By Michael L. Moskowitz and Michele K. Jaspan

On June 23, 2016, Governor Andrew Cuomo signed into law Chapter 73 of the Laws of New York 2016. We addressed the new law in a previous post which you can see here. We will address these changes in two separate blog posts. This first post addresses vacant and abandoned properties. Part II will address changes to foreclosure settlement conferences and the required pre-foreclosure notices.   

This legislation amends the Real Property Actions and Proceedings Law (“RPAPL”) and Civil Practice Law and Rules pertaining to residential mortgage loans and foreclosure. The changes go into effect on December 20, 2016. The new changes include provisions which govern procedures for vacant and abandoned properties, establish timelines for the sale of property post-foreclosure judgment, and provide enhanced protections for homeowners in default of their mortgage.  The new legislation imposes new obligations on lenders which will surely increase costs and add potential liability as follows:

I. Vacant and Abandoned Properties

RPAPL §1308 is a new section entitled “Inspecting, Securing and Maintaining Vacant and Abandoned Residential Real Property,” which applies to first mortgage lien holders. State or federally chartered banks or credit unions, with the smallest market share, are exempt from this provision if the carve out applies to them, which provides “For each calendar year this section shall not apply to state or federally chartered banks, savings banks, savings and loan associations, or credit unions which: (1) originate, own, service and maintain their mortgages or a portion thereof; and (2) have less than three-tenths of one percent of the total loans in the state which they originate, own, service, or maintain for the calendar year ending December thirty-first of the calendar year ending two years prior to the current calendar year.” This new law applies prospectively for state or federally chartered banks, savings banks, savings and loan associations, or credit unions with a higher market share, if they originate, own, service and maintain between three-tenths of one percent and five-tenths of one percent of the total loans in the state which they originate, own, service, or maintain for the calendar year ending December thirty-first of the calendar year ending two years prior to the current calendar year.

In order to have the property considered vacant and abandoned, lender must conduct at least 3 inspections, each between 25-35 days apart at different times of the day. Indicia of abandonment are overgrown vegetation, accumulation of newspapers or flyers, past due notices, trash accumulation, missing or broken windows, and property is open to entry to trespass.

If applicable, lenders have the following obligations:

1. Duty to Inspect during Delinquency. Servicer or mortgagee must inspect the mortgaged premises within 90 days of a borrower’s delinquency to determine if the property is occupied.  This inspection must be repeated every 25-35 days, at different times of the day.
2. Duty to Post Notice. Within 7 days that the premises is deemed abandoned or vacant, servicer must post a notice on a part of the property visible to the borrower, owner or occupant, including the servicer’s toll-free number or other contact information. The notice must remain posted.
3. Duty to Maintain. If no contact is made with the servicer, the servicer must secure and maintain the property.
4. Protection of Mortgagor’s Personal Property. Servicer may not remove personal property unless it is a significant health hazard.
5. Violation and Enforcement. If the Department of Financial Services determines there has been a violation by the mortgagee, a hearing officer can issue a civil penalty of up to $500 per day.

II. Statewide Vacant and Abandoned Property Electronic Registry

RPAPL §1310 is a new provision which requires the New York State Department of Financial Services (“DFS”) to maintain a registry. A lender must submit information within 21 days of learning a property is vacant. At minimum, lender must include contact information, date of foreclosure if applicable, and the last known address and contact information for the mortgagor.

III. Expedited Application for Judgment of Foreclosure and Sale

RPAPL §1309 is a new provision which provides that the mortgagee may move for immediate judgment of foreclosure and sale, upon proof that the property is vacant and abandoned. This relief is precluded if the borrower demonstrates an intention to contest the foreclosure action.

The salient procedural and evidentiary requirements for this streamlined process are as follows:

1. The motion can be made after the defendant’s time to answer the complaint has expired, and it must be served on the defendant regardless of whether or not they have defaulted;
2. The motion must be supported with proof of: (i) ownership of the note and mortgage, (ii) photographs evidencing the property is vacant, (iii) if available, utility records evidencing the abandonment, (iv) the sums alleged to be due;
3. The court will send a notice of the motion or order to show cause to the defendant(s);
4. The court may require Plaintiff to appear and give testimony, though it is not required; and
5. If the defendant fails to appear the court shall make a written finding as soon as practicable.

Should you, or anyone you know, need assistance navigating these new RPAPL duties and obligations, please reach out to the team at Weltman & Moskowitz, LLP for assistance.

About Weltman & Moskowitz, LLP, A New York and New Jersey Business, Bankruptcy, and Creditors’ Rights Law Firm:

Founded in 1987, Weltman & Moskowitz, LLP is a highly regarded business law firm concentrating on creditors’ rights, bankruptcy, foreclosure, and business litigation. Michael L. Moskowitz, a partner with the firm, focuses his practice on business and bankruptcy litigation, as well as creditor’s rights, foreclosure, adversary proceeding litigation, corporate counseling, M&A, and transactional matters. Michael can be reached at (212) 684-7800, (201) 794-7500 or mlm@weltmosk.com. Michele Jaspan is an associate of the firm. Michele can be reached at mkj@weltmosk.com.