Firm Successfully Protects Commercial Property Owner’s Due Process Rights in Tax Lien Foreclosure Case

Decision Allows Owner to Redeem Property, Thereby Avoiding Eviction and Loss of Business

UNIONDALE, NEW YORK — Sahn Ward Coschignano, PLLC (SWC) has announced that its Partners, Adam H. Koblenz, Andrew Roth, and Joseph Bjarnson, have obtained summary judgment from the Nassau County Supreme Court on behalf of their client in the case of Forest Glen Realty LLC v. T11 Funding et. al. Index No. 609334/2017).The Court’s decision protects Nassau County commercial property owners in real-property tax enforcement proceedings by holding that, in the event the tax deed owner seeks to enforce its tax deed by quieting title or a summary proceeding, they provide the former owner with the right to redeem the tax liens and their property.

Nassau County enforces delinquent real property taxes under procedures set forth in the Nassau County Administrative Code (NCAC). Under the NCAC, when a property owner fails to timely pay real property taxes, the amount of the unpaid taxes automatically becomes a lien on the real property. Once a year, Nassau County sells the liens at a public auction. Private investors can purchase the liens at the auction as investments. If a tax lien is not satisfied by the property owner within two years of its sale, the tax-lien purchaser can serve a notice to redeem on the property owner. If the property is a commercial property, and if the owner does not pay the unpaid taxes plus interest and penalties after service of the notice to redeem, the tax-lien purchaser can apply to the County Treasurer for a Tax Deed pursuant to which the Nassau County Treasurer conveys the subject property to the purchaser. Under this procedure, the property owner has no opportunity to be heard in a judicial proceeding before the Tax Deed is issued. Under the NCAC, the holder of the Tax Deed may thereafter commence a judicial proceeding in Nassau County Supreme Court to confirm that it has lawful title to the property. If the holder of the Tax Deed commences such a proceeding, however, the NCAC grants the commercial property owner the right to redeem the property in the proceeding by paying the unpaid taxes, penalties and interest. In an attempt to divest commercial property owners of their right to redeem their properties in a judicial proceeding commenced under the NCAC, some holders of Tax Deeds commence landlord-tenant proceedings to evict commercial property owners from their properties based on their Tax Deeds, in order to avoid affording the former property owner the further right to redeem.

In the Forest Glen Realty case, Forest Glen Realty (Forest Glen) owns a commercial building in Glen Cove, New York, valued at approximately $2 million. It allegedly owed approximately $1,000.00 in real property taxes on the property in 2014, unbeknownst to Forest Glen. Based upon this circumstance, Nassau County sold the tax lien on the property to T11 Funding, a private investor. When Forest Glen allegedly failed to redeem the tax lien by paying the unpaid taxes, T11 Funding applied for and was issued a Tax Deed for the property. Relying on the title that it purportedly acquired via the Tax Deed, T11 Funding commenced a landlord-tenant proceeding seeking to evict Forest Glen’s tenant from the property.

In response, SWC, on Forest Glen’s behalf, promptly commenced an action in Nassau County Supreme Court seeking, among other things, a preliminary injunction enjoining T11 Funding from prosecuting the landlord-tenant proceeding and otherwise interfering with Forest Glen’s ownership and possession of the building on the grounds that, among other things, Nassau County’s tax enforcement procedures violate Forest Glen’s constitutional rights to due process and equal protection of the law.

On November 13, 2017, Nassau County Supreme Court Judge Jeffrey S. Brown granted Forest Glen’s request for a preliminary injunction. The Court ruled that, in order to comply with fundamental requirements of due process, the commencement of the summary proceeding entitled Forest Glen “to one final opportunity to save … [its] property by paying the amount owed.” The Court ruled that T11 Funding could not circumvent this due process safeguard afforded under the NCAC by commencing a landlord-tenant proceeding against Forest Glen based on the Tax Deed.

Forest Glen then sought summary judgment against T11 Funding. On October 11, 2018, the Court granted summary judgment, which allowed Forest Glen to redeem the tax liens that were previously purchased and cancelled the owner’s tax deed upon payment of the County Treasurer.

“The ruling is a victory for commercial property owners in Nassau County and a blow to those who attempt to use Tax Deeds to confiscate commercial properties from unwary owners who failed to pay their real property taxes for one reason or another,” Mr. Koblenz said. “This recent ruling by the Court will help provide equal protection to commercial property owners in these situations. These owners will no longer have to worry about being evicted from the premises or losing their businesses.”

For more information about Sahn Ward Coschignano, call (516) 228-1300 or visit www.swc-law.com.