July 01, 2015 Urban Lawyer

Attack of the Zombie Properties

by Marissa Weiss

Marissa Weiss is currently a law student focusing on environmental and land use law at Pace Law School, where she is a research assistant to Professor John R. Nolon of the Land Use Law Center. She expects to graduate in 2017 with a J.D. and Certificate of Environmental Law from Pace, as well as a M.E.M. from the Yale School of Forestry & Environmental Studies. This article is submitted on behalf of the Distressed Properties Sub-Committee of the Land Use Committee of the American Bar Association Section of State and Local Government Law.

The Great Recession of 2008 has ushered in a new reigning problem and hot topic in the world of distressed property. This problem is marked by empty buildings, some in utter disrepair, and most entirely abandoned. Zombies, vampires, and other things that go bump in the night still plague some properties. The real estate market is well immersed in its own American horror story.

Zombie properties are properties that have been abandoned in the wake of foreclosure; however, the foreclosure process is never completed. Therefore, the zombie title owner still legally possesses the property, although they are not taking responsibility for it. Specifically, New York State is currently struggling with its own zombie invasion and its current laws that govern foreclosures. Section 1307 of the New York Real Property Actions and Proceedings Law states that a foreclosing entity only becomes responsible for a property’s maintenance once a judgment of foreclosure and sale is obtained.1 Often, the title owner assumes that the beginning of a foreclosure process signals that the lender (often the bank) is assuming responsibility for the property and that they must immediately vacate the property.2 This assumption fails to account for the fact that foreclosure processes are rarely timely and often take years to complete by obtaining a judgment of foreclosure and sale; some foreclosure processes are never completed.3 While the process moves along, the bank — which holds the lien on the property — will normally pay the taxes on the land to stop the municipality from regaining title to the property, but this is often where their involvement ends.4 As the property continues to degrade, representing potential safety concerns as well as surrounding property value depreciation, this lone property stands in a limbo be- tween life and death — between being owned and cared for and being completely ruined.5

As of January 2015, the database RealtyTrac estimated that there are 142,462 zombie properties in the United States.6 While the total number of zombies is down by six percent from 2014, the share of foreclosures represented by zombies is up from twenty-one to twenty-five percent.7 New York is the third most zombie-infested state with 16,777 total properties, behind Florida (35,903) and New Jersey (17,983).8 This massive inventory hurts the housing market, makes banks less willing to lend money for mortgages, and puts the onus entirely on cash-strapped municipalities to clean up these blighted properties.9 It is no wonder that this problem has caught the attention of the New York legislature; Attorney General Eric T. Schneiderman has called for action, stating that combatting zombies is a “no brainer” for the state.10

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