A tax lien against real property in New York can occurs after the property owner has failed to pay real estate taxes as assessed by the county in which they live. A tax lien sale is usually conducted by each county for its delinquent real estate taxes. The tax lien can be held by the county or sold to third parties. The owner of the tax lien gets a tax lien certificate for the tax year of the lien they purchased and the face amount of the lien which is entitled to statutory interest and costs. Interest rates vary by county but are typically in the vicinity of judgment and statutory interest; in Nassau County for example it is 10%. By paying off that years worth of taxes the certificate holder assumes the rights and powers of the county in the collection of the tax lien. The tax lien is superior to most other liens including mortgages and judgments.The property owner has several years to redeem the tax lien by paying off the the tax and the accumulated interest and other charges.
In NYS under Article 11 of the Real Property Tax Law Foreclosure may begin after two years of delinquency on the taxes. However counties and cities have different policies and can extend that period to three to four years from the date of the delinquency. A petition is the legal document which starts the law suit and is noticed by certified mail and regular mail to the property owner’s last known mailing address. NY RPTL 1125. The notice is also published in a newspaper specifying the last day for redemption. NY RPTL 1124. If mailings are returned, a posting may be required. NY RPTL 1125. In most counties the time to pay off the taxes, or the redemption time for residential property has been extended to three years. So. If the property owner fails to redeem the property within the required time, the owner of the tax lien can foreclose in the same manner as a mortgage holder can foreclose against the mortgage lien for the real property. At the end of the tax lien foreclosure case there is a foreclosure sale auction, just as with a mortgage foreclosure. However, it should be noted that every county in New York State handles tax lien sales and foreclosures differently.
Governments can convey real property that has not been redeemed of tax arrears within the required time in two ways: either through tax lien foreclosure, as discussed above, but also through a tax deed sale which conveys the deed to the government entity itself. At the end of a foreclosure proceeding is a foreclosure auction, similar to that in a mortgage foreclosure where the property is actually sold to bidders by the certificate holder. But, before the county can sell your home it must provide for a court hearing at least 30 days in advance. Because the property is usually worth more than the tax liens against it, often there is a surplus which can be claimed by other lien holders or the the former property owner if there are no other claimants. If the property is is conveyed by tax deed sale to the government itself, this is not a final act, because the conveyance of the deed to the government would not be subject to the same level of court proceedings as in a foreclosure case; therefore if the county elects to convey the deed through a tax deed sale, the property owner has a certain amount of time to redeem the property despite the conveyance of the deed.
In New York State real estate taxes are assessed yearly and generally divided into two payments during the year, usually a 1st payment due in January and a second payment due in May. The taxes are considered delinquent if not paid by their due dates and start to quickly accumulate interest calculated at high levels. Shortly after they are past due, the taxes become a tax lien that could be sold
There are several ways other than full payment through redemption for a property owner to obtain a temporary deferment for a year to avoid their taxes being sold as lien to a 3rd party. Those methods are:
a) Hardship form – A showing of severe hardship:
b) Installment agreement – Applying for and obtaining an installment agreement for the arrears;
d) Apply for an Exemption- Which is available under certain income criteria for seniors, disabled, veterans and active military duty – The taxes may be temporarily deferred and/or partially exempt due to these situations.
Preventing the loss of the property is called redeeming the property and can be accomplished by paying the tax arrears plus interest,costs and charges. NY RPTL 1110. The redemption period expires 2 years after the inception of the tax lien. However local law can provide a longer redemption period, like for residential property it is usually 3 or 4 years. NY RPTL 1110, 1111. But the redemption period can also be shorted to 1 year for vacant or abandoned property. The property can be redeemed also 13 days after the notice of foreclosure is mailed or the date specified in the notice as the last day to redeem whichever is later. NY RPTL 1125.
Besides redemption which pays off the entire amount owed in arrears here are several other ways to avoid a tax foreclosure proceeding as follows:
a) Installment Agreement –The property owner can potentially get into a payment plan with the tax assessor to pay the taxes.This period is typically short and may not be available if the lien has been sold to a third party or in foreclosure. If the property owner’s county allows it, the property owner can also pay the delinquent taxes in installments by entering a n installment agreement up to 36 months in length with a downpayment of 25%. NY RPTL 1184. However an installment agreement is not a possibility if: there is another delinquent tax lien on the property that is nog eligible to be part of the agreement; the property owner defaulted and/or lost a previous installment agreement in the last 3 years. NY RPTL 1184.
b) Contesting the Amount Alleged Owed –The property owner can also contest the amount of the tax assessment and the total sought by the county by contesting and appealing the assessment. But this option also needs to be implemented in the early stages of the delinquency. Tax liens that are in serious dispute are less likely to reach a litigation conclusion or be attractive for purchase.
c) Tax Deferral – Another option is requesting a tax deferral which is usually available for persons ages 65 and older or based on disabilities or other health hardships. Usually deferments are available for low income seniors, fixed income, extenuating circumstances for persons with limited income.
d) Bankruptcy – Any bankruptcy case would stay a tax lien foreclosure, but typically a chapter 13 bankruptcy case is extremely useful because it would protect the homeowner from foreclosure while implementing a 5 year Chapter 13 plan which spreads out the tax arrears over five years. In chapter 13 however, the homeowner needs to pay not just the tax arrears to a chapter 13 trustee but also the regular property taxes and/or mortgage payments going forward as they become due. Although a bankruptcy case will be an entry on the credit report, the saving of the property will allow the homeowner to also restore their credit.
e) New Loan – Given that many properties with tax arrears are owned by seniors who have considerable equity in the property or potentially own the property without a mortgage, it may be possible for the property owner to qualify for a loan in order to pay off the tax lien and avoid the threat of foreclosure.
The foreclosure proceeding can start 3 months before the expiration of the redemption period NY RPTL 1124. If the property owner does not respond to petition and lawsuit with answer and other opposition there would be a default entered against the property. If a default judgment results then there could be auction held to sell it or the county may gain possession of the property directly. NY RPTL 1120 1136.A tax lien foreclosure proceeding can move much more quickly than a mortgage foreclosure and if the property owner defaults in answering, can take as little as 6 months after the petition is filed.
a) Motion to Reopen Default Judgment – If failed to answer and/of litigate the foreclosure, and defaulted during during the case, and went to judgment, can potentially vacate the judgment, if can move showing a reasonable excuse for the default, 1 month after the judgment. Preventing the loss of the property is called redeeming the property and can be accomplished by paying the tax plus costs and charges. NY RPTL 1131.
b) Asking Court To Set Aside Tax Deed – To invalidate a tax deed and set aside a tax deed, the property owner needs to move to vacate the sale and/of tax deed within / years after the deed is recorded. NY RPTL 1137.
New York City instead of foreclosing on tax liens itself sells the liens to trusts called NYCTL Trusts who exercise rights to the liens thru a tax lien certificate and through servicers who seeks to collect and the tax liens. Eventually if the liens are not paid, the Trusts are able to foreclose as the plaintiffs on the liens. There is a great deal of controversy at present in NYC over this procedure which, has been in place since 1966. This system may be modified or completely abolished given that it has been blamed with exacerbating foreclosure rates especially in poor and minority neighborhoods.
Nassau and Suffolk Counties do not sell their real estate tax liens to Trusts but to 3rd party investors who bid to purchase the tax liens. The private purchasers of the tax liens then exercise the right to try to collect on the lien and when that is not possible, after waiting the required 3 years for residential property.
We concentrate in foreclosure defense and can find creative ways to prolong a real property tax foreclosure by answering the petition, opposing motions, challenging the amount due and other ways to creatively oppose the foreclosure. We want to do everything possible to delay a possible foreclosure sale. Where options are available to us to spread the arrears over time through an installment plan with the county or lien holder or through bankruptcy, we also have expertise in these areas, as well, and can discuss these options and a potential strategy with you. Pease call us at 631-271-3737 for a free consultation.