The history of real property law is replete with litigation over how one property owner’s assertion of its rights to control and adapt their property impacts their neighbors. These cases usually involve damage to a neighboring property resulting from acts of so-called trespass—which might better be termed a nuisance—one of the most common being damage caused to one property through the drainage or manipulation of surface water by a neighbor.

This damage might be from an uphill owner redirecting water in a way that floods its downhill neighbor, or even a downhill neighbor who artificially blocks the flow of water across its land, leaving such water to damage its uphill neighbor. Moreover, particularly in New York City, where water damage results from neighboring construction, strict liability may also apply.

While the basic rules governing these cases have been well defined by the Court of Appeals for almost 150 years (see Barkley v. Wilcox, 86 N.Y. 140 (1881)), it is still a remarkably fluid area of law, with Appellate Court decisions constantly refining the boundaries of where liability may be imposed when the surface water from one property damages another.

The General Rules of Water Diversion

“The rule in New York governing the rights of owners of property with respect to diffused surface water is ancient and authoritative, predicated on two Latin maxims:… aqua currit et debet currere, ut currere solebat (Water runs and ought to run, as it has used to run); cujus est solum, ejus est usque ad coelum et ad inferos (Whose is the soil, his it is even to the skies and to the depths below).” Musumeci v. State, 43 A.D.2d 288, 290 and n1 (3rd Dept. 1974).

Diffused surface water—i.e. “water from rains and melting snows”—is considered a common enemy among all landowners. Barkley, 86 N.Y. at 142. See also Stormes v. United Water New York, Inc., 84 A.D.3d 1352, 1353 (2d Dept. 2011) (“Surface waters are defined as an ‘accumulation of natural precipitation on the land and its passage thereafter over the land until it either evaporates, is absorbed by the land, or reaches stream channels…Surface waters can also form as a result of flood waters detaching from the main current and spreading over land where they remain’”) (citations omitted); Musumeci, 43 A.D.2d at 290 n. 2 (New York law regarding surface water is “more properly called common-enemy rule…because diffused surface water is considered a common enemy which each owner may fight off or control as he is able”).

In 1881, the Court of Appeals in Barkley was confronted with the task of adopting a definitive rule on this subject. In addressing the rights of property owners concerning surface water flow, the Barkley court drew a strong distinction between the rights of a property owner to direct or dam the flow of surface water and rights concerning naturally flowing waterways, like surface streams and rivers.

As discussed in more detail below, when it comes to addressing surface water, a property owner has the absolute right to take whatever measures it wants to control or staunch the gathering of surface water on its property so long as it is done as part of (1) “improvements made in good faith to fit one’s property to some rational use” and (2) as the diffused surface water is not drained into another’s property by means of artificial pipes and ditches.” Musumeci, 43 A.D.2d at 291 citing Kossoff v. Rathgeb-Walsh, Inc., 3 N .Y. 2d 583, 589-590 (1958).

A Landowner May Not Divert or Block Rivers and Streams to the Detriment of a Neighbor

With respect to naturally occurring waterways such as rivers and streams—as opposed to surface water—the Court of Appeals in Barkley stressed that streams and the like may be used by the owner of any land over which such water passes, but the water itself is not “owned,” and the landowner may not prevent the water from continuing to flow past his property and onto a neighbors because

The owners of land on a water course, are not owners of the water which flows in it. But each owner is entitled by virtue of his ownership of the soil, to the reasonable use of the water as it passes his premises, for domestic and other uses, not inconsistent with a like reasonable use of the stream, by owners above and below him. Such use is incident to his right of property in the soil. But he cannot divert, or unreasonably obstruct the passage of the water, to the injury of other proprietors.

(emphasis added). The Court of Appeals then noted that “[t]hese familiar principles, are founded upon the most obvious dictates of natural justice, and public policy. The existence of streams is a permanent provision of nature, open to observation, by every purchaser of land through which they pass.” 

A Landowner May Take Certain Steps to Combat Surface Water, Even to the Detriment of a Neighbor

By contrast to the obligation to allow a river to continue to flow across one’s property, the Barkley court noted that “the law has always recognized a wide distinction, between the right of an owner, to deal with surface water falling or collecting on his land, and his right in the water of a natural water-course.”

In Barkley, rain regularly gathered on the plaintiff’s lot before flowing onto the neighboring defendant’s property. The defendant used earth from construction of a house to fill in indentations, grade, and improve his property and the sidewalk in front of it; and, as a result, water pooled and damaged the plaintiff’s property.

In affirming judgment for defendant, the Court of Appeals held that it was in the public interest of cultivation and land improvement that a landowner must have the right to improve his land by preventing surface water from flowing over it or gathering, even if doing so would cause the water to be retained by the uphill landowner.

The court was careful to note that this rule does not allow for a lower landowner to, by artificial means, collect and divert surface water onto a neighboring property writing that “before [surface water] leaves his land and becomes part of a definite water-course, the owner of the land is deemed to have an absolute property, and he may appropriate it to his exclusive use, or get rid of it in any way he can, provided only that he does not cast it by drains, or ditches, upon the land of his neighbor, and he may do this, although by so doing he prevents the water reaching a natural water-course, as it formerly did, thereby occasioning injury to [neighboring properties].” (emphasis added).

In distinguishing improvements that staunch surface water pooling on one’s property from those that intentionally redirect water onto another property, the Barkley Court explained that “[t]here is a manifest distinction between casting water upon another’s land, and preventing the flow of surface water upon your own.” See also Bennet v. Cupina, 253 N.Y. 436, 428-39 (1930)(reconstruction and elevation of defendant’s driveway, which caused surface water to flow onto plaintiff’s property was not unlawful because “[s]ince this water is not cast by drains or ditches upon adjoining premises defendants may get rid of it any way they can….The resulting damage gives no right of action); Kossof, 3 N.Y.2d at 589-90 (no liability where defendant upper landowner’s improvement of adjoining lot by paving the surface area in connection with the construction of a gasoline station resulted in water leakage through the wall of plaintiff lower landowner’s building and property damage, because plaintiff had no “right to insist that the upper owner shall keep his land in its natural state, so that the surface water may percolate into the ground without flowing upon plaintiff’s land as it would be more likely to do after being improved.”). C.f. Buffalo Sewer Authority v. Cheektowaga, 20 N.Y.2d 47, 52 (1967) (defendant town’s use of basins and a drain system to redirect water into plaintiff’s system was “rather…that of a proprietor artificially collecting and concentrating large quantities of surface waters and discharging them into an outlet on another’s land unable to carry them off” and so it was liable for the damage to plaintiff).

The Appellate Departments Vastly Expands the Definition of “Artificial Means” to Include Culverts, Berms and the Expansion of Existing Water Routes

In the years since Buffalo Sewer, although still maintaining a landowner’s right to prevent surface water from gathering on its own property, the Appellate Divisions have slowly but surely expanded the definition of “artificial” means beyond the diversionary “drains, pipes, or ditches” specifically precluded by the Court of Appeals.

However, in any case, it still remains “plaintiff’s burden to establish that the improvements on the defendant’s land caused the surface water to be diverted, that damages resulted, and either that artificial means were used to effect the diversion or that the improvements were not made in a good faith effort to enhance the usefulness of the defendant’s property.” Hulse v. Simoes, 71 A.D.3d 1086, 1087 (2d Dept. 2010). The First Department cases of Ubiles v. Ngardingabe, 194 A.D.3d 436 and Univ. Ave. Assocs. LLC v. Andrews Dev. Corp., 92 A.D.3d 516 (1st Dept. 2012) concurred.

These Appellate Division cases have found liability for any sort of intentional diversion of water onto a neighboring property through berms, swales, and culverts, even if the defendant merely expanded or adjusted pre-existing structures.

For example, in Lytwyn v. Wawarsing, 43 A.D.2d 618 (3d Dept. 1973) the Third Department held that “[c]reating a channel which would discharge water onto another’s lands constituted an actionable wrong without requiring a showing that such channel was constructed or maintained in a defective, unsafe, dangerous or obstructive manner”; and in Hoffman v. Appleman, 120 A.D.2d 493, the Second Department, citing the Court of Appeals in Kossoff, noted that a “defendants’ installation of a culvertwithin an elevated access road hindered the natural flow of surface water and created an artificial gathering of water upon the plaintiffs land for which the defendants are liable.”

Likewise, in Long v. Sage Estate Homeowners Ass’n, Inc., 16 A.D.3d 963 (3d Dept. 2005), the Third Department held that defendant’s significant expansion of an existing berm was an artificial change that rendered it liable for water run-off damages to plaintiff.

Finally, in Krossber v. Cherniss, 125 A.D.3d 1274 (4th Dept. 2015), the Fourth Department determined that although “defendants established that their improvements were made in good faith…they admitted that they constructed a berm on their property, which may be considered an artificial means of diverting water.”

The Appellate Division Expands “Artificial” Means of Diversion to Include Certain Grading and Land Improvements

Following in the footsteps of Barkley and Kossoff, the Appellate Divisions have largely held that a landowner is not liable if paving, grading, and other improvements to his land divert water to a neighboring property. See Silverman v. Doell, 138 A.D.3d 1339, 1341 (3d Dept. 2016) (nothing ‘prevent[s] the owner of land from filling up the wet and marshy places on his [or her] own soil for its amelioration and his [or her] own advantage, [even if] his [or her] neighbor’s land is so situated, as to be incommoded by it’”) quoting Kossoff, 3 N.Y.2d at 589; Smith v. Town of Long Lake, 40 A.D.3d 1381, 1383 (3d Dept. 2007) (“Paving alone—as opposed to pipes, sluices, drains or ditches—does not constitute artificial means of diversion”); Prachel v. Town of Webster, 96 A.D.3d 1365, 1367 (4th Dept. 2012) (same); Congregation B’nai Jehuda v. Hiyee Realty Corp., 35 A.D.3d 311, 313 (1st Dept’ 2006) (“[w]here seepage occurs as a result of the natural grade of property, in the absence of any claim that such grade was created for the express purpose of diverting water onto another’s property, there can be no nuisance or trespass liability therefor”) citing Kossof, 3 N.Y.2d 583.

Indeed, as recently as 2021, the Fourth Department held in Hanley v. State, 193 A.D.3d 1397, 1397 (4th Dept. 2021) that the erection of a “curb” to block surface water from flowing onto one’s property was permissible because “‘[t]here is a distinction between casting water on the land of another and the right of that other to prevent the flow of surface water on [its] land’.”

However, two recent decisions from the Third Department seem to expand the definition of “artificial means” well beyond just pipes, culverts, berms, and similar water flow devices to include extensive land improvements and regrading to direct the flow of water.

First, in the 2017 case of 517 Union St. Associates LLC v. Town Homes of Union Square LLC et al., 156 A.D.3d 1187 (3d Dept. 2017), the Third Department announced that “[t]he diversion of water by artificial means, however, is not strictly limited to the use of pipes, drains and ditches and may otherwise be established where it is demonstrated that the net effect of defendants’ improvements ‘so changed, channeled or increased the flow of surface water onto [the] plaintiff[s]’ land as to proximately cause damage[] to the property’.”

In 517 Union, the defendant purchased two parcels adjacent to plaintiff’s land and then tore down a structure and built another, which purportedly led to flooding on plaintiff’s property. In reversing summary judgment that had dismissed the water damage claim, the court determined that, based on testimony that the construction and regrading may have—without resorting to any culverts or other artificial means—changed “water flow patterns” “there are triable issues of fact as to whether defendants’ improvements to the subject parcels diverted surface water onto plaintiffs’ property by artificial means.”

More recently, in Wfe Ventures v. Gbd Lake Placid, 197 A.D.3d 824, 829 (3d Dept. 2021), the Third Department explained:

This Court has held that the definition of artificial means should not be read so narrowly, as other, more esthetically pleasing means of water diversion—such as the construction of a swale or a berm—have been held to potentially constitute artificial means sufficient to form the basis for liability [citations omitted]. Indeed, “[the diversion of water by artificial means . . . is not strictly limited to the use of pipes, drains and ditches and may otherwise be established where it is demonstrated that the net effect of [the] defendant[‘s] improvements so changed, channeled or increased the flow of surface water onto the plaintiff[‘s] land as to proximately cause damage to the property.”

The Third Department went on to hold that, where the defendant had placed a total volume of 59,500 cubic feet of earthen fill to extend the slope of its land, “[a] jury might well conclude that the use of such a volume of fill to change the natural slope of the land could be deemed an artificial, as opposed to a natural, means of water diversion…and thereby expose defendant to liability.”

Property Owners May Be Held Strictly Liable for Water Damage to Neighbors Resulting from Certain Construction

These same principles also provide recourse to property owners for other damage resulting from the diversion of water during neighboring construction or even the negligent drainage of underground reservoirs, particularly in New York City. As the First Department recently held in 7-11 E. 13th St. Tenants Corp. v. New Sch., 221 A.D.3d 401 (1st Dept. 2023), New York City “Administrative Code § 3309.4…imposes on owners and contractors an absolute obligation to preserve and protect ‘any adjoining’ structures from injuries due to foundation-related excavation activities.”

This holding aligns with the Court of Appeals 2012 decision in Yenem Corp. v. 281 Broadway Holdings, 18 N.Y.3d 481 (2012) applying the predecessor statute and noting that the “original purpose” of strict liability, to “shift[] the risk of injury from the injured landowner to the excavator of adjoining land has remained constant over the years.”

Section 3309.4 and its predecessor does not differentiate between damages to a foundation caused by mechanical work and water damage resulting from neighboring foundation-related activity. Correspondingly, where construction on the foundation of one property—by disturbing water flow, depleting underground waters, or allowing water to gather—damages a neighboring property, the impacted neighbor may have recourse under Section 3309.4 and the above-noted caselaw.

However, recovery is not limited to Section 3309.4. Indeed, in each of the below cases, New York courts have found other grounds for suits related to damage from subsidence or gathered water after a neighboring property owner drains or otherwise manipulates underground water—such as an underground reservoir—or allows water to gather in a construction site, which negligently results in damage, including subsidence on an adjacent property. See A. L. Russell, Inc. v. City of New York, 4 A.D.2d 943, 944 (1st Dept. 1957), aff’d, 5 N.Y.2d 794 (1958) (“We would not agree with defendants’ argument that they might with legal impunity heedlessly drain water from the subsoil supporting an adjoining building knowing that as a likely consequence the building would settle”); Doundoulakis v. Town of Hempstead, 42 N.Y.2d 440, 446-49 (1977) (ordering new trial including as to whether landfill operation that “pumped under pressure” a “dredged mix of 85% water and 15% sand…raised the underground water table, thereby increasing pressure” damaged plaintiffs’ property or was subject to strict liability) differentiating Kossof, 170 N.Y.2d 583; Deutsch v. Nat’l Props., Inc., 37 Misc. 2d 860, 862 (N.Y. City Ct. 1961), aff’d, 37 Misc. 2d 863, 238 N.Y.S.2d 882 (App. Term 1963), and modified on other grounds, 19 A.D.2d 823 (1st Dept. 1963) (“the damages alleged by the plaintiff were caused by the defendants…by reason of their failure to properly brace and shore up the grounds while excavating; by their failure to provide proper drainage of the water that was filling in during the excavation; and by their failure to plug up and secure the exposed sewer pipe located within the excavation”).

Adam Leitman Bailey is the founding partner of Adam Leitman Bailey, P.C., and Eric S. Askanase is a partner in the firm’s real estate litigation group. Richard Trabosh, a third-year law student at Hofstra University and a summer associate of the firm, assisted in the preparation of this article.

Read the full New York Law Journal Article Here

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Our firm represents several Coop buildings in New York City in connection with closing the sales of their units. When the seller of a unit is the shareholder’s estate, we are often asked for coop estate requirements to sell. Here is a brief but thorough summary of what most coops will require.

To begin, an original death certificate for the decedent is required for review.

Next, we will request to see a copy of the stock certificate and proprietary lease allocated to the subject unit and confirmation both originals will be delivered to closing for cancellation. We will review both documents to determine if the deceased had a tenant by the entirety or a tenant with rights of survivorship who is alive and a party to the sale. If so, the next additional requirements are not needed. If not, we will proceed to request the following items.

A certified copy of the decedent’s will (if there is one) must be reviewed by coop counsel to confirm if the deceased’s will aligns with the method of the proposed sale.

A Federal Release of Estate Tax Lien Waiver is also required for review. In instances where an Estate is below the threshold, a List of Assets Inventory may be acceptable in its place.

A New York State Release of Estate Tax Lien (Form ET 117) is required. This may be obtained from the NYS Dept. of Taxation and Finance.

In order to proceed to Closing, currently dated (within the last six (6) months) and sealed Letters Testamentary (if the decedent died with a will) or Letters of Administration (if the decedent died without a will) must be presented authorizing the Executor or Administrator to sign closing documents. Executors and/or Administrators must be present at closing and may not assign their signing duties/power to another individual by Power of Attorney.

Our office will request an Affidavit of Debts and Domicile for the deceased to be signed by the Executor/Administrator of the Estate.

Lastly, several coops will require an Eagle 9 title policy with a coop endorsement in connection with Estate Sales.

Once all items are received, our office will conduct an extensive review to make sure all parties to the transaction are thoroughly protected and the transaction occurs in compliance with all transactional, coop, and estate laws.

The post Coop Estate Requirements appeared first on Adam Leitman Bailey Articles.

In their article, Adam Leitman Bailey and Jeffrey Metz discuss how, in New York, courts generally lack the authority to extend statutes of limitations, with only narrow exceptions permitting tolling which reinforces the importance of timely legal action in real estate matters.

Real estate markets require certainty. Lenders, developers, and all real estate actors require certainty to trust the market to make intelligent decisions and rely on these decisions and be able to sell these decisions to investors and the public at large.
Market parties from the largest lender to the first-time home buyer all rely on our courts, indirectly, when giving out a loan to make a purchase—that the law will be followed so their investments will be as safe as possible.

Rash or harmful legislative decisions, such as the State Legislature has signed by the Governor in July of 2019, have resulted in incredible monetary losses and harm to both landlords and tenants, and countless jobs lost for workers.

Thankfully, the New York Courts, from the local villages to the Court of Appeals, have upheld the law, and New York has been able to survive such an onslaught and many business persons continue to revitalize New York real estate.

On very few occasions in the past year, one of the most sacrosanct laws, the Statute of Limitations, has been extended without party consent by courts, at least temporarily. Knowing when a party’s ability to sue ends allows for proper planning, facilitates decision making, and promotes business prosperity because of the certainty and belief in our legal system.

States all over the country choose New York as their preferred state for choice of law provisions because of the quality of our court system and its decisions since we became a democracy. And one of those bedrocks that allows real estate to transfer with confidence is that only the Legislature, with Constitutional limitations, can amend a statute’s expiration of its time to sue.

The Court of Appeals has explained that Statutes of Limitation are “designed to promote justice by preventing surprises through the revival of claims that have been allowed to slumber until evidence has been lost, memories have failed, and witnesses have disappeared.” Blanco v. American Tel. & Tel. Co., 90 N.Y.2d 757, 773 (2000) quoting from Order of Railroad Telegraphers v. Railway Express Agency, 321 U.S.342, 348-349 (1944).
For practicing attorneys, recognizing when the statute of limitations for a particular matter is about to run is always of utmost importance because missing the applicable period will likely form an immutable barrier to the prosecution of a client’s action, and open the door to a claim for legal malpractice.

This article will examine the limited circumstances where a statute of limitations can be tolled and whether a court can provide attorneys with a life preserver by extending a statute of limitations.

Statutory Bar
CPLR § 201 states that “[a]n action, including one brought in the name or for the benefit of the State, must be commenced within the time specified in this article unless a different time is prescribed by law or a shorter time is prescribed by a written agreement.”
Importantly, § 201 goes on to provide that: “No court shall extend the time limited by law for the commencement of an action.” Id.

This is consistent with the long held belief of the Court of Appeals that “[a] Statute of Limitations is not open to discretionary change by the courts, no matter how compelling the circumstances…”. Arnold v. Mayal Realty Corp., 299 N.Y. 57, 60 (1947). See also Matter of Thorton v. NYC Housing Authority, 100 A.D.3d 556, 557 (1st Dept. 2012) (“[t]his Court cannot extend the statute of limitations.”); Roberts v. City University of New York, 41 A.D. 3d 825, 82. (2d Dept. 2007) (application to file a late claim in the Court of Claims denied because “[o]nce the applicable limitations period expired…the court was without authority either to entertain a subsequent motion to extend the time to file a late claim, or sua sponte, to grant such relief.”); Crum & Foster, Inc. Co. v. State of New York, 25 A.D. 3d 643 2d Dept. 2006) (reversing order of Court of Claims granting claimant leave to serve and file a properly verified claim as the statute of limitations had already run). The same holds true in criminal proceedings. See, People v Kellman, 156 Misc. 2d 179, 183 (Sup. Ct. Kings Cnty. 1992) (“ the court may not sua sponte, alter a statutory time period within which a defendant may invoke a right under the CPL.”

The Limited Exceptions

Notwithstanding this statutory bar, there are circumstances where a state court can sanction a tolling of the statute of limitations.

In State v. William, II, 224 A.D.3d 1356 (4th Dept. 2024), for example, the court found that an action was not time barred because Governor Cuomo had issued a series of executive orders in response to the COVID-19 pandemic, which had tolled “any specific time limit for the commencement… of any legal action…”

This comports with CPLR § 204(a), which provides that “[w]here the commencement of an action has been stayed by a court or by statutory prohibition, the duration of the stay is not a part of the time within which the action must be commenced.” See, e.g., Lubonty v. U.S. Bank National Assn., 34 N.Y. 3d 250, 258 (2019) (automatic bankruptcy stay pursuant to 11 U.S.C.A. §362 (a)(1) constitutes a statutory probation under CPLR 204(a) and reflects the “equitable principle that plaintiffs should not be penalized for failing to assert their rights when a court or statute prevents them from doing so.”); Wilson v. Motor Veh. Acc. Indem. Corp., 44 Misc 2d. 187 (Sup. Ct Bronx Cnty, 1964) (statute of limitations tolled because plaintiff was restrained from commencing action while court held in his abeyance motion for leave to sue); Vasquez v. Motor Vehicle Acc. Indemnification Corp., 272 A.D. 2d 275 (1st Dept. 2000) (because Insurance Law §5218 requires an order permitting MVAIC to be sued, the statute of limitations is tolled until the order granting leave is entered).

Furthermore, in Roldan v. Allstate Ins. Co., 149 A.D.2d 20, 32 (2d Dept. 1989), the Second Department found that the statute of limitations could be tolled where a cause of action had accrued but was “temporarily extinguished as a result of an erroneous court order, which was later reversed.” See also, Brown v. State, 250 A.D.2d 314, 319 (3d Dept. 1998) (holding that “the Statute of Limitations is tolled where the limitations would run against a person unable to bring an action based on a prior ruling.”) But this rule is fact dependent.

In Varo, Inc. v. Alvis PLC, 261 A.D.2d 262 (1st Dept. 1999), a case involving a claim for breach of contract, plaintiffs argued that an action brought by the government against the defendants under the Federal False Claims Act, which resulted in a qui tam proceeding requiring that the complaint to be under seal for a period of time, precluded them from bringing suit within the six-year statute of limitations period. Id. at 268. The court rejected plaintiffs’ contention, finding that nothing in the Federal False Claims Act prevented them from timely commencing the action. Id. at 268-69.

Of interesting note, the courts are clear that a limitations period is not tolled “while a petition for letters of administration is pending.” Xenias v. Mount Sinai Health System, Inc., 191 A.D. 3d 454, 455 (1st Dept. 2021); Singh v New York City Health & Hosp. Corp., 107 A.D. 780 (2d Dept. 2013).

Equitable Tolling: The Difference Between State and Federal Courts

Given the statutory bar of CPLR §201, and the limited exceptions which permit a tolling, the issue turns to whether a court can utilize the doctrine of “equitable tolling” to effectively extend the statute of limitations. The answer turns on the forum and the statutes involved.

Siegel, New York Practice §56 (6th Ed.) teaches that equitable tolling relates to federally created causes of action and has no precise state counterpart. The Court of Appeals for the Second Circuit has instructed that equitable tolling on the federal level “is only appropriate in rare and exceptional circumstances in which a party is prevented in some extraordinary way from exercising his rights.” Zerilli-Edelglass v. New York City Transit Authority, 333 F.3d 74, 80 (2d Cir. 2003) (citations and internal quotation marks omitted).

Illustratively, the doctrine is available where the plaintiff has actively pursued judicial remedies but filed a defective pleading during the specified time period or where a plaintiff’s medical condition or mental impairment prevented him/her from filing in a timely manner. Id. (citation and internal quotation marks omitted). However, “a want of diligence by a plaintiff’s attorney generally will not prompt a court to provide relief from a limitations period by way of an equitable toll.” Chapman v. ChoiceCare Long Island Term Disability Plan, 288 F. 3d 506, 512 (2d Cir. 2002).

Thus, federal courts “have typically extended equitable relief only sparingly.” O’Hara v. Bayliner, 89 N.Y.2d 636, 646 (1997) (quoting Irwin v. Dept. of Veterans Affairs, 498 U.S. 89, 96 (1990)) (internal quotation marks omitted) But no equitable toll is available at the state level.

“[E]quitable tolling does not apply to… state law claims, as the doctrine only tolls the statute of limitations with regard to federally created causes of action.” Von Hoffmann v. Prudential Ins. Co. of Am., 202 F. Supp. 2d 252, 264 (S.D.N.Y 2002).

The First Department is in accord. In Jang Ho Choi v. Beautri Realty Corp., 135 A.D.3d 451, 452 (1st Dept. 2016), plaintiff’s specific performance cause of action was found to be time-barred because the plaintiff did not commence his action within six years.

The court rejected the plaintiff’s contention that the statute was equitably tolled during the pendency of another case concerning a different party’s right to purchase the same property, as well as an action that the plaintiff had brought in South Korea.

The First Department stated in no uncertain terms that “the doctrine of equitable tolling is not available in state causes of action in New York.” Id. at 452. This follows prior First Department holdings in Ari v. Cohen, 107 A.D.3d 516, 517 (1st Dept. 2013), and Shared Communications Servs. of ESR, Inc. v. Goldman Sachs & Co., 38 A.D.3d 325 (1st Dept. 2007).

Interestingly, the Shared Communications court noted, in dicta, that a tolling might be possible under the theory of equitable estoppel.

Tolling by Equitable Estoppel

The Court of Appeals has instructed that the doctrine of equitable estoppel is “rooted in the principle that one may not take advantage of one’s own wrongdoing [and] operates to bar a party from asserting the Statute of Limitations when that party’s own wrongful concealment has engendered the delay in prosecution.” Matter of Steyer, 70 N.Y. 2d 990, 993 (1988). This principle is aptly demonstrated in Simcuski v. Saeli, 44 N.Y. 442 (1978)

In Simcuski, a doctor negligently injured a patient during surgery. Although the doctor knew that his negligence had caused potentially permanent injury, he falsely told her that her “pain and difficulties were transient and that they would disappear if she would continue a regimen of physiotherapy…” 44 N.Y. 2d at 447.

The patient relied upon the doctor’s assurances and did not discover the true extent of her injury until the Statute of Limitations had passed. Under these circumstances, the Court found that the plaintiff had justifiably relied on the doctor’s misrepresentations in not filing suit prior to the time she did and denied the doctor’s motion to dismiss plaintiff’s complaint. It wrote that, “a defendant may be estopped to plead the Statute of Limitations where plaintiff was induced, by fraud, misrepresentations, or deception to refrain from filing a timely action.” 44 N.Y. 2d at 448-449.

However, the court also provided the caveat that “[i]f the conduct relied on (fraud, misrepresentation, or other deception) has ceased to be operational within the otherwise applicable period of limitations (or perhaps within a reasonable time prior to the expiration of such period), many courts have denied application of the doctrine on the ground that the period during which the plaintiff was justifiably lulled into inactivity had expired prior to the statutory period, and that the plaintiff had thereafter had sufficient time to commence his action prior to the expiration of the period of limitations.” Id. at 449-450

Thus, it is the plaintiff’s burden “to establish that the action was brought within a reasonable time after the facts giving rise to the estoppel have ceased to be operational.” Id. at 450

Conclusion

The practitioner must be hyper-vigilant to make sure that a matter is brought within the statute of limitations as it is clear that unless there are extraordinary circumstances, the court will not and cannot throw you a lifeline.

Adam Leitman Bailey is the founding partner of Adam Leitman Bailey, P.C. Jeffrey Metz is the chief of the appellate group at the firm.

Read the full article on the New York Law Journal Here

The post One of the Bedrocks of Real Estate Transfers: The Statute of Limitations Cannot Be Extended By State Courts in New York appeared first on Adam Leitman Bailey Articles.

Eligibility:

The conditions of § 339-ee must be met for a sponsor to be eligible for the mortgage tax credit. Under § 339-ee, the following conditions must be met:

1. The proceeds of a construction mortgage were applied to the construction of a condominium

2. A condominium unit is subject to a blanket mortgage and the proceeds of the mortgage were applied to:

a. The payment of the construction mortgage, or

b. Capital expenditures or expenses for the development or operation of the condominium, or

c. The purchase of land or buildings for the condominium

3. The purchase of a condominium unit cannot be more than 2 years prior to the recording of the declaration of the condominium

4. A mortgage recording tax was paid on the construction or blanket mortgage by the Sponsor.

The mortgage tax credit is the product of the purchaser’s percentage of interest in the common elements of the condominium and the mortgage tax already paid on the construction or blanket mortgage by the Sponsor.

The above conditions must be detailed in a 339-ee Affidavit a/k/a Affidavit for Credit Against Mortgage Tax Pursuant to Section 339-ee of the New York Real Property Law. The title company will file the affidavit with the recording of a purchaser’s mortgage.

Exceptions to Eligibility:

A mortgage tax credit is not permitted where there is a special additional mortgage recording tax imposed by Section 253(1)(a) of the NY Tax Law or where the first condominium sold is more than 2 years after the construction or blanket mortgage was recorded.

Below is an example of how the mortgage tax credit operates under NY Real Property Law § 339-ee:

A purchaser has entered into a contract to purchase a unit in a new construction condominium. The purchase price of the unit is $18,000,000.00. The unit’s common interest is 1.80%. The purchaser is financing 80% of the purchase price by obtaining a loan in the amount of $14,400,000.00.

To develop the condominium, the sponsor obtained a construction loan in the amount of $300,000,000.00. The loan was recorded on August 30, 2023. The Sponsor paid a mortgage recording tax of $7,650,000.00 and $6,800,000.00 is eligible for a tax credit.

The New York Mortgage Tax for properties that are $500,000.00 or more is 2.175% of the mortgage principal. The lender will pay 0.25%. Thus, the purchaser is responsible for paying 1.925% of the mortgage principal at closing. The purchaser would pay $277,200.00.

If the closing of the condominium unit occurs within two years of August 30, 2023, the date the sponsor’s loan was recorded, the Sponsor will be entitled to receive a mortgage recording tax credit from the purchaser in the amount of $122,400.00 and the purchaser would be responsible for paying the remaining portion of the tax, $154,800.00.

In conclusion, a developer of a new construction condominium should consider negotiating a mortgage tax credit for the benefit of the developer in contracts of sale with purchasers of units bought within in two years of the developer’s construction or blanket mortgage being recorded.

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