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Court Approval of the Sale of Realty Belonging to an Infant or Incapacitated Person: RPAPL Article 17

BY: EDWARD D. LOUGHMAN, III*

Although guardians, adult guardians, conservators and committees are charged with the maintenance and control of the property of their wards, that does not include the power to transfer real estate.1 In order to convey good title, the transfer must be approved by the Court pursuant to article 17 of the Real Property Actions and Proceeding Law.2 Although this article will focus on its use in connection with the sale of unproductive or no-longer-needed property belonging to an incapacitated person, the procedure is also available to sell property belonging to an infant whether to pay debts, improve the premises or for other purposes.3

SCENARIO

Assume that an incapacitated person can no longer be managed in his or her home. Whether upon the lack of objection of the incapacitated person or after a hearing pursuant to section 81.22(a)(9) of the Mental Hygiene Law, the property owner is confined to a nursing home. Assuming that a spouse, child or other person dependent upon the incapacitated person does not reside there and that it is otherwise unproductive, the real estate must be sold. Not only would its upkeep and maintenance be a drain on the incapacitated person's resources but the proceeds should be used to generate income or pay bills. Accordingly, grounds to seek Court approval to sell exist.4

PROCEDURE

Like any property, the real estate should be effectively marketed. Any agreements with real estate brokers should clearly be made as guardian on behalf of the incapacitated person and be subject to Court approval. Presumably, notice5 has already been filed with the County Clerk alerting the world that a guardian has been appointed. Consideration should be given to hiring an independent appraiser to assess value, especially in a county such as Westchester where the petitioner is allowed to choose the appraiser who will testify at the hearing.

The contract of sale should expressly be conditioned upon Court approval pursuant to article 17 of the Real Property Actions and Procedure Law.6 Provision should be made for flexibility in the closing date to allow time for Court approval.

Once the contracts are signed, a special proceeding must be commenced to obtain approval.7 If an adult guardian, conservator or committee is in place, the application can be made within the context of that proceeding.8 The application is made by petition and order to show cause.9 In Westchester, an affidavit of an appraiser is customarily attached.10

At the hearing on the return day, petitioner should be prepared to establish the contract, the steps taken to market the sale and why the price is reasonable. The appraiser will give his or her expert opinion as to the value of the property. Generally, unless the appraiser's estimate of value is significantly higher or some other irregularities exist, the sale will be approved. If waiver of the posting and publication requirements was requested, good cause therefore should be shown. "Good cause" might include that the premises were vacant and that posting and publications would invite vandalism, that the premises were adequately advertised and that the appraised value was obtained or exceeded.

Upon approval, an order and judgment should be submitted to the Court. It should approve the contract, refer to the parties and purchase price, authorize the guardian to convey the property and, if appropriate, waive the posting and publication requirements. It will also award or approve the appraiser's fee and the broker's commission. Once signed, copies should be given to the buyer's attorney and the title company, as well as to those who appeared.

Although the requirements of each title company should be checked, the deed should be from the guardian, as guardian of the named incapacitated person and refer to the Court of appointment, index number and date of the order and judgment approving the sale. Such a deed, if given in good faith and pursuant to Court order, "has the same validity and effect as if executed by the person in whose behalf it was executed, and as if the infant were of full age or the incompetent person or conservatee were of sound mind and competent to manage his affairs."11

Your task is not yet done as the order and judgment will direct the guardian to report under oath12 and order that the attorney hold the proceeds in an escrow account.13 Accordingly, application should be made, usually by notice of motion, to confirm the sale. Notice should be given to the same parties noticed by the order to show cause. The application consists of the guardian's report of sale under oath and should contain the attorney's closing statement, describe the proceeds received and justify expenditures made. It should ask that the report of sale be approved, the sale confirmed and that an attorney's fee be awarded. The attorney's affidavit of services should accompany the report. A proposed order and judgment should be submitted granting the requested relief and leaving spaces for the Court to insert the amount of attorney's fee it approves and the amount of additional bond required as a condition to turning the monies over to the guardian (if an additional bond has not already been filed).

CONCLUSION

Although the provisions of article 17 add steps to the transfer of real estate belonging to an infant or an incapacitated person, they are not onerous and serve not only to protect the infant or incapacitated person, but to ensure the transfer of good title.

© Westchester County Bar Association 1998 reprinted with permission


*Member, Muldoon, Morgan & Loughman, New Rochelle, N.Y. Special thanks to Charles Devlin, Senior Law Clerk to the Honorable Louis C. Palella, Justice of the Supreme Court for his comments.

1 The statute uses the terms "dispose of real property or an "interest in real property." It defines "dispose of as "to sell, convey, exchange, mortgage, release or lease." R.P.A.P.L. §1701(5). An "interest in real property" is broadly defined to "include any term, estate or other interest in real property, vested or contingent, of an infant in being, an incompetent person, or a conservatee including an inchoate right of dower and a possibility of reverter, and also the contingent interest of an infant not in being." R.P.A.P.L. §1701 (3). Although a guardian for an incapacitated person is not mentioned, any reference in a statute to committee or a conservator it is deemed to include an adult guardian. L.1992, Ch. 698, §4.

2See R.P.A.P.L. §1753.

3R.P.A.P.L. §1753.

4R.P.A.P.L. §1711(2).

5 Mental Hygiene L. §81.20(6) provides in pertinent part: a guardian who is given authority with respect to property management for the incapacitated person shall:

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(vi) file with the recording officer of the county wherein the incapacitated person is possessed of real property, an acknowledged statement to be recorded and indexed under the name of the incapacitated person dentifying the real property possessed by the in capacitated person, and the tax map numbers of the property, and stating the date of adjudication of incapacity of the person regarding property management, and the, address, and telephone number of the guardian and the guardian's surety.
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6R.P.A.P.L. §1745.

7R.P.A.P.L. §1712.

8 The proceeding remains open because the Court retains jurisdiction to approve annual accountings.

9 Although R.P.A.P.L. §1721 refers to a notice of petition, it refers to notice "to such persons and in such manner as the Court may direct" - indicative of an order to show cause. Because Mental Hygiene Law §81.16(c) directs the Court in the judgment appointing the guardian, to "identify all persons entitled to notice of all further proceedings" it could be argued that notice of petition would be adequate. Customarily, order to show cause is used directing service by certified mail, return receipt requested upon the incapacitated person, his or her counsel, if any, the Court Examiner appointed to review the annual accounts and those who appeared in the guardianship proceeding.

10In Nassau, Queens and perhaps other counties, the Court, in the Order to Show Cause appoints an appraiser pursuant to R.P.A.P.L. § 1742 who is directed to appraise the property. Accordingly, in those counties, hiring your own may be an unnecessary (and unreimbursable) expense.

11R.P.A.P.L. §1753.

12R.P.A.P.L. §1745.

13In Queens County and perhaps others, an additional bond to cover the expected proceeds must be filed prior to and as a condition to closing. Once signed, the order and judgment, with notice of entry, should be served on the parties. Obviously, the next accounting filed will refer to the order and show the net proceeds received.

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