State lawmakers trying to block NYC plan to sell delinquent homeowners’ tax debts

A new state bill would block the de Blasio administration from selling overdue taxes owed by delinquent property owners for debt collection or foreclosure amid the coronavirus pandemic.

Mayor Bill de Blasio and the city Finance Department postponed a lien sale scheduled for May on the outstanding taxes, citing the COVID-19 outbreak.

But the city has rescheduled the sale for as early as Sept. 4 for the tardy property taxes and water and sewer fees on some 9,500 residential and commercials properties, according to Finance Department records.

Once a lien is sold, property owners must arrange a payment agreement with the lien servicing company — plus interest — or risk a legal seizure of their property. Foreclosure can be initiated six months and 30 days after the sale of the tax lien if the property owner makes no attempt at offering a repayment plan, according to Tower Capital Management, one of the city’s debt collectors on purchased liens.

The owners of properties eligible for the tax lien sale have until Sept. 3 to fully pay their debt, enter into a payment agreement with the Department of Finance or seek a hardship exemption, the department said.

But state Sen. Leroy Comrie and Assemblyman David Weprin, both Queens Democrats, argue it’s wrong to threaten squeezed homeowners during the public health crisis.

They have introduced a bill that would bar the city from holding a lien sale until one year after Gov. Andrew Cuomo lifts the emergency order declaring that the pandemic is over.

“Homeowners facing the lien sale need ample time to consult with attorneys, enter into payment agreements, and learn about exemption programs ahead of the sale,” Comrie said.

“COVID-19 has made this all but impossible to do on the scale that we need it to happen. The tax lien sale can’t happen this year, and I’m going to raise hell between now and September 4th to see to it that it doesn’t.”

Comrie’s Southeast Queens district has as many as 600 properties whose tax debts could be put up for sale. The state senator noted that his district his comprised largely of one-and-two family homes that were hard hit by the subprime mortgage crisis a decade ago. Many property owners are still recovering from that devastation, he said.

Said Weprin: “With thousands in our city struggling with the economic effects of the COVID-19 pandemic, including many homeowners in my Assembly district and across Queens, it is absolutely unconscionable to hold the tax lien sale in 2020.”

Housing advocates agreed with postponing the lien sale, which they argue threatens homeownership and destabilizes working neighborhoods amid a recession triggered by the pandemic.

“Now is not the time to amplify housing insecurity in communities of color or among seniors,” said Ivy Perez, spokesperson for the Coalition for Affordable Homes, which represents over 30 housing advocacy organizations. “Those same communities, most of them low- or moderate-income, have been hardest-hit by COVID-19, and the tax lien sale threatens to further destabilize them.”

The lien sale is a last resort after city officials make numerous attempts to get deadbeat property owners to pay up.

The Finance Department sends out four warning notices to property owners starting three months prior to the lien sale, alerting them their property could end up on the list.

Typically, more than 80 percent of owners pay the full amount owed, enter into a payment agreement or obtain a hardship exemption to remove them from the list, the Finance Department said.

Under the current program, the Finance Department sells the tax lien annually in bulk to city-owned trusts, who then issue interest-earning bonds secured by tax lien certificates to institutional investors. The lien certificates are secured by the delinquent properties. The purchasers of the liens then hire debt collectors to collect the outstanding taxes.

When de Blasio agreed to postpone the annual lien sale earlier this year, he said: “We must build a fair and equitable recovery for the working people of our city… Postponing the lien sale will give some relief to those struggling to make ends meet, and more time for New Yorkers to apply for our hardship programs.”

The Finance Department and the mayor’s office had no immediate comment on the proposed state law.

It was unclear how much property owners owed the city. In 2017, homeowners owed $186 million and nearly $800 million was outstanding on all properties.

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