Jason Bergman spoke on lender liability and foreclosed property. He noted an uptick in foreclosure activity, and we expect more within the next few months. The question that comes up is “what is the state of title after the foreclosure sale but before the deed is delivered?”
The foreclosure sale is conducted by the referee and sold to the successful bidder. At this point, this is not a conveyance of title, merely a step towards the conveyance. It is unlikely that the referee executes the deed within the next 30 days and may not execute the deed for over a year afterwards. Who owns the property? Who is liable for damage or injury? Until the deed is delivered, the successful bidder is possessed only of equitable title, not legal title.
Barret v. Pellerano 2020 NY Slip OP 32026, case from Bronx County. 2018, JFS entered foreclosure sale in March of 2019. The assignee lender is the successful bidder and the grantee in the referee’s deed. Sometime afterwards, the foreclosed owner and the foreclosing lender were sued by a plaintiff who was injured at the premises before the referee’s deed was actually executed. The Court grants the lender’s motion for summary judgement to dismiss the action because the foreclosed owner still had legal title. Divestment of title does not occur upon the sale, but upon delivery of the deed. Referee’s deed was not executed until 1 month after the injury took place. At the time the hammer falls, the borrower remains the fee owner until the referee’s deed is executed.