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Volume 6 - Opinions of Counsel SBEA No. 104

Opinions of Counsel index

In rem foreclosure (notice) (redemption) - Real Property Tax Law, § 1084; Article 10, Title 5; Article 11, Title 3:

Section 1084 of the Real Property Tax Law, providing for a proceeding to determine claims against property owned by a tax district acquired by tax sale, is not applicable to foreclosures in rem under Title 3 of Article 11 of the Real Property Tax Law.

We have been asked whether Title 5 of Article 10 of the Real Property Tax Law, which concerns “regularity of tax sale,” is a means by which property foreclosed in rem may be reacquired by its former owner. The specific questions posed are whether section 1084 may be used to determine the propriety of notice in an in rem foreclosure proceeding and whether the former owner would thereby be permitted to redeem the property prior to final judgment in the action.

Section 1084 of the Real Property Tax Law authorizes a tax district which has acquired property through a tax sale to bring a judicial proceeding to compel determination of any claim or potential claim by any person concerning the property.

Subdivision 3 of that section provides:

Any defendant shall have the right, and the plaintiff must in such action specially plead that he extends such right to such defendant, to redeem the real property from the tax sale upon a payment of the sum due the holder thereof when last redemption could be had according to the provision of the general, special or local law under which the tax lien was originally sold. . . . Such right of redemption shall terminate and cease upon the granting of final judgment.

It is clear from this language that a proceeding brought by a tax district under this statute revives the right of redemption which had expired and permits the former owner to pay the redemption price which was due when that right expired. A tax district bringing this proceeding is bound until entry of final judgment to permit redemption (First National Bank of Farmingdale v. Aeromotive Corp., 99 N.Y.S.2d 4). Thus, if it were possible to use this proceeding to determine the propriety of notice in an in rem foreclosure action, a former owner would be allowed to redeem until final judgment was entered.

The tax sale provisions of Article 10 and the foreclosure procedures of Article 11 are alternative means of enforcement of delinquent taxes.

The procedures for enforcement of unpaid taxes provided by Article 10 are administrative and are conducted by the taxing district itself. The “tax sale” is, in reality, a public auction at which the successful bidder acquires the right to taxes and interest outstanding against certain property. In return for his payment, the bidder receives a tax sale certificate documenting inchoate interest in the property, with his right to conveyance of title contingent upon the right of the owner to redeem the property by payment of the amount of the lien plus interest, subject to certain statutory time limitations. (The time for redemption ranges from one to three years (Real Property Tax Law, §§ 1010, 1022, 1024).)

Upon the expiration of the one year period of redemption provided in section 1010, the purchaser of a tax lien is entitled to a conveyance of the real property. Such a conveyance vests in the grantee absolute title subject to:

(a) all claims of the county or State for taxes, liens or other encumbrances and all easements or rights of way which were in existence at the time of the levy of the tax the non-payment of which resulted in the tax sale;

(b) redemption by an occupant or a mortgagee as provided in sections 1022 and 1024; and

(c) cancellation as provided in section 1020(3), (§ 1020(1).)

If the owner fails to redeem within the applicable time period and asserts irregularities with respect to the acquisition of the tax certificate or the taking of title by the tax district, or if there exist possible claims against such property, the tax district may institute a judicial proceeding under section 1084 to settle such claims and establish the validity of the tax sale.

In contrast, the in rem foreclosure proceeding, such as that in Title 3 of Article 11 and several special statutes, is judicial and may be brought only by a tax district which has acquired a tax lien and which has adopted the appropriate procedures. Pursuant to subdivision 2 of section 1122, a proceeding to foreclose an unpaid lien may be commenced as early as two years after the tax became a lien (or, in the case of owner-occupied property, three years), provided the owner does not redeem prior to the expiration of that period. Thereafter, a final judgment of the court vests in the tax district full and complete title to the subject property, divesting the owner of record of all rights that are inseparable from the parcel (Real Property Tax Law, § 1136(6); City of New Rochelle v. Stevens, 271 App.Div. 977, 68 N.Y.S.2d 31, aff’d, 297 N.Y. 533, 74 N.E.2d 469).

Title 3 of Article 11 contains no provision similar to that provided in section 1084 with respect to tax sales which would permit a tax district which has foreclosed in rem to bring an action to establish the regularity of the procedure. That is, unlike enforcement under Article 10, foreclosure in rem pursuant to Title 3 of Article 11 requires a final judgment of a court before a conveyance of title may occur (Real Property Tax Law, § 1136(2)). Prior to judgment, the court has “full power to determine and enforce in all respects the priorities, rights, claims and demands of the several parties to the action” (id, § 1136(1)).

Since the proceedings under Article 11, Title 3, conclude with a judicial determination, there is no need for a judicial proceeding similar to that provided by Title 5 of Article 10. It is our opinion, therefore, that the provisions of Title 5 of Article 10 have no application to a foreclosure in rem under Article 11.

March 2, 1978