One year in, cities adapt to ‘zombie’ property law

One year in, cities adapt to ‘zombie’ property law

A little over a year after state legislation aimed at curbing the scourge of “zombie” properties took effect, some cities say they’ve benefited from its reforms, even as the state agency tasked with oversight has appeared slow to carry out aggressive enforcement actions.

The law requires banks or mortgage servicers to inspect homes associated with delinquent loans and, if upon repeated visits the homes are deemed vacant, to secure and maintain them throughout the foreclosure process. Lenders must also register the properties with the state Department of Financial Services, which maintains a database accessible to local officials.

The law has teeth: DFS or localities can fine mortgagees $500 per day for failure to uphold these obligations. While the state only secured its first fine last month, localities had notified the state of nearly three dozen enforcement actions in the law’s first year, a DFS spokesperson told The Alt.

Before the law was adopted, lenders only had to maintain vacant properties following judgments of foreclosure and sale. This may have incentivized banks to delay foreclosing on abandoned homes, allowing them to deteriorate and drag down surrounding property values.  

The Alt asked the four major Capital Region cities—Albany, Schenectady, Saratoga Springs, and Troy—how, if at all, they have used or interacted with the zombie legislation since it took effect.

Robert Magee, director of the department of buildings and regulatory compliance in Albany, said the law has led to an uptick in responsiveness from lenders. Now, when financial institutions move to take over properties, they are more likely to inquire with the city about open code violations, he said.

Albany has also brought enforcement actions against mortgagees under the new law. David Gonzalez, an attorney in the city’s law department, said the city currently has eight open cases brought under section 1308 of the Real Property Actions and Proceedings Law.

“The problem that [RPAPL] 1308 solved was that it allows us to cite someone who doesn’t necessarily own the property but who is in the process of foreclosing on it,” Magee told The Alt.  

Magee said the city has accessed the zombie property registry but does not consult it on a regular basis. The list, he explained, will never be the definitive guide to every abandoned building in Albany, given its somewhat narrow focus—abandoned homes in the midst of mortgage foreclosure. There’s also an issue with the registry staying up to date: “Too often the Department has found that properties listed in the registry are either no longer subject to the law or the servicing rights have transferred to another servicer,” DFS said in its recent memo to industry.

Albany’s grant-funded neighborhood stabilization coordinator, Sam Wells, recently compiled a more comprehensive tally of vacant properties in Albany (there are 1,044). Magee says the city will continue to develop a comprehensive, interdepartmental approach to the issue.

In Schenectady, officials said the “zombie” registry has made it easier to track down lenders’ contact information. The city has not yet brought any enforcement actions under the law, but it has brought about two dozen cases in the past year under an older, somewhat arcane statute that allows municipalities to foreclose on properties that are not being maintained, even if taxes aren’t owed. Through these “abandonment proceedings,” Schenectady has taken title to about 10 properties, corporation counsel Carl Falotico told The Alt.

“Not a lot of municipalities have been using that because it’s been a cumbersome law,” Wade Beltramo, general counsel to the New York State Conference of Mayors, said of the law, RPAPL Article 19-A, which dates to the 1980s. Beltramo said he might ask Schenectady to write a bulletin for NYCOM’s members about how the city used it successfully.

In Saratoga Springs, code enforcer John Donnelly said the city has accessed the zombie registry one time since August, but that the city had already found the same information on its own. “We hope next month the info we are looking for is new,” he said.

A spokesman for the city of Troy did not return requests for comment.

Statewide, approximately 130 public officials or municipalities have requested access to the registry, according to DFS. And through Oct. 27, the state zombie property hotline fielded nearly two dozen calls per week in 2017, according to data obtained by The Alt through a Freedom of Information Law request.


In Western New York, the city of Niagara Falls—thanks to a grant through the nonprofit Local Initiatives Support Corporation—established a position solely focused on the new legislation.

Christine Marino, the city’s “Zombie Fight Project Coordinator,” has created a digital checklist based on the law that she consults when visiting properties with code enforcement. She spends a substantial amount of time corresponding with banks and servicers, notifying them of code violations or other obligations under the new law.

“Honestly, I don’t know if other municipalities could have success with this if they do not have dedicated staff,” Marino said. “It’s a lot of work.”

The law and its corresponding regulations are complex, and questions on its specifics from industry and localities continue to crop up, according to a trove of emails between DFS and local officials and lenders from September and October obtained by The Alt through a FOIL request.

The state Business Council, which opposed the legislation, continues to believe the pre-ownership obligations imposed on banks are unfairly burdensome, especially since foreclosures in New York can take several years.

“I think it’s pretty unclear if there has been a real, beneficial result,” Lev Ginsburg, the council’s director of government affairs, said of the law. “You’re putting banks in the business of property maintenance…when they don’t even own the property.”

For its part, DFS “continues to work with local officials, municipalities and the industry to educate and ensure compliance,” the agency said in a statement.

Wade Beltramo, NYCOM’s general counsel, expressed hope that certain parts of the law will be clarified and strengthened in the future. One potential amendment: allowing municipalities to request court orders directing lenders to either expeditiously complete foreclosures or release the mortgages in question.

“It’s not a panacea,” Beltramo said of the current zombie legislation. “Having said that, it is a substantial improvement over what was in place before.”

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