Foreclosure

April 28, 2023

Surplus Funds and Tax Lien Foreclosures – A Supreme Update

A prior blog post discussed a case now before the United States Supreme Court relating to surplus funds in tax lien foreclosures. The case involved a 94 year old woman in Minnesota who owed $2,300.00 in unpaid property taxes. The property was sold by the county for $40,000.00. The county then kept the excess funds from the sale, and, under the existing law, did not return the surplus funds to the former homeowner.

Several states, including New York, have similar laws. In New York State, if your property is sold to pay an overdue tax lien, any funds received from the sale belong to the government, and not to the person whose property was seized, even if they greatly exceed the amount owed in delinquent taxes.

The U.S. Supreme Court recently heard oral arguments on this case. During these arguments, Justice Elena Kagan asked, if the property was worth one million dollars, and the tax bill was only five dollars, would the county keep the excess funds? The attorney representing Hennepin County in Minnesota basically answered in the affirmative.

January 19, 2023

Surplus Funds and Tax Lien Foreclosures – The Supremes Check In

By Weiss & Weiss

Prior blog posts have discussed the concept of surplus monies in foreclosure proceedings. When a foreclosed property is sold at public auction, the winning bid may exceed the total amount owed to the entity foreclosing on the property. In such a case, the excess funds are considered “surplus funds,” and the Court-appointed Referee will then deposit the surplus funds with the New York State Department of Finance, which has the authority to disburse the funds to the proper party, upon receipt of a Court order from the Court that handled the original foreclosure case.

Most foreclosure cases involve mortgage debt to an institutional or individual party, usually involving the amounts borrowed by the owner in order to purchase the property, or a loan taken out on the property after it is purchased, such as a second mortgage. However, there is another category of foreclosures that may generate surplus funds – tax lien foreclosures.

Tax lien foreclosures occur when the owner of real property fails to pay property taxes due on his property. Unless the property is tax-exempt, such as a property owned by a non-profit or religious institution, there are generally local real estate taxes, such as village, city, school, and county taxes assessed to the property. Depending on where the property is located, one or more of these taxes would be assessed to the property, either on an annual, semi-annual, or other type of payment schedule as determined by the taxing entity.

November 9, 2022

The Return of New York Foreclosure Cases

By Weiss & Weiss

As the COVID-19 pandemic continues to fade, many legal cases that were temporarily postponed by the Courts, such as foreclosures, are resuming and going forward in litigation. During the COVID-19 era, foreclosure cases, along with evictions, were stayed by executive order. That meant that if a lawsuit had been filed to foreclose a property, the Courts did not move the case forward, and simply “froze” the case, pending the end of the pandemic.

Recently, with the waning of COVID-19 and the realization that we will never be completely free of the virus, the Courts in New York have lifted the stay on foreclosure matters. This means both that new foreclosure cases may be filed, and also that existing cases may continue moving through the Courts.

With the economy in recession, and home interest rates rising due to efforts to forestall inflation, many borrowers may now find themselves at risk of foreclosure. This post will discuss what to expect in a foreclosure case now that the Courts are “back to normal.” This review will assume that the property in question is residential, and is the primary residence of the homeowner. For primary residences, there are laws in place to assist homeowners, which do not necessarily apply to cases involving commercial properties or “second homes.”

May 5, 2022

Foreclosure Surplus Monies – Issues of Multiple Claimants

By Weiss & Weiss

Prior blog posts have discussed the concept of surplus monies in foreclosure proceedings. When a foreclosed property is sold at public auction, the winning bid may exceed the total amount owed to the entity foreclosing on the property. In such a case, the excess funds are considered “surplus funds,” and the Court-appointed Referee will then deposit the surplus funds with the New York State Department of Finance, which has the authority to disburse the funds to the proper party, upon receipt of a Court order from the Court that handled the original foreclosure case.

The question of who exactly is the “proper party” is one that our firm has encountered fairly often. There are several situations in which more than one entity may have claims to the surplus funds. This post will further discuss those situations.

In general, the original owner of the property (prior to the foreclosure sale) has the first claim to any surplus funds. If it is an individual, he can retain experienced counsel to file the proper motion papers to obtain a Court order allowing disbursements of the funds. There may be situations where the property was owned by a corporation or other entity with multiple owners. In such cases, the entity itself would be entitled to the surplus funds. If it is a corporation, the funds would be payable to the corporation itself. The corporation’s governing documents would then determine how the corporation would disburse the funds.

January 21, 2022

New York Legal Update – Expiration of Eviction Moratorium

By Weiss & Weiss

With the beginning of the COVID-19 pandemic, New York, along with many other states, adopted a law temporarily halting evictions. In addition, there was an additional moratorium that prevented foreclosure cases from going forward in Court.

This blog post will focus on the eviction moratorium, its effects, and its expiration as of January 15, 2022. The original moratorium went into effect in March of 2020. The statute initially provided that if a landlord sought eviction against a tenant, the tenant could complete a form which stated that they were suffering from a COVID-19 related hardship which affected their health and ability to move, or from a financial hardship caused by COVID-19. Once the form was completed and send to either the Court, the landlord, or the landlord’s attorney, the eviction proceeding would be stayed until the moratorium was lifted.

The main problem with this statute was that it provided a landlord no opportunity to rebut the tenant’s assertion that they were negatively impacted by the COVID-19 pandemic, and that such impact affected their ability to pay their rent, or to find new living arrangements. A group of landlords challenged the constitutionality of that statute in a lawsuit. Ultimately, the United States Supreme Court ruled that, in order for the statute to be constitutional, the landlords should have the right to challenge the tenant’s hardship declaration in Court. Eventually, the moratorium statute was amended by the New York State legislature to allow landlords to request a hearing if they wanted to challenge a tenant’s hardship declaration in Court. If the Court subsequently found that the tenant could not prove his allegations that he was suffering from a COVID-19 related hardship, then the Court could rule that the eviction moratorium did not apply to that particular case, and allow the eviction matter to proceed in its normal course.

May 21, 2021

Surplus Funds in Foreclosure Cases – How to Recover?

By Weiss & Weiss

Prior 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.

May 5, 2021

Post-Foreclosure Occupancy – A New York Story

By Weiss & Weiss

A 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.

December 18, 2020

Foreclosure Actions and COVID – An Update

By Weiss & Weiss

Regular 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.

September 23, 2020

Foreclosures – Judicial and Non-Judicial

By Weiss & Weiss

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.

July 23, 2020

An Update on COVID and the Courts in New York

By Weiss & Weiss

At 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.