Air Rights & Title Insurance
The Insured had contracted with the Seller to purchase Lot 4 and the air rights above Lot 1. Once the deal closed, First American’s policy-writing Agent issued the fee policy for Lot 4 and timely recorded the deed. The “Zoning Declaration” required to transfer the air rights pursuant to New York City’s zoning law had been prepared, but the Agent failed to record it until three years after the closing. In the meantime, circumstances had changed, allegedly rendering the Zoning Declaration ineffective to transfer the air rights.
The Insured sued First American (as well as the Agent) for “damages and indemnification based upon Defendants' negligence and contract breaches arising from Plaintiff's apparent purchase of insufficient title insurance and payment for the timely recording of certain instruments with respect to [Lot 4] and [Lot 1 Air Rights]" [brackets in original].
Both claims against First American were dismissed. The plain language of the policy excluded coverage for “any property beyond the lines of the area described or referred to in Schedule (A),” which only described Lot 4 [emphasis in original]. The negligence claim was unsupportable because First American had not itself undertaken to perform recording services with respect to the Zoning Declaration. Union Street Tower LLC v First American Title Company, 2014 NY Slip Op 50253(U) (Sup. Ct., Kings Cty., February 21, 2014).
(Kudos to Constructive Notice subscriber Todd Harris Hesekiel, Esq. at Ackerman, Levine, Cullen, Brickman & Limmer, LLP for a job well done.)
Comment:
The decision emphasizes that the policy “does not reference Lot 1 air rights.” Apparently, the Insured had not availed itself of the New York City Development Rights Endorsement. In addition, the Agent had prepared a key component of the Zoning Declaration “as the authorized agent” of a different insurer, omitting important information and undermining the validity of the Declaration. That insurer is not a party to the instant action.