Dani Schwartz ()
A notice of pendency is a publicly filed document that gives notice to the world that an action is pending involving a dispute over some right, title, or interest in or to a parcel of real property. Specifically, CPLR 6501 permits the filing of a notice of pendency in any action “in which the judgment demanded would affect the title to, or the possession, use or enjoyment of, real property, except in a summary proceeding brought to recover the possession of real property.” Once recorded, a notice of pendency clouds the marketability of title of the affected property for the duration of the underlying lawsuit, or until it is discharged.
For decades, courts have issued conflicting decisions on whether a tenant may file a notice of pendency in a landlord/tenant leasehold dispute. At first glance, such a dispute can involve “possession, use or enjoyment of, real property.” Yet, courts have long held that a lease is considered personalty, not real property (see, e.g., Matter of Grumman Aircraft Eng’g v. Bd. of Assessors of Town of Riverhead, 2 N.Y.2d 500, 507 (1957)), which would take lease disputes out of the statute’s ambit. Despite seemingly settled precedent on this point, the Appellate Division, First Department (Lawlor v. 543 Second Ave., 49 A.D.3d 449 (1st Dept. 2008); Casanas v. Carlei Group, 105 A.D.3d 570 (1st Dept. 2013)) and Second Department (Robert Fiance Hair Design Inst. v. Concourse Props. Co., 130 A.D.2d 564 (2d Dept. 1987)) have upheld notices of pendency filed in lease disputes based on the statute’s language regarding “possession, use or enjoyment of, real property” where the underlying “real property” at issue was the space leased by a landlord to a tenant.
But in PK Rest. v. Lifshutz, 138 A.D.3d 434, 439 (1st Dept. 2016), an important recent decision that has generated surprisingly little discussion, the First Department appears to have disavowed a prior line of cases and clarified that, absent extremely unusual circumstances, a notice of pendency filed by a possessory leaseholder lacking any interest in title to real property is not “viable,” and may be sanctionable.
Given the recent decision in Lifshutz and the Second Department’s older but still followed decision in Robert Fiance, there is presently a putative split between the First and Second Departments as to whether a tenant in a leasehold dispute lacking interest in title to real property may properly file a notice of pendency. This article explores the history of the statute and the attendant case law to address the question of whether a tenant may do so.
The Statute and Case Law
As the Court of Appeals explained long ago, a notice of pendency is only proper “to protect some right, title or interest claimed by a plaintiff in the lands of a defendant which might be lost under the recording acts in event of a transfer of the subject property by the defendant to a purchaser for value and without notice of the claim.” Braunston v. Anchorage Woods, 10 N.Y.2d 302, 305 (1961).
Because a notice of pendency can be filed without any prior judicial review, “to counterbalance the ease with which a party may hinder another’s right to transfer property,” courts narrowly interpret the type of dispute in which a notice of pendency may be filed. 5303 Realty v. O & Y Equity, 64 N.Y.2d 313, 320-21 (1984).
While some courts recognized that a leasehold interest is personalty (as opposed to real property), and therefore cannot be a basis for filing a notice of pendency (see, e.g., Rose v. Montt Assets, 250 A.D.2d 451 (1st Dept. 1998); Club Ventures II v. Marks, 2005 NY Slip Op 30264[U] (Sup. Ct. New York County 2005)), other courts gave a literal interpretation to CPLR 6501 and included lease disputes within its coverage. See, e.g., Robert Fiance, 130 A.D.2d at 564.
In 1987, in Robert Fiance, a tenant brought an action “for a judgment declaring a lease in full force and effect and for the enforcements of its provisions.” The tenant filed a notice of pendency against the building containing its leased premises, and the landlord moved to cancel the notice. Supreme Court denied the motion, and the Second Department affirmed, holding that “[t]he complaint, which seeks to enforce provisions of a lease, plainly demands a judgment which would affect the title to, or the possession, use or enjoyment of, real property. Therefore, it justifies the filing of a notice of pendency by the plaintiff.” Id. (internal citations omitted). The Second Department has never since wavered from this rule.
However, in 1990, in Nadeau v. Tuley, 160 A.D.2d 1130, 1132 (3d Dept. 1990), the Third Department recognized the tension in permitting a month-to-month tenant entangled in a leasehold dispute having to file a notice of pendency against a building despite no claim to the underlying real property: “Literal construction of CPLR 6501 would bring about an unreasonable, if not absurd, result in this case since … the provisional remedy places a greater servitude upon the realty than the interest asserted in the underlying action.” Thus, the court affirmed cancellation of the notice of pendency at issue.
The dissent in Nadeau agreed with the majority’s reasoning, but felt compelled to literally interpret the statute’s reference to “possession, use or enjoyment” of real property to include leasehold disputes, which the dissenters stated was in accord with prior decisions of both the First and Second Departments. 160 A.D.2d at 1132-32. The dissenters nevertheless explained that “recognizing a great potential for mischief, we would call upon the Legislature to consider amending CPLR 6501 so as to exclude tenancies of limited duration from its coverage.” Nadeau, 160 A.D.2d at 1133.
The Legislature took action in 1993. Curiously, despite expressly aiming to “codify the holding in Nadeau” (McKinney’s NY Session Laws, 1993, vol. 2, at p. 2983), the Legislature amended CPLR 6501 by excluding “ summary proceedings brought to recover the possession of real property” from cases in which a notice of pendency can be filed (L. 1993, c. 657, § 1), rather than all cases brought to recover the possession of real property (which would include plenary actions for ejectment of a tenant), or even cases centering on “tenancies of limited duration,” as the dissent had suggested in Nadeau.
If the intention of the amendment was to remove leasehold disputes from the purview of CPLR 6501, the exclusion of summary proceedings from the statute’s purview without a concomitant exclusion of ejectment actions may have unwittingly created a loophole that encourages tenants to commence their own plenary actions against landlords as pretexts to file notices of pendency: precisely the type of “mischief” that the dissent in Nadeau warned against.
In any event, after the amendment, some notices of pendency filed by tenants in lease disputes were cancelled (see, e.g., Rose, 250 A.D.2d at 452; Club Ventures II, 2005 NY Slip Op 30264[U]), but the First Department also upheld a notice of pendency filed by a tenant (Lawlor v. 543 Second Ave., 49 A.D.3d 449 (1st Dept. 2008)), albeit under what it would later call “a unique set of facts.” See also Casanas v. Carlei Group, 105 A.D.3d 570 (1st Dept. 2013) (affirming tenant’s filing of a notice of pendency by relying exclusively on Lawler, without elaboration or explanation).
The issue came to a head in April 2016 in the Lifshutz case. There, the First Department reaffirmed the doctrine that a lease is personalty, and reviewed its recent post-amendment decisions on the issue:
To the extent plaintiff relies on Lawlor v. 543 Second Ave., LLC,in support of its position that the notice of pendency was properly filed, we note that case was decided on a unique set of facts. There, the out-of-possession tenant was asserting restoration, pursuant to Administrative Code of the City of N.Y. §26-408(d), to a building that had been demolished by the landlord. Nevertheless, given the suggestion in Lawlor and in Casanas v. Carlei Group, which relied exclusively on Lawlor, that a notice of pendency filed by a possessory leaseholder could be viable, plaintiff had grounds to believe that it was justified in filing a notice of pendency. Therefore, it should not be forced to pay “costs and expenses occasioned by the filing and cancellation” (internal citations omitted).
The court’s ruling in Lifshutz is instructive. In reviewing the precedent that seemingly permits the filing of a notice of pendency by a tenant in a leasehold dispute, the court was careful to distinguish the “unique set of facts” in Lawlor on the ground that a rent-controlled tenant had been unlawfully removed from her leased apartment, whereupon the landlord “unilaterally decided to demolish” the building (Lawlor, 49 A.D.3d at 449). Lawlor brought an action seeking restoration to the apartment, and had a viable claim to be restored to possession under applicable law, notwithstanding the building’s demolition. Under this “unique set of facts,” the court upheld the tenant’s filing of a notice of pendency.
Casanas, the other post-amendment case in which the First Department affirmed a tenant’s filing of a notice of pendency, “relied exclusively” on Lawlor in support of its holding, with no substantive explanation of its result.
But Lifshutz appears to have disavowed Casanas and limited Lawlor to its “unique set of facts”: the court held that it was only the “suggestion in Lawlor and in Casanas” that a notice of pendency filed by a tenant “ could be viable” that gave the plaintiff-tenant in Lifshutz a basis to believe “that it was justified” in filing one. The court further held that due to the tenant’s reliance on this precedent, the tenant should not be ordered to pay any costs and expenses incurred in connection with the filing and cancellation of the notice of pendency, as permitted by CPLR 6514. The implication is that absent a tenant’s ability to rely on these now limited (Lawlor) and disavowed (Casanas) precedents, the filing of a notice of pendency by a “possessory leaseholder” is not viable, and may result in an order forcing the tenant to pay the costs and expenses occasioned by the notice’s filing and cancellation—essentially, a sanction. It thus appears that a tenant generally may no longer file a notice of pendency in a leasehold dispute within the jurisdiction of the First Department.
Recent First Department precedent is now in conflict with older, but still followed, Second Department precedent. Until this putative conflict between departments is clarified, a tenant’s right to file a notice of pendency in a leasehold dispute may turn on the location of the leased premises. So, to return to the question with which we began: May a tenant file a notice of pendency? The answer is, it depends.