Gallet Dreyer & Berkey, LLP | Tax Lien Foreclosure Proceedings on the Rise
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Tax Lien Foreclosure Proceedings on the Rise

06/05/2014 | Summer 2014 Newsletter
The economy and staggering government deficit has stimulated a bumper crop of tax lien foreclosure actions being commenced in the Supreme Courts of the five boroughs.

Tax lien foreclosure actions arise when unit owners do not pay their property taxes, water charges, and other charges. The New York City Department of Finance imposes a tax lien, and if it is not paid, the Department then sells these tax liens to third party lien servicing companies, called a NYCTL trust, which can then bring a foreclosure action against the owner to collect the tax lien. Under the City’s tax lien sales program, the Bank of New York holds the tax lien certificate on behalf of the purchasing trust as collateral agent and custodian.

In a typical action, the Bank of New York typically names the Board of Managers of a condominium as a necessary party defendant to foreclose upon the lien. Usually, if the unit owner has not paid their taxes, the unit owner also owes money to the condominium for unpaid common charges and other charges. In order to protect the building’s interests, the building may need to file an answer to complaint, file its own lien if not already done, or take other action to protect its interests in the foreclosure proceeding.

Because each situation is different, the recommended strategy may be different in each case. Building managers and unit owners who are served with a tax lien foreclosure proceeding should consult with experienced counsel to decide the appropriate course of action.

About the author: Edward M. (“Mike”) Cuddy III is an associate at Gallet Dreyer & Berkey LLP. His practice focuses on complex commercial litigation. He has represented developers, corporations, cooperatives, insurance companies and individuals in construction law disputes, contract actions, architectural and structural engineering malpractice claims, and casualty related property damage subrogation claims. He regularly advises co-op and condominium boards and managing agents on governance issues and disputes with shareholders or unit owners. He is a lecturer for Lorman Educational Services and the author of “Basic AIA Contracts – Dos and Don’ts of Negotiation.” Mr. Cuddy can be reached at