Court of Appeals upholds restrictive covenant

Language in City approval binds future owners. After foreclosure, the City sold 330 West 86 Street for $340,000 to the tenants under UDAAP, to allow an expedited sale. The deed required the tenants to remove all code violations. Instead, the tenants sold the property for between $1 to $2.25 million. The new owner planned to demolish the building and construct a 15-story residential building. The adjacent co-op sued to stop demolition. A lower court enjoined the new owner from using the property for any use other than conservation of the building or new construction of only four units as required by UDAAP, which it viewed as incorporated into the deed and applicable to future owners.

The First Department reversed, ruling that the deed failed to clearly state that the UDAAP restrictions applied to future owners. 3 CityLand 128 (Sept. 15, 2006).

The Court of Appeals reinstated the lower court’s decision, ruling that the use restrictions should be determined by looking at the whole set of documents that conveyed the property. After examining the documents, including the City Council’s and the mayor’s approvals, the Court found 28 references to the project being governed by UDAAP. The Court also found that the habendum clause stated that any covenant in the deed covered successive owners, and the deed’s recital provision included the restrictive covenant. Together, this rendered the covenant enforceable. The conditions required to make a covenant applicable to successive owners had been met.

328 Owners Corp v. 330 W. 86 Oaks Corp., 2007 N.Y. Slip Op. 2788 (N.Y. Apr. 3, 2007).

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