On April 30, 2025, the Second Department issued a decision in Kearny Bank v. Beaux Equities, LLC, 2025 NY Slip Op. 02580, holding that a good faith mortgagor for value prevailed against an earlier purchaser that did not record its interest in a property, explaining:
The New York Recording Act protects a good faith purchaser for value from an unrecorded interest in a property, provided such a purchaser’s interest is first to be duly recorded. A conveyance of property that is not recorded is void as against any person who subsequently purchases or acquires the property in good faith and for a valuable consideration, and whose conveyance is first duly recorded. The plaintiff’s mortgage was a conveyance as that term is defined in Real Property Law § 290(3) and used in Real Property Law § 291. Here, since the plaintiff acquired its mortgage interest on the property before the Trust recorded its deed, the plaintiff is protected by the recording statute. Moreover, the plaintiff established that it was a bona fide encumbrancer for value, as it demonstrated it did not have actual knowledge of the unrecorded deed to the Trust or knowledge of facts that would have put it on inquiry notice of that deed; the plaintiff provided an affidavit of its first vice president wherein he averred that the Trust exercised due diligence in obtaining a title report that gave no indication that the Trust, as opposed to the borrower, was the owner of the property. Accordingly, the plaintiff established its entitlement to summary judgment on the complaint insofar as asserted against the Trust.
In opposition, the Trust failed to raise a triable issue of fact as to whether the mortgage held by the plaintiff was void ab initio or whether the plaintiff had knowledge of facts that would lead a reasonable, prudent lender to make inquiries of the circumstances of the transaction at issue and that it therefore was not a bona fide encumbrancer.
(Internal quotations and citations omitted).