Adam Leitman Bailey, P.C. Maximizes and Collects Surplus Money Funds for Condominium Board After Bank Foreclosure Sale of Condominium Unit
After a years-long battle, including a bank’s foreclosure proceeding against a condominium unit and several bankruptcy filings by the unit owners, a frustrated board of managers of a New York City condominium turned to Adam Leitman Bailey, P.C., for help. Adam Leitman Bailey, P.C. then enforced the condominium’s lien for unpaid common charges against the unit and obtained 100% of the post-foreclosure sale surplus monies for the condominium.
Following years of delays, the condominium board—which was owed hundreds of thousands of dollars in unpaid common charges, assessment fees, late fees, and interest, which accrued prior to our retention—retained Adam Leitman Bailey, P.C.
As is often the case, when the unit owners defaulted on their mortgage payments to their bank, they also stopped paying their condominium common charges and related fees. The bank, which is protected by a first priority lien against the condominium unit, commenced a foreclosure action to force a sale of the unit to enforce its lien. The board filed a lien for common charges against the unit, but became embroiled in the bank’s foreclosure action, forced to wait until the bank enforced its lien.
Under New York Real Property Law, the condominium’s lien for unpaid common charges is generally second in line in priority after the bank’s mortgage. However, as other lienholders and judgment creditors battle for lien position, as the fees and default interest owed to the bank continually grow throughout the foreclosure action and as there often is insufficient equity in the property to cover the sums owed to all lienholders, the condominium’s lien may be wiped out by the bank’s foreclosure.
Making matters worse, the three-unit owners in this case each successively filed various bankruptcy proceedings, delaying the foreclosure case for years. As the unit owners’ personal debt obligations were discharged in the bankruptcies, the condominium’s chances of recovering any of the monies due to it rested solely in the equity of the unit itself.
Despite the bank obtaining a judgment of foreclosure and sale and all bankruptcy-related stays of the foreclosure action being lifted, the bank was delaying scheduling its foreclosure sale. The board then retained Adam Leitman Bailey, P.C., and the firm immediately went to work.
First, Adam Leitman Bailey, P.C. evaluated the bank’s claims and the market value of the unit and determined that there should be sufficient equity such that, even in a typically below market foreclosure sale of the condominium unit, there would be a surplus left over after the sale.
Next, Adam Leitman Bailey, P.C. obtained a detailed report of all liens associated with the condominium unit and evaluated the validity and priority of each lien to determine the condominium’s location on the list. Based on Adam Leitman Bailey, P.C.’s research, the firm determined that the condominium’s lien was second in line after the bank’s lien.
When attempts at a short sale of the unit by the unit owners failed, but the bank still refused to schedule a foreclosure sale, Adam Leitman Bailey, P.C. applied pressure on the bank to force the sale to stop the continued accrual of the bank’s claims which were cutting into what would be left over for the condominium. Adam Leitman Bailey, P.C. painstakingly reviewed the bank’s payoff claims and, leaving no stone unturned, challenged the propriety and amounts of the claims, to further decrease the bank’s total claims, thereby increasing the condominium’s share.
Adam Leitman Bailey, P.C. attended the foreclosure sale where a third-party buyer was the successful bidder and then Adam Leitman Bailey, P.C. attended the referee’s closing, further scrutinizing every line item of charges. After the closing, the surplus was over two hundred thousand dollars, which the referee deposited with the bank along with his report of the sale.
Adam Leitman Bailey, P.C. still needed an order from the court directing that the monies be paid to its client. Adam Leitman Bailey, P.C. first applied for and obtained a certificate from the Department of Finance confirming the deposited sums, which certificate is required for an application for the funds. Adam Leitman Bailey, P.C. then prepared and filed a motion in the Supreme Court seeking to confirm the referee’s report of sale and the appointment of a referee to ascertain and report the amount due to the condominium on its lien and to ascertain the priorities of all of the other liens.
Once the motion was granted and the referee was appointed, Adam Leitman Bailey, P.C. prepared detailed affidavits from its client and the client’s managing agent and provided financial documentation evidencing each dollar owed to Adam Leitman Bailey, P.C.’s client and that the total sum owed to Adam Leitman Bailey, P.C.’s client under its lien exceeded the amount on deposit with the court. Then, using the relevant legal authority, Adam Leitman Bailey, P.C. demonstrated that its client’s lien was next in line after the bank’s. Accordingly, Adam Leitman Bailey, P.C. argued that its client was entitled to 100% of the surplus sums.
The referee scheduled a hearing on notice to all other lienholders. Adam Leitman Bailey, P.C. appeared at the hearing on the condominium’s behalf and presented, in detail, the evidence establishing the sums owed to its client and its client’s priority over all other lienholders. The referee agreed and issued a report of his findings that Adam Leitman Bailey, P.C.’s client was entitled to the entirety of the surplus sums.
There was still more work to do. Adam Leitman Bailey, P.C. then prepared and filed a motion seeking to confirm the referee’s findings and finally for an order directing the disbursement of the surplus monies to its client. Adam Leitman Bailey, P.C. presented to the court the legal authority which demonstrated that its client’s lien was next in line, and the financial documents that demonstrated that Adam Leitman Bailey, P.C.’s client was owed the entirety of the surplus sums.
The court agreed and granted the motion. Adam Leitman Bailey, P.C. then obtained a certified copy of the court’s order and assisted its client in filling out all of the applications and forms required to be submitted to the Department of Finance for the issuance of the sums.
Finally, after a years-long battle, Adam Leitman Bailey, P.C.’s client was awarded and received the entirety of the surplus sums—the best case scenario and a complete victory for Adam Leitman Bailey, P.C.’s client.
Vladimir Mironenko, Esq. of Adam Leitman Bailey, P.C., represented the condominium board. Jackie Halpern Weinstein, Esq., of the firm’s Foreclosure Group advised concerning foreclosure matters, and Danny Ramrattan, Esq. assisted with motion practice.