In various situations, New York State obtains abandoned property, which it holds in escrow until the rightful owner applies to release the property to it. This may arise from surplus moneys in mortgage foreclosure cases, deposits paid into court, or other statutory deposits.
The New York State Comptroller is in charge, by virtue of the Abandoned Property Law, of holding onto the funds or “abandoned property.” The Comptroller’s office maintains a list of all property it is holding, and makes the same available to the general public. By simply inputting one’s name into the Comptroller’s website, all records will be located.
However, sometimes the Comptroller’s search is not enough to locate all property to which a person may be entitled. An asset locator (a search firm engaged in this business) may locate other property to which a person may be entitled. One of the typical scenarios in which this occurs is:
In a mortgage foreclosure case, the real estate is sold at auction and a “surplus” is generated (which is the amount of money the real estate sold for above what the mortgagee/lender is entitled to). No party applies to the court for payment of the surplus moneys, and after five years, the local County Clerk pays the surplus moneys over to the State Comptroller as abandoned property.
In the above situation, the asset locator will help a party entitled to the surplus moneys (e.g., second mortgagee, judgment creditor, etc.) to locate the abandoned property, as it will not be held under its name.
Once the abandoned property is located, the Comptroller will issue a “Certificate of Deposit” and require that a Court Order be obtained for release of the property. A proceeding will need to be brought in the court in which the moneys were deposited for turnover of the surplus moneys deemed abandoned.
The proceeding, in which the court will order the turnover, must be conducted upon proper notice to all interested parties, along with notice to the Comptroller.
Upon a person’s death, a proceeding may be brought in the Surrogate’s Court of the county in which the person formerly resided. The proceeding will seek to collect and administer assets of the deceased person, and distribute them to his/her heirs.
There are two basic types of proceedings: Probate and Administration.
Probate: where the deceased executed a “Last Will and Testament,” a proceeding will be filed to “probate” [or “prove”] the Will. The deceased, known as the “testator” will have designated an “executor” [someone selected to carry out the deceased’s wishes], who may or may not receive a commission for such services. The deceased will also have designated beneficiaries to receive portions of his/her estate. The deceased may indicate specific bequests of property (such as “to my brother, I leave my guitar”) or general bequests (such as “to my three siblings, I leave them each one-third of my net estate”).
Administration: where the deceased did not execute a Will, the person is referred to having died “intestate.” Contrary to popular belief, the assets of that person’s estate do not automatically go to the State. Rather, there is a section of law which specifies the manner in which an intestate’s assets are distributed. Depending on who the survivors of the intestate are (such as a spouse, child, parent, or cousin), the law will tell the “administrator” to whom the net assets of the estate must be paid. The “administrator” serves a similar duty to the deceased’s estate as the “executor” mentioned above, and may be appointed by the Surrogate of the county upon proper application.
Collection of assets After appointment, the executor/administrator will have the duty to locate and collect the various assets of the deceased. An account may be opened in which the assets will be deposited; non-liquid assets, such as cars, houses, stocks, or furniture may be sold at auction or otherwise converted to money. Actions may be brought on behalf of the deceased to collect moneys due to the estate or for wrongful death/personal injury actions.
Tax returns After all of the assets have been collected, the executor/administrator will determine whether federal and/or state estate tax returns must be filed. Various banks or institutions may require “tax waivers” or “releases of tax lien” from the State in order to release funds to the executor/administrator.
Accounting The final duty of the fiduciary is to file with the court an “accounting” of what that person did during his term as executor/administrator.
Professional fees The fiduciary will retain and pay professionals in connection with the estate proceeding, including attorneys, accountants, brokers, auctioneers, and appraisers.
by Richard A. Klass, Esq.
———– copyr. 2014 Richard A. Klass, Esq. The firm’s website: www.CourtStreetLaw.com Richard A. Klass, Esq., maintains a law firm engaged in civil litigation in Brooklyn Heights, New York. He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.com with any questions. Prior results do not guarantee a similar outcome.
In certain cases, the Referee in the foreclosure action conducted a sale of the subject real property generates surplus moneys after an auction sale, which are then deposited with the court. After filing of the Referee’s Oath and Report of Sale after foreclosure auction sale, a party can move for confirmation of the Report of Sale more than 3 months but not later than 4 months after the filing of the Report of Sale. RPAPL Section 1355. Further, upon confirmation of the Report of Sale, and on motion of any party prior to or within 3 months of confirmation of the Report and Sale claiming the surplus moneys which have arisen from the foreclosure auction sale, the Supreme Court shall determine the priorities in such surplus moneys and order distributions thereof. RPAPL Section 1361.The Second Department has held that the failure to move to appoint a Referee in a Surplus Money Proceeding following foreclosure of a mortgage within the time prescribed by statute is a mere irregularity which, in the absence of prejudice of any substantial right of a party, may be disregarded. Associated Financial Services, Inc. v. Davis, 183 AD2d 686, 583 NYS2d 274 (2d Dept. 1992).The potential issue of a defendant or claimant not having filed an Answer or Notice of Appearance in the foreclosure action is not relevant as to whether that party may pursue recovery of surplus moneys. It is well settled that a defendant who defaulted in answering the foreclosure action is not precluded from proving its lien in Surplus Money Proceeding. Riverhead Savings Bank v. Garone 183 AD2d 760, 583 NYS2d 483 (2d Dept. 1992), citing to The Dime Savings Bank of Brooklyn v. Pine Drive Associates, Inc., 28 Misc.2d 648, 212 NYS2d 111 (Sup. Ct., Nassau Co. 1961). Further, a second mortgagee/lienor, as a party named in the foreclosure action, is not required to file a Notice of Claim to Surplus Moneys in order to preserve its right to satisfaction of its lien from surplus proceeds of a foreclosure sale. Federal Home Loan Mortgage Corp. v. Grant, 224 AD2d 656, 639 NYS2d 72 (2d Dept. 1996) (“As a party to the foreclosure action, the respondent, secondary mortgagee Marine Midland Bank, was not required to file a notice of claim to the surplus moneys in order to preserve its right to the satisfaction of its lien from the surplus proceeds of the foreclosure sale.”).Where, under a mortgage foreclosure sale, a surplus is realized, and the premises are at the time of such sale subject to a second mortgage, the respective rights of the parties will be determined as of the date of the foreclosure sale. Elsworth v. Woolsey, 19 AD 385, 46 NYS 486 (1st Dept. 1897), affirmed, 154 NY 748, 49 NE 1096 (1897). New York courts have held that those respective rights in the surplus moneys, as enunciated by Elsworth, transfer from the “res” of the action, to wit: the land, to the surplus moneys. In Roosevelt Savings Bank v. Goldberg, 118 Misc.2d 220, 459 NYS2d 988 (Sup. Ct., Nassau Co. 1983), the court held:
“Surplus money realized upon a foreclosure sale is not a general asset of the owner of the equity of redemption, but stands in the place of the land for all purposes of distribution among persons having vested interests or liens upon the land. Surplus money takes the place of the equity of redemption, and only one who had a vested estate or interest in the land sold under foreclosure which was cut off by the foreclosure sale, is entitled to share in the surplus money, with priority in each creditor determined by the filing date of his lien or judgment.”
by Richard A. Klass
———–copyr. 2012 Richard A. Klass, Esq.The firm’s website: www.CourtStreetLaw.com Richard A. Klass, Esq., maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York.He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.com with any questions.Prior results do not guarantee a similar outcome.
Almost every parcel of real property within New York City is assessed taxes on an annual basis. When these real estate taxes are not paid, tax liens are created by law which “attach” to the property. The tax lien, similar to other liens, serves as notice to the public that the City has a claim against the property. Traditionally, New York City was enabled by statute to bring “in rem” proceedings to foreclose on the lien and, thus, become the owner of the property.
In 1996, New York City’s Administrative Code was amended to include an article permitting the City to sell at auction these real estate tax liens. This was done partly to shift the administrative burden of collecting the tax liens outside of the City’s system; it was also partly done to get the City immediate money from the sale of the liens from third parties.
The change of process from “in rem” proceedings to the sale of tax liens, affects owners of real property against which tax liens exist in important ways:
Unlike in the past, where the City may have been perceived as almost lethargic in collecting the tax arrears, this new process motivates the purchaser of the tax lien to immediately take action to collect on the lien, including the bringing of a foreclosure action in the Supreme Court in the county in which the property is located.
The statute gives the purchaser of the tax lien a high rate of interest on the tax lien until paid, plus an award of reasonable attorney’s fees and expenses for the prosecution of the foreclosure action.
Once the tax lien is sold, it is removed from the records of the City. Unless the homeowner inspects the tax lien records in the City Register’s office, the tax lien information will not appear on the owner’s tax bill. This may cause confusion, with the assumption that no older tax arrears are due.
Prior to the sale of a tax lien, the City is required to provide notice to the owner of the subject property and to the public. The owner will be sent notice by mail at the registered address for such owner (which, in some cases, may be different than the property’s address). The public will receive notice by virtue of advertisements of the sale published in newspapers.
Once the tax lien is sold, the purchaser will send notification to the owner of the property. Further, the purchaser will afford the owner the opportunity to satisfy the lien prior to the commencement of a foreclosure action. In the event that payment is not made, a foreclosure action will be commenced for the unpaid tax arrears as indicated in the tax lien, along with a request for interest and attorney’s fees. After a Judgment of Foreclosure is entered, the property will be auctioned off to first satisfy the lien and, then, to pay off junior lienors. Any surplus moneys left over will be turned over to the owner of record.
This article was originally published in the legal newsletter LawCURRENTS.
The firm’s website: www.CourtstreetLaw.com
Prior results do not guarantee a similar outcome.
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Article Title: The Sale of New York City Tax Liens at Auction
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About the Author: Richard A. Klass, Esq. maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York. He may be reached by phone at (718) COURT-ST [(718) 268-7878)] or RichKlass@courtstreetlaw.com with any questions. Prior results do not guarantee a similar outcome.
Read the original article in context at: http://courtstreetlaw.com/newsletters/LawCURRENTSSpring2003.html Additional articles by Mr. Klass may be found at: http://courtstreetlaw.com/articles/index.html. Back issues from Mr. Klass’ quarterly newsletter, Law CURRENTS are available at http://courtstreetlaw.com/newsletters/index.html.
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