Introduction

After purchasing real property in 2017 in Greenport, New York, Plaintiff JMMJ Development, LLC (“JMMJ”) brought an action to force the Defendant Town of Greenport (“Greenport”) to remove its sewer and water lines crossing the property, which were authorized by a 20-foot permanent easement that was never recorded. Greenport defended its claim to title by contending, among other things, that it had a prescriptive easement and that JMMJ had notice of its claim before closing on the property through surveys reviewed and its title policy. JMMJ lost in the Supreme Court on a summary judgment motion and then appealed to the Appellate Division. Addressing New York Real Property Law Section 291 and case law on prescriptive easements, the Court ruled that Plaintiff had actual notice of the easement and, thus, was not a good faith purchaser without notice.  It then held that Greenpoint had established a prescriptive easement for the proscribed ten-year term.  JMMJ Dev., LLC v. Town of Greenport, 2023 NY Slip Op 06779 (App. Div. 3rd Dept.)

Background

In 1971, Greenport authorized the construction of Sewer District No. 2, which had sewer and water lines crossing the property, together with a 20-foot-wide permanent sewer easement over land now owned by JMMJ, formerly owned by Earl and Ava Stalker. Eight years later, Greenport authorized payment of $13,800 to the Stalkers to acquire property and easement rights for the sewer project. Sewer lines were then installed.  The easement, however, was again never recorded.

In 2013, when Ava Stalker went to sell the property, she commissioned a land surveyor to survey the land. She gave the surveyor a 1979 letter from Greenport offering the $13,800 payment for the sewer easement and a written metes and bounds description of the easement. “The letter stated that [Greenport] had acquired its property interest through the power of eminent domain and that the $13,800 offer was based upon defendant’s highest approved appraisal, in accordance with the [eminent domain law].”

Before purchasing the property from Ava Stalker in 2016, JMMJ hired professional land surveyors to prepare an update to the 2013 survey. The survey confirmed the existence of the 20-foot-wide sewer easement crossing the property, although it was not recorded in the land records. The title policy referenced JMMJ’s 2017 survey identified an unrecorded easement and specifically excepted from coverage “the rights of the Town of Greenport and others in and to the use of said sewer easement.”

JMMJ brought a quiet title action, claiming that there is no valid easement as it was not recorded and that the sewer lines on his property are unlawful, as well as trespass and nuisance claims. Greenport counterclaimed, “seeking a declaration that it has an easement over the property for use of its sewer and water lines” via a prescriptive easement as the pipes had crossed the property for well over the ten-year prescribed time period under controlling New York case law. Allen v Mastrianni, 2 AD3d 1023, 1024, 768 NYS2d 523 (2003). At the conclusion of discovery, Greenport moved for summary judgment and prevailed.

Appeal

A good faith purchaser cannot be bound by an unrecorded easement prior to purchase, but one’s status as a good faith purchaser for value cannot be maintained when that purchaser has notice or knowledge of a prior interest or equity in the property. Real Property Law § 291. Additionally, “Notice sufficient to grant summary judgment has been found where a purchaser, prior to its acquisition of servient land, had actual notice of an easement thereon by virtue of it being excepted in its title insurance policy.” Baiting Hollow Props., LLC v Knolls of Baiting Hollow, LLC, 89 AD3d 776, 778, 932 N.Y.S.2d 160 (2d Dept 2011).

The Third Department sustained the trial court’s grant of summary judgment because it found that Greenport had adequately shown that JMMJ had both actual and constructive notice through the 2017 contract to purchase, the 2013 and 2017 surveys, and the plaintiff’s title insurance policy. Defendant also showed that “its use of the easement was open, notorious, continuous, hostile and under a claim of right for over 30 years prior to plaintiff's purchase.” In turn, JMMJ only relies on the fact that the easement was unrecorded. With that, the Third Department reaffirmed that a purchaser does not maintain its good faith status if it has notice or knowledge prior to purchasing the property. JMMJ commissioned his own land surveyor, which showed the presence of the easement. JMMJ purchased title insurance that specifically mentioned the easement. It had actual notice of the easement prior to purchase.

Takeaways

JMMJ Dev., LLC v. Town of Greenport is a simple and straightforward reminder that purchasers of real estate or a lienholder will be deemed to have accepted encumbrances on property that they have actual notice of, even if those encumbrances are not recorded in the County Clerk’s office.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Thomas Persico at tpersico@riker.com, Kevin Hakansson at khakansson@riker.com, or Kori Pruett at kpruett@riker.com.