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Volume 7 - Opinions of Counsel SBEA No. 46

Opinions of Counsel index

Taxes (enforcement) (foreclosure in rem - liens of other tax districts) - Real Property Tax Law, §§ 1020, 1136:

The amendments in 1979 to section 1020, preserving town, city and village liens against real property, when title thereto has been conveyed by county tax deed, have no application to in rem tax foreclosure proceedings.

We have been asked to consider the effect of Chapters 700 and 701 of the Laws of 1979, amending section 1120 of the Real Property Tax Law, in a county which forecloses delinquent taxes in rem pursuant to title 3 of Article 11 of the Real Property Tax Law. By virtue of those Chapters, county tax deeds issued pursuant to section 1020 were made subject to village (c.700) and city and town (c.701) claims for “taxes, liens or other encumbrances”. The purpose of these amendments was to overcome the Court of Appeals opinion in Segar v. Youngs, 45 N.Y.2d 568, 383 N.E.2d 103, 410 N.Y.S.2d 801 (1977) (see, 6 Op.Counsel SBEA No. 52).

The amendments made by Chapters 700 and 701 apply only to tax deeds issued by a county under the authority granted by Article 10 (see, e.g., §§ 1018, 1020). Therefore, in order to determine the effect of a county foreclosure pursuant to title 3 of Article 11 on competing municipal liens, we must look to the provisions of that title.

Section 1136 grants to the courts full power to determine and enforce all rights, claims and the like in regard to the properties to be foreclosed pursuant to title 3 of Article 11. Subdivision 6 of section 1122 provides that every person, “including a tax district other than the one foreclosing”, having a lien upon a parcel described in a list of delinquent taxes prepared pursuant to that section, may redeem the parcel by paying the sums mentioned in the list before the expiration of the period for redemption. Alternatively, the tax district may serve a duly verified answer upon the attorney for the foreclosing tax district, setting forth in detail the nature and amount of its interest and any defense or objection to the foreclosure (see, form of the Public Notice of Foreclosure set forth in subdivision 1 of section 1124).

Subdivision 3 of section 1136 sets forth the procedure to be followed where an answer is interposed by another tax district. One option is for the tax districts to agree to a conveyance (without sale) of the parcel to one of them “subject to any right, title, or interest in or lien upon such parcel of such other tax district”. However, subdivision 5 of section 1136 provides that in the absence of such an agreement, the deed issued pursuant to that section conveys a “full and complete” title to the real property.

This last subdivision also declares that upon the execution of that deed, the grantee is seized of an estate in fee simple absolute (unless the conveyance is expressly made subject to the tax liens of another tax district) and all persons – including the State – who have had any claim or lien against the parcel are “barred and forever foreclosed” of those claims or liens.

In addition, the tax districts could agree, even prior to the commencement of the in rem proceedings, to the disposition of their competing liens in accordance with the provisions of section 1150. In the absence of this type of agreement, or the redemption of the parcel by the competing tax district or the service of a duly verified answer by that same tax district setting forth a defense or objection to the proceeding, the other tax district would be “barred and forever foreclosed” from its lien on that real property (see, 24 Op.State Compt. 202 (1968)).

In conclusion, the amendments to section 1020 affected by Chapters 700 and 701 of the Laws of 1979 have no application to foreclosure proceedings instituted under title 3 of Article 11 of the Real Property Tax Law.

October 16, 1979