- May 30, 1996
- All New York Branch Managers, Counsel and Agents
- Tax Lien Sales in the City of New York
Pursuant to the enactment of Local Law 26, which was signed into law by Mayor Guiliani on March 18, 1996, certain sections (11-301 et al) of the Administrative Code of the City of New York relating to tax lien sales were amended (and other sections repealed) which could have a significant impact on real estate transactions involving property located within the City of New York. The purpose of this bulletin is not to describe the new law in great detail, but only to apprise you of its existence and recommend that you use caution in setting up tax searches in title reports where tax lien sales are involved.
Pursuant to the amendment, where a tax lien on a property has remained unpaid, in whole or in part, for one (1) year or more, such property is eligible for inclusion in a sale of such liens by the City of New York (unless it is a class 1 or 2 property that is a residential, condo or cooperative, in which case the open tax liens must be at least three (3) years old before such property can be included in the sale).
A list of the properties that were eligible for inclusion in the first tax lien sale was published on March 19, 1996 and the first sale took place on May 21, 1996. We have been advised that although this first group of tax liens was transferred to a trustee who will ultimately convey them to a private party, none of the private transfers has yet been effectuated.
Although the statute provides for the recording of lax lien sale certificates in the land records and for the maintenance of a record of such certificates in the Office of the Commissioner of Finance, it is our understanding that these procedures have not yet been implemented. At present, once the tax liens are sold, the City's Fairtax system will "zero out" the open tax balance so that anyone looking at a tax bill from the Department of Finance, would conclude that there are no open taxes against the property. This will be very misleading to a title closer or purchaser's attorney who might rely on the bill as proof that all prior taxes have been paid by the owner. Consequently, you should not rely on a tax bill showing no open items as evidence that prior taxes have been paid by the owner or that they are no longer a lien against the property. The tax searcher, title reader or clearance officer must look at the tax account history (in the City Fairtax computer system) of the property in question which will show whether a tax sale transaction has taken place. We have been advised that such a tax sale would be identified by a "Code 810" entry on the account history.
Furthermore, until the statutory procedures relating to the recording of these certificates is operational, where a tax search indicates that a tax has been paid by or through a tax sale, the following exception must be raised in the title report:
Tax search indicates that the (tax year) (tax half or quarter, etc.) tax lien was sold by the City of New York pursuant to a tax lien sale. Unless the amount of the lien and any subsequent taxes paid by the tax lien buyer, together with interest and surcharges due thereon, is paid in accordance with the provisions of Sec. 11-332 of the N.Y.C. Administrative Code, the buyer of the tax lien may commence an action to foreclose such lien. In the event that payment is not made and the tax lien is not canceled, policy will except all loss or damage by reason of such tax lien and/or the foreclosure thereof.
Please make sure that the tax search on all titles includes a review of the tax account history so that any tax sale that may have taken place can be discovered.
Should you have any questions regarding this matter, please do not hesitate to contact Company Counsel.
THIS BULLETIN IS FURNISHED TO INFORM YOU OF CURRENT DEVELOPMENTS. AS A REMINDER, YOU ARE CHARGED WITH KNOWLEDGE OF THE CONTENT ON VIRTUAL UNDERWRITER AS IT EXISTS FROM TIME TO TIME AS IT APPLIES TO YOU, AS WELL AS ANY OTHER INSTRUCTIONS. OUR UNDERWRITING AGREEMENTS DO NOT AUTHORIZE OUR ISSUING AGENTS TO ENGAGE IN SETTLEMENTS OR CLOSINGS ON BEHALF OF STEWART TITLE GUARANTY COMPANY. THIS BULLETIN IS NOT INTENDED TO DIRECT YOUR ESCROW OR SETTLEMENT PRACTICES OR TO CHANGE PROVISIONS OF APPLICABLE UNDERWRITING AGREEMENTS. CONFIDENTIAL, PROPRIETARY, OR NONPUBLIC PERSONAL INFORMATION SHOULD NEVER BE SHARED OR DISSEMINATED EXCEPT AS ALLOWED BY LAW. IF APPLICABLE STATE LAW OR REGULATION IMPOSES ADDITIONAL REQUIREMENTS, YOU SHOULD CONTINUE TO COMPLY WITH THOSE REQUIREMENTS.