• A Primer of the Elements and Risks of Filing a Notice of Pendency in New York
  • March 3, 2011
  • Law Firm: Blank Rome LLP - Philadelphia Office
  • New York's notice of pendency statute1 replaces the common law rule of lis pendens. The statute, like its common law predecessor, allows a party claiming an interest in real property to notify prospective purchasers or encumbrancers of the property that it is the subject of litigation.2 It is relatively simple to satisfy the statutory requirements to file a notice of pendency, inviting potential abuse by parties seeking to restrict property owners' ability to convey marketable title. This article examines principal elements of a notice of pendency, and certain risks of filing in light of its simplicity.

    The New York Civil Practice Law and Rules § 6501 provides, in relevant part, that a "notice of pendency may be filed in any action in a court of the state or of the United States in which the judgment demanded would affect the title to, or the possession, use or enjoyment of, real property."3 A notice is filed in the office of the clerk of any county where the affected property is located, and must state only (1) the names of the parties to the court action to which it relates, (2) the object of the action and (3) a description of the property affected.4 The notice must be served on the defendant in the action within thirty days after filing.5 The notice does not set forth the plaintiff's claim relating to the property or require supporting evidence of a valid claim. Because "the statutory scheme permits a party to effectively retard the alienablity of real property without prior judicial review,"6 courts require strict adherence to the procedural requirements of the statute, and, crucially, as to whether the action affects real property.7 The ease with which a party may file a notice merits examination of associated risks in filing.

    A party in contract to purchase real property might file a notice of pendency if the sale is not consummated, in connection with a suit against the seller to compel specific performance.8 However, a court may cancel a notice of pendency upon motion by any aggrieved party "if the plaintiff has not commenced or prosecuted the action in good faith."9 The statute itself provides a remedy for an aggrieved property owner if a court cancels a notice of pendency for such reason: the court may require the plaintiff to pay any costs arising out of the filing of the notice of pendency and its cancellation by the court, and also "any costs of the action."10 A party filing a notice of pendency unsure of whether such notice is properly filed on substantive grounds can evaluate potential damages by looking in part to the defendant's potential injury from the filing—for example, a lost sale or loan.

    What other risks does a plaintiff face in addition to those contemplated by the statute? Courts have consistently applied the principle that "the only actionable wrong which may arise from the improper filing of a notice of pendency is a cause for malicious prosecution."11 An action for malicious prosecution requires proof that the plaintiff filed the notice of pendency without probable cause, and with malice.12 At least one New York court has held that a plaintiff did not act with malice where it believed it had an interest in property based on an oral modification to a written contract, even where the court found the plaintiff's contract based argument "not convincing."13

    Defendants have alleged that filing a notice of pendency under improper circumstances constitutes "slander of title," i.e., a communication falsely casting doubt on the validity of a complainant's title, reasonably calculated to cause harm, resulting in special damages.14 However, it is undisputed that "a notice of pendency does not give rise to a cause of action sounding in slander of title."15 Because a notice of pendency is an "undeniably true statement,"16 the first element of a slander of title claim cannot be satisfied; the notice merely states that an action is pending concerning the property.17

    Attempting to prevent disposition of property, plaintiffs might suggest rational objectives to dispel allegations of ­malicious intent or intent to do harm required to prove the elements of malicious prosecution and abuse of process, respectively. But lest plaintiffs choose to risk that such claims cannot be proven against them, or be willing to face potential damages claimed by defendants, they should note that a court may impose sanctions on plaintiffs (and their attorneys) for filing a meritless notice of pendency.18

    Although filing a notice of pendency is a simple process and does not require review by the court, it is not without risk if not filed in good faith, intended merely to harm a property owner. But if a plaintiff adheres to the requirements and intent of the statute, filing a notice of pendency can be a valuable tool to prevent the conveyance or encumbrance of a property to which a plaintiff claims an interest.

    1.N.Y. C.P.L.R. § 6501 et seq.
    2.At both common law and by statute, a purchaser or encumbrancer of real property with constructive notice of a pending suit takes its interest in the property subject to the outcome of the litigation. In contrast to the common law of lis pendens, however, constructive notice of a pending suit under the statutory regime is attributed only "from the time of filing of the notice" (N.Y. C.P.L.R. § 6501) as opposed to from the filing of the suit and service of process on the defendant (13 Weinstein, Korn & Miller, New York Civil Practice: C.P.L.R. ¶ 6501.01).
    3.N.Y. C.P.L.R. § 6501.
    4.N.Y. C.P.L.R. Rule 6511.
    5.N.Y. C.P.L.R. § 6512.
    6.5303 Realty Corp. v. O & Y Equity Corp., 64 N.Y.2d 313, 320 (1984)
    7.Id. at 320-21 (noting that "the ease with which a party may hinder another's right to transfer property" mandates strict compliance with statutory procedural requirements, and "a narrow interpretation in reviewing whether an action is one affecting 'the title to, or the possession, use or enjoyment of, real property'").
    8.See, e.g., Downtown Realty Operating Corp. v. Flatiron 21 Associates, LLC, Slip Op 5233U at *3, 7 (N.Y. Sup. Ct. Dec. 9, 2010) (suggesting that a contract purchaser filed a notice of pendency for "'its proper purpose'" in an action for specific performance to convey the property in question, and noting that the plaintiff withdrew the notice of pendency upon amending its complaint to state instead a claim for rescission.)
    It is worth noting that by the language of N.Y. C.P.L.R § 6501, a notice of pendency must relate to an action commenced or pending. The statute neither contemplates nor permits placing a notice of record announcing a claim to real property without also commencing an action which would affect title, possession, use or enjoyment of the property. A purchaser negotiating a contract of sale to purchase real property, but without a signed agreement with the seller, might contemplate filing a notice of pendency if the seller conveys the property to a third party, but a negotiating purchaser must have ground on which to base its claim other than arising out of a written contract.
    9.N.Y. C.P.L.R. § 6514(b).
    10.N.Y. C.P.L.R. § 6514(c).
    11.35-45 May Assoc. v. Maylock Assoc., 162 A.D.2d 389, 390 (1st Dep't. 1990); see Bandachowicz v. McFarland, 2009 N.Y. Misc. LEXIS 6097 (Sup. Ct. 2009); but see Grandome Enterprises, Inc. v. Stillman, 1993 U.S. Dist. LEXIS 4828, *5-8 (S.D.N.Y. April 12, 1993) (noting that "an abuse of process claim can be grounded on a notice of pendency," the court denied the defendant's motion for failure to state a claim of abuse of process, the elements of which are "'(1) regularly issued process, either civil or criminal, (2) an intent to do harm without excuse or justification, and (3) use of the process in a perverted manner to obtain a collateral objective'" (quoting PSA Metals, Inc. v. Firemen's Ins. Co. of Newark, N.J., 839 F.2d. 42, 43 (2d Cir. 1988); the court notes also that pleading damages is a necessary element of a claim for abuse of process).
    12.35-45 May Assoc., 162 A.D.2d at 390.
    13.Bandachowicz, 2009 N.Y. Misc. LEXIS 6097 at *8, 17.
    14.Brown v. Bethlehem Terrace Assoc., 136 A.D.2d 222, 224 (3d Dep't. 1988).
    15.Sopher v. Martin, 243 A.D.2d 459, 462 (2d Dep't. 1997); see 35-45 May Assoc., 162 A.D.2d at 389.
    16.Brown, 136 A.D.2d at 224.
    17.Id. at 224-25.
    18.See Yenom Corp. v. 155 Wooster Street, Inc., 33 A.D.3d 67, 74-74 (1st Dep't. 2006), (following a frivolous appeal of cancellation of a notice of pendency arising out of an oral agreement to purchase a net lease, the appellate court remanded to determine the amount of reasonable expenses and attorneys' fees incurred in responding to the appeal; in addition, the lower court had awarded actual expenses and reasonable attorneys' fees resulting from the commencement of the action and the filing of the notice of pendency.)