ATTENTION NEW YORK CITY BUILDING OWNERS AND LANDLORDS, the next time a former or current commercial tenant files a notice of pendency or lis pendens against your building claiming that he, she or it has the right to be restored to possession of the premises, please take solace in the fact that the First Department, Appellate Division has ruled that said notice of pendency must be cancelled because a leasehold interest is deemed to be personal property and not an interest that would affect title to, or the possession, use or enjoyment of, real property, as required by statute in order for a notice of pendency to be filed in the courts of New York. You’re welcome!
What is a notice of pendency? A notice of pendency has been described by the New York Court of Appeals as “an extraordinary privilege” that allows a litigant to put a lien on real property when the complaint in the underlying lawsuit falls within the scope of CPLR 6501. Although a notice of pendency has a powerful effect because of the ease in which it can be used and the alienability it may cause to the marketability of the property, the courts will not initially investigate whether the notice of pendency filed is proper or if it should remain upon the real property.
However, the Appellate Division, First Department has held that the privilege of filing a notice of pendency ceases when a litigant uses such filing as a “sword” against the owner of the real property and not as a “shield” which it is intended for when protecting a litigant’s claimed interest in real property from being lost during a lawsuit.
Partner, Erik Bashian, immediately recognized this issue in his New York commercial litigation case in that the plaintiff, a former commercial tenant, was using the filing of a notice of pendency against his client’s building as a “sword” and not as a “shield.” Here, plaintiff sought to be restored to possession of a premises under a lease agreement despite the fact it had, among other things, abandoned possession of the restaurant and returned its keys to the premises more than five months before the building was purchased by Bashian’s client (the new building owner) and that the notice of pendency was not filed until even one year after that.
As a result, Bashian moved before the New York Supreme Court to have the notice of pendency vacated. Bashian’s position was quite simple – a notice of pendency is inappropriate when a litigant’s claims stem from rights under a lease, which is personal property and not real property, as required. Bashian went even further by asserting that to allow the notice of pendency to be filed in this context would be in direct contravention with the 1994 amendment to the statute, which also prohibited the filing of a notice of pendency in summary proceedings.
At oral argument, the trial court granted Bashian’s motion to vacate the notice of pendency but in its subsequent written order it erroneously declined to do so.
Therefore, Bashian appealed the lower court’s decision to the Appellate Division, First Department by alleging that it, among other things, erred by failing to vacate the notice of pendency.
The Appellate Division, First Department agreed with Bashian and his law firm in its decision entitled PK Rest., LLC v Lifshutz, 2016 NY Slip Op 02595 [1st Dep’t Apr. 5, 2016] by holding that a lease is “personalty” and that whereas here, an out of possession tenant, is asserting to be restored under a lease and not pursuant to some statute that the notice of pendency must be cancelled.
To read more this Appellate Division, First Department’s decision please see here: http://law.justia.com/cases/new-york/appellate-division-first-department/2016/84-654177-13.html