Directs the court to provide notice to the former owners of foreclosed property of the right to file a claim for the excess funds from the sale of the real property

Title of bill

An act to amend the real property actions and proceedings law and the real property tax law, in relation to requiring the court in a foreclosure action to provide notice to the former owner of the real property of the right to apply for surplus moneys from the sale of such property

Purpose

This bill will require that those who formerly owned foreclosed property are notified that they may be entitled to a portion of the surplus of funds remaining after an in rem foreclosure sale.

Summary of provisions

Section 1. Adds a new subdivision 5 to section 1354 of the real property actions and proceedings law to require that after the surplus monies resulting from an in rem foreclosure tax sale are provided to the court, the court shall provide notice to the former owner or owners of the property of their right to file a written notice of claim to all of a portion of such proceeds pursuant to section 1361 of the real property tax law.

Section 2. Adds a new subdivision 4 to section 1136 of the real property tax law to require a court that has vested title to in rem foreclosed property to a municipal entity shall notify the former property owner or owners that they may be entitled to file for any surplus funds which may result from a future tax sale of such property.

Justification

Currently there is no state requirement that former owners of a property foreclosed upon for failure to pay taxes are notified of their potential entitlement to any surplus funds which may result when the property is sold. The bill will close a loophole in state law which was highlighted in a recent news article examining the city of Buffalo's unclaimed tax foreclosure process. The City retained approximately $11.6 million in auction proceeds after the in rem foreclosure sale, which have never been claimed. The funds would eventually be transmitted to the state as unclaimed funds. Many former owners and other property lienholders were never made aware that the sale of their former property resulted in a surplus to which they may be legally entitled. This bill requires that a former be owner be notified that there is a potential surplus when the title is vested in the municipality and again, if, after the property has been sold by the municipality so that they will be afforded knowledge of the existence of a surplus and their right to file a claim for a portion of those funds.

Legislative history

This is a new bill.

Fiscal implications

None.

Effective date

Immediate.