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DEFENDANT WAS A GOOD-FAITH PURCHASER OF THE REAL PROPERTY AND WAS ENTITLED TO A DECLARATION OF SOLE OWNERSHIP; DEFENDANT PURCHASED THE PROPERTY FROM THE RECORD OWNER AND WAS UNAWARE OF THE UNRECORDED BENEFICIAL OWNERSHIP AGREEMENT BETWEEN THE RECORD OWNER AND PLAINTIFF WHO RESIDED ON THE PROPERTY; THE FACT THAT PLAINTIFF FILED A NOTICE OF PENDENCY BEFORE DEFENDANT RECORDED THE DEED HAD NO EFFECT (SECOND DEPT).

The Second Department, reversing Supreme Court, determined defendant’s (Vertex’s) motion for summary judgment dismissing the complaint and declaring defendant was the sole owner of the real property should have been granted. Vertex purchased the property from the record owner. The fact that the record owner had entered into an unrecorded agreement acknowledging beneficial ownership by others who contributed to the purchase price, including plaintiff, who resided on the property, did not affect defendant’s status as a good-faith purchaser, despite plaintiff’s filing a notice of pendency prior to defendant’s recording of the deed:

… [T]o establish itself as a bona fide purchaser for value, a party has the burden of proving that it purchased the property for valuable consideration and did not have “knowledge of facts that would lead a reasonably prudent purchaser to make inquiry” … .

… Vertex established … that it purchased the subject property for valuable consideration, without actual or constructive notice of the plaintiff’s alleged interest … . Contrary to the plaintiff’s contention, his filing of a notice of pendency against the property before Vertex filed its deed did not negate Vertex’s status as a good-faith purchaser … . “[H]aving failed to avail itself of the protection of either Real Property Law §§ 291 or 294, the plaintiff may not successfully contend that its filing of a notice of pendency serves as a substitute for the recording of a conveyance or a contract” … . Vertex also established … that the plaintiff’s occupancy at the property “was not inconsistent with the title of the apparent owner of record,” and thus, did not defeat Vertex’s status as a good-faith purchaser … . In addition, Vertex established … that the 2008 agreement did not negate its status as a good-faith purchaser, as that agreement was insufficient to satisfy the statute of frauds (see General Obligations Law § 5-703 …). Bello v Ouellette, 2022 NY Slip Op 07043, Second Dept 12-14-22

Practice Point: Here plaintiff had entered an unrecorded written agreement with the record owner of the real property indicating plaintiff, who resided on the property, had a one-fourth beneficial interest in the property. Defendant was unaware of the agreement. Defendant’s goof-faith-purchaser status was not affected by the fact that plaintiff filed a notice of pendency before defendant recorded the deed.

 

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