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Articles Posted in Foreclosure

officebldg-300x259Prior blog posts have discussed the concept of surplus monies in foreclosure proceedings.  Surplus funds occur when a property is sold at a public foreclosure auction, and the amount bid exceeds the amount of debt owed on the property.  For example, a homeowner defaults on his mortgage, and owes $300,000.00 to his lender.  After extensive legal proceedings, the house is sold at public auction, and the winning bid is $400,000.00.  There is therefore an “extra” $100,000.00 now available.  Does the defaulting homeowner have a right to these surplus funds?

The answer is yes.  In general, subject to other liens, the owner of the property which is sold at auction has the right to collect the surplus funds if the house is sold for more than the foreclosing creditor (usually a bank) is owed.  How does the former owner of the property go about collecting these funds?  We would advise that any homeowner who may be in such a position to engage experienced counsel to represent his interests.  The reason is that collecting surplus funds requires knowledge of the Court system and the procedures necessary to allow the funds to be disbursed.

When a property is sold at auction, a Court-appointed Referee is responsible for collecting the funds from the winning bidder, and paying off the creditor who brought the foreclosure action.  Once this is done, the Referee will file a report in the appropriate Court, showing an accounting of the sums received from the auction, and the disbursement of same.  The report will also show whether there were surplus funds; that is, whether the winning bid exceeded the amount owed to the foreclosing entity.  If that is the case, the Referee will deposit the surplus funds with the Department of Finance in the County in which the foreclosure took place.

guramrit-300x200A recent cover story in the New York Post relates the astonishing story of Guramrit Hanspal, who has lived in a house he doesn’t own for over twenty years.  However, for those attorneys experienced in the areas of foreclosure, landlord-tenant, and bankruptcy, Mr. Hanspal’s story, while certainly an outlier, is not actually that surprising.

According to the Post, Mr. Hanspal purchased a house in East Meadow, New York in 1998, with a mortgage loan from Washington Mutual Bank.  He made exactly one mortage payment before defaulting on his loan.  Of course, Washington Mutual Bank then commenced foreclosure proceedings against him in Supreme Court, Nassau County.  Foreclosure proceedings can take many years to be resolved in Court, and the foreclosure sale was not actually completed until the year 2000.  Our firm’s experience has shown that although the foreclosure case took approximately two years to be resolved, delays of five or even eight years are not unusual, especially if the borrower retains experienced counsel who can use completely legal methods to ensure that Court proceedings take significant time to be resolved.

Even though the foreclosure proceedings had been completed, Hanspal did not vacate the premises.  As prior blog posts have discussed, simply because a house is foreclosed, and sold to another owner (usually the lending institution simply takes back title to the property), does not mean that the owner is legally obligated to leave.  In order to evict a former owner, additional legal proceedings must be brought in the appropriate landlord-tenant forum.

foreclose-1Regular readers of this blog have been able to get information on how the COVID-19 pandemic has affected foreclosure actions in New York.  This post will serve as an update on current conditions in New York Courts.

At the beginning of the pandemic, New York Courts closed for all matters, including foreclosure cases.  In addition, executive orders from Governor Cuomo stayed all foreclosure cases from proceeding.  This meant that, at that time, no new foreclosure cases could be filed, and all foreclosure cases previously filed would not be allowed to proceed until allowed by New York State.

This obviously was a benefit to any party subject to a foreclosure action.  Even if the Court had, before the pandemic, granted a judgment of foreclosure and sale, the actual sale was not allowed to proceed.  In addition, both New York State and the federal government imposed further legal restrictions on all evictions.  This meant that even if the foreclosure sale had occurred prior to the “freezing” of all foreclosure cases, the new owner, whether it was the original lender or a successful bidder at a sale, had no legal means of evicting the former owner.

auction-300x206Some 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.

justice-300x200At the start of the coronavirus pandemic, all of the Courts in New York State closed for health and safety reasons.  Recently, as the numbers of those afflicted in New York continue to decrease, some Courts are reopening.  This blog post will discuss the current situation as of the writing of this post, and how this effects certain practice areas covered by our firm.

Foreclosure matters, generally heard in New York State Supreme Court, are still subject to a stay from Governor Cuomo’s executive order.  It is possible that the stay may be lifted next month, but, at this point, no foreclosure cases are proceeding in the Courts.  This stay also applies to the filing of new foreclosure actions.

Other real estate litigation, such as partition actions, are proceeding, generally as usual.  A partition action occurs when a co-owner of real property no longer wishes to co-own the property.  Litigation is commenced by the co-owner, which will allow the property to be sold with the proceeds shared between the owners.  If an owner does not want to sell, they must agree to purchase the interest of the other owner at a fair price.  Courts are accepting new partition actions for filing, and cases are proceeding relatively normally through the Court system.  However, due to health concerns, in-person appearances at courthouses are being limited.  As a result, many appearances are being made by telephone or video-conferencing.  In addition, motions and pleadings can be filed through e-courts, limiting the need for attorneys to physically appear at courthouses.  Whether this situation will change in the future, as conditions to continue to improve in New York, is unknown at this point.

openworkWe hope that our readers have been fortunate enough to have stayed healthy during these trying times.  Finally, our home region has commenced the post-Covid re-opening process.  We are currently in Phase II.  Our attorneys hope that all business activities will return to “normal” as soon as possible, just as baseball fans want to hear the “crack of the bat” as their favorite player hits a home run.  Since it is time for us to catch up on routine medical care, it is also prudent to consider returning to meeting your legal needs.  This post will address the specific areas that can be covered by our lawyers at this time.

New real estate transactions have diminished in recent months.  This author anticipates a delayed Spring market, meaning that contracts that may have been signed in March and April will likely be signed in the upcoming weeks instead.  Covid shutdown regulations forbid in-person showings by real estate agents.  Property owners were scared to allow potential buyers into their homes for viewings.  Phase II allows real estate agents to show properties in person, rather than merely virtually.  Sellers have become aware that buyers concerned with diminished quality of city life may now crave serene suburban living.  It is potentially an optimal time to sell one’s house.

Restrictions on retail establishments have started to loosen, allowing for curbside pickup and potential additional shopping options.  Restaurants are permitted to serve with outside seating.  While these sound like positive developments, the income stream to the commercial tenant with such restrictions is severely limited.  As such, it may be time to request that your attorney  review your commercial lease and seek a modification.  Tenants are otherwise expected to pay full rent, without being able to fully occupy the space and generate the same amount of income per square foot.

fight-300x180Prior blog posts have discussed the concept of surplus monies in foreclosure proceedings.  To summarize, when a foreclosed property is sold at public auction, it is possible that the highest winning bid may exceed the sum owed to the entity foreclosing on the property.  For example, an individual defaults on his mortgage, and the Referee determines that the amount due to the mortgage holder is $300,000.00.  The property is sold at a foreclosure sale, and a third party bids and pays $350,000.00 for the property.  In that situation, the foreclosing lender would be paid the first $300,000.00.  But who is legally entitled to the remaining $50,000.00?

A recent case from the New York Appellate Division, Second Department helps answer this question.  In that action, a homeowner on Staten Island failed to pay his taxes, resulting in a tax lien being filed against his property.  As is often the case, the tax lien was sold to a third party, who brought a foreclosure action to sell the property at public auction in order to satisfy the tax lien.  When the property was sold at public auction in 2000, it resulted in a surplus of $42,986.00.  That is, the winning bid at the foreclosure auction exceeded the amount of the tax lien (plus costs, penalties, and interest) by $42,986.00.

The Appellate Division had to determine which of two claimants was entitled to this surplus money.  The first claimant was the original homeowner.  The other claimant was a mortgage holder on the property, the New York City Department of Housing Preservation and Development (HPD).  HPD held a first mortgage on the property securing a fifteen year loan in the sum of $56,250.  The homeowner defaulted on the HPD mortgage in April, 1997.  HPD claimed that, as of 2017, the homeowner owed it $148,096.30 (the unpaid balance of the mortgage, plus interest), and sought to claim the surplus funds to partially satisfy this debt.

virus-300x225Unless you have been living in isolation on a deserted island, you are aware of the recent coronavirus situation.  In order to avoid contaminating large numbers of people, many businesses have closed, and many individuals are remaining at home rather than venturing outside.

This blog post will discuss the effects of coronavirus on our legal system.  The first change relates to eviction actionsOur firm is rare in that it represents both landlords and tenants in Court.  On March 15, 2020, the Chief Administrative Judge for the State of New York Unified Court System issued a Memorandum in which it was stated that effective March 16, all eviction proceedings and pending eviction orders shall be suspended statewide until further notice.

This means that landlords will be unable to commence new proceedings against defaulting tenants.  Most courts have closed due to the health crisis, including lower level Courts which generally handle evictions in New York State, such as City Courts and Town and Village Courts.  Since these Courts are closed until further notice, there are no Court Clerks or other officials which whom to file a new eviction petition.  Nor are Courts open to assign return dates for such petitions, or hold hearings for eviction matters.

foreA recent decision in a case in upstate New York discusses issues relating to the denial of an application for a foreclosure judgment.  In a foreclosure case, the plaintiff, who is usually a bank or other lending institution, must apply to the Court for a judgment.  Often, after the case has first been referred to the settlement conference part, and then, in Westchester County, assigned to the Mandatory Appearance Part, the plaintiff will move for summary judgment.

In a summary judgment action, the moving party argues to the Court that there are no issues of fact which would require a trial.  This may occur in several situations.  The first is when the defendant fails to file an Answer to the foreclosure Complaint.  If the defendant’s time to answer has expired, then the plaintiff may move for a judgment of foreclosure and sale on default.  However, the plaintiff must show to the Court that it has met the elements of proof to obtain a foreclosure judgment.

The first element is to show to the Court that they are the proper party and the holder of the mortgage and note in question.  This is usually done by having an officer of the lender submit an Affidavit in Support of the motion showing that the mortgage is being held by the plaintiff.  In support of the Affidavit, complete copies of the Mortgage and Note should be annexed as exhibits.  In addition, if the loan has been assigned to a different lender than the one listed on the Mortgage and Note, complete copies of the assignment documents should also be annexed as exhibits.

sickMost of us have been recently inundated by reports of the Coronavirus pandemic.      virus Although many of our readers do not travel to some of the afflicted locations, fear has a way of becoming contagious in its own right and can have negative business consequences.  Fundamentally, the fear is based upon not only becoming sick but also on the effect that widespread contagious illness can have upon the economy.  This post will address how our attorneys  respond to unfavorable financial times and the strategies to be rendered.

Real estate transactions  tend to be voluntary business activities.  For instance, a proposed buyer may be renting an apartment and be in the market to potentially purchase a house.  Typically, a buyer needs liquid cash assets to post a downpayment and have the cash needed to close.  If the stock market continues its losses of the past few days, a buyer may decide not to move forward because he needs to sell additional assets than previously intended in order to raise the cash needed.  An experienced attorney  would advise such a person that real estate is an investment that can be sold at a future date, hopefully at a profit.  However, continuing to rent an apartment does not provide an asset to be sold at a future date or potential tax benefits such as deducting mortgage interest and real estate taxes paid.  Now that we are about the enter the Spring market , new inventory and opportunities for buyers are available.  Perhaps if a seller is concerned that her house will not sell as readily in this economy, the price may be reduced to attract additional buyer interest.

Certainly, commercially leased properties  may see reduced customer traffic if consumers are afraid to be in public places and prefer to order products online or not visit restaurants where ill persons may be present.  If such conditions persist, a tenant may need a seasoned lawyer to negotiate a lease modification or lease surrender , thus assisting the tenant in not being required to continue in a lease that is not consistent with current economic conditions.  If such a modification cannot be negotiated, the tenant may be advised to “go dark” .  Should the landlord not be willing to accept these options, he may seek to bring a landlord-tenant proceeding against the tenant.

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