Some of our prior blog posts have dealt with foreclosure actions concerning real property. A recent New York Supreme Court case, however, deals with a different type of foreclosure, and the effects of the COVID-19 pandemic on the same.
Most foreclosure cases in New York State are of the judicial type, and deal with the foreclosure of real property. In a judicial foreclosure, the owner of real property gives a mortgage and note to a lender, in exchange for a loan. The real property is collateral for the loan. If the borrower fails to repay the loan, or otherwise defaults on the loan by failing to follow the loan terms, the lender may file a foreclosure action in the appropriate New York State Court, which would be the Supreme Court in the county in which the property is located.
New York State currently has a moratorium, due to the effects of the coronavirus, on judicial foreclosures. Under this Administrative Order, “no auction or sale of property in any residential or commercial matter shall be scheduled to occur prior to October 15, 2020.” However, not every foreclosure case in New York is a judicial foreclosure, requiring a Court proceeding. Non-judicial foreclosures occur most commonly in coop matters. An owner of a cooperative apartment does not own real property, but, rather, shares in the cooperative corporation, which, in turn, owns the real property on which the building is located. As a result, if the shareholder defaults on a share loan, the lender may foreclosure on the shares without Court intervention. The lender can issue notices under the Uniform Commercial Code (UCC), which is integrated into New York law, and have an auction sale under the UCC rules, without going to Court.