Real Property Law Section Blog

Real Property Tax Law Section 425 ("School tax relief (STAR) exemption") affords a partial real estate tax exemption known as the STAR exemption to the owner of a one-to-three family residence, a farm dwelling, or a residential condominium or cooperative unit used as the owner's primary residence, if the owner meets certain maximum income requirements. An "enhanced STAR" may be available to such owners who are at least 65 years of age.

New York State's Department of Taxation and Finance has issued a "Summary of Tax Provisions in State Fiscal Year 2012-2013 Budget". According to the Summary, "Part B of Chapter 59 of the Laws of 2012 [the State Budget Bill signed into law on March 30, 2012] provides for the suspension, beginning in the 2013-2014 school year, of STAR benefits to homeowners who have past-due state tax obligations. Taxpayers who have outstanding tax liabilities will receive at least 45 days notice from the Department that their STAR exemption may be suspended if no action is taken to satisfy such liability." The provision for the suspension of STAR benefits expires at the end of the 2015-2016 school year.

Part B of Chapter 59 amends Real Property Tax Law Section 425 ("School tax relief (STAR) exemption") and adds Section 171-y ("Enforcement of delinquent state tax liabilities through the suspension of eligibility for STAR exemption") to the Tax Law. Under new paragraph (f) of Subdivision 3 of Tax Law Section 425:

"The property [afforded a STAR exemption] shall be ineligible for a basic or enhanced STAR exemption effective with the next school year commencing after the issuance of notice by the department of the suspension of its eligibility for the STAR exemption, even if the notice was issued after the application taxable status date. If a STAR exemption has been granted to such a property on a tentative or final assessment roll, the assessor or other person having custody of that roll is hereby authorized and directed [on receipt of notice from the Department of the suspension of eligibility for the STAR exemption] to immediately remove that STAR exemption from the roll."

The Summary is posted on the Department's website at
http://www.tax.ny.gov/pdf/stats/sumprovisions/summary_of_2012_13_tax_provisions.pdf.

On March 12, 2012, the Federal Housing Finance Agency announced that it was issuing a final rule restricting Fannie Mae, Freddie Mac and Federal Home Loan Banks "from dealing in mortgages on properties encumbered by certain types of private transfer fee covenants and in certain related securities." The final rule was published in the Federal Register on March 16, 2012 at 77 FR 15566-01 (12 CFR Part 1228). The final rule is effective July 16, 2012. The rule allows the regulated entities "to trade in mortgages encumbered by otherwise disqualifying covenants if the covenants were created" before February 8, 2011, the date on which the rule was proposed.

New York State commenced an Action in the Supreme Court, Kings County, against a number of lenders, Merscorp, Inc. and MERS, the Mortgage Electronic Registration Systems, Inc. The State alleges that the Defendants, by failing to record transfers of mortgages in the public records and in their handling of foreclosures, engaged in repeated fraudulent or illegal acts in violation of Executive Law Section 63 ("Department of Law; General Duties") and in deceptive acts and practices in violation of General Business Law Section 349 ("Deceptive acts and practices unlawful"). The Complaint asserts, among other things, that MERS often lacked standing to foreclose, representations that MERS held the promissory notes secured by the mortgages being foreclosed "were often false and deceptive," and the creation and use of MERS has "resulted in a myriad of fraudulent, deceptive and illegal acts and practices." The Complaint seeks declaratory and injunctive relief, monetary damages, and an Order "directing Defendants to take all actions necessary to cure any title defects and clear any improper liens resulting from the fraudulent and deceptive acts and practices alleged" in the Complaint.

It has since been reported on the Firedoglake and HousingWire websites that Bank of America, Citigroup, J.P. Morgan Chase, Wells Fargo and Ally Financial have settled certain of the claims in the lawsuit in exchange for their collectively paying $25,000,000 to the State of New York.

See http://news.firedoglake.com/2012/03/14/schneidermans-office-responds-on-mers-lawsuit-partial-settlement/ and http://www.housingwire.com/news/schneiderman-banks-agree-25-million-mers-deal

New York City's Department of Finance has been imposing a penalty for the late filing of a Real Property Transfer Tax Return notwithstanding that the Transfer Tax was timely paid. Due to the efforts of the New York State Land Title Association, the Department has changed its position. The City Register has advised the Association as follows:

"The agency recently determined that the law as currently written, does not support that imposition of a late filing penalty if the tax shown on the return as due and owing was paid in full by the due date if the NYC Real Property return is filed late."

"The computer system was adjusted to eliminate billing of the late penalty when the tax due was paid in full and on time. The agency has canceled and adjusted our records for accounts that received a Notice of Penalty and Interest due for RPTT where Finance imposed a penalty for the late filing but the RPTT was paid timely. The agency will send notices to the accounts [when] a payment was made for the late filing penalty and the account now reflects a credit. The party/parties who made the payment will need to apply for a refund and include the proof of payment."

In the case of In Re Agard, a decision of the United States Bankruptcy Court for the Eastern District of New York reported at 444 B.R. 231 and 2011 WL 499959, a mortgage servicer brought a motion to lift the automatic stay so that a mortgage on property owned by the Debtor, assigned by MERS as nominee for the original lender, could be foreclosed. Because a judgment of foreclosure had been entered by the Supreme Court, Nassau County, and, under the so-called Rooker-Feldman doctrine and res judicata, the Court could not look behind the foreclosure judgment to question the foreclosing mortgagee's standing, it lifted the stay. However, the Bankruptcy Court Judge also stated that "in all future cases which involve MERS, the moving party must show that it validly holds both the mortgage and the underlying note in order to prove standing"; naming MERS as "nominee" and/or "mortgagee of record" in the original mortgage did not, in itself, authorize MERS to assign the mortgage.

MERS appealed the Court's denial of its motion for reconsideration. The United States District Court for the Eastern District of New York granted MERS' appeal and vacated the portion of the Bankruptcy Court's Order addressing the "hypothetical question of whether [the mortgagee] would have had standing absent the Judgment of Foreclosure." The Bankruptcy Court ruling was held to be an "improper advisory opinion"; under Rooker-Feldman, whether or not MERS had the authority to assign the mortgage "had no effect on the parties or the bankruptcy." Agard v. Select Portfolio Servicing, Inc., dated March 28, 2012, is reported at 2012 WL 1043690.

Under Real Property Actions and Proceedings Law Section 1371 ("Deficiency judgment"), if no motion for a deficiency judgment is made, the proceeds of the [foreclosure] sale shall be deemed to be in full satisfaction of the mortgage debt and no right to recover any deficiency in any action or proceeding shall exist."Although a foreclosing mortgagee's successful bid was for an amount less than the amount of the judgment of foreclosure it did not seek a deficiency judgment. The Appellate Division, First Department, reversing the Supreme Court, New York County, and granting the Defendants' motion to dismiss, held that due to the mortgagee's failure to move for a deficiency judgment it could not sue to recover fire insurance proceeds which the prior owners of the property had not applied to repair fire damage. "Plaintiff's failure to obtain a deficiency judgment...defeats any right of recovery [it] may have had as mortgagee." (Citation omitted). Option One Mortgage Corp. v. J.P. Morgan Chase & Co., decided March 13, 2012, is reported at 2012 WL 787506.

After an environmental consultant and an electrical engineer allegedly found high levels of radio frequency radiation in the Plaintiffs' apartment, the Plaintiffs commenced an Action seeking the removal of a cell phone tower from the rooftop of the Defendant's nearby building, and damages. The Plaintiffs alleged that the tower's radio frequency ("RF") emissions presented a danger to their health and were a nuisance. The Supreme Court, New York County, dismissed the Complaint for the failure to join as a Defendant the owner of the radio tower. The Appellate Division, First Department, affirmed, but on the ground that the Plaintiffs' claims were preempted by the federal Telecommunications Act of 1996, which restricts the ability of states to regulate cellular towers. The levels of RF emissions in the Plaintiffs' apartment were within the Federal Communications Commission's Maximum Permissible Exposure limits for RF radiation, and they were therefore permissible under federal law. Stanley v. Amalithone Realty, Inc., decided March 13, 2012, is reported at 840 N.Y.S. 2d 65.

Robert E. Becker and others leased beachfront lots from the Town of Babylon. In the 1960's, they constructed wooden jetties to prevent beach erosion. On his parcel, Mr. Becker erected a dock using the jetty for support and extended the boardwalk to reach the dock. However, a 1984 survey done for the Defendant-lessee of an adjoining property disclosed that the jetties were misaligned, such that a portion of Mr. Becker's boardwalk and the entire dock he had constructed encroached on the property the Defendant leased. Mr. Becker commenced an Action for a judgment declaring that he had title by adverse possession to that portion of the adjoining lot on which the boardwalk and dock were located.

The Supreme Court, Suffolk County, granted the Estate of Robert E. Becker's motion for summary judgment; the Appellate Division, Second Department, reversed, holding that the Plaintiff had no rights in the disputed property. The Court of Appeals reversed, holding that Mr. Becker had "established title by adverse possession" under the laws as to adverse possession in effect prior to the effective date of Chapter 269 of the Laws of 2008, which amended Article 5 ("Adverse Possession") of the Real Property Actions and Proceedings Law. The Court also noted that the adverse possession claim had no bearing on the property interest of the Town of Babylon. Estate of Becker v. Murtagh, decided April 3, 2012, is reported at 2012 WL 1080325.

The Suffolk County Clerk's Office has issued the following notice:

"Due to the passing of a Resolution [No. 1222-2011] by the Suffolk County Legislature effective April 2, 2012 the Real Property Verification fees will increase to $60.00 per lot for each lot verified and there will no longer be a maximum fee limit of $1400.00."

The notice further states, as to rejected documents:

"At this time your document is being rejected for various recording issues. The document(s) must be returned to us in a timely fashion (within one month) or we will be forced to return it again to you to accommodate the fee increase."

The following communication dated February 10, 2012, concerning the PREP [Property Records Electronic Portal] System used to submit real property related instruments for recording, was received from the Office of the Westchester County Clerk.

"Notice: Financial Rejection Email Alert Added"

"Beginning today, customers will receive an email notification when their package is rejected for a financial reason only. In addition, the package will return to your PREP package grid where you can view and print the rejection letter if necessary. In an effort to save paper and postage, we will no longer be mailing out financial rejection letters when there is no need to mail back a rejected payment (such as an unsigned check)."

"Eliminate Financial Rejections and Refund Applications by Authorizing ACH Debit"

"By simply filling out a form authorizing us to debit funds for land records from your bank account, you will never get a financial rejection letter or need to apply for a refund again. Once your package has moved through our system and been approved, you will get an email with the list of packages and amounts we intend to debit. You are given two business days to be sure these amounts are correct and you have the funds available. In the meantime, your package is recorded. In addition to the daily email, our ACH customers can login to PREP at any time and run Excel spreadsheets of financial activity. For more information, visit WestchesterClerk.com and choose 'Services' and then 'ACH Debit Accounts' or call our Finance Unit at (914)995-2140."