A recent class-action settlement addressing foreclosure procedures in New York State has significant implications for condominium and homeowners’ associations (HOAs) that have owners in arrears. The law involved only applies to foreclosures of home loans, and not condo and HOA foreclosure of common charge liens and experienced counsel need to make this clear at the initial filing of the foreclosure action or risk having the action dragged into a mandatory court process where owners could be appointed legal counsel and the action delayed.
Where condos and HOA boards took a back seat to lender foreclosure actions, simply appearing in the actions and waiting for lenders to prosecute the action, condo and HOA boards may better off starting their own foreclosure action which should not be covered by this delayed process that lenders will have to go through. This will avoid delays and the extension of the owners not paying their common charges and speed up recovery by the condos and HOAs.
The Settlement Background
- New York courts were routinely bypassing a mandatory process in residential foreclosure cases of home loans by lenders – assessing whether a homeowner qualifies for appointed legal counsel.
- This violation of state law prompted a class-action lawsuit, which the courts recently settled.
- The settlement could lead to “do-overs” for thousands of foreclosure cases by lenders, potentially delaying proceedings by lenders. Condos and HOAs have to make sure to argue against getting dragged into this delayed process which could substantially delay lender foreclosures.
- While NY Civil Procedure Laws & Rules § 3408, which is the law at issue, applies specifically to foreclosures of home loans, this settlement may embolden judges to favor homeowner rights in all foreclosure contexts and condos and HOAs must have experienced counsel argue against such a result for them.
What Condo/HOA Boards and Management Can Do
- Consult Your Attorney: Discuss whether the settlement could impact your ongoing or planned foreclosure actions. Consider any proactive or preventive measures.
- Stay Informed: Keep up-to-date on any evolving case law or procedural changes in New York related to homeowner rights in foreclosure.
This settlement underscores the complexities of foreclosure law and the evolving focus on protecting homeowners. Condos and HOAs Condo and HOA boards and management must have experienced counsel fighting for them and must be vigilant in understanding their legal rights and prepared to navigate an increasingly challenging environment.
