New York's Foreclosure Ban Did Not Bar Action for Foreclosure, Just Enforcement of the Judgment and Sale of Property

On March 4, 2021, Justice Cohen of the New York County Commercial Division issued a decision in Natixis, N.Y. Branch v. 20 TSQ Lessee LLC, 2021 NY Slip Op. 50249(U), holding that the New York foreclosure ban did not bar an action for foreclosure, just the enforcement of the judgment of foreclosure and sale of the property, explaining:

[P]andemic-related Executive Orders 202.8 and 202.28 (and their successors) do not bar Lenders' motion. Executive Order 202.8, which was issued on March 20, 2020, mandated there shall be no enforcement of a foreclosure of any residential or commercial property for a period of ninety days. On May 7, 2020, the Governor issued Executive Order 202.28, which prohibited, until August 20, initiation of a proceeding or enforcement of a foreclosure of any residential or commercial mortgage, for nonpayment of such mortgage. That prohibition subsequently was extended, through intervening orders, to January 31, 2021.

Borrowers contend that because Lenders filed this motion in May 2020, the motion violates Executive Order 202.8 and therefore should be denied out of hand. But ruling on Lenders' entitlement to judgment does not contravene the EO's moratorium on foreclosure enforcement. The latter refers to the sale of the subject collateral — an event that follows, and is distinct from, the award of judgment entitling the creditor to enforce the terms of the loan.

The State's directives about foreclosure matters track with that practical distinction, differentiating between enforcement of a foreclosure and foreclosure proceedings more generally. Because the Executive Orders do not stay the determination of this motion, the Court may proceed to the merits of Borrowers' defenses.

(Internal quotations and citations omitted) (emphasis added).

We frequently litigate disputes over the sale or leasing of commercial property. Contact Schlam Stone & Dolan partner John Lundin at jlundin@schlamstone.com if you are involved in a dispute regarding a commercial real estate transaction.