Property owner wins right to challenge foreclosure in Brooklyn case

October 4, 2024 Robert Abruzzese, Courthouse Editor
The Appellate Division, Second Department courthouse in Brooklyn, where a recent ruling granted a property owner the right to intervene in a foreclosure action involving its tenant’s disputed leasehold interest. Brooklyn Eagle photo by Rob Abruzzese
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The Appellate Division, Second Department, has reversed a Kings County Supreme Court decision, ruling that BLDG Oceanside, LLC, the owner of a commercial property in Brooklyn, should be allowed to intervene in a foreclosure action involving its tenant, 980 Atlantic Holdings, LLC. 

The lower court had denied BLDG’s motion to intervene, but the Appellate Division found that BLDG has a substantial interest in the case because it claims to have terminated the lease, which would render the tenant’s leasehold mortgage unenforceable.

The case centers on a foreclosure action initiated by Atlantic Avenue Capital, LLC, which acquired a leasehold mortgage on 980 Atlantic’s leasehold interest in BLDG’s property. When 980 Atlantic allegedly defaulted on its payments, Atlantic Avenue filed to foreclose the mortgage. BLDG, claiming it had terminated the lease due to unpaid rent and other charges, sought to intervene in the action to assert that Atlantic Avenue’s mortgage interest no longer existed.

The Appellate Division held that BLDG has a right to intervene under New York law because the outcome of the foreclosure action could adversely affect its property interests. The court held that allowing BLDG to participate would promote judicial economy by addressing the validity of the lease termination and the mortgage foreclosure in a single proceeding. The case will now return to Kings County Supreme Court for further consideration of BLDG’s arguments, including its request to dismiss the foreclosure complaint or, alternatively, to submit an answer.

~ Atlantic Avenue Capital, LLC v. 980 Atlantic Holdings, LLC ~





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