Scott E. Mollen

Condemnation-Adverse Possession—Property Owned by the City in its Governmental Capacity, is Immune From Adverse Possession Claims

Plaintiffs sought a declaratory judgment that they are the legal owners of the subject property. The defendant City of New York (City) is the record owner of the property and is in the process of conveying the property to a defendant not-for-profit organization (NFP). The plaintiffs claimed they had “exclusively, continuously, openly, and hostilely utilized the property for at least 22 years” and they should be declared the legal owners of the property based on their alleged adverse possession of the property. They sought, inter alia, a preliminary injunction which would restrain the defendants from conveying the property, erecting fences around or building structures on the property or otherwise interfering with the plaintiff's use of the property and removing vehicles and equipment that the plaintiffs had stored or parked on the property.

The plaintiffs asserted that since approximately 1986, they had “operated lots which surround the property,” in connection with their flooring supply business. They claimed that the City had acquired the property through a tax foreclosure and therefore, the City owned the lot in its “proprietary capacity.” They further alleged that they had “erected a fence,” had paved part of the lot, had installed video cameras and the City had done “nothing to stop them from using the Property until Aug. 27, 2018.

The City countered that it had acquired ownership of the property before the tax foreclosure proceeding. In 1968, its Board of Estimate (BOE), had created an urban renewal area (URA) which includes the property. The BOE resolution stated that the URA “qualified as an eligible project…because the property…was 'substandard and insanitary' and…was 'detrimental and a menace to the safety, health and welfare'” of people in the neighborhood. The resolution permitted the City to acquire the property through eminent domain. The City acquired title to the property on Dec. 1, 1971, “upon the filing of the vesting order and the acquisition map….”

Notwithstanding the transfer of title to the City, the property's former owner had purported to transfer the property on or about Dec. 14, 1971. A deed was recorded on March 17, 1972. The property was included in a 1988 in rem tax foreclosure action, resulting in a foreclosure judgment and in rem deed. The City claimed that this filing was a “nullity,” and that it owned the property “as part of the [URA] under the Dec. 1, 1971 recordings.” In or around January 2018, the City began negotiating to transfer the property to the NFP. The NFP intended to build “affordable and supportive housing” and provide related social services. The plaintiffs sought to enjoin that transfer.

The plaintiffs argued that the City's “status as a municipality does not affect their right to adverse possession,” since it does not hold the property in its “governmental capacity” and there is “no public purpose,” i.e., the City is not protected from an adverse possession claim. They also argued that although the City may have initially had a public purpose for the property, “the City subsequently abandoned” such intention and the City held the property solely “in a proprietary manner.” They also asserted that since the City permitted the property to “languish through the decades of it purported ownership, while (plaintiffs) have improved the property and relied upon its existence for 22 years,” the balance of equities favors the plaintiffs. They claimed that the City and the NFP would suffer no harm if the court maintained the status quo.

The City countered, inter alia, that it owns the property in its governmental capacity, even if it “underutilized” the property and the term “public use,” “encompasses urban renewal. Thus, the plaintiffs may not acquire title to the property through adverse possession.

It also argued that the prior owner's attempt to transfer the property was a “nullity,” since the prior owner lacked title to the property when the purported transfer occurred. Eminent Domain Procedure Law (EDPL) 402(B)(5) provides that “upon the filing of the [vesting] order and the acquisition map [with the county clerk], the acquisition of the property in such map shall be complete and title to such property shall then be vested in the condemnor.” The City reasoned that since it acquired the property for a public purpose on Dec. 1, 1971 and the tax foreclosure action and judgment were legal nullities and did not “convert the City's purpose…from a public to a proprietary one.” Thus, adverse possession is unavailable and the plaintiffs are “unlikely to succeed on the merits….”

It further argued that the balance of equities favors the City, since it has a public interest in transferring the title to the NFP for a “public good,” the transfer will provide “housing and services to people in need” and such benefit “outweighs the interest plaintiffs have in using the property to store vehicles, debris, and the like.”

The plaintiffs claimed, inter alia, that since the 1971 vesting order had not been recorded in the city register, the City had not acquired absolute title under the EDPL, it's argument with respect to the tax foreclosure was “entirely speculative” and it had not provided any “affidavits or other evidentiary support.” They claimed that the City had “abandoned” the property for decades, had offered “no semblance of any public purpose” and it's vesting order had not been “properly noted in the records and therefore, despite the fact that the county clerk's records reflect the filing of the vesting order, the City did not acquire the lot in question….”

The court held that the City had acquired the property through eminent domain since it had complied with EDPL. Pursuant to the terms of the EDPL 402(B)(5), “it was sufficient for the City to file the vesting order in the office of County Clerk.” The court held that the “purported transfer of title by the prior owner and the tax foreclosure filing are nullities,” urban renewal “is a public purpose within the meaning of the law” and the property could not be “lost through adverse possession.” Thus, the plaintiffs could not show that they are “likely to succeed on the merits.”

Although, the court did not have to reach the irreparable harm and balancing of the equities issues, it opined that the plaintiffs could “find another area to store their vehicles” and “debris.” The plaintiffs own or lease several nearby properties, some of which were used for storage purposes and they could likely “find space on one of those sites.” The plaintiffs had not “asserted a threat to their ability to sustain their businesses and, at best, can assert that they will incur financial harm if they must lease another space in which to store their materials and vehicles. Monetary harm is not considered irreparable….”

Finally, the court observed that urban renewal is a “laudable” purpose and if the NFP—which provides important services—lost the property, the damage would be “irreparable.” Accordingly, the court denied the plaintiff's motion for a preliminary injunction.

Eastside Floor Supplies LTD v. Torres-Springer, Supreme Court, New York Co., Case No. 157938/2018, decided Jan. 10, 2019, St. George, J.

Commercial Landlord-Tenant—Tenant Permitted to Use Basement and Sidewalk Access Door Even Though They Were Not Specified The Demised Premises—They Were Considered an “Appurtenance”—No Other Way to Clean Grease Traps or Accommodate Deliveries—Landlord Had No Other Use for the Space.

A landlord commenced a summary holdover proceeding against a restaurant tenant, seeking possession, based on allegations that the tenant breached its lease by using the building's basement and damaging the landlord's property. The issue at trial was whether the tenant was entitled to use “the sidewalk hatch door leading to the basement (sidewalk hatch).”

The tenant uses the sidewalk hatch, notwithstanding that it is not “a portion of the premises demised to tenant under the terms of the Lease.” The tenant had allegedly “damaged” the landlord's property, i.e., “locks and other security devices in order to utilize” the sidewalk hatch and had ignored the landlord's specific instructions to not utilize such property. The landlord asserted, inter alia, violations of lease provisions that addressed “repairs,” the obligation to take “good care of the premises,” and use of the “vault, vault-space area.”

The lease permitted the space to be used as a restaurant and bar and only described the “subject premises as Store #1.” A lease diagram depicted the “first floor and a greenhouse area.” The certificate of occupancy provided that the first floor could be used as a “drinking and eating establishment and that the cellar is to be used for a boiler room and restaurant storage area.” The lease was otherwise silent with respect to use of the basement. Both parties agreed that part of the basement was included as part of the subject premises.

The prior owner of the restaurant gave the tenant keys for the front door, the sidewalk hatch and the back door of the restaurant. A door in the basement divided the basement into two parts. That door was not locked.

The tenant “credibly testified” that since his purchase of the restaurant, he has used the sidewalk hatch for “deliveries and to clean out the grease trap and oil that collects from cooking.” The grease trap had to be cleaned approximately once a month and deliveries were received on an average of two or three times per week. The tenant testified that the building's super was “well aware of this use through personal observations.”

After about six months after the tenant's purchase of the restaurant, the super told a tenant employee that the landlord no longer wanted the tenant to use the sidewalk hatch and asked for the key back. The super allegedly agreed to personally provide access when the tenant needed to use the sidewalk hatch. The tenant returned the keys and “for a while” the super provided access as requested. However, since the super also worked at other buildings, the tenant often received no response when it called for access to the sidewalk hatch. The tenant thereafter broke the padlock on the hatch door, replaced it with a new padlock and provided the key for the new padlock to the super. The parties allegedly “took turns changing the locks on 2-3 occasions.” The landlord thereafter issued a notice to cure and thereafter a notice of termination.

After reviewing the lease provisions, the court found that the landlord failed to establish a “material or substantial fault.” There's no evidence that the tenant breached its obligations to maintain the premises in good repair and or that there had been any “outside installation” and the tenant's use of the sidewalk hatch did not constitute the “conduct of business beyond the demised premises.” The court held that the tenant was “entitled to use the sidewalk hatch as an appurtenance.”

The court explained:

Under a lease, the tenant acquires not only rights to the premises specifically leased, but also rights outside the demised premises that pass to the tenant whether or not mentioned. Rights of the latter kind are known as appurtenances and are generally defined as incorporeal easements or rights and privileges which are essentially or reasonably necessary for the full beneficial use and enjoyment of the property conveyed or leased.

Here, the sidewalk hatch was a “necessary appurtenance” to the tenant's leasehold since there was “no other way for the restaurant to clean out the grease traps and that access through the sidewalk hatch is necessary for that purpose.” Moreover, there was no other “practical way for food deliveries to come through to the kitchen.” The restaurant received food deliveries at 5 p.m., an hour when large boxes could not be brought through the main restaurant entrance as the restaurant is open for business. Furthermore, the landlord did not have any other use for the space and its “concern that some problem from the use might arise in the future because of electrical meters and boilers in the basement did not “warrant a different outcome.”

The court stated that each party should have a key to the lock for the sidewalk hatch and that the landlord lacked the right “unilaterally expel or exclude” tenant “from continued use of the sidewalk hatch.” The court further noted that since the landlord changed the lock without giving the tenant a key, “such an expulsion could constitute an actual partial eviction….” Accordingly, the Court dismissed the petition.

1606 First Realty v. Baltimore Rest. Inc., Civil Court, New York Co., Case No. 777209/18, Decided Feb. 28, 2019, Kraus, J.

 Scott E. Mollen is a partner at Herrick, Feinstein.