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Empire Justice Memo of Opposition: Vacant and Abandoned Bill is Harmful to Tenants and Consumer Protections

June 16, 2015

 

S.4498 (Funke)


Empire Justice Center strongly OPPOSES S.4498, an act to amend the Real Property Actions and Proceedings Law, in relation to summary action to foreclose mortgages on vacant and abandoned residential property.  While we support the concept of moving foreclosures on truly vacant and abandoned buildings along more quickly, this bill will not significantly hasten the timeline (if it hastens it at all), and only quickens the process at great cost to tenants and owners.  It also will cause loss of material consumer protections.    

Empire Justice has three general concerns regarding this bill.  First, the expedited foreclosure process outlined in the bill could be applied to properties inhabited by the owner or by a lawfully residing, rent-paying tenant because it has a poorly drafted definition of “vacant and abandoned.”  While the bill states that the property should not have a tenant, section 1(a) defines tenant as one who has a written lease entered into prior to initiation of a lawsuit.  An owner of a property can lease their property even after a foreclosure has been filed.  It is common for owners to rent units even after a foreclosure has been filed, and often the tenant does not know the property is in foreclosure.  The definition also negates oral leases which are considered valid in New York.       

In addition, the definition lists five criteria that must be met in order for the lender to show the property is vacant and abandoned, including not being well maintained and having a code violation.  These criteria could be said of many properties, not just vacant and abandoned properties.  The definition also includes properties destroyed by a natural disaster but awaiting repair.

Second, section 2 of S.4498 circumvents the appointment of an independent referee in the foreclosure process.  It is common practice for courts to appoint a referee who is an independent third party, typically a lawyer not otherwise involved in the case, to compute the rightful amount due to the lender.  Referees find discrepancies in the amounts stated by the lender to be owed and also serve a valid role in alleviating the court of administrative tasks.  The bill implies that under its proposed process, the lender would just submit to the court the amount that is owed.  In addition, the referee typically conducts the sale.  The bill seems to add a layer of burden to the courts to compute the amount owed, as well as to schedule, publicize, and hold the sale.  Getting rid of the referee process would remove a material consumer protection, add a burden on the courts and ultimately, would not significantly, if at all, hasten the foreclosure process. 

Third, section 2 of S.4498 also states that if a defendant filed an answer in a foreclosure in which the lender averred the property was “vacant and abandoned,” but failed to specifically contest that the property was vacant and abandoned, the court could be required to strike the answer.  This provision is especially problematic because a defendant who showed up by filing an answer, stating to the court that they want to defend the foreclosure, but who did not plead correctly, perhaps because they did not have access to counsel and filed the answer pro se, could still have their house taken without further court proceedings.

The provision in the bill which exempts “vacant and abandoned” properties from New York’s mandatory settlement conference process (Civil Practice Law and Rules, Rule 3408) is already provided in New York law.  A mandatory settlement conference applies only in cases in which the lender is foreclosing on a “home loan” as defined in Real Property Actions and Proceedings Law, section 1304(5)(a).  Under that definition, a “home loan” is one which is “secured by a mortgage or deed of trust on real estate improved by a one to four family dwelling, or a condominium unit, in either case, used or occupied, or intended to be used or occupied wholly or partly, as the home or residence of one or more persons and which is or will be occupied by the borrower as the borrower's principal dwelling.”

The irony of this bill that lenders, in fact, have foreclosures filed on vacant and abandoned properties around the state, but are not moving the existing cases forward!  We would like to see legislation that instills efficiencies in the foreclosure process to move cases along in a way that is not harmful to owners and tenants, but that would also compel lenders to move foreclosures along on all vacant and abandoned properties – not just the properties they choose to cherry pick. 

For these reasons, Empire Justice Center strongly OPPOSES this legislation and recommends that before the Legislature goes to the extremes set forth in S.4498, which would harm legally residing tenants and remove homeowner rights, such as striking answers and getting rid of the referee process, lenders should be held accountable for the foreclosures filed on vacant and abandoned properties they have caused to stall in New York’s judicial foreclosure process.          

For more information, please contact:


Kirsten E. Keefe

Empire Justice Center
119 Washington Avenue
Albany, NY  12210 


(518) 462-6831
(518) 935-2852
kkeefe@empirejustice.org