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Council questions new process to get surplus foreclosure sums to former owners

Council questions new process to get surplus foreclosure sums to former owners

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LOCAL AERIAL BUFFALO GEE (copy)

(Derek Gee/Buffalo News file photo)

Letters will be sent over the next few weeks to those who lost their Buffalo properties to foreclosure but are owed refunds because the homes sold at the 2019 auction for more than what the former owners owed.

The letters are part of a new process to give the surplus to the previous homeowners – not to the state's general fund.

The City of Buffalo’s new plan to bring in $4.8 million by taking ownership of properties on the foreclosure lists before they are auctioned next month could lead to the tax burden being shifted to other property owners in Erie County, according to County Clerk Michael “Mickey” Kearns. And attorneys with the Western New York Law Center say part

Those who have already reached out to the city were told how to begin the process, city spokesman Michael DeGeorge said.

The city's Law and Taxation and Assessment departments worked with the Western New York Law Center on the new process.

But some Common Council members want more information "because right now we're not clear" about the process, University District Council Member Rasheed N.C. Wyatt said. "We're confused and trying to understand. We're trying to get the details on it."

The city’s new plan to change the way it sells tax delinquent properties at annual foreclosure auctions is coming under scrutiny from community groups, stakeholders and the Western New York Law Center, which represents low-income residents. Currently a property that is foreclosed on goes to the new buyer at the auction and no Common Council approval is needed because

And the law center has concerns about the potential for a conflict of interest.

“We’re happy that there is a process being put in place," said Kate Lockhart, the law center's director of vacant and abandoned properties. "Is it the process I personally would’ve put in place? Probably not. But it’s a way to get these funds to homeowners, and that’s the important part. Personally, I have a little bit of a concern about the city being the one determining whether or not someone should receive their surplus, but also the same entity that benefits from someone not receiving their surplus."

Niagara Council Member David Rivera has asked the Brown administration to send a representative to the Council's next Finance Committee prepared to answer questions.

“We want to make sure that the surplus gets back to the people who owned the property," Rivera said. "We all want people to be made whole. We foreclosed on their properties. They’ve paid off their liens, and if there’s a surplus, it should go to them."

Of all the homes sold in the 2019 auction, 104 properties netted a surplus after all back taxes, user fees, fines and water bills were paid. Their combined surplus totaled $3.6 million.

Half of the auctioned properties had a surplus over $31,185, and the average surplus was $34,748. The biggest surplus was $131,156. The smallest was $19.

"We know it’s not an insignificant amount of money, especially for homeowners who might be struggling transitioning out of their previous home," Lockhart said. "Even if it’s $1,500 worth of surplus, that could be life changing for someone who has just lost everything and needs to have first (month rent), last (month rent) and deposit to get into a new apartment." 

None of the surplus from the 2019 auction has been dispersed yet to the former owners. Only three claims have been made. 

The former owners may not be entitled to all of the surplus from their former property, but the city said the new process should get funds into the hands of the people who are entitled to some or all of the money.

For the first time, the city is keeping all the unclaimed surpluses. Before, the city sent the money to Erie County and then the unclaimed funds went to New York State and were absorbed into the state budget, said Jason Schell, commissioner of the city’s Department of Taxation and Assessment.

The Brown administration did a “soft launch” of the new notification and claims process last month, Shell said at the Common Council’s recent Finance Committee meeting.

But some on the Council have questions. 

"They talked about a soft opening. I don’t know what that means," said Rivera, the council's majority leader. "They’ve already started this, and they’re not able to answer questions.”

Rivera said he wants more information on how the notifications are being disseminated to people.

“If they don’t have the information, and information isn’t made available to them in a very easy manner to understand, comprehend and navigate, sometimes you’ll be discouraged if you don’t know how to go about doing it. Then the time will go by, and you lose not only your property, you lose the surplus funds that you may be entitled to,” he said.

Rivera also wants to know how many times the city tries to reach out to the former property owners.

“Do you make one attempt? Is it two attempts? Is it three attempts? Is it certified mail? Is it posted on their homes? What’s the process for notice is very important because there’s an inherent benefit to the city, obviously, in not putting that information out because the benefit is we keep the money," he said.

The new process applies only to the last city auction, held in October 2019. The city's annual auction was not held in 2020 or this year because of the pandemic. The next auction is scheduled for spring 2022. By then, the kinks should be worked out, and the city will have a “hard launch” of the program, Shell said.

Under the former process, the city did not send notices letting people know they may be entitled to a surplus. Any money collected above what the city was owed went to the Erie County comptroller – who handled unclaimed funds for the county – and then eventually to New York State. The title holder and/or lien holder at the time of the auction could apply for the funds through the state.

Under Buffalo's new plan, the city took the title to all the properties on the foreclosure lists before they were auctioned off in 2019. As the title holder, the city keeps all surplus funds from the sale of the property.

Negotiating with the law center, which represents low-income residents, the administration set up the parameters and the process for the claims, how to notify people and the timelines to claim any type of funds they might be owed, Shell said.

Claim forms, guidelines and instructions on how to claim a surplus are listed in the Law Department’s webpage.

There are time limits on claims for a surplus. Former occupants have five years to claim a refund, with investors given two years and lien holders given 120 days.

“We’re trying to figure what is the effective date of the process to begin the countdown of the time period in which a person or other vested party would be able to come and get their money,” Wyatt said. 

Shell reiterated the process is in the early stages.

“Locking down the process, whatever it is ... those decisions will obviously be solidified through this process,” he said. “But, as of right now, it’s been a soft launch."

“While we think this is a great start, we would love to see this taken a step further by the City of Buffalo," Lockhart said. "This is just an internal process that the city is going by, and the issue with that is if a future administration decided to change the process ... they could quietly just take down the website and not do it anymore. And so we would love to see something codified in a way that if any future administrations, or even this one, chose to make changes to this process, they would have to have a public conversation and that the Common Council would need to be involved.”

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Erie County Clerk Michael “Mickey” Kearns is threatening to sue County Executive Mark Poloncarz, saying Poloncarz has overstepped his authority by refusing to allocate money that the County Legislature set aside for the Clerk’s Office last year. The county executive has refused to release $200,000 for an abandoned homes initiative, calling the program pushed by Kearns redundant and unnecessary.

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