Lender couldn't foreclose on 21 condos due to lack of notifying tenants.

This lawsuit concerned the foreclosure of 21 condominium units encumbered by three mortgages. The defendants moved to dismiss the case since the plaintiff failed to serve Real Property Actions and Proceedings Law (RPAPL) §1303 notices. According to the RPAPL §1303, the foreclosure party must give notice to any tenant of a dwelling unit of the foreclosure action within ten days of receiving the foreclosure summons and complaint. The court reiterated that complying with RPAPL §1303 is a prerequisite to starting a foreclosure action, and any noncompliance warrants dismissal of the case. The plaintiff did not serve any RPAPL §1303 notice to the tenants occupying the units in question, 11 of which were occupied by tenants. The plaintiff argued that RPAPL §1303 was not applicable since the mortgages were commercial mortgages, not residential ones. However, the court dismissed the plaintiff's argument, stating that RPAPL §1303 is not restricted to residential mortgages but is more broadly applicable to mortgages that involve residential property. The court ruled that the plaintiff's interpretation of RPAPL §1303 would effectively defeat the statute's purpose of informing tenants that their occupancy may be in danger. Consequently, the court granted the defendants' motion to dismiss the foreclosure action.

U.S. REAL ESTATE CREDIT HOLDINGS III-B, LP V. BCS 20 W. LLC

NO. 850003/2021 (N.Y. SUP. CT. N.Y. CNTY. NOV. 10, 2021) NYSCEF NO. 7