In part 1 of this post, we introduced the notice of pendency, which gives constructive notice of a pending lawsuit regarding a dispute about ownership, use, enjoyment or possession of real property such as land or buildings. In part 2, we look at when a plaintiff may file a notice of pendency and how the court can cancel one.
When is a notice of pendency appropriate?
The New York statutes governing notices of pendency provide that, with certain exceptions, the underlying suit must “affect the title to, or the possession, use or enjoyment of, real property …” The question as to whether the lawsuit that is the subject of the notice qualifies under the statute can be surprisingly complex.In addition, a plaintiff cannot cure an improperly filed notice by amending the original complaint in the lawsuit.
Types of lawsuits that have supported notices of pendency include:
- Actions to partition (divide) real estate
- Suits to impose constructive trusts on real property
- Probate proceedings regarding disputed ownership rights to real estate in a deceased person’s will
- Lawsuits to set aside transfers of real estate to third parties where the transfer was intended to fraudulently evade creditors
- Mortgage foreclosures
- Mechanics’ lien foreclosures
- Actions for specific performance of real property sales contracts
- And others
Notably, New York courts have repeatedly said that a notice of pendency is not supported by a shareholder suit concerning corporate (or another entity) ownership of real property. Although the shareholder may attempt to assert an interest in the real estate based on their interest in the corporation, stocks are deemed personal, not real, property and the shareholder has no direct interest in the real estate.
Canceling a notice of pendency
If someone believes that a notice of pendency is inappropriate, they may ask the court to vacate it. The court must cancel the notice if the plaintiff did not timely serve the summons in the underlying lawsuit; if the lawsuit has been “settled, discontinued or abated;” if the time for appeal of a judgment for the defendant is past; or in other narrow circumstances.
The court also has discretion to vacate the notice if the plaintiff has not acted in good faith in the underlying lawsuit.
Anyone facing issues related to a notice of pendency – whether plaintiff or defendant in the underlying lawsuit or a third party with potential interests in the real estate – should seek legal advice, as this is a complicated area of New York law.