Tax Liens

The Importance of Saving Proof of Payment

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In 1994, tax payments were made to the NYC Department of Finance for several parcels of real property by a client.  In 2001, unbeknownst to the client, the Department of Finance unilaterally reversed the payments made, added interest, created tax liens, and bundled up the liens for public auction sale.

My firm commenced an action against the City of New York in 2002, after learning of the tax lien sales, to declare that the payments made in 1994 had truly been made, and that the Department of Finance acted without authority in reversing the credits.  Luckily for the client, he saved the receipts issued by the Department of Finance when he made the payments in 1994 (which receipts are stamped onto the tax bills and actually given to the taxpayer).

The case culminated with the City of New York agreeing to reverse all of the unauthorized charges in 2001, reversing the tax lien sales, and clearing the tax delinquencies on the client’s account.  A win!

What does this teach?  The importance of retaining proof of payment in various situations.  Here, proof of payment was crucial in winning the case.

Common proofs of payment include a check or credit card statement showing that the bill was paid.  Other forms of proof may be a store receipt, credit card receipt, or paid invoice.  If cash is tendered, a signed receipt should be obtained.

The general rule of thumb is that most business records should be maintained for safekeeping for seven years.  Many advocate saving records for much longer, if feasible given space considerations.

The ability to prove payment of a debt or bill comes in handy in various situations, including:

  1. Many parents pay the custodial parent their child support payments by cash.  Sometimes, the custodial parent has kept poor records and will allege non-payment.  The burden of proving payments will fall upon the person charged with making the support payments.
  2. Distribution companies, such as food wholesalers, will have the drivers pick up payments at the time of making delivery of goods.  The driver may not account for the payments and the store will be forced to show payment of the invoices.
  3. Tenants of smaller rental buildings or two-family houses will pay the landlord (who generally lives at the building) by cash and fail to obtain a rent receipt.  Afterwards, the landlord may commence an action for non-payment in the Housing Court and the tenant will be without proof of payment of the rent.

Since the general burden of proof of payment falls upon the person liable for the same, it is crucial that proof be obtained at the first instance and maintained.  This will ensure that later mistakes or intentional denials of payment are disproved.

copyr. 2014 Richard A. Klass, Esq.
The firm’s website: www.CourtStreetLaw.com
Richard A. Klass, Esq., maintains a law firm engaged in civil litigation in Brooklyn Heights, New York.
He may be reached at (718) COURT-ST or e-ml to RichKlass@courtstreetlaw.comcreate new email with any questions.
Prior results do not guarantee a similar outcome.

R. A. Klass
Your Court Street Lawyer

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The Sale of New York City Tax Liens at Auction

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Almost every parcel of real property within New York City is assessed taxes on an annual basis. When these real estate taxes are not paid, tax liens are created by law which “attach” to the property. The tax lien, similar to other liens, serves as notice to the public that the City has a claim against the property. Traditionally, New York City was enabled by statute to bring “in rem” proceedings to foreclose on the lien and, thus, become the owner of the property.

In 1996, New York City’s Administrative Code was amended to include an article permitting the City to sell at auction these real estate tax liens. This was done partly to shift the administrative burden of collecting the tax liens outside of the City’s system; it was also partly done to get the City immediate money from the sale of the liens from third parties.

The change of process from “in rem” proceedings to the sale of tax liens, affects owners of real property against which tax liens exist in important ways:

  1. Unlike in the past, where the City may have been perceived as almost lethargic in collecting the tax arrears, this new process motivates the purchaser of the tax lien to immediately take action to collect on the lien, including the bringing of a foreclosure action in the Supreme Court in the county in which the property is located.
  2. The statute gives the purchaser of the tax lien a high rate of interest on the tax lien until paid, plus an award of reasonable attorney’s fees and expenses for the prosecution of the foreclosure action.
  3. Once the tax lien is sold, it is removed from the records of the City. Unless the homeowner inspects the tax lien records in the City Register’s office, the tax lien information will not appear on the owner’s tax bill. This may cause confusion, with the assumption that no older tax arrears are due.

Prior to the sale of a tax lien, the City is required to provide notice to the owner of the subject property and to the public. The owner will be sent notice by mail at the registered address for such owner (which, in some cases, may be different than the property’s address). The public will receive notice by virtue of advertisements of the sale published in newspapers.

Once the tax lien is sold, the purchaser will send notification to the owner of the property. Further, the purchaser will afford the owner the opportunity to satisfy the lien prior to the commencement of a foreclosure action. In the event that payment is not made, a foreclosure action will be commenced for the unpaid tax arrears as indicated in the tax lien, along with a request for interest and attorney’s fees. After a Judgment of Foreclosure is entered, the property will be auctioned off to first satisfy the lien and, then, to pay off junior lienors. Any surplus moneys left over will be turned over to the owner of record.

by Richard A. Klass, Esq.
©2003 Richard A. Klass

 

This article was originally published in the legal newsletter LawCURRENTS.
Prior results do not guarantee a similar outcome.

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Article Title:
The Sale of New York City Tax Liens at Auction


Author Name:
Richard A. Klass, Esq.


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About the Author:
Richard A. Klass, Esq. maintains a law firm engaged in civil litigation at 16 Court Street, 28th Floor, Brooklyn Heights, New York. He may be reached by phone at (718) COURT-ST [(718) 268-7878)] or by email at RichKlass@courtstreetlaw.comcreate new email with any questions. Prior results do not guarantee a similar outcome.


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