NY towns can sue banks for vacant homes' upkeep

Towns and cities across the state are spending millions of dollars to maintain vacant foreclosed homes despite a law that allows them to sue banks to recover those costs, according to a report by New York State Comptroller Thomas DiNapoli.

In a downstate region that includes Long Island, according to the comptroller's report, fewer than one in 10 towns surveyed knew about the law. None of the 11 Long Island municipalities surveyed had sued a bank under the state law, the comptroller found.

The report, scheduled for release Thursday, is intended to raise towns' awareness of the 2009 law, DiNapoli said.

The comptroller's report comes as foreclosures on Long Island continue to decline. In another report scheduled for release Thursday, data provider RealtyTrac reported that in February, 223 foreclosure-related documents were filed in Nassau County, down 41 percent from a year earlier. In Suffolk, 215 foreclosure documents were filed, nearly 51 percent fewer than a year earlier.

Cities and towns spent an estimated $15 million to $29 million maintaining foreclosed properties in 2010, according to the comptroller's survey of 105 municipalities in 23 counties hard hit by foreclosures. Only two-thirds of towns reported that they fully recovered their costs.

Some 40 percent of towns have used local laws to hold banks responsible for costs, according to the comptroller. The state law, DiNapoli said in an interview, "can actually in some cases be a more efficient way to recover the costs."

In response, town and housing attorneys said the law doesn't apply in all situations.

In a 2010 case, a Suffolk County District Court judge ruled that IndyMac Bank, the lender on a half-completed home in the Town of Huntington, couldn't be sued by the town to secure the structure. The new state law applies only to properties that have received a judgment of foreclosure -- a process that hadn't been completed, said A.J. Carter, a spokesman for the town.

It can take years for a foreclosure action to reach the judgment stage, when the state law kicks in, said Michael Wigutow, supervising attorney at Nassau/Suffolk Law Services.

Some banks argue they are not responsible for maintenance of homes whose mortgages have been sold to investors. Deutsche Bank is the owner of record of a four-bedroom house in Huntington village, according to the Town of Huntington's website. Last year, a tree fell on the house, breaking windows and punching a hole in the roof, said broker Barbara Wanamaker. The home went into contract on March 1, said Wanamaker, who handled the sale.

A spokesman for the bank said, "As trustee for the trusts of residential mortgage-backed securities, Deutsche Bank is not responsible for the maintenance of foreclosed properties."