BILL NUMBER: S5480
SPONSOR: COMRIE
 
TITLE OF BILL:
An act to amend the real property tax law and the social services law,
in relation to tax lien foreclosure
 
PURPOSE OR GENERAL IDEA OF BILL:
The purpose of this bill is to provide homeowners at risk of tax lien
foreclosures the same protections that are afforded to borrowers in
residential mortgage foreclosure proceedings.
 
SUMMARY OF PROVISIONS:
Section 1 of the bill amends the real property tax law section 1185
titled "homeowner bill of rights" to add new rights for homeowners
facing tax lien foreclosure: All foreclosures for property tax liens
must be judicial proceedings; The owner must have a chance to partic-
ipate in a mandatory settlement conference process to avert foreclosure;
Any payments must be applied to the oldest liens first; and If the resi-
dential property is foreclosed on, the owner must receive any money
remaining after the tax lien is satisfied ahead of any secured credi-
tors.
Section 2 of the bill amends the real property tax law to require all
taxing jurisdictions, even those who previously opted out of or were
exempted from Article 11 to include protections for homeowners that are
at least as protective as the homeowner bill of rights.
Section 3 of the bill amends the real property tax law to allow for
local laws that increase the maximum threshold for repayment plans to
cure tax delinquency.
Section 4 of the bill amends the real property tax law to require taxing
authorities to send pre-foreclosure notices and provide homeowners the
opportunity to participate in settlement conferences prior to commencing
a foreclosure action.
Section 5 of the bill amends the social services law to require social
services districts to assist eligible homeowners with property tax
assistance.
Section 6 of the bill amends the real property tax law to require all
taxing jurisdictions to offer installment plans for homeowners to prepay
taxes.
Section 7 contains a severability clause.
Section 8 states the effective date.
 
JUSTIFICATION:
In New York, when a homeowner owes property taxes or other property-re-
lated charges for an extended period, those delinquent taxes become
liens that put the property at risk of a tax lien foreclosure. These
property tax foreclosures disproportionately impact homeowners who have
satisfied their mortgages. Because the typical mortgage products last 30
years, many of these owners are retired or approaching retirement and
are living on fixed incomes. As such, inequity relating to tax liens and
their collections falls most heavily on senior citizens. Additionally,
research has consistently shown that more liens are generated in commu-
nities of color. These factors contribute to gentrification and strip-
ping of equity and generational wealth in communities adversely impacted
by appreciating real estate values.
Tax lien foreclosures are governed by Article 11 of the Real. Property
Tax Law Article 11, but many jurisdictions were exempted from the law or
were permitted to opt out. Therefore, there are many parts of the State
of New York that are not governed by the provisions of state law. This
has created a hodgepodge of property tax collection schemes throughout
the state and a homeowner's rights and the protections they are afforded
are entirely dependent on where they live. Even for those localities to
which Article 11 applies, many of the provisions in it are permissive,
instead of prescriptive and therefore carry little force or authority.
Additionally, Article 11 does not afford homeowners facing property tax
foreclosures the same consumer protections that are available to home-
owners in residential mortgage foreclosure actions and proceedings, such
as pre-foreclosure notices under Article 13 of the Real Property Actions
and Proceedings Law and mandatory settlement conferences under CPLR
3408. In many jurisdictions tax lien foreclosures are obscure processes
with strict deadlines that can be detrimental for homeowners and have
dire consequences because of the system's rigidity. The absence of these
protections is especially harmful because tax lien foreclosures - due to
the low amounts of debt involved as compared to the value of the encum-
bered homes - often can be easily resolved through affordable repayment
plans or even lump sum payments (where the debt has been significantly
increased by exorbitant interest and fees). This is especially the case
for senior homeowners who have paid off their mortgages, but who may be
tax burdened or who may have experienced health challenges that have
caused their property taxes to become delinquent.
Foreclosure that are not averted can represent a loss of substantial
equity if a home is sold to satisfy a tax lien that represents a small
proportion of the home's value. Indeed, homeowners in some jurisdictions
face total loss of the equity in their homes as the tax lien foreclosure
is accomplished by a simple transfer to the municipality and a complete
termination of all ownership rights. These problems are exacerbated in
some municipalities or counties that sell tax liens to Wall Street
investors who relentlessly pursue foreclosure and refuse to engage in
the sort of basic loss mitigation procedures that are required in the
mortgage foreclosure context. Providing basic due process protections
such as a pre-foreclosure notice comparable to those required in mort-
gage foreclosures - and governed by the same legal requirements - and a
mandatory settlement conference process governed by a good faith negoti-
ation standard can promote earlier resolution of tax lien arrears and
ensure that taxing authorities are not promoting displacement of vulner-
able citizens - and especially senior citizens - and gentrification in
New York's communities of color.
This bill aims to protect the due process rights of homeowners who are
at risk of losing their homes to property tax foreclosure by granting
them the same protections that are afforded to borrowers in the residen-
tial mortgage foreclosure process - most importantly the right to retain
the equity in their homes, which for many is their only significant
asset.
 
PRIOR LEGISLATIVE HISTORY:
S5213A: 2024
 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
TBD.
 
EFFECTIVE DATE:
This act shall take effect immediately.

Statutes affected:
S5480: 1142 real property tax law, 1146 real property tax law, 1146(1) real property tax law, 972 real property tax law