PROPOSED MORATORIUM ON TAX FORECLOSURES

BILL NUMBER: S7549A has already passed Senate and Assembly.

SPONSOR: THOMAS
 
TITLE OF BILL:

An act relating to a temporary in rem foreclosure moratorium; and
providing for the repeal of such provisions upon the expiration thereof

 
PURPOSE:

Institutes an in rem foreclosure moratorium in response to United States
Supreme Court Case Tyler v. Hennepin County, Minnesota.

 
SUMMARY OF PROVISIONS:

Section 1 explains the legislative findings, and the Legislature's
conclusion that there should be a moratorium placed on in rem foreclo-
sures as a result of the legal uncertainty that exists following the
Supreme Court's decision in Tyler v. Hennepin County, Minnesota.

Section 2 institutes an in rem foreclosure moratorium and provides that
no tax enforcement officer may convey title to any tax-delinquent parcel          

of real property owned by a tax district, which has been the subject of
an in rem tax foreclosure proceeding, to the treasurer or other official
of the tax district, in any in rem foreclosure action which was filed
and adjudicated prior to the effective date of the act, and prior to its
expiration date.

Section 3 provides that any properties that a tax district acquired
title to prior to July 1, 2023 pursuant to an in rem tax foreclosure
proceeding may be auctioned by the tax district if the surplus funds are
held in a segregated trust account that's maintained by the chief fiscal
officer of the tax district until the moratorium is repealed on June 30,
2024.

Tax districts that opted out of the state law and have local procedures
that govern their tax foreclosures will be able to continue those fore-
closures so long as they have, or they subsequently institute, a legal
mechanism that provides for the return of the surplus funds that is
compliant with the Tyler v.  Hennepin decision.

Section 4 provides that the act is effective immediately and will expire
on June 30, 2024.

 
JUSTIFICATION:

Tyler v. Hennepin County was a United States Supreme Court case decided
in May, 2023 which ruled on local governments' ability to seize property
for unpaid taxes, when the value of the property is greater than the tax
debt. The Court unanimously held that the surplus value (the amount the
property sells for above the value of the property) are protected by the
Fifth Amendment's Takings Clause.  Effectively, this means that local
governments must return surplus funds to homeowners.

In New York, tax foreclosures occur when a property owner is delinquent
on their taxes and does not pay the delinquency by the redemption date.
Localities then either foreclose on the property and sell it at auction
or utilize a tax lien sale where the tax liens are sold to third party
buyers. Some municipalities return the surplus funds, while others do
not. In the wake of Tyler v. Hennepin, certain areas of New York's stat-
ute are incompatible with this recent Supreme Court precedent. As issues
of real property tax, delinquencies, in rem foreclosures, and the asso-
ciated surpluses are complex issues of policy and law, the Legislature
seeks to provide time for the various stakeholders to discuss the tax
foreclosure process and how best to change New York's statute; as such,
this legislation institutes a moratorium on most in rem foreclosures
until June 30, 2024.

 
LEGISLATIVE HISTORY:

New Bill.

 
FISCAL IMPLICATIONS:

None to the state or localities.

 
EFFECTIVE DATE:
This act shall take effect immediately and shall expire and be deemed
repealed on and after June 30, 2024.