ECB Lien Confusion Explained
Do ECB liens and judgments attach to a property in the New York boroughs? Can these liens convert to property tax liens? How do I handle them in due diligence? All of these questions are very confusing for the funds and investors buying real estate properties or mortgages. Most of the time, the title search will provide you with a total on ECB liens and violations, but what you don’t know is whether the ECB lien will be removed at the foreclosure or if it will stick to the property.
Let’s start our discussion with ECB lien classification. An ECB violation is not a single lien type but can be classified on subtypes that would behave differently with respect to the type of ECB violation. ECB violations can be bucketed into 3 categories: judgments, violations and emergency repair liens. ECB violations should be filed against the subject property address to attach as a lien. Since the city of New York allows title companies to search by Block and Lot (Address) and owner’s name, some ECB violations may just match by owner and not the address. ECB violations that are matched by the name on the title report and not the address should be treated as a civil judgment lien type which does not survive foreclosure.
Here is an example below:
Let’s start our discussion with ECB lien classification. An ECB violation is not a single lien type but can be classified on subtypes that would behave differently with respect to the type of ECB violation. ECB violations can be bucketed into 3 categories: judgments, violations and emergency repair liens. ECB violations should be filed against the subject property address to attach as a lien. Since the city of New York allows title companies to search by Block and Lot (Address) and owner’s name, some ECB violations may just match by owner and not the address. ECB violations that are matched by the name on the title report and not the address should be treated as a civil judgment lien type which does not survive foreclosure.
Here is an example below:
ECB violations matched by address should be reported as municipal liens, independent of what name the lien is against as the name could be misspelled in the City of New York ECB database.
ECB judgments by address on a current owner can be reported either as a civil judgment removable by foreclosure or municipal liens attaching to the property. ProTitleUSA reports these as municipal liens at all times, due to the fact that they can become tax liens at any point in time, once transferred to the Dept. of Finance, hence they would then attach to the property. Here is the interesting point that should be considered in due diligence: if the foreclosure happens within a year of mortgage acquisition, while the ECB judgment was not converted to a tax lien, the ECB judgment is wiped off from the property. But, if the ECB judgment was a judgment at the time of acquisition and was converted to a tax lien before the foreclosure, the ECB judgment converted to a tax lien would attach to the property and would need to be paid off. In ProTitleUSA’s opinion, the date of an ECB judgment is important to track in due diligence to estimate the risk on purchase, assuming ECB judgments will take at least 1-2 years to be converted to tax liens.
ECB judgments by address on a current owner can be reported either as a civil judgment removable by foreclosure or municipal liens attaching to the property. ProTitleUSA reports these as municipal liens at all times, due to the fact that they can become tax liens at any point in time, once transferred to the Dept. of Finance, hence they would then attach to the property. Here is the interesting point that should be considered in due diligence: if the foreclosure happens within a year of mortgage acquisition, while the ECB judgment was not converted to a tax lien, the ECB judgment is wiped off from the property. But, if the ECB judgment was a judgment at the time of acquisition and was converted to a tax lien before the foreclosure, the ECB judgment converted to a tax lien would attach to the property and would need to be paid off. In ProTitleUSA’s opinion, the date of an ECB judgment is important to track in due diligence to estimate the risk on purchase, assuming ECB judgments will take at least 1-2 years to be converted to tax liens.
ECB judgments by address on a prior owner should be reported as municipal liens as we would be unable to determine if the judgment has attached to the property or not.
Emergency Repair Liens will be interpreted as Code Enforcement or Unsafe Living Conditions, as these types of liens would impact the property condition and property value. Emergency repair charges could appear on the property tax bill if the city hired a contractor to fix the violations and non compliance. Those violations are placed against the owner and the property in the case when owners do not correct emergency violations. New York City will bill the property through the NYC Department of Finance (DOF) for the cost of the emergency repair plus related fees and/or for the cost of sending a contractor to attempt to make repairs. If the owner fails to pay, the city will file a tax lien against the property. The tax lien will bear interest and, if it remains unpaid, may be sold and/or foreclosed to collect the amount owed.
Emergency Repair Liens will be interpreted as Code Enforcement or Unsafe Living Conditions, as these types of liens would impact the property condition and property value. Emergency repair charges could appear on the property tax bill if the city hired a contractor to fix the violations and non compliance. Those violations are placed against the owner and the property in the case when owners do not correct emergency violations. New York City will bill the property through the NYC Department of Finance (DOF) for the cost of the emergency repair plus related fees and/or for the cost of sending a contractor to attempt to make repairs. If the owner fails to pay, the city will file a tax lien against the property. The tax lien will bear interest and, if it remains unpaid, may be sold and/or foreclosed to collect the amount owed.