The running of the statute of limitations is of course a major and continuing problem for mortgage holders – typically encountered not surprisingly in the mortgage foreclosure action itself. But the concept is not confined solely to that arena. Rather, it can apply to what might be seen as peripheral pursuits, for example, the strict foreclosure.
Just as a refresher, the strict foreclosure is an action begun after a foreclosure is completed to dispose of any party who could have been named as a defendant but was not. Afterall, if there is an interest that was not extinguished by the foreclosure, such as a junior mortgage, the new owner takes the property subject to that continuing interest. The strict foreclosure action solves that problem by foreclosing the unnamed party’s right of redemption – giving that party the right to pay the mortgage debt with interest and costs together with the value of all improvements and repairs to the property with taxes and other assessments and costs.
A recent case, 517-525 W. 45 LLC v. Avrahami, 202 A.D.3d 611, 164 N.Y.S.3d 106 (1st Dept. 2022), clarifies the statute of limitations aspect in bringing a strict foreclosure. In that case, the previously unnamed party, the subject of the strict foreclosure, argued that the statute of limitations began to run upon the filing of the original foreclosure action, which would have barred the strict foreclosure. This is understandable; a foreclosure action sometimes can consume six years so that a subsequent strict foreclosure could be beyond that time. Since in a sense the strict foreclosure arises out of the defaulted mortgage and the mortgage foreclosure action, it is not irrational to think that perhaps the statute of limitations began to run at the inception of the foreclosure action itself.
But that is not the law and as the cited case ruled, the six year statute of limitations did not begin to run until the property was sold at the foreclosure sale. Citing the statute and 4 Bergman On New York Mortgage Foreclosures, §32.03, the court observed the application of the strict foreclosure only after a foreclosure has been completed, that is, there has been a sale, with the strict foreclosure curing a defect in the foreclosure judgment.
While there could be danger to a foreclosing party if the statute of limitations for a strict foreclosure commenced at the start of the foreclosure action, since it must await the sale in that action there appears little danger of a statute of limitations barring a strict foreclosure. It is important to be familiar with the principle.
Mr. Bergman, author of the four-volume treatise, Bergman on New York Mortgage Foreclosures, LexisNexis Matthew Bender (rev. 2022), 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.