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Current Developments in the Commercial Divisions of the
New York State Courts by Schlam Stone & Dolan LLP
Posted: August 2, 2020

Plaintiff Was Not Entitled to RPL § 291’s Good Faith Purchaser for Value Protections Because it Was Aware of the Unrecorded Interest

On July 24, 2020, the Fourth Department issued a decision in Amalfi, Inc. v. 428 Co., Inc., 2020 NY Slip Op. 04285, holding that a plaintiff was not entitled to RPL 291’s good faith purchaser for value protections because it was aware of the unrecorded interest, explaining:

We also reject the SS defendants’ contention that the court erred in determining that SS was not protected by the recording statute (Real Property Law § 291). It is well settled that the recording statute protects a good faith purchaser for value from an unrecorded interest in a property, provided that the purchaser’s interest is first to be duly recorded. The status of good faith purchaser for value cannot be maintained by a purchaser with either notice or knowledge of a prior interest or equity in the property, or one with knowledge of facts that would lead a reasonably prudent purchaser to make inquiries concerning such. There is no dispute that plaintiff did not record the operative lease containing the right of first refusal at issue here. Thus, SS is not chargeable with record notice of the lease or plaintiff’s right of first refusal, and plaintiff therefore had the initial burden on its motion of establishing that SS had either actual or constructive notice of the lease and plaintiff’s right of first refusal. Here, we conclude that plaintiff met that burden by submitting evidence establishing that the same person had almost unilaterally controlled, managed, or owned both SS and 428 Co. for over 10 years at the time of the transfer and that, as a result, SS had actual notice of the lease and plaintiff’s right of first refusal. Indeed, plaintiff submitted evidence establishing that the person had a substantial, long-term involvement in matters that centered on the original lease, that he was substantially involved in negotiating and executing a first amendment to the original lease, and that he corresponded with plaintiff twice to facilitate renewal of the lease. We further conclude that, in opposition, the SS defendants did not submit any evidence raising a triable issue of fact regarding the issue of actual notice (see generally Zuckerman, 49 NY2d at 562).

(Internal quotations and citations omitted).

We frequently litigate disputes over the sale or leasing of commercial property. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you are involved in a dispute regarding a commercial real estate transaction.

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