Foreclosing Lenders Are Now Required To Pay HOA Or Coop Fees On Abandoned “Zombie” Properties
The New York State legislature enacted Chapter 168, of the laws of 2019, effective August 14, 2019, that amends Section 1308 of the Real Property Actions and Proceedings Law to require holders of mortgages or secured loans on abandoned HOA or cooperative properties to pay homeowners’ association or cooperative fees “as needed to maintain the property” if they are foreclosing on such abandoned properties. This law is part of the legislature’s effort to preserve “zombie properties” – those that are abandoned by their owners and allowed to fall into disrepair.
In the past, mortgagees who were foreclosing on HOA properties and secured lenders foreclosing on cooperative shares often did not pay HOA dues or cooperative maintenance charges during the pendency of a foreclosure, causing other HOA or cooperative owners to carry the extra burden of paying fees or maintenance charges that should have been paid by the abandoning homeowner. Now HOAs and cooperatives may bill the foreclosing lender for such fees and sue to collect if the lender does not pay them. The law does not explicitly state that it applies to abandoned condominium units that are the subject of mortgage foreclosure, but the bill memorandum indicates that it may also be intended to apply to condominiums. That issue should be resolved by the legislature or the courts.