Earlier in 2016, the New York State legislature enacted the Zombie Property Remediation Act, RPAPL §1392 (“the Act”). The Act permits a municipality to compel a mortgagee to either complete a mortgage foreclosure proceeding or to issue a certificate of discharge of the mortgage for any property which has been certified abandoned pursuant to section 1971 of the Real Property Actions and Proceedings Law.
Essentially, mortgagees have been reluctant to complete a foreclosure of a property if the property is abandoned for fear of having to provide funds for the repair and upkeep of the property while the property is being sought to be resold. The legislature saw many properties decay while mortgagees delayed and pondered whether it was economically feasible to foreclose on a property and acquire title to the property where it could not be sold at an auction. In order to address an underlying social policy, which is to encourage the development of real estate so that value is maintained in the communities of New York State, the legislature enacted §1309 of the Act. It permits municipalities where the property is located to bring first certify a property as abandoned pursuant to RPAPL §1701. Once the property is certified, the mortgagee must either complete the foreclosure or discharge the mortgage.
The legislatre also enacted §1308 of the Act which requires a servicer authorized to accept payments on a first mortgage loan on a one-to-four family residential property to secure and maintain the property when the loan is delinquent and where the servicer has a reasonable basis to believe that the property is “vacant and abandoned”. A civil penalty of up to $500 per day, for each day a violation of a requirement of §1308 by a mortgagee continues, may be assessed by a court.
Peter Moulinos, a real estate attorney, believes that this legislation will cause lenders to think twice before commencing a foreclosure action and insure that the property to be foreclosed is not abandoned in order to avoid the costs associated with maintaining the property it seeks to foreclose its mortgage against. It will also further the State’s policy of preventing the decay of properties and maintaining property values in communities.