(Recent decisions by the New York Court of Appeals involving commercial and residential real estate matters that are of interest and with potential broad impact.)
Matter of DCH Auto v. Town of Mamaroneck (June 16, 2022). A net lessee of a parcel of commercial real property in Mamaroneck sought to challenge a real estate tax assessment as being too high. On Article 78 judicial review, the Court dismissed the net lessee’s challenge because it interpreted the relevant statute, Real Property Tax Law §524 (3), as permitting only the “owner” to file a grievance with the local tax authority. The Appellate Division affirmed, but the
Court of Appeals reversed and held that the net lessee was entitled to file the tax assessment grievance as the entity that is contractually obligated to pay real estate taxes on the net leased property. In reaching this decision, the Court found that the text of RPTL §524 (3) did not clearly define who could challenge real estate tax assessments and it was therefore necessary to employ various principles of statutory construction in order to discern the legislative intent of the provision. In reviewing the legislative history of the statute, examining how the specific provision in dispute conforms to the overall statutory framework, and how the State Department of Taxation and Finance has interpreted the provision in its public service publications, the Court of
Appeals held that the right to file real estate tax grievances belongs to net lessees in addition to owners.
Batavia Townhouses, Ltd. v. Council of Churches Housing Development Fund Company, Inc. (May 24, 2022). This case also involved a statutory construction dispute, this time in the mortgage foreclosure context. The mortgagor-plaintiff commenced an action to declare that its
wrap-around mortgage was no longer enforceable because, despite having failed to make any payments for more than six years, the defendant-mortgagee had never brought a foreclosure action. The Supreme Court ruled that the mortgagee’s claim was, indeed, now time-barred and the six-year statute of limitations had not been tolled by any means set forth under the General
Obligations Law. The two means at issue were (1) an “acknowledgement of the debt” (GOL §17-101), or (2) “a promise to pay… by the express terms of a writing signed by the party to be charged” (GOL §17-105). The Court of Appeals held that GOL §17-101 did not apply. Only an express promise to pay could toll the operative limitations period; the actions by the mortgagor in listing the outstanding mortgage as a liability in various annual financial statements and tax returns within the limitations period were a mere formality that amounted to, at best, nothing more than an implied promise to pay. Those acts were legally ineffective to toll the statute of limitations under the governing GOL §17-105. In reaching this conclusion, the Court of Appeals noted that the legislative history of GOL §17-105 showed that express and unequivocal acts of intent to pay are necessary so as to prevent “[s]erious impairment of titles to land and hindrance of real property financing.” As a result, the mortgage debt was held extinguished as unenforceable due to the mortgagee’s failure to commence a timely foreclosure action.
Matter of Callen v. New York City Loft Board (February 15, 2022). After a loft owner and its tenants settled a Loft Law coverage application, whereby the loft owner recognized the tenants as rent stabilized and agreed to procure an updated certificate of occupancy for the lofts from the Department of Buildings, the New York City Loft Board rejected the settlement and refused to accept the tenants’ withdrawal of their coverage application. The Loft Board maintained that because the occupancy was currently in violation of the existing certificate of occupancy, it could not condone “illegal living arrangements” and the coverage application must be adjudicated on the merits. On Article 78 review—jointly sought by the owner and tenants—the Supreme Court held that the Loft Board’s actions were not rationally based, and the Appellate Division agreed, finding that the parties, both of whom were represented by experienced counsel, should not be forced to litigate. The lower courts noted that there was no evidence of any violation having been issued by any City agency for illegal occupancy or unsafe conditions at the loft building. However,
on the City’s further appeal, the Court of Appeals reversed. In a brief memorandum decision, the Court did not credit the Loft Board’s determination that the settlement agreement “perpetuat[ed] an illegal living arrangement.” The Court stated that “[the] rationality of that determination is not before us.” Nonetheless, the Court concluded that “[u]nder these limited circumstances, it was not irrational for the Board to remand for further proceedings, thereby declining to give effect to a
provision of the settlement agreement in which tenants purported to withdraw their application for Loft Law coverage.” In this curious decision, no mention was made as to what would happen if on remand the tenants simply elected to default and not prosecute their coverage application.