A bill sponsored by State Sen. Timothy M. Kennedy and Assemblyman Sean M. Ryan to give the City of Buffalo millions in surplus money from its annual property auctions has been amended to require the city to notify the foreclosed property owners that the money belongs to them.
Also, under the revised measure, the city would only be able to claim excess proceeds from the sale of nonowner-occupied properties.
The change comes after a story in the Nov. 26 editions of The Buffalo News revealed that $11.6 million in excess proceeds auctions, going back to 2009, sit unclaimed, and the city does not tell owners they are entitled to the money.
SEARCHABLE DATABASE: Buffalo property auction surpluses, 2009-14
The two Buffalo Democrats announced the changes to the legislation on Wednesday.
“We weren’t aware of the notification problems,” Kennedy said. “With any legislation, as you find things out, you make changes.”
If the amended legislation passes, the city will have to notify property owners before and during the foreclosure process of the possibility of surpluses and their right to claim them. And when a property is auctioned off, the city then would have to inform the former owner of the selling price and any leftover money, Kennedy said.
Assemblyman Michael P. Kearns also announced similar legislation but with a caveat: The notification should be retroactive to 2009.
“I believe it’s still the responsibility of the city to let those people know about the money as well,” he said.
Additionally, he is calling for a simplification to the lengthy legal process to claim the surplus, which can take months.
The city supports the changes to the Kennedy-Ryan bills but even if they fail, “we’ve said previously the city will take steps to notify in the future,” said Mike DeGeorge, the city’s spokesman.
Common Council President Darius Pridgen said the Common Council will adopt a resolution in the coming weeks to improve the city’s handling of surplus money from foreclosure auctions.
“I think we are all going down the same road. We’re all on the same page,” Pridgen said.
Yvonne Young, a Buffalo resident who lost her home in 2012 but only learned of her $64,535 surplus last week from The Buffalo News, said the change would “be a good thing because the money could help former owners get back on their feet quicker.”
“If I’d known about the money in 2012, it would’ve helped us get caught up on bills, and we would’ve been better prepared for my daughter’s college expenses,” the 47-year-old said. “It just would’ve been less of a struggle for my family.”
Each year, the city sells the properties of owners who are delinquent on their taxes and utility fees at its in-rem auction. In recent years, sale prices have gone through the roof. Speculators, investors and immigrants seeking low-cost housing have turned the auction into a high-stakes event, with homes that would have gone for $5,000 in the past fetching $40,000 and more. In 2009, a slate of 826 properties went for $4.6 million, and excess proceeds totaling $1.1 million remained on 158 properties. Five years later, 808 properties generated $9.2 million in sales, and 324 of them netted surpluses with a sum of $4.6 million.
But the city is only entitled to the back taxes and fees owed on the property with a large number of properties fetching more than the tax debt. Former owners, lienholders and judgment creditors can claim the money. With the city mum about the surplus, it has grown to $11.6 million from the sale of more than 1,200 properties on more than 500 streets across the city. The average surplus is about $9,600 and the largest is almost $150,000.
Changing the law would put Buffalo on par with Rochester and other cities that are diligent about notifying homeowners of surpluses. But those cities have had local laws that govern their foreclosure processes since the mid 1990s when the state allowed municipalities to create their own. While Rochester and Syracuse implemented their own statutes, Buffalo opted for the state’s guidelines, which do not address surplus funds. So going back to the early 1980s when it began holding in-rem auctions annually, Buffalo has not notified property owners about surplus money.
The city said its focus has been on keeping homes off the auction block. It transfers surplus funds to the county comptroller, who manages accounts with the county’s unclaimed funds. Kearns’ legislation also calls for the city to give the comptroller the names of previous owners for further outreach. Currently, only the addresses of properties and surplus amounts are transferred to the comptroller’s office.
If the auction money is unclaimed for five years, it is turned over to the state Comptroller’s Office and becomes part of the general fund. Even then, claims still can be made through the County Clerk’s Office. Since 2008, state lawmakers have tried and failed with legislations to reroute the money to the city, calling the current protocol unfair.
The Kennedy and Ryan’s original bills, designed to make slumlords accountable, would have rerouted the auction money from the state’s general fund to the city for its weatherization and home improvement program. But it also would have prevented former property owners from claiming the money.
Kennedy proposed his bill in 2014 and Ryan followed suit in 2015, making it a part of an effort attack the problem of big banks behind the foreclosures on abandoned “zombie” homes, as well as slumlords and their dilapidated properties.
Their first legislation called for code violations on nonowner-occupied homes to become tax liens.
If that property is foreclosed on, the second bill directs any excess proceeds from that sale and all sales at the auction to the city instead of the state, a move that would have revoked the former property’s owner’s right to claim the money.
While some of the money can be claimed by people living in far-flung places, like California and even Australia, the surplus list abounds with the properties that were owned by city residents who fell on hard times.
Ryan said the original bill was well-meaning but needed clarification. Owners who lose their primary residence to foreclosure would continue to be able to claim their money in perpetuity. But leftover money from the sale of nonowner-occupied properties would become the city’s after five years.
“The focus is still irresponsible landlords but we want to strike a balance so family members aren’t unjustly penalized and slumlords don’t continue to abuse the system,” he said.
Also on Wednesday, the Western New York Law Center announced that it has launched a program to provide free legal assistance to homeowners who are trying to claim surplus money from their old properties. The center can be reached at 855-0203, Ext. 124.