New York Zombie Law Claims Dismissed Against Financial Services Provider
Case Study

New York Zombie Law Claims Dismissed Against Financial Services Provider

May 20, 2021

Goldberg Segalla earned a dismissal in favor of a financial services provider and its loan servicer in a first-of-its-kind Zombie Property Remediation Act (Zombie Law) and Real Property Actions and Proceedings Law (RPAPL) § 1307 claim.

In this matter, the plaintiff entered the premises of a property, as part of his official police duties, to determine if anyone was located inside the premises prior to it being boarded up. Upon arriving, he saw a broken window and attempted to enter the premises through the window when he fell and was injured. The plaintiff then brought a lawsuit against our client for his failure to maintain the property pursuant to RPAPL § 1307.

The property was previously foreclosed upon by their lender. The financial services provider purchased the property at a foreclosure sale and had equitable title to the property. However, the plaintiff was injured on the property before our client was provided with the deed and legal title.

Although the plaintiff alleged facts suggesting the financial services provider may have had an obligation to maintain the property until the deed for the sale was recorded on Sept. 7, 2017, the court found that there was no private right of action under which the plaintiff can recover under the Zombie Laws. Despite the clear language of § 1307, the plaintiff further argued that the New York State Appellate Courts have already held that personal injury plaintiffs, who had been injured at a property as a result of the mortgagee’s failure to maintain that property under § 1307(1), have a right to bring a private cause of action against the mortgagee bank.

Marc W. Brown, vice-chair of Goldberg Segalla’s Commercial Litigation and Arbitration group, argued that the financial service provider is an out-of-possession mortgage holder and had no duty to the plaintiff to maintain the property under the Zombie Laws because it did fall into one of the designated classes identified as a statute. He further argued that the plaintiff failed to provide seven days of notice to our client prior to filing its claim as required under § 1307(3) and failed to name the previous owners as defendants of the matter, despite the fact that they were still legal owners at the time of the accident.

On March 19, 2021, the U.S. District Court for the Southern District of New York agreed and held that the protections of the Zombie Laws, which were designed to ensure that foreclosure properties were properly maintained, did not extend to third parties such as the plaintiff and his personal injury claims.

MORE ABOUT GOLDBERG SEGALLA’S COMMERCIAL LITIGATION AND ARBITRATION GROUP:

Mindful of the costs and interruption to business that litigation brings, Goldberg Segalla aims to avoid it whenever possible by employing creative and results-oriented pre-suit negotiations and pre-answer motions to resolve disputes before they become full-fledged litigations. However, when litigation becomes necessary, our seasoned litigators and trial attorneys utilize business-minded strategies designed to achieve our client’s desired outcome in the most effective and expeditious way possible. We draw on our decades of collective experience handling commercial disputes of all sizes for businesses, senior executives, investors, financial institutions, and nonprofits in complex matters that often span a multitude of jurisdictions.