Lis Pendens Payment Security
Can a Lis Pendens be used to secure repayment of a loan purportedly given to purchase real property?? That is one of the questions that was addressed in a very interesting Nassau County Supreme Court case and the answer, according to Justice Leonard D. Steinman, is - NO! Below is a summary of the relevant facts of the case and a link to the decision and order:
The Plaintiff commenced an action to recover from the Defendant monies allegedly loaned to the Defendant to enable her to purchase a home with her co-Defendant. A notice of pendency was filed to prevent the sale of the home until the loan was repaid. The Supreme Court, Nassau County, vacated the notice of pendency, holding that the Plaintiff had not established valid causes of action for a constructive trust or an equitable lien. According to the Court,
“…the plaintiff has failed to identify…any promise, express or implied, relating to the subject property, or any transfer in reliance on any promise relating to the property [citations omitted]. Instead, plaintiff merely alleges that he made an unsecured loan…used to purchase the...property…As a result, no claim for constructive trust is stated.”
As to the claim of an equitable lien, there was no agreement “‘express or implied that there shall be a lien on specific property’ [citations omitted].” Aziz v. Asha, 2019 NY Slip Op 34881, decided February 27, 2019, and posted to the New York Slip Opinion Service on December 8, 2022 at
https://www.nycourts.gov/reporter/pdfs/2019/2019_34881.pdf
Since a Notice of Pendency may only properly be filed if there exists a valid cause of action seeking judgment affecting title to or possession, use or enjoyment of, real property. (CPLR 6501; Coleman v. Coker, 66 A.D.3d 812 (2d Dept. 2009)) and given the Court held that the Plaintiffs failed to state such cause of action, the Lis Pendens was vacated. While this is not an Appellate Court decision (to our knowledge the order has not been appealed), this case does serve as a reminder that the best way for your clients to secure their loans is to record a mortgage (which of course requires the payment of the applicable mortgage recording tax) against the property being purchased or refinanced. Anything short of a recorded mortgage leaves the lender “unsecured.”
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