Inevitable: More Lender Problems With Maintenance Requirement


15 December, 2016


Mortgage Lender and Servicer Alerts

Our alerts (and articles) inveigh against the lender maintenance obligation in New York foreclosure actions and yet another case confirms our concern.  [Wells Fargo Bank v. Vuksanovic, 13963/08, NYLJ 1202757352318 at 1 (Sup., WE, 4/26/16), Lubell, J.]   The bank happened to win, but it suffered the time and expense of the assault, just what the maintenance obligation foments. (RPAPL §1307)  Not incidentally the new maintenance requirement effective December 20, 2016 imposing the repair mandate at the inception of a foreclosure (if the property is abandoned) will only exacerbate the situation.

As the briefest review of the existing law (the focus of the new case), when a residential foreclosure reaches the judgment stage, should the property be vacant, or occupied by a tenant but abandoned by the borrower, the mortgage holder at that moment becomes liable for maintenance – of the mortgaged premises which it does not own.   And it becomes liable for accidents at the premises [see actual nightmare scenario related in “Lender Liable for Fire Death at Mortgaged Premises”, New York Law Journal, December 17, 2014, at 5, col. 2’ “Lender Victimized by Negligence Suit…In a Foreclosure Action?”, 26 Servicing Management 14 (February 2015).] and there are any number of people and entities which can enforce the maintenance mandate, a tenant or a local municipality for example.

The new case is an instance of a surprising source attempting that enforcement:  a condominium!

This was a foreclosure of a condo unit and the board decided that maintenance (presumably the obligation of the foreclosing lender) included condominium common charges.

We need not belabor this alert with all the details of the condo’s assertions, but it can be observed that the condo had not demonstrated that maintenance encompasses paying common charges, and the court ruled that such an exploration was premature in any event because the judgment in the case had not yet issued.  This suggests that the condo may be back to again to assail the lender, and that returns us to the real point of this exploration.

In addition to its other faults, the maintenance scenario opens the door for a host of sources to seek enforcement.  Even if their attempts are fanciful, the foreclosing plaintiff must incur the time and expense of the litigation.  Lenders will correctly wonder whether the mortgage contract ever contemplated such a scenario.

Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2017), is a partner with Berkman, Henoch, Peterson, Peddy & Fenchel, P.C. in Garden City, New York. He is also a member of the USFN, The American College of Real Estate Lawyers, The American College of Mortgage Attorneys, an adviser to the New York Times on foreclosure issues and writes a regular servicing column for the New York Law Journal. He is AV rated by Martindale-Hubbell, his biography appears in Who’s Who In American Law and he has been for years listed in Best Lawyers In America and New York Super Lawyers.