Developer Corp owns a large tract in Nassau County. On Monday, it deeds Parcel A to Builder Inc, who does not record. On Tuesday, Developer Corp takes out a construction loan secured by the entire tract, including Parcel A, with Metro Bank, which records its mortgage immediately. On Wednesday, Builder Inc records its deed. Metro Bank claims its mortgage covers Parcel A. Under New York law, what is the most likely outcome?
Correct Answer
B) Metro Bank's mortgage is valid only if the bank can prove it had no actual knowledge of the conveyance to Builder Inc
This is a classic race-notice scenario. Metro Bank can have priority over Builder Inc's unrecorded deed only if the bank both recorded first (which it did) AND took without notice of Builder Inc's prior interest. If Metro Bank had actual knowledge of the Monday conveyance to Builder Inc, it cannot claim bona fide purchaser protection.
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Related Topics & Key Terms
Key Terms:
Related Concepts
A transfer tax is a tax imposed by state, county, or local government on the transfer of real property from one owner to another. It is typically based on the sale price or a flat rate per dollar of consideration.
An abstract of title is a condensed history of all recorded documents and proceedings that affect the title to a specific parcel of real property. It is a summary, not a guarantee, of title condition.
Actual notice means a person has direct, personal knowledge of a fact or interest in real property. This can come from being told, seeing something firsthand, or any form of direct awareness.
More Property Ownership Transfer Questions
David owns shares in a cooperative corporation that entitle him to occupy apartment 4B. He wants to sell his interest in the co-op. What is David actually selling?
In New York, what is the primary difference between an owner's title insurance policy and a lender's title insurance policy?
Rachel owns a property and grants a deed to her son Paul, who does not record it. Later, Rachel grants a mortgage to Community Bank, which records immediately. Subsequently, Paul records his deed. The bank claims its mortgage has priority over Paul's ownership. Under New York law, what factor will be most critical in determining priority?
Amy purchased a house in Monroe County and received a warranty deed. Before she could record it, a judgment was entered against the seller for $50,000, and the judgment creditor recorded a judgment lien. Amy recorded her deed three days later. Under New York law, how does this affect Amy's title?
Patricia owns property in Erie County and executes a quitclaim deed to her brother Mark. Mark records the deed immediately. Later, Patricia claims the deed was forged and sues to recover the property. Under New York law, what effect does Mark's recording have on Patricia's claim?
- → Jennifer inherits her grandmother's cooperative apartment in Brooklyn. The proprietary lease has 75 years remaining. What happens to Jennifer's ownership interest if the proprietary lease expires?
- → In New York, what type of property interest does a cooperative apartment represent?
- → Karen wants to make renovations to her cooperative apartment kitchen. Before beginning work, what must she typically do?
- → A cooperative corporation in New York has various ongoing responsibilities to its shareholders. All of the following are typical responsibilities of a co-op corporation EXCEPT:
- → John owns 150 shares in Riverside Cooperative Corporation, which entitles him to occupy apartment 4B under a proprietary lease. He wants to sell his cooperative interest. What is John actually selling?
- → Under New York's recording system, what happens when two deeds for the same property are recorded on the same day?
- → David owns shares in Brooklyn Commons Cooperative and wants to sublet his apartment for two years while working overseas. What restriction typically applies to subletting cooperative units in New York?
- → Lisa is explaining the difference between cooperatives and condominiums to her client. What document do cooperative purchasers receive instead of a deed?
- → Robert's proprietary lease for his cooperative apartment is about to expire. He is concerned about losing his right to occupy the unit. How long do proprietary leases typically run in New York cooperatives?
- → Sarah purchases a condominium unit in Manhattan. As a New York condominium owner, what type of property interest does she hold in the unit itself?
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