On August 14, 2019, the New York State Real Property and Proceedings Law (RPAPL) Section 1307 was amended to reflect a new section (4)(k) which requires that a foreclosing lender “pay homeowners’ association or cooperative fees as needed to maintain the property.” RPAPL 1308 itself applies ONLY to vacant and abandoned one to four family residential property, and only applies to the first mortgage holder. Vacant and abandoned is defined under RPAPL 1309 as a property where after three consecutive inspections by the lender that 1. No occupant was present and there was no evidence of occupancy on the property to indicate that any persons reside there; 2 residential real property was not being maintained in a manner consistent with the standards in the NY property maintenance code.
Within seven business days of determining that the property is vacant and abandoned as defined by statute, the service must post a notice on an easily accessible part of the property that would be visible to the borrower, property owner, occupant, and monitor that the notice remains posted.
In addition to the other requirements already existing by statute, the recent change of law requires the servicer to pay homeowners’ association fees and cooperative fees. The existing statutory language requires the property be secured, boarded, winterized, attractive nuisances addressed, etc.
Since the servicer already has a process in place to address the existing requirements under RPAPL 1308, the team that handles these items will next have to flag the property in the servicing system for the advancement of funds in payment of these fees.
Cooperative security interest is for personal property that is mortgaged and fall under the UCC. Cooperative maintenance has priority to all liens, including, the security agreement. Thus, it behooves the servicer to pay outstanding cooperative maintenance.
As with all new statutes and changes, we can anticipate further litigation. For many years, first mortgagees relied on RPL Section 339-z which provides that the board of managers “shall have a lien on each united for unpaid common changes….prior to all other liens, except…taxes, all sums unpaid on a first mortgage of record, and…liens by a New York State Agency”
This new change will require a step by step analysis and a close review the developing case law.
Please contact Director of Operations, Deborah Gallo, at [email protected] with any questions.