Background
In 2014, Bank of America commenced a mortgage foreclosure action against property owner Wallace Morris for a condominium unit in Elmont, Nassau County, and filed a notice of pendency against the property. Two years later, the Board of Managers of the homeowners association separately foreclosed on its lien for unpaid common charges. Through that second foreclosure proceeding, a referee’s deed conveyed title to the plaintiff, 16011, LLC—but the deed was dated February 4, 2019, and was not recorded until February 1, 2022.
Crucially, between the referee’s deed date and its recording, Bank of America filed a third notice of pendency (January 28, 2020), and the mortgage was assigned to US Bank National Association (January 2021). On July 13, 2022—after 16011 LLC had recorded its deed—a judgment of foreclosure and sale was entered in the bank foreclosure action, extinguishing 16011 LLC’s interest.
16011 LLC then brought an action pursuant to RPAPL article 15 to quiet title, seeking a declaration that the bank’s foreclosure judgment did not extinguish its interest. US Bank moved for summary judgment dismissing the quiet title claim and sought declarations in its own favor. The Supreme Court, Nassau County (Solages, J.) granted the motion. 16011 LLC appealed.
The Court’s Holding
The Appellate Division, Second Department affirmed. Under CPLR 6501, a notice of pendency provides constructive notice of any action in which the judgment demanded may affect title to real property. A person whose conveyance is recorded after a notice of pendency is filed is bound by all proceedings taken in the action after such filing to the same extent as if that person were a party.
Here, the referee’s deed conveying title to 16011 LLC was recorded after the third notice of pendency was filed (January 2020 vs. February 2022). That meant 16011 LLC had constructive notice of the bank foreclosure action when it recorded its deed and was therefore bound by the subsequent foreclosure judgment—even though it was never joined as a party. The foreclosure judgment, entered in July 2022, effectively extinguished 16011 LLC’s interest in the property. The court remitted the matter to Supreme Court for entry of a declaratory judgment confirming that result.
Key Takeaways
- Under CPLR 6501, a party whose conveyance is recorded after a notice of pendency is constructively bound by all subsequent proceedings in the pending action—including a foreclosure judgment—as if it were a named party.
- Lien foreclosure purchasers who acquire title subject to a first mortgage must record their deeds promptly. A delay in recording that allows a notice of pendency to be filed in the meantime eliminates the title protection otherwise provided by the recording acts.
- An RPAPL article 15 quiet title action will not rescue a purchaser who took title with constructive notice of a prior pending foreclosure; the lender’s eventual judgment of foreclosure and sale will be held to have extinguished the purchaser’s interest.
- Practitioners counseling HOA lien foreclosure purchasers should verify the status of any first mortgage foreclosure action—and any notices of pendency—before the referee’s deed is issued and recorded.
Why It Matters
This decision highlights a critical trap for real estate investors who acquire property through condominium or homeowners association lien foreclosures. Purchasing through a second-lien foreclosure does not insulate a buyer from a first mortgage foreclosure already in progress, especially where a notice of pendency has been filed. The failure to record the referee’s deed promptly—before a new or renewed notice of pendency is filed—can mean losing the property in the subsequent bank foreclosure without any right to contest the outcome.
For New York real estate practitioners advising clients at condominium and HOA foreclosure sales, the lesson is clear: conduct a thorough title search before bidding, confirm whether any senior mortgage foreclosure is pending, and record any acquired deed as quickly as possible after the sale. Delays in recording leave a window for adverse notices of pendency that can prove fatal to the buyer’s title.