145 W. 21st Realty LLC v. First West 21st Street LLC, New York County Index No. 653241/2012

New York County Supreme Court Justice Kelly O’Neil Levy has issued a decision adding to the understanding of the party wall rules. In 145 W. 21st Realty LLC v. First West 21st Street LLC, Justice O’Neal Levy granted the defendant summary judgment dismissing causes of action sounding in conversion/encroachment, trespass, and negligence. In 145 W. 21st Realty v. First West 21st Street LLC, the plaintiff and defendant shared a party wall. The defendant, however, demolished its building to redevelop its property. When redeveloping, rather than tie into the party wall, the defendant built an independent wall and extended the height of its building 135 feet above the rooftop of the plaintiff’s adjoining building.

The plaintiff alleged that defendants new building contained an independent wall that cantilevered over the party wall. It was undisputed that the defendant had not crossed the property line. The plaintiff’s essential complaint was that because of the defendant’s redevelopment the plaintiff could not increase the height of its building without incurring the significant expense of installing a new supporting wall inside its own property or effectively demolishing its own building and rebuilding entirely within its own lot, thereby losing square footage.

In granting the defendant’s motion for summary judgment, Justice O’Neil Levy wrote that “Where a party wall runs directly over the property line between two parcels each of the two adjoining owners of a party wall owns in severalty so much of the wall as stands upon his own lot, each having an easement in the other strip for purposes of supporting his own building.” Justice O’Neil Levy continued that, “Either adjacent owner may increase the height of a party wall when it can be done without injury to the adjoining building, the wall is of sufficient strength to safely bear the addition, and the addition can be used by both owners to increase the height of their own building.”

But Justice O’Neil Levy distinguished cases of increasing the height of the party wall from cases where an adjoining building is demolished and an independent wall is installed. The court wrote, “Where one adjoining owner demolishes its building, however, this puts an end to the necessity of support on its side of the building.” Finally, Justice O’Neil Levy concluded that an “owner may use its side of the wall for its own commercial use so long as none of its structures compromise the integrity of the wall or cross the property line.”

The lesson of 145 W. 21st Realty LLC v. First West 21st Street LLC is that the advantages conferred by party wall structures may not last forever. An adjoining property owner need not consider its neighbor’s interests if it elects to redevelop its property so that it no longer needs the support of a party wall.

US Bank National Association v. Zeidman, Westchester County, Supreme Court Index No. 52204/2012

Foreclosing lenders often have back-office operations out-of-state.  In US Bank v. Zeidman, the foreclosing lender’s back-office operations were performed by a loan servicing company located in California.  In support of a motion for summary judgment in foreclosure, the lender filed an affidavit of its loan servicer’s Vice President of  Loan Documentation.  The Vice President’s affidavit contained a notary’s jurat and a “Uniform Certificate of Acknowledgment.”  The defendant contended that the Vice President’s affidavit should be disregarded because it failed to comply with CPLR 2309(c) which provides, ” [a]n oath or affirmation taken without the state shall be treated as if taken with in the state if it is accompanied by such certificate or certificates as would be required to entitle a deed acknowledged without the state to be recorded within the State  if such deed had been  acknowledged before the officer who administered the oath or affirmation.”

The court rejected the defendant’s argument and granted the lender summary judgment in foreclosure.  Relying upon Real Property Law 299-a, the court ruled that to be valid in New York an acknowledgement may be taken either in the manner prescribed by the laws of New York or in the manner prescribed by the laws of the state where the acknowledgement is taken if it is accompanied by a certificate of conformity.   The court then concluded that no certificate of conformity is required where the acknowledgement  is taken in the manner prescribed by New York law.  Because the acknowledgement on the Vice President’s affidavit was in the form prescribed by New York law, the court found it admissible.

The lesson of US Bank v. Zeidman is that courts will consider documents notarized out-of-state provided that the acknowledgment conforms to the requirements of New York law.

SPRE Realty, Ltd. v. Dienst, First Department 651671/2013

The Appellate Division, First Department has clarified the test for whether a broker is entitled to a commission in the absence of a written agreement. In SPRE Realty, the plaintiff-broker showed the defendants a two-unit, duplex, condominium apartment at 397 West 12th Street during the summer of 2008.  Thereafter, the broker negotiated on the defendants behalf and a contract was prepared. In August 2008, the defendants pulled out of the deal to purchase the two units.  Thereafter, in February 2010 the defendants completed a purchase of a duplex apartment comprised of two different condominium units in the same building, albeit at a lower price than contemplated for the units that defendants viewed in 2008.  The broker sued and the defendants moved to dismiss.

In a decision authored by Justice Rolando Acosta, the First Department reviewed various formulations of the test of whether a broker, in the absence of a written agreement, was entitled to a commission if the introduction by the broker was the “direct and proximate link” to the consummation of a sale.  The court wrote that  the “direct and proximate link” standard  “requires something beyond a broker’s mere creation of an  ‘amicable atmosphere’ or an ‘amicable frame of mind’  that might have led to the ultimate  transaction.   At the same time, a broker need not negotiate the transactions final terms or be present at the closing.”  In its decision, the First Department expressly  rejected an “amicable  atmosphere”  or “amicable frame of mind”  standard.  Nevertheless, the Court  ruled that  even under the  “direct and proximate link ” standard, the plaintiff broker had stated  a cause of action sufficient to survive a motion to dismiss.

The lesson of SPRE Realty is that a broker must allege and prove a “direct and proximate link” between his or her introduction of the purchaser and seller and the consummation of a sale in order to recover a commission in the absence of a written agreement.

Eastern Savings Bank, FSB v. McLaughlin United States District Court, Eastern District of  New York 13 CV 1108

Federal Magistrate Judge Lois Bloom of the Eastern District of New York has held that New York law permits interest to accrue at the default rate even after the plaintiff is awarded summary judgment in foreclosure as long as the loan documents so provide in clear, unambiguous and unequivocal language.

In this case, heard in federal court on diversity grounds, the plaintiff was awarded summary judgment in foreclosure.  The plaintiff sought to recover interest during the period after the award of summary judgment at the loan’s default interest rate of 24%.  The defendant-borrower contended that after summary judgment, the statutory rate of 9% applied.   The District Court referred the matter to Magistrate Judge Bloom.

Magistrate Judge Bloom ruled that New York Law provides that where there is a “clear, unambiguous, and unequivocal expression to pay an interest rate higher than the statutory rate” until the judgment is paid, interest on an unpaid mortgage accrues at the default rate even when the default interest rate is greater than the statutory interest rate.

The lesson of Eastern Savings Bank, FSB v. McLaughlin is that a mortgagee may contract for default interest rates that are greater than the statutory rate, but must do so in clear, unambiguous, and unequivocal language in order to receive default rate interest post-judgment.

Gural v. Drasner, Appellate Division, First Department Index No. 103283/2008

The Appellate Division, First Department has limited the applicability of the part performance exception to the Statute of Frauds.

As many real estate lawyers know, the Statute of Frauds, which requires certain contracts for conveyances of interest in real property to be in writing and signed, contains an exception for “part performance.” by the party claiming the existence of a binding agreement.  The alleged part performance must be “unequivocally referable” to the alleged contract. In Gural, the plaintiff attempted to enforce a purported oral agreement to improve land in exchange for a promise to use the land and to reimburse the plaintiff for his expenses upon the sale of the land.  The plaintiff improved the land and used it as a pasture for his horses.  Apparently, it takes more than one year to improve land so that it may be used for pasture.  Thereafter, the land was sold and the seller/defendant did not pay plaintiff’s alleged expenses for the land’s improvement.  The plaintiff contended that his improvement of the land constituted part performance taking the case out of the statute of frauds and entitling him to assert a claim based upon an alleged oral agreement to reimburse his expenses of improving the land upon its sale.

The Gural court held that the part performance exception could not apply.  The part performance exception to the statute of frauds appears in General Obligations Law 5-703 which applies only to certain contracts concerning real property.  But General Obligations Law 5-701, the general statute of frauds, applies to all contracts that cannot be performed in less than a year.  Because it takes more than one year to improve land so that it may be used for pasture, General Obligations Law 5-701 applied to these facts.  The text of General Obligations Law 5-701 does not contain a part performance exception.  Thus, because the plaintiff was stating a claim within the scope of 5-701, the First Department ruled that it was compelled to grant summary judgment for the defendant. The plaintiff’s alleged contract was not in writing, could not be performed in less than one year, and no part performance exception was available.

The lesson of Gural is clear.  Where the contract is incapable of being performed in less than one year, it must be written.  Plaintiffs, then, are well-advised to structure  cases alleging breach of an oral contract in such a manner as to insure that the contract can be performed in under one year.


Cadelrock Joint Venture, L.P. v Callender, Supreme Court, Kings County, Index No. 3354/2011

Justice Carolyn Demarest has held that a note holder suing on a note secured by real property must serve the notice required by Real Property Actions and Proceedings Law 1304 even though the lender is not seeking foreclosure.

RPAPL 1304  is applicable to actions at law to recover on a note securing a  “home loan” in addition to actions for foreclosure.

In Cadelrock,  the holder of the note and mortgage  obtained a default judgment against the borrower  in an action at law to recover on the note  as opposed to an action in equity to foreclose on the mortgage.  The  borrower-defendant sought to  vacate the default judgment and dismissed the action on the grounds that the lender failed to serve the notice required under Real Property Actions and Proceedings Law  1304.  This statute requires that  “with regard to a home loan, at least ninety days before a lender, an assignee or a mortgage loan servicer commences legal action against the borrower, including mortgage foreclosure, such lender, assignee or mortgage loan servicer shall give notice to the borrower”  in the manner prescribed by the statute.

The lender conceded that the  underlying loan was a “home loan” for purposes  of the statute but argued  that the statute did not apply  because it was suing only on the note  and not seeking foreclosure.  Although not expressly discussed in the court’s opinion, it is likely that the lender, for whatever strategic reasons,  elected to sue on the note  as opposed to seek foreclosure as is required by New York’s  election of remedies statutes,  Real Property  Actions and Proceedings  Law 1301.

Justice Demarest ruled that as a remedial statute , Real Property Actions and Proceedings Law 1304  was to be “liberally construed .”  Justice Demarest found that the  “plain terms”  of the statute  were not limited to foreclosures.  Accordingly,  the court vacated the default and dismiss the action.

The lesson of Cadelrock is  even when not seeking foreclosure  and only proceeding  on the note,  lender must serve the ninety day  notice prescribed  by  Real Property Actions and Proceedings law  1304  when seeking to recover on a “home  loan.”


Azad Property Group, LLC v. Willspring LLC, Supreme Court, New York County, Index No. 656626/2013

Commercial Division Justice Marcy Freidman has allowed a broker’s claim for breach of an implied-in-fact contract to pay a commission to survive a motion to dismiss.  In this case, the plaintiff alleged that although it did not have a written agreement with the owner, it produced a buyer, Vornado Realty Trust, that accepted all of the material terms that the owner claimed were necessary for it to agree to a sale.  The plaintiff broker alleged that after Vornado accepted the owner’s terms, but before a contract was signed, the owner received a better offer that it ultimately accepted.

While agreement on price alone does not constitute a meeting of the minds, where the prospective purchaser agrees to all the essential terms set forth by the seller, the seller’s obligation to pay a commission will not be excused because the seller chooses not to proceed in finalizing the contract.

Justice Friedman wrote that “While agreement on price alone does not constitute a meeting of the minds, where the prospective purchaser agrees to all the essential terms set forth by the seller, the seller’s obligation to pay a commission will not be excused because the seller chooses not to proceed in finalizing the contract.”  Justice Freidman further ruled that the complaint adequately alleged that the owner “availed itself of the plaintiff’s services to procure a prospective purchaser, knowing [the broker] expected payment for acting on the seller’s behalf to extract concessions [from the prospective purchaser] on price and mortgage defeasance terms.”  Accordingly, Justice Freidman ruled that the plaintiff-broker stated a cause of action for breach of an implied in fact contract.

The lesson of Azad Property Group is that a signature and a completed deal are not necessary elements to a broker’s claim for a commission.  Rather what is essential is that a broker set forth evidence that it produced a prospective buyer that is ready, willing, and able to close on the seller’s clearly articulated essential terms.

AMT CADC Venture v. 455 CPW, Supreme Court, New York County Index No. 810109/2011

In this mortgage foreclosure action, the court addressed the issue of what constitutes a “first mortgage” for purposes of Real Property Actions and Proceedings Law 339-z.  This statute provides that the condominium will have a priority lien for unpaid common charges that will receive priority over all other liens, irrespective of when filed, with the exception of tax liens, certain government liens and a “first mortgage of record.”  The issue in AMT CADC Venture was whether a lien on three residential units and a garage that resulted when the condominium sponsor mortgaged these properties would prime the condominium board’s common charge lien.

The court held the sponsor’s mortgage was a “first mortgage of record” for purposes of Real Property Actions and Proceedings Law 399-z.  The court analyzed the statute and determined it did not define “first mortgage of record.”  Accordingly, the court reasoned that because “first mortgage of record” was not defined by the statute, it would give effect to the statute’s plain meaning. Finding that nothing in the text of the statute limited the meaning of “first mortgage of record” to mortgages for the purchase of a condominium unit, the court found that the sponsor’s blanket mortgage was a “first mortgage of record” for purposes of Real Property Actions and Proceedings Law 339-z and therefore had priority over the condominium board’s common charge lien.

The lesson of AMT CADC Venture is that a sponsor’s blanket mortgage on a condominium will trump a condominium board’s statutory lien for common charges.

1855 7 Ave. Housing Dev. Fund v. Wigfall, New York County Landlord-Tenant Court, Index No. 81069/2010

In this residential landlord-tenant case, a co-op board was successfully able to terminate a tenant-shareholder’s proprietary lease based upon objectionable conduct in violation of the House Rules and  the Proprietary Lease that created a nuisance and an unhealthy and unsafe environment for residents and guests.  The trial testimony established that the co-op had documented 744 separate incidents of objectionable conduct, complete with respective dates and times, including urinating and defecating in the hallways and elevators, loitering and smoking, illegal drug sales in and around the building, and sexual activity in the stairway.  The co-op, apparently, had security camera footage of many of these events.  The co-op board scheduled a meeting notified the tenant-shareholder that it would consider whether to terminate the shareholder’s tenancy and served the tenant with notice of the meeting.  The tenant appeared and spoke at the meeting, after which the co-op board decided to terminate her tenancy.

The Board’s failure to act in the face of these allegations would amount to an abdication of its responsibilities and duties to all the shareholders.

The court ultimately determined that the co-op had the authority, within the scope of the business judgment rule to terminate the tenancy.  The Court emphasized that the board provided notice to the tenant-shareholder, acted for the purposes of the cooperative, within the scope of its authority, and in good faith.  The co-op in 18557 7Ave Housing Dev. Fund had obviously taken the time to develop an extensive record upon which to base its decision. The tenant-shareholder was unable to provide assurances that her objectionable conduct would not continue in the future.  Under these circumstances, the court found the board’s action to be “deliberate, thoughtful, and accommodating.”  The court further wrote that the “Board’s failure to act in the face of these allegations would amount to an abdication of its responsibilities and duties to all the shareholders.”

The lesson of 18577 7Ave Housing Dev. Fund is that a co-op board can terminate a shareholder’s tenancy, but it should take great care to insure the the tenant has notice and  an opportunity to be heard, to follow the procedures set forth in the governing documents, to act solely for the purposes of the cooperative, to proceed in good faith, and to document its allegations of objectionable conduct.

Kaplan v. Park South Tenant Corp., New York County Supreme Court, Index No. 157669/2013

While the business judgment rule often protects a decision by a co-op board from legal challenge, there are times when it does not.  As a recent decision by New York County Supreme Court Justice Arthur Engoron demonstrates, the Board’s business judgment cannot trump the tenant-shareholder’s proprietary lease.

the proprietary lease trumps the business judgment rule

Kaplan began with the tenant-shareholder’s request to install an air conditioning system on terrace space appurtenant to the tenant-shareholder’s apartment.  The proprietary lease provided that any alterations to a co-op unit could not be made without the prior written consent of the board of directors not to be “unreasonably withheld.”  Plaintiff sought a preliminary injunction seeking a declaration that the co-op would not take any action preventing the plaintiff from installing the air conditioning system and relocating a telecom riser.

Justice Engoron granted the preliminary injunction expressly holding “the proprietary lease trumps the business judgment rule.” The court further found that the co-op board had been unreasonable in its refusal to consent to the tenant-shareholder’s proposed alterations primarily because of the minimal impact the proposed alterations would have on other tenant-shareholders. The court also ruled that it could award such relief on a motion for preliminary injunction because it would still try the issue of whether the board’s refusal to withhold consent to the tenant-shareholder’s proposed alteration was reasonable. The court concluded that if the board’s action were found to be reasonable, the tenant-shareholder could be required to remove the air-conditioning system and restore the premises.

The lesson of Kaplan v. Park South Tenant’s Corp. is that while the business judgment rule provides co-op boards with broad latitude, co-op boards may not take any actions in derogation of the proprietary lease.