Requires certain individuals or entities to maintain a property in good condition during the term of foreclosure

BILL NUMBER:S5292

Title of bill

An act to amend the real property actions and proceedings law and the penal law, in relation to requiring a plaintiff in a mortgage foreclosure action to maintain the subject property in good faith

Purpose

To require plaintiffs in mortgage foreclosure actions to act in good faith at the commencement of a foreclosure action and throughout the foreclosure process and to create the crime of criminal negligence of vacant real property in foreclosure proceedings.

Summary of provisions

Section 1307 of the real property, actions and proceedings law is amended to require plaintiffs from the commencement of foreclosure proceedings to obtain a mortgage foreclosure in 'good faith' and defines 'good faith' as honesty in fact and the observance of reasonable standards of fair dealing.

The penal law is amended by adding a new section 270.40 creates the crime of criminal negligence of vacant real property under foreclosure proceedings, a class B misdemeanor, when an entity is in violation of section 1307 of the real property, actions and proceedings law.

Justification

Due to New York State's struggling financial situation a financial crisis emerged causing citizens to fall behind on their mortgages and in many instances leave or abandon their homes. In some instances the foreclosing institution will commence the process but not follow through or delay taking control of the property which in some instances can cause the property to become unmaintained and blighted in the surrounding neighborhoods. This law would obligate mortgage foreclosure plaintiffs to act in good faith when it commences a foreclosure and throughout the foreclosure process. Financial institutions cannot delay in taking action in controlling and providing upkeep on the vacant dwelling itself.

This law also seeks to impose penalties on lenders in clear violation of property maintenance laws for vacant or abandoned homes in foreclosure proceedings. Municipalities across the country such as Las Vegas, Nevada and Indio, California with similar laws on the books have had great success in deterring bad actors from allowing abandoned or vacant homes to fall into disrepair. The penalties imposed in this bill will provide the State with a mechanism to hold lenders accountable and prevent the blight of unmaintained homes in neighborhoods across the State.

Legislative history

This is a new bill.

Fiscal & local implications

None.

Effective date

Immediately after the bill has become law.