Last year Governor Cuomo signed new legislation, the “Abandoned Property Relief Act of 2016,” to create Sections 1308, 1309 and 1310 of the Real Property Actions and Proceedings Law (“RPAPL”) to confront the lingering vacant and abandoned property epidemic resulting from the mortgage foreclosure crisis that continues to blight neighborhoods throughout New York State. The new law helps identify delinquent properties and hold banks and mortgage servicers accountable for their inaction. Under the new law, mortgage services may be obligated to maintain vacant and abandoned properties and are subject to enforcement actions and daily fines if they fail to comply.
New York State Department of Financial Services (“DFS”) serves as the lead State agency in this initiative. DFS has created a vacant and abandoned property registry and the lending institutions or mortgagees are required to inspect and maintain vacant properties prior to the completion of the foreclosure process and report said properties to the DFS registry. Elected officials must first register online to access the information available on the registry. Once an elected official registers, the elected official may create five subaccounts to provide other municipal officials access to the registry. The registry is highly confidential and cannot be shared with the public. Only elected officials can obtain initial access. The registry will include the vacant property address and the mortgagee’s information.
The Statutory scheme is set up as follows:
- RPAPL § 1308- lays out inspection and maintenance requirements
- RPAPL § 1309- contains the definition of vacant and abandon and provides an expedited foreclosure process for properties deemed vacant.
RPAPL § 1310- details reporting requirements and mandates the creation of a database.
Definition of Vacant and Abandoned
In order to trigger the maintenance and registration obligations, a property must meet the legal definition of vacant and abandoned under RPAPL Section 1309. This can happen in one of three ways:
- Mortgagee Inspections- The law requires mortgagees to conduct occupancy inspections, every 24-35 days apart, of properties associated with loans that are at least 90-days delinquent. If the mortgagee finds that at each of three consecutive inspections (1) no occupant was present and there was no evidence of occupancy on the property to indicate that any persons are residing there; and (2) the property is not being maintained in a manner consistent with specific provisions of the New York State Maintenance Code, then the property is deemed to be vacant and abandoned.
If squatters are found on the property, the property cannot be deemed vacant and abandoned and the new law will not apply. The DFS has acknowledged that this is loophole that needs to be corrected.
Mortgagees must register the vacant property with the DFS for inclusion on the vacant and abandon property registry within 21 business days of learning of the vacancy status of the property.
- Court or Locality Determination– A property may be deemed to be an abandoned property after a court or other appropriate state or local government entity has made a formal determination of vacancy, following due notice to the borrower pursuant to RPAPL Section 1308.
Once a court or municipality declares a property to be vacant and abandoned, following procedures provided in the municipal code or RPAPL Article 19-a, the municipality will contact the state and the state will notify the mortgagees and will make sure the registry gets updated.
- Borrower/Owner Affidavits– If each borrower on the mortgage and owner of the property has issued a sworn written statement, expressing his or her intent to vacate and abandon the property and an inspection of the property shows no evidence of occupancy.
Obligation to Maintain Vacant Property
Once a property has been deemed to be vacant and abandoned, the mortgagee must take necessary steps to ensure that the property is secured and maintained, in order to minimize public safety risks and related blight to the neighborhood and surrounding community. Mortgagees must maintain the property according to the standards established in the 2010 Property Maintenance Code. Currently, Building Inspectors are enforcing the 2015 building code, but DFS argues that RPAPL Section 1308 requires Building Inspectors to enforce the 2010 Property Maintenance Code against mortgagees. This is a disputed area of the law.
The law only applies to one to four family residential properties that are subject to a mortgage and are found to be vacant and abandon. Also, only mortgagees whose volume of business exceeds certain thresholds are subject to the new law.
Mortgagees are required to protect against the health and safety issues and must avoid having properties fall into disrepair. They are not required to beautify the property. RPAPL Section 1308 sets forth maintenance requirements; however, some provisions under Section 1308 are vague, such as those provisions that require the mortgagee to take reasonable and necessary actions or measures. As a result the DFS recommends using local provisions to fill in the blanks to determine what is reasonable.
The mortgagee’s maintenance and registration obligations do not apply or will cease to apply (1) if the borrower has filed for bankruptcy or is actively engaged in loss mitigation efforts; (2) if the mortgagee sells the mortgage or releases the lien on the property; or (3) an occupant of the property has asserted his or her right to occupy the property.
Filing a Complaint
If a municipal Building Inspector has a maintenance complaint, he or she can file a maintenance complaint online through the DFS website by going to www.dfs.ny.gov/consumer/fileacomplaint/htm and clicking on the consumer complaint form button. The DFS will then seek to determine whether the property is subject to a mortgage, and, if so, identify the party responsible for inspecting and maintaining the property in question. Once identified, DFS will contact the party to ensure that it is complying with its obligation. A municipal Building Inspector may also file a complaint to add a property to the DFS list of vacant and abandoned properties.
A mortgagee that fails to comply with the basic duty to maintain vacant and abandon property may be subject to enforcement actions by either the DFS or the municipality in which the property is located and a $500 a day fine may be imposed for each day they are in violation. In addition, in an emergency, the municipality may perform the necessary maintenance work themselves and bring an action in court against the mortgagee to recoup costs.
For further information or questions, contact:
Drew Victoria Gamils