Legal Updates

A real estate gift within the family that was not recorded but made in good faith will trump over a later imposed lien

April 5, 2020

A owner of an apartment entered bankruptcy proceedings and a lien was imposed on the apartment, but the brother of the owner contended to have received the apartment as a gift over ten years before such date.
The Court held that although no cautionary note was recorded in favor of the recipient of the gift, the brother of the recorded owner, the brother's right to the apartment trumps over the lien. A later duly recorded lien normally trumps over a real estate transaction that was not recorded. However, this is not always the case and weight should be given to the grantor's good faith and the refutation of the concern that the transaction was intended to hide property from creditors. Here, the apartment was gifted due to internal family reasons long before the grantor entered bankruptcy proceedings and the grantor did not use the apartment but her brother used it as an owner throughout the years and was in contact with the tenants and even took care of electricity, water and city bills. The neglection of recording the legal rights by the brother over the years due to understandings with his family and late actions to amend the register after the grantor’s entry into bankruptcy does not necessarily indicate a lack of good faith or intent to hide property but rather a desire to amend the register and adjust it to the reality. Thus, the lien is of no value.