Constructive Trusts and Real Estate in New York State

A constructive trust is a legal concept which may occur in the ownership of real property in New York State. It can be imposed by a Court in New York State when there is evidence that the actual ownership of property is not accurately reflected in the deed to the property in question.

To give an example, two siblings agree to purchase a property, such as a house. They both agree to contribute the same amount of money to the purchase of the house. However, only one sibling can qualify for a mortgage, as the other has bad credit. In order to obtain a mortgage and purchase the property, the two parties agree that the property shall be purchased in the name of the sibling with good credit, and the deed and mortgage shall also be only in that sibling’s name.

After the property is purchased, both siblings contribute to the upkeep of the house and to the payment of the mortgage. After several years, the sibling who is not the record owner passes away. The surviving owner then claims that, because he is the only person on the recorded deed and the sole obligor on the mortgage, that he is the sole owner of the property. Of course, the heirs of the other sibling object and claim a fifty-percent share in the property.

In such a situation, the heirs of the non-record owner should file an immediate lawsuit in the jurisdiction in which the property is located. Such a lawsuit would also include filing a “lis pendens” on the property in question. A lis pendens is a legal notice that is recorded with the County Clerk of the County in which the property is located. It serves as a notice to any third parties (such as potential purchasers of the property), that there is a pending legal action which may affect ownership of the property. One of the purposes of such a filing is to prevent the record owner from transferring title to a third party during the litigation in question.

The non-record owner, in their lawsuit, should demand that the Court impose a constructive trust on the property. In order to gain this remedy, the complaining party must present evidence to the Court that they contributed to the purchase of the property and the upkeep of the property, even though they are not the current record owner, and that the parties intended to own the property jointly. It is up to the Court to decide what the intent of the parties was in relation to ownership of the property, based upon the evidence presented. The Court will also examine evidence as to the monetary contributions of each party to the purchase and maintenance of the property, and then decide, based upon the full evidence presented, whether a constructive trust should be imposed, and what percentage of the property should be owned by each of the parties.

If, as in the hypothetical situation presented in this blog post, the parties intended to jointly and equally own the property, and both parties contributed equally, and the Court is presented with convincing evidence of same, then it would likely rule that the parties each own fifty percent of the property. Then, the Court has the power to order that a new deed be prepared, executed by the parties, and filed with the County Clerk, reflecting the ownership as the parties originally intended.

Of course, even if this remedy is achieved, the parties may still find themselves in conflict over the use of the property in question. The matter may then become a partition action between the joint owners, the subject of which was covered in a prior blog post.

Weiss & Weiss has extensive experience in litigating constructive trust property matters, as well as partition actions. If you find yourself in such a situation, please call our offices for a consultation.