On June 23, 2016, Governor Andrew Cuomo signed the Abandoned Property Neighborhood Relief Act of 2016, a bill to combat the blight that vacant, neglected and abandoned properties – referred to as “zombie properties” – have on New York communities. See, pg. 27, Part Q. The sweeping legislation includes several measures designed to reduce the number of foreclosures, assist homeowners who are facing foreclosure, and protect property values by ensuring that properties in foreclosure are properly maintained during the foreclosure process. Specifically, the new legislation:
- Imposes a pre-foreclosure duty on banks and other lenders to maintain a residential property during the foreclosure process.
- Creates a toll-free hotline for people to report potentially vacant or abandoned sites, and an electronic database to provide streamlined access to information for affected communities.
- Provides for an expedited foreclosure process for vacant and abandoned properties and requires the foreclosing party to move to auction within 90 days of obtaining a foreclosure judgment.
- Establishes a Consumer Bill of Rights to inform property owners of their rights in foreclosure proceedings and protect them from predatory and deceptive foreclosure practices.
- Creates a Community Restoration Fund that will allow the State of New York Mortgage Agency (SONYMA) to purchase defaulted mortgage notes and offer partial loan forgiveness to help families afford and keep their homes.
Zombie properties are properties that have been abandoned by their owners – often after they have received a foreclosure notice – which then languish, unmaintained, until the foreclosure process has been completed. These vacant properties create a blight on the neighborhood because they sit neglected for years on end while the lengthy foreclosure process runs its course. During this time, many of these properties fall into significant disrepair, which then drags down the values and appearance of other properties in the neighborhood. Last year, New York Attorney General Eric Schneiderman estimated that there were as many as 16,700 zombie properties in New York.
New Lender Obligations
To curb the threat that zombie properties pose to communities, the law imposes a pre-foreclosure duty on those who hold a mortgage on a vacant or abandoned residential property to maintain and secure it during the foreclosure process. This obligation is triggered when the mortgagee becomes aware of the vacancy, or there is a reasonable basis for the lender to believe the property is vacant and abandoned. Lenders that fail to properly maintain and secure a property face civil penalties up to $500 per violation, per property, per day. Prior to the legislation, there was no legal obligation to maintain a property in foreclosure until there was a judgment of foreclosure and sale.
Town of Hempstead’s Approach
In the wake of the State’s zombie properties law, the Town Board of the Town of Hempstead recently adopted Local Law No. 46-2016 – modeled after similar laws adopted in several upstate New York communities – that will ensure that banks and other lenders will fulfill their maintenance obligations under the new State law. The Town’s law requires mortgagees to post a $25,000 security deposit each time a house in the Town of Hempstead goes into foreclosure. This money can be used by the Town for lawn care, graffiti removal, snow removal and other home maintenance in the event that the lender fails to maintain the property.
After years of tolerating the scourge of zombie properties, State and local governments have acted to give regulators and law enforcement the tools they need to tackle the problems associated with vacant and abandoned properties. These measures should help revitalize communities that have suffered the consequences of zombie properties by improving conditions, both aesthetically and economically.