Damages for Frivolous Notice of Pendency
In J Group Holdings I LLC v. Michem Properties Inc., 2014 NY Slip Op 32792 (Sup. Ct., Kings County, Oct. 22, 2014), the contract was signed by potential buyer J Group, but the seller returned it unsigned, along with the proffered down payment. Upon learning that another buyer had gone into contract, J Group filed a NoP, misrepresenting that a legally binding contract existed for J Group’s purchase. Almost $90,000 in attorney’s fees later, the seller was able to have the NoP discharged on December 19, 2012. Because of the appeal period, however, the new buyer was unable to obtain title insurance until January, 2013.
Unfortunately for J Group, capital gains taxes increased on January 1, 2013. As a result, the Seller incurred additional tax liability of $268,784.08. This liability would have been avoided had the sale to the new buyer not been delayed by the frivolous NoP filing. When the dust settled, J Group was hit with a judgment of $357,255.35, representing the additional taxes along with the Seller’s attorney’s fees!
Any colorable claim affecting the title to, or the possession, use or enjoyment of real property can justify the filing of a notice of pendency (NoP). But a filing utterly lacking foundation can result in significant damages.