ALTHOUGH THERE IS MERIT TO THE DEFENDANTS’ ARGUMENT THEY WERE DEPRIVED OF THEIR PROPERTY WITHOUT JUST COMPENSATION IN THESE TAX FORECLOSURE PROCEEDINGS WHERE THEIR PROPERTIES WERE TRANSFERRED TO NEIGHBORHOOD RESTORE UNDER NYC’S THIRD PARTY TRANSFER PROGRAM, THE DEFENDANTS’ FAILURE TO ANSWER IN THE TAX FORECLOSURE ACTIONS AND THEIR FAILURE TO REDEEM WITHIN FOUR MONTHS PRECLUDED ANY RECOVERY (SECOND DEPT).

The Second Department, in a full-fledged opinion by Justice Wooten, determined the tax foreclosures on defendants’ properties were valid and the transfer of the properties under New York City’s Third Party Transfer Program (TPT program) was proper. The court noted that, under the current procedure, property worth $2 million could be lost for nonpayment of a small water bill and the owner would receive no compensation. Here the city demonstrated it fulfilled the tax-foreclosure notification requirements and defendants did not answer and did not attempt to redeem the property within the four-month redemption period:

… [T]he defendants’ motions were time-barred due to their failure to move to vacate the judgment of foreclosure or to take any action to redeem the subject properties within the four-month redemption period … . In light of the presumption of regularity created by the entry of the judgment of foreclosure against the subject properties (see Administrative Code § 11-411), which became conclusive four months after the entry of the judgment …, there is no basis to consider the defendants’ contentions that the subject properties were not distressed … . Further, this Court has held that where, as here, the defendant property owners failed to interpose a timely answer or to redeem the property during the four-month period following the entry of the judgment of foreclosure, they are not entitled to “compensation” for any “surplus money as a result of the foreclosure and transfer of the property” under the TPT program … . Thus, while we emphasize that there is potential merit to the defendants’ contentions that they were deprived of their properties without just compensation, and that the transfer of a property which was not distressed under the TPT program was improper, we are constrained to conclude that those issues are not reviewable by this Court under the circumstances presented. Matter of Tax Foreclosure Action No. 53, 2023 NY Slip Op 02711, Second Dept 5-17-23

Practice Point: The court acknowledged that the city’s transfer of defendants’ properties to Neighborhood Restore under NYC’s Third Party Transfer program may have deprived defendants of just compensation for the taking of their properties, the fact that defendants did not answer in the tax foreclosure proceedings and did not attempt to redeem the properties within the four-month redemption period precluded any recovery.