Tenant Claims Her 99-Year Lease Still in Effect After Building Foreclosure

Facts: Tenant was prior building landlord. She sold the building in 1990 to landlord "B," who gave tenant a 99-year lease for a second-floor apartment. As rent, tenant was required to pay half the building's carrying costs and half the mortgage. The lease wasn't recorded until 1997. In 1991, landlord "B" defaulted on the mortgage and the bank took the building over in foreclosure. Tenant wasn't joined as a party to the foreclosure action. In 1994, landlord "C" bought the building in a referee sale. In 2004, the building was sold again to landlord "D," who sued to eject tenant from the apartment. Landlord "D" claimed that tenant had no right to remain after the foreclosure and sale of the building to landlord "C." Tenant claimed that she had a valid 99-year lease for her apartment. She said that since she wasn't notified of the foreclosure action and paid rent to prior landlords, landlord "D" couldn't evict her. The court ruled for landlord, finding that tenant wasn't a necessary party to the foreclosure action and that the lease was void against landlord "C" because it was unrecorded at the time of the foreclosure sale. Tenant appealed.
Court: The appeals court ruled for tenant and reopened the case. By law, tenant should have been made a party to the 1991 foreclosure action. And although the lease may not have been recorded when the building was sold to landlord "C," she knew about tenant's lease. However, tenant was required to pay rent to landlord "C" to maintain her lease, and a trial was needed to determine if she did so.

1426 46 St., LLC v. Klein: 2009 N.Y. Slip Op. 01784, 2009 WL 615412 (App. Div. 2 Dept.; Skelos, JP, Dillon, Angiolillo, Eng, JJ)