New York Homeowners Have a Constitutional Right to Recover Surplus Funds from Foreclosure Sales in 2024
Following the landmark Supreme Court decision in Tyler v. Hennepin County in May 2023, New York homeowners facing foreclosure now have stronger protections when it comes to recovering surplus funds from property sales. The unanimous Supreme Court ruling established that surplus value from foreclosure sales is protected by the Fifth Amendment’s Takings Clause, fundamentally changing how municipalities across New York must handle excess proceeds from foreclosure auctions.
Understanding Foreclosure Sale Surplus Funds
In New York, when a foreclosed property is sold for more than the outstanding mortgage debt and associated costs, the excess funds are known as surplus monies. These funds are deposited with the court and can be claimed by individuals or entities with a legitimate interest, such as junior lienholders or the former property owner.
The money from the public sale and transfer is used to pay any liens or judgments against the property that the court finds are valid and take priority over the prior owner’s interests – for example, unpaid mortgage loans or tax liens. After all these valid liens and judgments are paid, any money that is left over from the public sale and transfer of the property is called “surplus monies.”
The Tyler v. Hennepin County Impact on New York
On May 25, 2023, the United States Supreme Court, in Tyler v. Hennepin County, ruled it is unconstitutional for municipalities to unilaterally retain the surplus monies generated from tax lien foreclosure sales. This decision has forced New York to update its foreclosure laws to ensure homeowners can recover their rightful surplus funds.
For years, New York towns kept the surplus funds after selling foreclosed houses at public auctions. Now, they have to give it back. Foreclosure lawyers are asking municipalities to return the money they’ve taken from their clients over the years, arguing that New Yorkers are owed the homes’ fair market value at the time of foreclosure.
New York’s Legal Framework for Surplus Recovery
New York has specific statutes governing surplus fund recovery. Any person who had any right, title, interest, claim, lien or equity of redemption in or upon a parcel immediately prior to the issuance of the judgment of foreclosure may file a claim with the court having jurisdiction for a share of any surplus resulting from the sale of such property.
For residential properties, New York law provides additional protections: In the case of residential property, if at the time of the confirmation of the report of sale, no former homeowner has filed a claim for surplus, and there are surplus proceeds that remain to be distributed, the proceeding shall remain open for at least three years from the confirmation of the report of sale, or for such longer period as the court may direct. If a former homeowner should file a claim for surplus during such period, the court shall proceed as if it had been timely filed.
The Claims Process
Any person claiming the surplus moneys arising upon the sale of mortgaged premises, or any part thereof, either in his own name, or by his attorney, at any time before the confirmation of the report of sale, may file with the clerk in whose office the report of sale is filed, a written notice of such claim, stating the nature and extent of his claim and the address of himself or his attorney.
There is a $45.00 motion filing fee that must be paid when you e-file. You may wish to hire a lawyer to help you claim surplus monies. If you wish to file your claim without a lawyer, the following instructions provide a step-by-step outline of the forms you must complete, the filing procedures, and what might happen if the court approves your claim.
Who Can Claim Surplus Funds?
Potential claimants include: Former Property Owners: Individuals who owned the foreclosed property. Junior Lienholders: Entities or individuals holding liens that were subordinate to the foreclosed mortgage, such as second mortgages, judgment liens, or tax liens.
Working with Experienced Legal Counsel
Given the complexity of foreclosure proceedings and surplus fund recovery, it’s crucial to work with experienced legal professionals who understand New York’s evolving foreclosure laws. The Law Offices of Ronald D. Weiss, PC, located in Long Island with offices in Brooklyn, has been providing expert Foreclosure Sale defense and debt negotiation services since 1993.
The Law Offices of Ronald D. Weiss, PC have been supplying expert bankruptcy, foreclosure defense, and debt negotiation services since 1993. They offer practical, compassionate solutions customized to each client’s financial situation. With over 30 legal professionals on their team, they have the resources to handle important legal matters.
They handle the complicated foreclosure cases that most law firms struggle with – cases with complex situations, tough legal problems, and long histories of court motions. They take pride in turning around cases that have faced delays, setbacks, and frustrations by bringing a fresh, creative approach that finds new legal arguments to help their clients.
Time-Sensitive Nature of Surplus Claims
Given the complexities involved, consulting with a legal professional experienced in New York foreclosure law is advisable to navigate the process successfully. The window for claiming surplus funds can be limited, and proper documentation is essential for a successful claim.
Within 45 days after the sale of tax-foreclosed property, the enforcing officer shall determine whether a surplus is attributable to such sale and if so, the amount thereof. If a former homeowner should file a claim for surplus during such period, the court shall proceed as if it had been timely filed.
Conclusion
The Tyler v. Hennepin County decision has strengthened homeowners’ rights to recover surplus funds from foreclosure sales in New York. The Tyler decision makes clear that tax foreclosure is almost exclusively a debt collection tool. In other words, local governments can use the foreclosure process to recover only the amount they are owed and no more.
If you believe you may be entitled to surplus funds from a foreclosure sale, it’s essential to act quickly and work with experienced legal counsel who can guide you through the complex claims process and ensure your constitutional rights are protected.