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Articles Posted in Foreclosure

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.

court-300x128New York State has passed several laws that protect homeowners who may be subject to a foreclosure action.  One of these laws requires that a settlement conference be held for a homeowner when his primary residence is in foreclosure, due to his failure to pay their mortgage, taxes, or other amounts due to the lender.

Prior blog posts have discussed what may occur at a foreclosure settlement conference.  We recommend engaging experienced counsel to appear at the foreclosure settlement conference.  At this conference, attempts will be made, with the Court’s assistance, to resolve this matter, often through a modification of the existing mortgage.

However, there may be cases in which the parties are unable to reach a resolution in the settlement part.  There may be several conferences held, but, for various reasons, the parties are unable to reach a resolution.  What happens at that point?  The first step is that the Court will generally release the case from the settlement part.  Under the law, when the case is in the settlement part, all litigation, including motions, are “stayed” by the Court, which means that no litigation can occur in the action until the case is released by the settlement part.  Depending on the overall circumstances of the case, the settlement part may order that the stay on litigation be extended for a period of time after the case is released, generally 30, 45, or 60 days.  This may give the party being foreclosed additional time to negotiate a resolution, or, if there is sufficient equity, to sell the property and use the proceeds to pay off any amounts due, thus ending the foreclosure suit.

evict-300x200Most eviction matters handled by our firm involve conventional landlord-tenant relationships.  Either in a residential or commercial context, a property owner rents property to a tenant, who pays rent to the landlord on a monthly basis.  Usually, there is a written lease between the parties that delineates their rights and responsibilities to each other.  When one party violates the lease, an action can be brought in the appropriate Court.  For example, if the tenant fails to pay the rent due, a non-payment proceeding can be brought.  If the lease has expired by its terms, and the tenant refuses to vacate, a holdover proceeding should be brought to evict the tenant.

However, there are two common situations in which the ordinary landlord-tenant relationship does not apply, which will be discussed in this blog post.  The first is when a property is sold at foreclosure.  The purchaser of the property at the foreclosure sale generally buys the property “as is”, which may mean that the original owners of the property still occupy the premises.  The former owners are not “tenants” in the traditional sense, as they do not have a lease with the new owner and are not paying rent to the new owner.  How do the Courts handle this situation?

New York Real Property Actions and Proceedings Law, Section 713 provides the “ground rules” for eviction where no landlord-tenant relationship exists.  Subsection 5 of this law relates to situations where the property has been sold in foreclosure, and there are still occupants at the premises.  In this situation, the new owner of the property must first serve a ten-day notice to quit on the occupant or occupants.  This is a legal notice, usually prepared by the attorneys for the new owners.  It states that the occupant must vacate within ten days, or an eviction action will be brought.  If the former owner refuses to vacate the premises after receiving the notice to quit, then counsel will commence an eviction action in the appropriate landlord-tenant court.  The Notice to Quit must also include a certified copy of the Referee’s Deed in Foreclosure to prove the new owner’s ownership.

newlaw-1-300x300A recent article reports on a new law signed by New York Governor Andrew Cuomo which is meant to assist defendants in foreclosure actions.  This article will explain the law, as well as its possible impact on both plaintiffs and defendants in foreclosure lawsuits.

The law amended Article 13 of the New York Real Property Actions and Proceeding Law to allow a defendant to raise the issue of “standing” at any time in the legal proceedings.  A non-attorney may first ask what is the issue of standing and how this change in the law benefits a party being foreclosed.  Standing is a legal defense relating to the plaintiff’s basic right to bring a foreclosure action (or any other type of action).  In order to commence a  foreclosure lawsuit, the lender (usually a bank or loan servicer) must show that it is a corporation licensed to do business in New York State, and also it is the holder of the note and mortgage which is the subject matter of the lawsuit.

Failure to meet these requirements may result in the lawsuit being dismissed due to a lack of standing.  Because many loans are transferred between different lenders and loan servicers on a frequent basis, it is entirely possible that the party bringing the foreclosure action may not have “standing” as the loan may have been sold to another entity prior to the case being filed.  In that case, the plaintiff may lack standing, and the action may be dismissed.

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