COVID-19 Impact on Real Estate Tax Liens

06/12/20

When a residential or commercial property owner fails to pay his/her real estate taxes, the municipality has the ability to issue a tax lien on the property, which can then be sold to a private entity. In Nassau County, such sales are held annually in February for the prior year's taxes due. After 21 months from the sale, the lien holder can then send a notice to redeem, which gives the delinquent tax paying owner 3 months to make full payment on any amounts due. In addition to payment in full on all accrued unpaid taxes, there is interest owed which runs at 20% per year, as well as accrued penalties. 

For commercial properties, a tax lien holder merely files an affidavit of service with the Treasurer, who then issues that tax lien holder a tax deed. For residential properties, whether owner occupied or not, the lien holder must file a petition in Court in order to foreclose on the lien. A judge must then grant the petition and order the Treasurer to issue a deed. This protective policy in the residential field was instituted in 1986 to protect homeowners from aggressive tax lien holders. Now, tax lien holders cannot take a property owner's property without this additional due process.

The pandemic has not significantly changed this process, but due to the Governor's Executive Orders, extensions have been put in place to protect property owners during this crises. (See Executive Order 202.8). More specifically, all foreclosures, including tax lien and mortgage foreclosures, were stayed until June 20, 2020. The Governor extended the stay to only mortgage foreclosures to August 20, 2020. (See Executive Order 202.28). Moreover, we anticipate another extension for tax lien foreclosures, especially since the statute of limitations under Executive Order 202.39 extended that stay through July 6, 2020.

With that being said, a tax lien holder is in a strong position, despite the stay, as interest continues to run. In addition, there is no compunction to issue discounts, as the charged interest is primarily paid to the County, and cannot be reduced should the tax lien holder agree to be paid less that he/she is entitled to. Finally, the Courts have not shown much sympathy for the delinquent tax payer who has had more than 2 years to resolve the unpaid balance by either refinancing, selling, or borrowing.

These situations require nuanced responses, as every case is different. Our firm is here to review your situation and guide you accordingly.