Chapter 73: Zombie Property and Foreclosure Prevention Act

CHAPTER 73: ZOMBIE PROPERTY AND FORECLOSURE PREVENTION ACT 10/29/18 Hofstra University Land Use Training Program for Municipalities and Zoning Officials

Presented by Nicole Lubell, Esq.

Agenda 1) 2) 3) 4)

About the Act Vacant and Abandoned, defined The Act and Preemption Property Maintenance and Inspection (RPAPL Section 1308) 5) Penalties and Enforcement 6) The Expedited Foreclosure Process (RPAPL Section 1309) 7) The Statewide Electronic Registry (RPAPL Section 1310) 8) Summation 2

About the Act • Signed into law by Governor Andrew Cuomo June, 2016 • Drafted to address the zombie property and foreclosure crises in New York.

• Codified in New York State Real Property and Proceedings Law (RPAPL) Sections 1308, 1309 and 1310 • Three main parts regarding vacant and abandoned residential property: 1) Property Maintenance 2) Expedited Foreclosure Process 3) Statewide Electronic Registry 3

The Act and Preemption The Act is subject to:

• Federal laws • Court orders • Investor/insurer guidelines Municipalities are prohibited from: Imposing duties, penalties, or monetary obligations in a manner inconsistent with the Act against: • Any lender that originates, owns, services or maintains a mortgage related to the property or • Any lender exempt from coverage under RPAPL Section 1308 of the Act.

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Vacant and Abandoned, Defined Determined in one of three ways: 1) Property inspection by the lender: • Three inspections • First inspection within 90 days of loan delinquency • Then, 25-35 days apart • Different times of day • No evidence of occupancy OR 2) A court or government entity has formally determined it, with due notice to the borrower OR 3) Sworn statements from each owner/borrower of intent to vacate 5

When is a property not considered vacant and abandoned?

Properties that are: • Undergoing diligent construction, rehabilitation or renovation • Seasonable use properties • The subject of ownership disputes; probate/quiet title • Property is damaged by natural disaster but owner intends to repair/reoccupy • Lawfully occupied

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Property Maintenance and Inspection (RPAPL 1308) Who is required to maintain and inspect the vacant and abandoned property?

The owner of the mortgage and note When is the maintenance required to begin?

From the time the lender knew, or should have known, that the property was vacant and abandoned How must the maintenance begin? • 7-day notice posted with lender information • If no contact within 7 days, OR an emergent condition exists, and the lender has a reasonable basis to believe the property is vacant and abandoned, THEN, The lender must maintain the property.

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Property Maintenance and Inspection (RPAPL 1308) - Continued What does maintenance include?

• Replacing door locks

• Securing broken windows and doors • Secure any “attractive nuisance” (pools, wells, septic tanks) • Remediate health and safety issues, including code violations • Respond to government inquiries regarding the property

When does the maintenance end?

The lender must keep the property secure pursuant to the Act AND Maintain the property consistent with New York State Property Code UNTIL: • An occupant • • • • • •

A bankruptcy A court order No access Property sale or transfer Release of the lien Mortgage note transfer or sale 8

Property Maintenance and Inspection (RPAPL 1308) – Penalties & Enforcement What are the penalties?

• $500/day for each day the violation persists Who can enforce a violation in court?

• New York State Department of Financial Services (“DFS”) with 7 days’ notice to the lender, AND • A municipality, to include a county, town, city and village  With 7 days’ notice to the lender, absent an emergency, and 10 days’ notice to DFS, BUT Lenders are immune from liability where they: • Peacefully enter the property AND • Make “reasonable efforts” to comply with the Act.

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Expedited Foreclosure Process (RPAPL Section 1309) If it can show the property is vacant and abandoned, the lender can file for an expedited judgment of foreclosure and sale.

The Expedited Foreclosure Process: The Plaintiff:

• Files a foreclosure action • Waits for time to answer to expire  30 days from an appearance at the first settlement conference • Files a motion or order to show cause • Files for final judgment of foreclosure and sale • Plaintiff and court send separate notices of the filing • If no response, then Court rules on the motion or order to show cause.

• If judgment denied, then not on the merits of underlying proceeding.

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Statewide Electronic Registry (RPAPL Section 1310) What is it?

An electronic database maintained by the DFS to keep track of vacant and abandoned properties Who is required to input the information?

• Within 21 days, a lender must submit information when it “learns or should have learned, that such property is vacant and abandoned” • Within 30 days, a lender must update any information with respect to the vacant and abandoned property, when it “learns or reasonably should have learned of the new or changed information.”

• The information is confidential BUT • DFS may release it in the public interest and • DFS must release it to public officials upon written request • A municipality may not impose a duty to register in a manner inconsistent with the Act.

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In Sum: The Zombie Property and Foreclosure Prevention Act:

• Creates accountability for maintenance of properties • Expedites the legal foreclosure process • Electronic registry provides a place for the exchange of information BUT • Municipalities are uniquely impacted • They are enforcers of the law, subject to: 1. Unequal state/municipal notice provisions and 2. Associated duplicative enforcement risk

AND • They are remediators of the law, subject to: 1. Police Power 2. Uncharted tort liability 12

END Presented by Nicole Lubell, Esq. Niclubell@gmail.com

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