Case Study

Adam Leitman Bailey, P.C. Protects Foreclosure Purchaser and Clarifies Intervention Question

After a property is sold at a foreclosure sale, the foreclosed owner will frequently move to vacate the foreclosure, claiming that it did not receive proper notice. In a case decided by the Appellate Division, First Department, Adam Leitman Bailey, P.C. successfully defended the purchaser of a development site in the Bronx in a tax lien foreclosure.

The foreclosure was brought by a New York City Tax Lien Trust, which served the limited liability company property owner through the New York Secretary of State. As required by law, the Secretary of State mailed the complaint to the company’s address on file, the transactional lawyer who formed the company to purchase the property. Because the company had never registered its mailing address with the City Department of Finance or updated its address with the Secretary of State, the only current addresses the Tax Lien Trust had for the company was its transactional lawyer and the property itself, which did not have a street number because it was an unimproved lot. As a result, the Trust mailed all required notices to the transactional lawyer and “No #” at the street on which the property was located.

The foreclosed company claimed that it never received notice of the foreclosure, and that the mailings were inadequate to provide it with proper notice, offering to pay off the relatively modest tax debt underlying the foreclosure. In the Supreme Court, Adam Leitman Bailey, P.C. moved to intervene on behalf of the foreclosure sale purchaser and defend the purchaser’s claim to the property. The Supreme Court found that the company had no grounds to vacate the foreclosure, but denied intervention to the purchaser.

On appeal, the First Department found that the foreclosed company had not raised a reasonable excuse for its default because of its failure to update its address, and that it had no meritorious defense to the foreclosure because its “claimed willingness to pay the tax lien well after the property was sold at auction is not a defense.”

The First Department also clarified the previously undecided question of whether a foreclosure purchaser has the right to intervene in the foreclosure to defend its property interest. The Court held that: “The proposed intervenor, as the subsequent purchaser of the property, should have been permitted to intervene in Supreme Court.” However, because the court had rejected the foreclosed company’s appeal, it denied intervention as academic.

Appellate litigators Jeffrey R. Metz and William J. Geller, and Jackie Halpern Weinstein of Adam Leitman Bailey, P.C.’s title insurance claim group represented the successful foreclosure sale purchaser.

NYCTL 1998-2 Trust v. Alanis Realty LLC, 2019 NY Slip Op 07348, A.D.2d (1st Dept. Oct. 10, 2019).

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