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New York passes new protections for tenants in foreclosure

Stop Evictions Foreclosure, NEW YORK, december 2009

Stop Evictions Foreclosure

The New York Legislature did pass a set of comprehensive amendments to various provisions of the foreclosure laws and procedures. The new foreclosure law, in addition to extending the availability of settlement conferences for homeowners to all home loans (not just the subprime loans covered last year), includes some key tenant-related provisions:

The New York Legislature was called into “Extraordinary Session” to address the state’s budget crisis. They didn’t solve the budget problems, but they did pass a set of comprehensive amendments to various provisions of the foreclosure laws and procedures. The bill language had actually been negotiated since the end of the regular session, and finally had the support of the leadership in both houses and of the Governor. The new foreclosure law, in addition to extending the availability of settlement conferences for homeowners to all home loans (not just the subprime loans covered last year), includes some key tenant-related provisions.

One of the key tenant-related provisions of the new foreclosure law is that foreclosing mortgagees are now required at the commencement of the foreclosure action to provide tenants with the information that if the property is foreclosed they will have the right to remain for the greater of 90 days or the remaining term of the lease. There are corresponding substantive amendments on that point in a new section, Real Property Actions and Proceedings Law (RPAPL) §1305, which creates that right of continued occupancy. That section, of course, parallels the federal Protecting Tenants at Foreclosure Act of 2009. The value-added here, though, is that in addition to the notice at the start of the action, the NY law does not have a sunset date. Additionally, the NY law defines the term “fair market rent” for the purposes of this protection.

Perhaps most importantly for tenants in NY, though, there are also corresponding amendments to the two alternative procedural provisions that are used to obtain a court order to evict a tenant after foreclosure. In NY the mortgagee has the option to get an order in the foreclosure action itself (RPAPL §221), or the purchaser can later proceed against the tenant under NY’s summary eviction procedures (RPAPL §713). The new foreclosure law amends both of those sections to make clear that the removal of the tenant is subject to the protections assured by the new foreclosure law, §1305. These additions should assure that the intended benefits of the federal law are carried out, since they should reduce the possibility that a court issue an order in the foreclosure action that would require a tenant bo move even before the “successor in interest” would have been required under the federal law to advise the tenants of their limited right to remain.

The new legislation also has important provisions that require the foreclosing mortgagee to maintain the property after the judgment of foreclosure but prior to sale. This is an important point in NY because many banks were delaying the sale of the property, yet failing to even minimally maintain it. The new law applies minimal standards to assure that the property will not be a blighting influence on the neighborhood or be unsafe to occupants.