New York
How It Works
The rules vary in different counties and cities, depending on local rules. The default rule in New York is that taxing jurisdictions place tax liens on delinquent properties. After two years, they may foreclose, take absolute title, and keep the property or sell it and retain any profits.
An exception to home equity theft occurs when taxing jurisdictions choose to protect equity through a judicial sale that returns surplus proceeds to the debtor. For example, New York City has a city law that uses judicial sales, typically to protect debtors’ equity.
The Impact
Homeowners caught up in this process lose, on average, 82% of their equity. For the 1,281 homes in our dataset, homeowners lost a total of $79 million.
Why It Matters
In New York:
- Our data cover just 5% of the state population and we are still trying to gather more.
- 65% of homes were forcibly seized for tax debts less than the price of a 10-year-old Honda CR-V.
- Governments sold these homes for a fraction of their value but still pocketed $7 million more than the debt owed.
In Ontario County, at the intersection of Routes 5 and 20, sat a family diner beloved by both locals and travelers passing through. The Hetelekides family had been running the Akropolis restaurant for 20 years when its co-owner, Demetrios, died in August of 2006. His widow, Krystalo, was left as the sole owner and was determined to continue providing food and jobs to the community.1
Unfortunately, when Krystalo’s husband died, there was a tax debt of $21,343 on the property. In New York, if you don’t pay your property taxes, the delinquent amount becomes a lien on your home or business. If no one responds to the foreclosure notice before the redemption period ends, the court enters a default judgment against the property’s owner. The foreclosing district may then auction off the property and keep all the proceeds, even if they far exceed the debt.
In October of 2006, the county initiated foreclosure proceedings against the property.2 The treasurer sent mailed notice of the proceedings addressed only to Demetrios, who had passed away months earlier.3 By December, the treasurer had realized his mistake and determined that further attempts at notice needed to be made before the foreclosure deadline of January 12.4
The Constitution requires that, before taking a property, the government provide notice in a form that “one desirous of actually informing” the property owner might reasonably adopt.5 But the treasurer waited until January 9, just three days before the deadline, to try and reach out to Krystalo.
He made two short phone calls and, on the day before the deadline, a three-minute visit to the property. Krystalo was not present during these attempts, and the treasurer did not mention to anyone the pendency of foreclosure and the risk of losing the property, nor did he bring a copy of the foreclosure notice on his visit. Instead, he left only his business card.
The following week, Krystalo found the card and went to the treasurer’s office. By then, the county had already transferred ownership, and the treasurer refused to accept her tax payment.6
Municipalities in New York may permit a delinquent taxpayer to repurchase their property before it is auctioned off, but the County Board of Supervisors would not allow it in this case. They were incorrectly informed by the treasurer that “Krystalo herself signed for the foreclosure notice.” In reality, the mailing was only signed by a waitress working at the restaurant.7 In emails to other government officials, the treasurer celebrated his successful efforts at preventing the Board from investigating the particular facts of Krystalo’s case.8
So in May, Krystalo went to the auction of her restaurant, the restaurant she had established with her late husband. Dozens of customers and employees showed up to offer support, and a bidding war commenced. Krystalo’s brother-in-law stepped in to outbid two unidentified bidders at $160,000—nearly $140,000 more than Krystalo owed in property taxes was kept by the county.9
Krystalo knew that she had been harmed in this process. So, she filed an action in the New York Supreme Court for violation of statutory and constitutional due process, stating that the county could not take her property without notifying her. The Court dismissed the due process claim but ruled in her favor on statutory grounds. The Appellate Division, however, reversed the judgment that the county had violated statutory notice requirements. It further held that the county had satisfied constitutional due process requirements.10
The Court of Appeals of the State of New York has agreed to review the case.
Whether or not the county had satisfied due process requirements, Krystalo should not have lost the full value of the property over a debt the fraction of the property’s value. Demetrios owed the county just over $21,000. Yet Krystalo was forced to borrow and pay $160,000—nearly eight times the amount owed—to regain the property. The $139,000 difference represents nothing but theft by the county.
Home equity theft leaves its victims devastated, both financially and emotionally. Such an unjust practice should be ended immediately.
Resources
End Home Equity Theft Model Policy
Legal Appendix
City holding millions in other people’s money
State Summaries
Download Data
Demand Letter to Governor
New York Home Equity Theft Laws
Does the law commonly protect owners’ equity?
- Analysis
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No. Failure to redeem forever bars the former owner from asserting any right or title in the property.
- Citation
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Citation: N.Y. Real Prop. Tax §§ 1131, 1194(10).
Are there any exceptions to that rule?
- Analysis
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No. However, under limited circumstances, a county or municipality may opt to enforce taxes in accordance with its own system, rather than Article 11 of the state’s tax code. Theoretically, this could mean that property owners in some cities are able to secure the equity value of their property after foreclosure.
- Citation
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N.Y. Real Prop. Tax § 1104.
Does the government sell tax liens, or does it sell property outright, and what procedures does it use for the sale?
- Analysis
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Local tax districts do not sell tax liens to private investors under the tax code but may do so if they have opted out of Article 11. Rather, they foreclose on the property or take a deed to the property in lieu of foreclosure. Foreclosure vests title in the property to the tax district, which is authorized but not obligated to sell the property. Alternatively, the tax district can sell the lien to the N.Y. Municipal Bond Agency, which can foreclose the lien in accordance with the state mortgage foreclosure procedures.
- Citation
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N.Y. Real Prop. Tax §§ 1123, 1166, 1170, 1190, 1194.
What interest and penalties accrue for delinquent taxes, and who collects them?
- Analysis
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There is a penalty of 5% of the delinquent tax as levied. The tax commissioner may set the rate of interest, but it cannot be less than 12% of the unpaid taxes per year. The Schenectady County legislature may impose a rate of 15% per year. The interest rate may be lowered by local rules for installment payments.
- Citation
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N.Y. Real Prop. Tax §§ 936, 924-a(2)−(3).
What is the redemption period—the length of time to pay the debt prior to permanently losing title?
- Analysis
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Two years after the generation of the tax lien. One year for vacant and abandoned property. A tax district can adopt a three- or four-year redemption period for residential or farmland.
- Citation
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N.Y. Real Prop. Tax §§ 1110, 1111.
Who keeps the equity, and what are the post-foreclosure sale requirements, if any?
- Analysis
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The foreclosing party keeps all equity and acquires full title to the property. There is no sale requirement.
- Citation
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N.Y. Real Prop. Tax §§ 1131, 1194(10).
How much time does the previous owner have to claim the surplus proceeds, and what are the procedures for claiming them?
- Analysis
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N/A
- Citation
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N/A
What types of foreclosures are used in the state?
- Analysis
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Judicial.
- Citation
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N.Y. Real Prop. Tax § 1120.
What types of notice does the state require?
- Analysis
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(1) Notice of commencement of foreclosure proceedings.
- Citation
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N.Y. Real Prop. Tax § 1125.
1 Hetelekides v. Ontario County. Brief amicus curiae of Pacific Legal Foundation. 28 Apr. 2022.
2 Hetelekides v. Ontario County, No. 10-0932 (N.Y. Sup. Ct. Nov. 7, 2019) (Slip Op. at 2)
3 Hetelekides v. Ontario County, No. 10-0932 (N.Y. Sup. Ct. Nov. 7, 2019) (Slip Op. at 2)
4 Hetelekides v. Ontario County, No. 10-0932 (N.Y. Sup. Ct. Nov. 7, 2019) (Slip Op. at 3)
5 Jones v. Flowers, 547 U.S. 220, 229 (2006).
6 Hetelekides v. Ontario County. Brief amicus curiae of Pacific Legal Foundation. 28 Apr. 2022.
7 Hetelekides v. Ontario County. Brief amicus curiae of Pacific Legal Foundation. 28 Apr. 2022.
8 Hetelekides v. Ontario County, No. CA 20-00680, Brief for Plaintiff-Appellant. 11 Feb. 2022.
9 Craig Fox, “Owner Keeps Akropolis: Relative Who Owns Batavia Diner Wins Bidding War,” Fltimes.com, Finger Lakes Times, May 10, 2007, https://www.fltimes.com/news/owner-keeps-akropolis-relative-who-owns-batavia-diner-wins-bidding-war/article_dd271742-7661-52e8-afa1-190d6cc5a30d.html.
10 Hetelekides v. Ontario County. Brief amicus curiae of Pacific Legal Foundation. 28 Apr. 2022.