Zombie Houses are aptly, albeit inelegantly, named due to their association with the idea of the walking dead and their ability to suck the life out of a neighborhood. Many such houses exist in the United States; a large number are in New York and New Jersey. Not even the most affluent communities are immune to the effects of their presence. The number of these houses increased as a result of the housing crisis/recession beginning in 2008.
Zombie Houses are houses in limbo. They are in the foreclosure process, which can often take years to complete. Thus, they have been vacated by their owners, but the lending institutions have not yet taken title so the home is vacant because the defaulting owner is no longer in residence. Because the lender does not yet own the premises, the lender is not legally responsible for the premises and/or may not have the right to perform maintenance on the property.
When such a home is allowed to deteriorate, it can become a locus for undesirable elements such as squatters, rodents, garbage, drug users and illegal activities. This can result in neighborhood blight and a drop in adjacent property values in addition to the creation of unsafe conditions such as the use of the property for illegal purposes and the spread of rodents around the neighborhood.
In an effort to contain the situation, municipalities may be obliged to spend taxpayers’ money to maintain these homes. Deteriorating homes may result in burst pipes, roof damage and leakage, broken windows, etc. Local law enforcement may become involved responding to complaints and with additional patrols to ascertain that no vandals, squatters or burglars are on the property, thus diverting manpower from other needed enforcement activities. Consequently, some municipalities bill the lender for upkeep, additional patrols, police calls and fire extinguishing; if the lender does not pay then the municipality adds the amount to taxes and puts a lien on the property. When the lender denies responsibility owing to the fact that the foreclosure is not complete and the lender does not have title, the owner who has vacated the property during the protracted foreclosure process is startled to learn that he or she is still responsible for the property and must pay the bills.
Because foreclosures may drag on for years in parts of the United States where homeowners have many protections, one solution to the problem is legislation aimed at fast-tracking foreclosures, which results in allowing the lender to obtain possession before the property deteriorates. Yet lenders themselves are often reluctant to complete the foreclosure process and take possession. The Empire Justice Center, a nonprofit New York law firm, notes that banks and loan servicers sometimes back out of proceedings before taking possession to avoid legal responsibility for maintaining the property. Some banks have so many foreclosed/potentially foreclosed properties that they don’t know what to do with them.
Other proposed solutions are requiring lenders to post bond to cover maintenance costs prior to foreclosure. Or, houses can be donated to be used for affordable housing. Neighbors pitch in and mow lawns and park in driveways to make it appear that the house is occupied. Private enterprise can become involved by buying these houses, rehabilitating them, and selling them.
New York State has established a Zombie House hotline. On June 28, 2016, Governor Cuomo announced the hotline for residents to report vacant abandoned houses to be added to a New York State registry. Call 800-342-3736 (NYS Department of Financial Services). The department will identify the mortgage servicer in order to initiate maintenance of the property. Banks and mortgage servicers must report vacant properties no later than 15 days after learning of their abandonment. Should the vacant house not be maintained then the DFS and the property’s municipality can seek fines of up to $500 per day from the companies that do not maintain houses for which they are responsible. Residents can also report vacant homes not properly maintained at www.dfs.ny.gov.
In July 2017, New York City’s Housing Preservation & Development agency began Zombie House Initiative, a one-year pilot program to perform “exterior surveys of Zombie Houses; aggregate information about Zombie Houses through a new database; design new approaches to return Zombie Houses to productive use; and conduct outreach to homeowners at risk of foreclosure.” HPD also helped to enforce the aforementioned Zombie Property and Foreclosure Prevention Act of 2016 (the “Zombie Law”) in which New York State requires lenders and servicers to inspect, secure, maintain and report Zombie Houses to the New York State Department of Financial Services. HPD reported Zombie Houses not being maintained to the NYC Law Department, which pursued legal action against the banks and servicers. The program works even better if residents fill out (even anonymously) HPD’s Zombie House Information Form or, if there is imminent danger posed by the property, call 911 (if no imminent danger, call 311).
By Vivian J. Oleen
Vivian J. Oleen is an associate broker at Sopher Realty.