Buffalo Fire Damage Rules: The Inspection and the Registry

Where These Rules Came From

New York enacted a group of statutes effective 20 December 2016, intended to monitor and reduce the number of vacant and abandoned houses sitting in foreclosure. The relevant ones are sections 1308, 1309 and 1310 of the Real Property Actions and Proceedings Law.

The problem they addressed is a familiar one in this region: borrowers vacate, foreclosures take years, and properties deteriorate in the meantime. The response was to put duties on lenders early in the process rather than waiting for a judgment.

Who Exactly Do the Duties Fall On?

Section 1308 is explicit and narrow. Notwithstanding any other provision of law, its subdivisions apply only to vacant and abandoned one to four family residential real property, and any duties and responsibilities it prescribes apply only to the first lien mortgage holder. So a second mortgage, a home equity line or a judgment creditor does not carry these obligations, and identifying who actually holds the first lien is the starting point for anybody trying to work out what should be happening.

The Inspection Cycle

Within 90 days of the date on which the loan for the property becomes delinquent, the mortgagee or its agent must complete an exterior inspection of the subject property to determine occupancy.

So long as the loan remains delinquent, that inspection is repeated every 25 to 35 days, and at different times of the day.

The varying times matter. The purpose is to establish occupancy rather than to observe a property once, and a house that looks empty at eleven in the morning may look occupied at seven in the evening.

The Notice

If at any time the mortgagee or its agent determines that the property is vacant and abandoned, as defined in section 1309(c), it must within seven business days of that determination post a notice on an easily accessible part of the property that would be reasonably visible to the borrower, property owner or occupant.

The notice provides contact information and requests that the homeowner contact the servicer. The mortgagee or its agent must also monitor the property for any change in occupancy and ensure that the notice stays posted.

What Does Responding to It Actually Do?

It contradicts the determination. The whole apparatus rests on a judgement that nobody is dealing with the property, and a borrower who telephones the number on the notice is a borrower dealing with it. Where the posted notice is not responded to and persists for seven consecutive days, the position moves the other way. This is the cheapest and most consequential action available to an owner in this position, and the reason most people miss it is that they are not living at the address where the paper is.

We publish no determinations about whether any particular property is vacant and abandoned, and nothing here is legal advice. This is a statutory scheme that runs alongside a foreclosure, and where a loan is delinquent or a notice has been posted, a New York lawyer is the right first call rather than a buyer.

Secure and Maintain

Once the determination stands, section 1308 imposes the duty its title describes: inspecting, securing and maintaining vacant and abandoned residential real property.

That is worth understanding from both directions. It means somebody other than you may begin securing and maintaining a property you still own, and it means a lender who does nothing while a building deteriorates is in breach of a statutory obligation.

The Penalties, and Who Can Enforce Them

Where it appears to the satisfaction of the hearing officer or the court that section 1308 has been violated, a civil penalty may be issued in the amount of up to $500 per day per property, for each day the violation persists.

The Superintendent of Financial Services may, in his or her sole discretion, pursue any suspected violation of the section. Before taking such action the superintendent must give the lender, assignee or mortgage loan servicer at least seven days' notice of the violation.

In addition, the municipality in which the residential real property is located has the right to enforce the obligations described in the section in any court of competent jurisdiction, after at least seven days' notice to the lender, assignee or mortgage loan servicer.

Why Does That Matter to an Owner Rather Than a City?

Because it changes the shape of a conversation with a servicer. An owner asking a large institution to do something usually has no leverage. An owner pointing out that a statutory duty runs to the first lien holder, that penalties reach $500 a day per property, and that both the state superintendent and the municipality can enforce it, is having a different conversation. That is a matter for your lawyer to raise rather than for you to raise alone, and it is worth knowing that the leverage exists.

The Registry

Section 1310 requires the Department of Financial Services to maintain a statewide vacant and abandoned property electronic registry. DFS promulgated Part 422 of Title 3 of the official compilation of codes, rules and regulations to implement it.

Reporting is triggered for loans where the borrower has been delinquent for 90 or more days, and for each such loan the report includes the address of the property, the date of each occupancy inspection conducted as required by section 1308(1), the date on which a determination was made that the property was vacant and abandoned, the date on which the notice required by section 1308(3) was posted, identification of all actions taken to secure and maintain the property together with the date and nature of each, and whether a foreclosure proceeding has been commenced with the date and status.

The obligations imposed by section 1310 apply to both the mortgagee and the servicer. The superintendent may require any party receiving information from the registry to execute a confidentiality agreement or periodic certifications.

The Expedited Foreclosure Route

Section 1309 provides for an expedited application for judgment of foreclosure and sale for vacant and abandoned property, reducing the time such properties remain in that state.

A plaintiff seeking one must put before the court the evidence relied upon in finding the property vacant and abandoned, evidence showing that the plaintiff is the owner and holder of the subject mortgage and note or has been delegated authority to institute the foreclosure action by the owner of the same, and the sums due and owing upon the mortgage and note after a review of a detailed and itemised account of each fee, each cost, and a calculation of interest accrued.

Is That a Low Bar?

It is a specific one, and the specificity is useful to a borrower. A plaintiff has to demonstrate the vacant and abandoned finding rather than assert it, has to establish standing, and has to produce an itemised account rather than a round figure. Those are the points at which a defended file differs from an undefended one, and they are exactly why an owner in this position should be talking to a New York lawyer rather than deciding alone that nothing can be done.

What This Means Before Anything Has Happened

Keep the loan current if you possibly can. The entire scheme runs from delinquency, and nothing in it engages while payments are being made.

Tell the servicer about the fire. Before a missed payment rather than after, because a file with a known reason behind it is handled differently from a silent one.

Go and look at the door. Regularly, or have somebody do it. The notice is posted at the property, not sent to wherever you are staying.

Keep somebody visiting. Inspections are about occupancy and they happen at varying times.

Your Options, Compared

Respond and stay engaged. Contradicts the determination and keeps the ordinary timeline.

Sell while the loan is current. The cleanest position, with no statutory machinery running.

Sell after a notice. Workable, and the timetable is no longer entirely yours.

Ignore the paper on the door. The route the whole scheme was designed to catch.

Across Buffalo and Erie County

Exposure varies with values and with how much of the stock carries a mortgage at all. The east is covered under the East Side, the west under the West Side and Black Rock, and the north under North Buffalo and Elmwood. Further pages deal with South Buffalo, the first ring suburbs and the wider region.

Those outer areas include Cheektowaga, Tonawanda, Amherst, West Seneca, Lackawanna and Kenmore, with Niagara Falls, Lockport, Batavia and Jamestown beyond them.

The full index is on our service area index.

Rules Questions

Who Holds My First Lien?

Your mortgage statement names the servicer, and the county clerk's records show what was recorded. They are not always the same party and the duties attach to the first lien holder.

How Do I Know If I Am on the Registry?

Reporting is made by lenders and servicers to the Department of Financial Services rather than published to owners. A New York lawyer is the right route to that question.

Can I Stop the Process by Moving Back In?

Occupancy bears directly on the determination, and whether it is safe or possible to occupy a fire-damaged building is a separate question with a different answer. Do not move back into an unsafe structure for this reason.

Primary Sources

New York RPAPL sections 1308, 1309 and 1310; Article 13 generally
Part Q of Chapter 73 of the Laws of 2016, effective 20 December 2016
Section 1308(1), (3) and (8) — inspection, notice and enforcement
Section 1309(c) — definition of vacant and abandoned
3 NYCRR Part 422 — DFS rules implementing the statewide registry