The uptick in commercial foreclosures, combined with the still-lingering pandemic-induced delays, has created an environment, particularly in judicial foreclosure states, where delays in sales pursuant to judgments of foreclosure should be expected or parties should at least plan for the possibility of such delays. These delays will create issues for New York foreclosures due to the state’s 90-day deadline to conduct the foreclosure sale.
Under New York law, a foreclosure sale must occur within 90 days of the court’s entry of judgment in favor of the foreclosing lender.1 Upon entry of such judgment, the lender must arrange for the foreclosure sale and auction to occur at the courthouse, which puts the lender at the mercy of the courthouse’s scheduling limitations. In the current environment, lenders may be unable to arrange the foreclosure sale within the statutory time period.
While this statute may appear to put a foreclosing lender into a bind and effectively risk the benefit of the foreclosure judgment, New York law also provides lenders with a way around the 90-day deadline. Since the statute creating the deadline does not forbid courts from providing extensions to this deadline, New York courts can grant extensions for good cause,2 and notably, judgments will sometimes include an automatic extension of the 90-day deadline in the event the courthouse is unable to schedule the sale within 90 days. Additionally, lenders can request these extensions even after the 90-day time period has passed, although it’s preferable for lenders to request such an extension before the time expires.
The availability of an extension, however, is not a guarantee that the court will grant an extension. Lenders should still exhibit diligence and take care to move expeditiously through the foreclosure process, because the owner being foreclosed upon always has the opportunity to object to a lender’s requested extension. If a borrower can show the court good cause why an extension is not appropriate, then the court may deny the lender’s request. An owner’s best avenue to object to the extension is to show both that the delays in conducting the foreclosure sale will prejudice substantial rights of the owner and that the delays were caused by the lender, and not simply the result of unavoidable delays. Conversely, the lender will want to show that it acted diligently but that the delay was the result of factors beyond its control, such as schedule congestion at the courthouse or a bankruptcy filing by the owner. If the extension is not granted, and the sale occurs outside the 90-day period, then the court will have discretion to vacate a completed foreclosure sale, although it appears such vacaturs are relatively rare as courts are inclined not to revisit their judgments of foreclosure.
Because the court has discretion for whether to grant the extension, lenders should act diligently to ensure that foreclosure sales are scheduled as early as possible, and document that any delays are not within their control. Owners, on the other hand, should aim to document any losses as a result of delays beyond 90 days, as owners who suffered losses as a result of the delay could seek to hold the foreclosing lender responsible for delay losses in the event the lender tries to recover under a guaranty or similar agreement after foreclosure.
N.Y. RPAPL § 1351(1).
N.Y. CPLR 2004.