New York State has adopted a new law aimed at helping municipalities reduce the number of abandoned homes within their borders, something that continues to be a growing problem in the village.
Signed into law by Gov. Cuomo in June, this new legislation is intended to address “zombie” or distressed, vacant, and abandoned properties that blight New York’s cities and villages. Zombie properties are mortgage-delinquent properties that have been abandoned by the owner but which languish for years in a state of disrepair and neglect until the mortgagee completes the foreclosure process.
This is good news for Stillwater, which has been faced with a growing number of abandoned buildings in the village due to foreclosures, bank repossessions, etc. When buildings are abandoned and no longer maintained they become a safety and liability risk for municipalities. At some point they must be boarded up or demolished leading to cost issues.
Over the years, the village has spent countless hours without success trying to locate owners or banks responsible for the buildings. That has proven to be a nearly impossible task.
‘We are very hopeful that this new law will force the banks to step up and identify the properties they own,” said village Mayor Rick Nelson. “Because of the condition of these homes, neighboring residents have seen an increase in their homeowners insurance premiums and a reduction in the value of their properties. I actually know of one resident who tried to refinance his home only to find out that the value had dropped below the amount from the original mortgage.”
Four main components to the law
The state’s zombie law, which affects one- to four-family residential properties, becomes effective December 20, and has four main components:
- It requires certain mortgagees to inspect properties that are 90 days mortgage-delinquent and to secure and maintain properties that are found to be vacant and abandoned;
- It requires certain mortgagees to register vacant and abandoned properties with a state-maintained property registry;
- It allows mortgagees to complete mortgage foreclosure via an expedited process when the property is vacant and abandoned; and
- It enhances many of the consumer protections that were enacted to protect homeowners after the subprime mortgage market collapse in 2008.
Mortgage lenders have greater responsibilities to act
The new law requires loan servicers (banks and mortgage lenders) to inspect, secure, and maintain mortgage-delinquent properties that have become vacant and abandoned. Within 90 days of a borrower’s delinquency, servicers authorized to accept payment of a loan must inspect the subject property’s exterior to determine its occupancy status. After this initial inspection and throughout a loan’s delinquency, the servicer must conduct exterior inspections of the property every 25 to 35 days.
Within seven business days of determining that a property is vacant and abandoned, the servicer must post a reasonably visible notice (containing the servicer’s toll free number or similar contact information) on an easily accessible part of the property. They must also monitor the property for any change in occupancy or contact with the borrower, property owner, or occupant, and monitor the property to ensure that the notice remains posted so long as the duty to maintain the property applies.
If no one responds to the posted notice within seven calendar days thereby indicating that the property is not vacant or abandoned, or if an emergent property condition arises which could reasonably damage, destroy or harm the property, the servicer must:
- Lock up the property and secure, replace, or board up broken doors and windows;
- Secure any part of the property that may be deemed an attractive nuisance including, but not limited to, a water feature that could create a drowning risk, refrigerator or freezer units, outbuildings, wells or septic tanks;
- Take reasonable measures to ensure that pipes, ducts, conductors, fans and blowers do not discharge harmful gases, steam, vapor, hot air, grease, smoke, odors or other gaseous or particulate waste directly upon abutting or adjacent public or private property or that of another tenant;
- Winterize the applicable plumbing and heating systems, if appropriate;
Provide basic utilities including, but not limited to, water, electricity, natural gas, propane and sewer service, as appropriate and when allowed by the local utility provider, that are needed for the operation of sump pumps or dehumidifiers, or when there are jointly-owned or shared utilities with adjoining properties or units, except for turning off water service to prevent flooding or water leaks in the property, or when other utility service could reasonably create a hazard to the property or an unauthorized occupant or person entering the property;
- Remove and remediate any significant health and safety issues, including outstanding code violations;
- Take reasonable measures to prevent the growth of harmful mold, etc.
If a hearing officer or court determines that a mortgagee has failed to inspect, secure, and maintain a mortgage-delinquent property they may impose a civil penalty of up to $500 per property for each day the violation persists. Any municipality, such as the village, which remediates a residential real property may sue the lender to recover cost it incurs as a result of maintaining the zombie property.
Creating an abandoned property registry
Another major component of the zombie law involves the creation of a vacant property registry. Within 21 days of learning that a property is vacant and abandoned, a lender must report to the New York State Department of Financial Services the following information:
- The current name, address, and contact information for the lender, assignee or mortgage loan servicer responsible for maintaining the vacant property;
- Whether a foreclosure action has been filed for the property in question, and, if so, the date on which the foreclosure action was commenced; and
- The last known address and contact information for the mortgagor(s) of record.
Additionally, the lender must update the registry within 30 days of learning of a material change to any of the information contained in initial submission to the registry.