Attorney General James Urges Sweeping Reforms to NYC Tax Lien Sale

In Letter to Mayor de Blasio and Council Speaker Johnson, AG James Calls for Elimination of
Annual Tax Lien Auction, Utilization of Community Land Trusts and Land Banks

NEW YORK – New York Attorney General Letitia James today called on New York City Mayor Bill de Blasio and New York City Council Speaker Corey Johnson to enact permanent, meaningful reform to the tax lien sale. The authorizing legislation allowing the city to conduct the lien sale expires on December 31, 2020, providing an opportunity for significant reform. In a letter to Mayor de Blasio and Speaker Johnson, Attorney General James urged New York City to utilize community land trusts and land banks for delinquent properties, ensuring residents can stay in their homes

“In the new year, we will have an opportunity to transform the tax lien sale from a process that tears down neighborhoods to one that builds them up,” said Attorney General James. “With a few key changes to the way we approach tax liens, we are able to create a system that keeps homeowners in their homes, and stabilizes neighborhoods, all while continuing to allow the city to collect tax revenue. For the benefit of all New Yorkers, I urge Mayor de Blasio and the New York City Council to enact real, lasting reform to the tax lien sale.”

Every year, the New York City Department of Finance (DOF) holds a tax lien sale, through which the tax liens on properties for unpaid property taxes and water bills are sold off in an auction. The terms imposed by the tax lien sale on New Yorkers are dramatic: mandatory five percent surcharges, legal fees, and a nine or 18 percent interest rate that compounds daily. These additional fees can quickly turn a relatively small tax lien into an overwhelming financial burden, eventually pushing homeowners into foreclosure. By utilizing community land trusts and land banks instead of an auction, residents can remain in their homes and properties will be permanently secured as community assets.

New York City’s authorizing legislation to hold the tax lien sale expires December 31, and it requires action from the New York City Council to reauthorize any tax liens sales after that date.

On August 31, 2020, Attorney General James and a group of 57 local, state, and federal officials urged the delay of the city’s annual tax and water lien sale. In a letter, the group called for the removal of more than 4,700 Class 1 Properties, or residential buildings with three or fewer units, from the tax lien sale. On September 4, 2020, Governor Andrew Cuomo issued an executive order temporarily halting the lien sale through the end of 2020.

Attorney General James has long advocated for reforms to the lien sale program to address some of its gravest housing injustices, and continues those calls today, including:

  • Eliminating water and sewer lien sales for low- and middle-income occupants of one-to-three family homes (there are currently 482 Class 1 properties on the list that have water debt only);
  • Creating a “Homeowner Advocate” position who would help homeowners navigate different agencies involved in the tax lien sale (no such position currently exists); and
  • Excluding non-profits and houses of worship from both the water and the property tax lien sale (there are currently 44 non-profit properties on the list).