Attorney-at-Law

THE RACE TO THE COURTHOUSE DOOR

In Uncategorized on 06/15/2017 at 16:51

It’s been fifty years and more since I first heard that phrase, on The Hill Far Above, when I first encountered the recording statutes of Our Fair State, from the now-long-departed Chief Whistler William Hirsch Farnham. No, Willie was a different kind of whistler than is found gazing at the Ogden sunset.

Enough nostalgia.

Briefly, if you want to protect your grantee’s interest in a conveyance or encumbrance, you must record the conveyance or encumbrance with the proper official before the grantor-encumbrancer unloads the property to that innocent purchaser for value without notice.

Merely taking possession of a written conveyance (deed, declaration) or encumbrance (mortgage, judgment, lien) means nothing unless you take it down, pay the fees, and get it recorded.

Ex-Ch J Michael B (“Iron Mike”) Thornton plows through our Real Property Law and a bunch of New York cases to prove this point. Ten Twenty Six Investors, Douglas Oliver, Tax Matters Partner, 2017 T. C. Memo. 115, filed 6/15/17, gets all kinds of technical, claiming that New York’s Environmental Conservation Law, which addresses architectural easements (yes, it’s another Section 170 “joy forever”), doesn’t apply, and, dragging arguments from the Graev, claim “so remote as to be negligible” that they would sell their historic warehouse before the National Architectural Trust got down to the thirteenth floor of 66 John Street, around the corner from where I sit typing this, with documents and fees in hand.

I’ve blogged the Graev case extensively. But see my blogpost “Back from the Graev,” 2/19/15, for this specific gambit.

Doesn’t fly.

An architectural easement is what we dirt lawyers call an “easement in gross.” That is, one not connected to adjoining property. For example, my right to drive over your driveway if we live next door to each other is an “easement appurtenant,” that is, part of my right in my land, which I can pass on to anyone else who gets title to my land. An easement in favor of a 501(c)(3), which doesn’t own any land anywhere, over your building is an easement in gross, and not enforceable at common law in Our Fair State.

Of course there are exceptions, and the recording statute, among others, bails out the grossers. Our Environmental Conservation Law does, but Ten Twenty Six is loudly protesting their easement wasn’t created under that law, because then their easement would require recording to be effective.

It was recorded. Only in the wrong year; not the year Ten Twenty Six claimed the $11 million tax writeoff.

So? says Ten Twenty Six. We wouldn’t sell or encumber until National Architectural Trust got around to recording the easement.

Mox nix, says Judge Iron Mike.

“Under N.Y. Real Prop. Law sec. 291 (McKinney 2006), a purchaser of real property who pays value for the property and does not have notice of an unrecorded interest in the property when the property is purchased will take the property free of that unrecorded interest, provided that the purchaser’s interest is recorded before the unrecorded interest is recorded.   Therefore, the relevant question is whether–as of the date of donation-there was a nonnegligible possibility that a recorded sale might have occurred without notice of the easement deed and before it was recorded.  If so, then the perpetuity requirements are not met.

“Petitioner has not argued or set forth facts to show that (1) the partnership was under any obligation not to sell the warehouse or that (2) NAT was under any obligation to record the easement deed.  Therefore, it was quite possible that a sale could have occurred at some point after donation of the easement but before the easement deed was recorded.  And given that property sales are almost always recorded, the possibility of a recorded sale before the easement deed was recorded was not so remote as to be negligible.” 2017 T. C. Memo. 115, at pp. 28-29. (Footnote omitted).

We wouldn’t have gone behind NAT’s back, says Ten Twenty Six. OK, says Judge Iron Mike, you could have disremembered to tell either NAT or your buyer about the easement, and that’s not so remote as to be negligible.

I shall not, in a blogpost meant for family reading, repeat the old joke about the translation of the words “trust me, trust me.”

No recording in the right year, no perpetuity, no deduction, 40% chop. Gross.

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