Purchaser On Constructive Notice From Gap in Title

Buying real estate comes with a lot of worries. Is there mold? Is this a good neighborhood?

Most of the time buyers do not worry about title-the bundle of rights they are purchasing. But title is the most important asset being purchased. For example, a hopeful owner cannot purchase from a renter. The renter only has a temporary right to reside - not full title.

Mortgages and easements are two common encumbrances. They are generally recorded in county records using the Block and Lot identifiers, a mapping system commonly used throughout the United States. Buyers are legally deemed to have “constructive notice” of the records of the county. This means that regardless of whether they actually know what affects their title, they are legally deemed to “know” everything that is recorded: the history of deeds and encumbrances that “run with the land” and that may affect how they can use the land. They cannot complain about title defects later.

Buyers routinely pass this inquiry on to a title company who is responsible for searching the recorded instruments to see if the seller can pass good title to the buyer, and whether the property is encumbered. The title officer searches the county records for that property’s unique Block and Lot combination to see what was recorded. If an encumbrance was not recorded, it is not likely to be found or enforced.

What if the county makes a mistake in the Block and Lot designations?

In Akasa Holdings v. 214 Lafayette House, New York’s Appellate Division addressed this question.

Akasa purchased a vacant lot on Crosby Street in 2011. Akasa did not know that in 1981 an easement had been recorded in 1981, because the title officer did not find the easement in the county records. Why? Because for several years, the lot had a different Block and Lot identifier. In 1972 the property merged with three others and was re-designated from Lot 9 to Lot 30. In 1984 Lot 30 was subdivided, and the property was re-designated back to Lot 9. The easement was recorded while the property was Lot 30, and a search for Lot 9 records did not reveal the easement.

Akasa argued that it could not find the easement with a standard Block and Lot search and therefore was not on constructive notice.

The Court disagreed in this instance. Yes, the easement was recorded outside of the “chain of title” and a search under Lot 9 did not reveal the easement. However, a search under Lot 9 also revealed a gap in the chain. The relevant parts of the chain of title show that:

• Deed 1 - 1971 Epstein purchased from ConEd (as Lot 9)

• Deed 2 - 1979 Spacemaker purchased from Epstein (as Lot 30)

• 1981 easement recorded (as Lot 30)

• Deed 3- 1983 PLP purchased from Spacemaker (as Lot 30)

• Deed 4 - 1999 Chatham purchased from PLP (as Lot 9)

• Deed 5 - 2011 Akasa purchased from Chatham (as Lot 9)

Clearly a search of Lot 9 would not reveal the easement. However, it also reveals an ownership gap. A title officer only looking at Lot 9 would not see Deed 2 and Deed 3. The title officer should have wondered: how did the property go from Epstein to PLP? That title officer should have then searched the “grantee” chain - a different record showing how each grantee obtained title. That search would have revealed the Lot number re-designation. The title officer would have then performed an additional search for Lot 30, and found the easement.

Because a diligent buyer or title office would have thus discovered the easement, Akasa was held to have constructive notice of the easement, and could not remove the easement from the property.