papered over these significant doctrinal weaknesses. The second half of Kettering's long article is, in his own words, a study in "legal sociology," in particular a meditation on how new legal/financial products are received, how their doctrinal weaknesses are minimized or ignored, and how, after extensive use, they finally become "too big to fail." Here he discusses the role of financial industry regulators and private rating agencies. It is principally the latter, he argues, who become the key "lawmakers" by giving securitized debt a higher credit rating than the originators themselves based on the supposed bankruptcy isolation of the SPEs. This favorable credit rating, in turn, accounts for the growth of the entire securitization process, rendering it, in the end, "too big too fail," despite its inherent doctrinal flaws. Surprisingly, Kettering does not propose that we do away with securitization entirely. He recognizes there may be some economic value inherent in securitization, particularly to debt originators who seek lower cost capital. Instead, he proposes that Congress amend the Bankruptcy Code to provide expressly for the bankruptcy isolating result that securitization aims to achieve, while at the same time defining and limiting the objects of securitization to those assets—receivables, but not for instance, core inventory—that would not be central to the reorganization of a bankrupt originator. Implicit in his critique is the suggestion that if rating agencies have become the key "lawmakers" in the regulation of new financial products, perhaps it is not surprising that we can become so vulnerable to their misjudgments, whether they are legal in nature or factual.
Securitization and Doctrinal Certainty. To say that Prof. Kettering's principal thesis has been unsettling to the securitization industry, and to the lawyers who serve it, is an understatement. It should come as no surprise then that one of the leading academic proponents of securitization, Prof. Thomas E. Plank, has offered a tart rebuttal in Sense and Sensibility in Securitization: A Prudent Legal Structure and a Fanciful Critique, 30 Cardozo L. Rev. 617 (2008). Plank argues in essence that Kettering has creatively imagined doctrinal uncertainty at the heart of the securitization process when in fact none really exists. Plank agrees with Kettering's assessment of the fundamental purpose of securitization and asserts that the cost savings it achieves in reduced borrowing costs for originators of debt is significant (at least as compared to conventional corporate debt issuance). Plank also claims that in the case of residential mortgages these cost savings are ultimately passed on to borrowers. Plank's primary disagreement with Kettering concerns the theory that the sale of assets to an SPE amounts to a frustration of bankruptcy policy and a fraud on other creditors of an insolvent originator. Plank argues that the two legal devices underpinning securitization—a true sale of the receivables to an SPE and the existence of an SPE as a "truly separate legal entity with a separate governance structure that is sufficiently capitalized"—are both doctrinally sound. Plank's critique initially focuses on the case law that Kettering uses to support his thesis. In Plank's view, these cases, and principally Shapiro v. Wilgus, 287 U.S. 348 (1932), are outdated and inapposite. At a more fundamental level, Plank challenges what he claims is Kettering's assumption that, absent effective securitization, the "Bankruptcy Tax" otherwise imposed on secured creditors would benefit unsecured creditors. In Plank's view, the Bankruptcy Tax does little to help unsecured creditors and only hurts secured creditors. Plank even claims that by avoiding the costs of the Bankruptcy Tax securitization actually benefits unsecured creditors—and society as a whole—by allowing debt originators to obtain credit at lower cost. Plank does not really address the financial debacle produced by the securitization of so many poorly underwritten sub-prime and other loans, and in this reply at least does not offer any solution to the problem, except, it seems, more securitization. Readers interested in this heated debate and its implications for resolution of the sub-prime mortgage debacle should stay tuned. Prof. Kettering has already penned a reply to Prof. Plank, which Cardozo Law Review will publish soon.
New Jersey allows victims of domestic violence to terminate a residential tenancy. Under the New Jersey Safe Housing Act, a tenant may terminate any lease of a residential property by documenting domestic violence and providing the landlord with a written notice that the tenant, or a child of the tenant, faces an imminent threat of serious physical harm from another named person if the tenant remains on the leased premises. The tenant may establish domestic violence by providing the landlord with a copy of a restraining order issued under the New Jersey Domestic Violence Protection Act, or a similar order from another jurisdiction. Alternatively, the tenant may document domestic violence through records from the police, a health-care provider, a domestic violence agency, or a licensed social worker. The tenant may quit the premises and is discharged from payment of rent for any period following 30 days from the date of the notice. Other cotenants also are released from the lease. 2008 N.J. Laws 111.
New York substantially revises its Durable Power of Attorney Law. A durable power of attorney, unlike a common law power of attorney, survives the disability of the principal. Among other changes, under the new law powers of attorney are presumed to be durable. Proper execution of the power of attorney requires, at a minimum, the signature of the principal, acknowledgment, and acceptance in writing by the attorney-in-fact. The law establishes a general fiduciary standard (the "prudent person standard of care") and specific fiduciary duties are for all attorneys-in-fact, which also apply to powers of attorney executed before the legislation's effective date. Third parties who refuse to accept the power are now subject to statutory liability. The law creates a statutory short form for major gifts (statutory major gifts rider, or SMGR), with appropriate options for most taxable and nontaxable estates. Powers that contain an SMGR, or a similar customary form, are subject to the requirement that the power of attorney must be signed by the principal, witnessed by two witnesses, acknowledged, and accepted in writing by the attorney-in-fact. Careful attorneys, of course, have all powers of attorney executed in this manner to maximize the usefulness of the power, especially for real property. 2008 N.Y. Laws 644.Return to Probate & Property Magazine