Real Property Law Section Blog

Under a contract of sale, property in Kings County was to be conveyed subject to zoning and subdivision laws and regulations, provided that they did not render title unmarketable and were not violated by the existing buildings and improvements on the property and their use. After the contract was executed but before the scheduled closing date the property was down-zoned. As a result of the change in zoning the Plaintiff-Buyer sought return of his down payment, and the Defendants-Sellers sought an award of liquidated damages for breach of the contract. The Supreme Court, Kings County, granted the Defendants' motion for summary judgment and awarded them liquidated damages pursuant to the contract's terms. The contract was not conditioned on the zoning remaining unchanged and the Plaintiff, a licensed real estate broker and developer, could have inquired as to pending zoning changes before entering into the contract. Defendants had no information that was unavailable to the general public. Dunn v. Arniotes, decided May 29, 2007, is reported at 2007 WL 1615120.

Columbia and Sullivan Counties have enacted legislation to extend their County mortgage recording taxes.

The Columbia County mortgage recording tax of $.50 for each $100 of principal debt secured has been extended to apply to mortgages recorded prior to December 31, 2009. The total tax imposed on mortgages on real property in Columbia County will continue to be $1.25 for each $100 secured.

The Sullivan County mortgage recording tax of $.25 for each $100 of principal debt secured has been extended to apply to mortgages recorded prior to May 23, 2010. The total tax imposed on mortgages on real property in Columbia County will continue to be $1.00 for each $100 secured.

See http://www.tax.state.ny.us/pdf/memos/mortgage/m07_1r.pdf and
http://www.tax.state.ny.us/pdf/memos/mortgage/m07_2r.pdf

By Karl B. Holtzschue

In a 1999 survey of caveat emptor case law, I found that purchasers won only 47 of 130 cases. In a recent update, I found that purchasers won only 1 of 22 cases.

The Property Condition Disclosure Act (PCDA) became effective March 1, 1992, requiring sellers to deliver a 48 question Property Condition Disclosure Statement or give the purchaser a $500 [edited 8/10/07 by NYSBA] credit against the purchaser price at the closing. I summarized the law of caveat emptor and the cases under the PCDA in my article, Holtzschue, "The Purchaser Hasn't Got a Ghost of a Chance: Update on PCDA Cases and PCDA Revision," 35 N.Y. Real Prop. L.J. 7 (Winter 2007). [For a list of current articles in the N.Y. Real Property Law Journal click here.] In my article, I noted that purchasers had won 3 cases and lost 10, a somewhat better performance than under the common law of caveat emptor.

Since the article cited above, there have been six more cases. The purchasers won 2 and lost 4, bringing the running total to 5 wins and 14 losses for the purchasers. Following is a brief summary of those cases:

Middleton v. Calhoun, 13 Misc.3d 949, 821 N.Y.S.2d 444 (County Court Rensselaer County 2006) (McGrath, J.) (9/19/06) (purchaser failed to prove fraud in the inducement or that PCDS answer as to septic system was false; purchaser failed to inspect; PCDA did not create statutory cause of action)

McMullen v. Propester, 13 Misc.3d 1232A, 831 N.Y.S.2d 354 (Supreme Court Yates County 2006) (Falvey, J.) (10/30/06) (complaint that sellers knew septic system was faulty, despite disclaimer in PCDS, and actively concealed defect and odor, survived motion to dismiss complaint) P WON

Ercole v. McGay 13 Misc.3d 144A, 831 N.Y.S.2d 359 (Supreme Court, App. Term, 2d Dept. 2006) (Angiolillo. J.P.) (Suffolk County 11/29/06) (having elected to provide $500 credit in lieu of PCDS, seller had no duty to speak; seller did not actively conceal electrical and plumbing work not in accordance with Town Code)

Brady v. Posse, 14 Misc.3d 1232A, 2007 N.Y. Misc. LEXIS 416 (Civil Court Richmond County 2007) (Straniere, J.) (2/16/07) (purchaser did not prove seller knew of basement water condition and mold; seller elected to provide $500 credit in lieu of PCDS)

Ayres v. Pressman, 14 Misc.3d 145A, 2007 N.Y. Misc. LEXIS 704 (Supreme Court, App. Term, 2d Dept. 2007) (Rudolph, P.J.) (Orange County 3/5/07) (seller knew septic system defective and located partially on neighbor's property; purchaser won damages of cost of title search and mortgage application fees; seller gave PCDS) P WON

Rivietz v.Wolohojian, 38 A.D.3d 301, 832 N.Y.S.2d 505 (1st Dept. 2007) (Mazzarelli, J.P.) (New York 3/15/07) (because condominium purchasers had opportunity to inspect, had detailed report by their architect and there was no evidence of false representations, there was no justifiable reliance to support a claim of false representation)

The courts have split as to whether the PCDA created a statutory cause of action:

(1) The PCDA did NOT Create a Statutory Cause of Action: Malach (statute incomprehensible; did not specify remedy); Korik (citing Malach); Renkas (proper claim is common law fraudulent misrepresentation; defense is no justifiable reliance); Short (cited Renkas); Bishop (only viable cause of action is common law fraud in the inducement; Middleton (5 cases)
(2) The PCDA DID Create a Statutory Cause of Action: Gabberty; Fleischer (purchaser won); Delano (implied; purchaser won); Calvente (purchaser won); McMullen; Ayres (implied, purchaser won) (4 cases)

In light of the questions raised in the PCDA opinions about whether the PCDA established a statutory cause of action, shouldn’t the PCDA remedy sections be clarified?

The legislative history of an amendment (and perhaps the text of the remedies sections as well) could recite that the legislature intends to create a statutory cause of action similar to a common law action for fraudulent misrepresentation. The elements of the statutory cause of action would be: (1) a representation by the seller in the PCDS that the seller had actual knowledge was false when made; (2) the misrepresentation was made willfully, not negligently; (3) any representation made in a PCDS is deemed to be made to induce the buyers to rely on it; (4) the buyer must have justifiably relied on the misrepresentation; and (5) the buyer must have suffered actual damages.

Clarification of the existence of a statutory remedy under the PCDA would seem to be a benefit to judges, not to mention practitioners.

Section 106-49 of the Mamaroneck Town Code makes it illegal to occupy any building on property sold after January 1, 2006 in the unincorporated portion of the Town of Mamaroneck unless a Discharge Compliance Certificate is issued by the office of the Director of Building Code Enforcement and Land Use Administration. That law does not apply to property within the Village of Mamaroneck or the Village of Larchmont (which is within the Town of Mamaroneck), only to property in the unincorporated portion of the Town of Mamaroneck.

The Village of Mamaroneck, which includes parts of the Towns of Rye and Mamaroneck, has added Article IV ("Removal of Illegal Sewer Connections and Elimination of Illegal Discharge of Liquids") to Chapter 282 ("Sewers") of the Code of the Village of Mamaroneck. This new law, effective on July 20, 2007, requires the issuance of a Discharge Compliance Certificate by the Code Enforcement Officer of the Village of Mamaroneck, or his designee, on or before August 1, 2007 for each apartment building, and each cooperative and condominium complex in the Village; the Certificate must be renewed every five years. A Discharge Compliance Certificate is also required on the transfer of title of any other type of real property (not including a cooperative or a condominium unit) after July 1, 2007. Section 282-13 of Article IV of the Code states that "[n]o building on real property shall be used or occupied, in which or in part, unless a discharge compliance certificate is issued therefor".