A New York foreclosure sale wipes out the borrower’s ownership and every lien ranking behind the foreclosed mortgage. But only for lienholders properly named in the lawsuit, or who got their lien after the foreclosure was put on the record. Liens that rank ahead of the foreclosed mortgage stay, and so do unpaid real estate taxes and water and sewer charges.
A lower-ranking lienholder left out of the case keeps its lien. A federal tax lien can survive outright, or leave the United States a 120-day right to redeem, meaning it can still claim the property after the sale.
These rules apply statewide, because every New York mortgage foreclosure goes through a court (the state’s foreclosure law). The taxes and charges that rank ahead of a mortgage differ between New York City and the rest of the state, as noted below.
What the auction buyer gets
After the auction, a court-appointed referee signs a deed to the winning bidder. It gives the buyer what the foreclosed mortgage covered, nothing more. Anything ranking ahead of that mortgage stays.
The deed binds the borrower, the lender, everyone properly named and served, and anyone who took an interest through them after the lis pendens (a notice on the property record that a lawsuit affects it) was filed. Anyone left out is not bound.
Who has to be named in the foreclosure
The lender must name everyone whose interest ranks behind its mortgage (who must be named):
- Owners and tenants in possession
- People with future interests in the property
- Anyone holding a lower-ranking lien or other claim against the property
A higher-ranking lienholder is not on the list, because a lower-ranking foreclosure cannot affect it.
The lender must file a lis pendens in each county where the property sits at least 20 days before judgment (filing rule). Anyone who records a deed, mortgage or lien after that filing is bound by the case as if named (notice rule). So the filing date of the lis pendens is the dividing line between “must be named” and “bound anyway.”
Survives or wiped out: the short version
| Interest | Survives? | When |
|---|---|---|
| Senior mortgage (ranks ahead) | Yes | Always |
| Junior mortgage (ranks behind) | No | If named |
| Judgment against borrower | No | If junior and named |
| Mechanic’s lien | Usually no | If junior and named |
| NYS tax warrant | No | If junior and named |
| Federal tax lien, junior, US named | Redeemable | The US can redeem (claim the property) within 120 days after the sale |
| Federal tax lien, US not named | Yes | If the IRS filed its notice before the foreclosure began |
| Real estate taxes | Yes | Unless paid from the sale money |
| NYC water and sewer charges | Yes | Unless paid from the sale money |
| Condo common charges | No | If the board is named; charges after the sale are the buyer’s |
| Any left-out junior interest | Yes | Until cleared in a second lawsuit |
| Lien filed after lis pendens | No | Bound without being named |
| Residential tenant | Partly | Has notice and stay rights |
Liens that rank ahead of the foreclosed mortgage
Senior mortgages. When a second mortgage lender forecloses, the buyer takes the property still subject to the first mortgage. In a 2024 appeals case, the second lender bought at its own sale, the referee’s deed went to an affiliate “subject to the senior mortgage,” and the first lender then foreclosed. So a bidder at a junior foreclosure needs a payoff figure for every senior lien.
Real estate taxes and city charges. Taxes set by a county board are a lien from January 1 of the tax year and stay a lien until paid (tax lien rule). Cities, villages and school districts set their own lien dates. Tax liens outrank mortgages (2013 appeals decision, in a tax foreclosure). In New York City, taxes, assessments, sewer charges and water charges stay a lien until paid and are paid ahead of all other charges (NYC Administrative Code). A mortgage foreclosure does not erase them.
The referee pays taxes, assessments and water charges that are liens out of the sale money, as a cost of the sale (payment rule). In New York City, the referee also pays city agency liens that rank ahead of the mortgage. One court has held that a tax must already be a lien at the time of sale to be paid this way (2016 Manhattan trial court decision). Anything the sale money does not cover, or that becomes a lien after the sale, stays with the property.
In NYC, two kinds of charges sit on the Department of Finance (DOF) property account as tax liens: HPD (NYC housing agency) emergency repair charges, and Buildings Department (DOB) violation judgments from the ECB that were converted to tax liens. They are paid this way if they are liens at the time of sale. Ordinary ECB judgments against the owner are treated as judgments (see NYC property violations at closing).
Mechanic’s liens filed before the mortgage. A mechanic’s lien (a contractor’s or supplier’s claim for unpaid work) ranks ahead of a mortgage that was not yet recorded when the lien was filed (Lien Law). That lien is senior and survives. Most mechanic’s liens are filed after the mortgage. They rank behind it and are wiped out if the contractor is named.
Liens that rank behind the foreclosed mortgage
These are wiped out against the property once their holders are named and the sale closes:
- Junior mortgages
- Judgments against the borrower filed after the mortgage was recorded
- Junior mechanic’s liens
- New York State tax warrants
They do not disappear entirely. Their claim moves to the surplus, any money left after the foreclosing lender is paid. The court ranks the claims and divides the money (surplus rule).
Condo common charge liens rank behind taxes and a recorded first mortgage (condo law). So a first-mortgage foreclosure wipes out the condo board’s lien for unpaid charges from before the sale, if the board is named. Charges that build up after the buyer takes title are the buyer’s.
The borrower’s own right to pay off the debt and keep the property ends at the sale. As a 2006 appeals decision put it, “this right is extinguished by the foreclosure sale itself.” New York gives the borrower no period to reclaim the property after the sale.
Federal tax liens
Federal tax liens follow federal rules. The result depends on whether the United States was named in the case.
United States named. A foreclosure that names the United States can wipe out a junior federal lien, but the United States keeps a right to redeem, that is, to claim the property after the sale (federal law). For an IRS lien, that window is 120 days from the sale, or the state’s own redemption period if longer. For other federal liens it is one year. Because New York gives no redemption period after the sale, the 120 days controls for IRS liens. Naming the United States has its own rules, including service on the U.S. Attorney and mailing to the U.S. Attorney General.
United States not named. If the IRS filed a notice of federal tax lien before the foreclosure began, the sale is made “subject to and without disturbing” the federal lien (federal tax law). If no notice was on file when the case began, state law decides whether the lien is wiped out.
A bidder who sees a federal tax lien needs to confirm the United States was named. The 120 days is a real risk to any resale or new loan in that window.
Lienholders left out of the case
A junior lienholder who should have been named and was not keeps its lien. Its rights are “unaffected by the judgment and sale,” and the sale “may be considered void as to the omitted party” (2022 appeals decision for Manhattan and the Bronx).
The buyer has two ways to clear it:
- Strict foreclosure (law). The court sets a deadline for the left-out lienholder to redeem (pay off the foreclosed mortgage) or bring its own foreclosure. If it does neither, its interest is “extinguished and terminated.” The appeals court for Manhattan and the Bronx held that the six-year deadline to bring this claim starts at the foreclosure sale. Courts apply it narrowly: it covers lienholders and others with a right to pay off the mortgage, not, for example, someone holding an easement (a right to use part of the property) (2013 appeals decision).
- Reforeclosure (law). Available where the record shows the foreclosure may be void or open to challenge, including to settle a junior lender’s right to foreclose. It can go forward even where a new foreclosure would be too late (2022 appeals decision). To get a deadline set, the person bringing the case must show the mistake “was not due to fraud or wilful neglect” and did not actually harm the left-out party (rule; 2021 appeals decision).
Either way, it is a second lawsuit. Until it is done, the title company will list the left-out lien as an exception, a problem the title policy does not cover.
Tenants
A residential tenant whose lease ranks behind the mortgage is not simply wiped out. The new owner must give written notice, and the tenant can stay at least 90 days and, in many cases, for the rest of the lease (tenant protection law). Rent-regulated tenants keep their protections. So occupancy matters as much as liens.
What to check before bidding or lending
- The full lien search, not just the judgment. Compare each lien’s recording or filing date with the foreclosed mortgage and with the lis pendens.
- Each junior lienholder against the list of defendants. Anyone junior who recorded before the lis pendens and was not named survives.
- Any federal tax lien, and whether the United States was named. Note the 120-day window.
- Current tax, water and sewer balances. In NYC, they are on the DOF property account. Elsewhere, ask the town or city receiver of taxes and the county. The terms of sale say who pays them.
- Senior liens at a junior foreclosure. Get the senior mortgage balance before bidding.
- Who lives there. Tenants may have rights under the tenant protection law.
For the NYC search steps in practice, see checking liens before a NYC foreclosure auction. For how individual judgments and liens are cleared at a regular closing, see what happens when a title search finds a lien or judgment. NYC charges that follow the building to a new owner are covered in ECB and HPD charges that follow the property.
Details for attorneys and title professionals
- The referee’s deed passes the estate the lender would have had if the borrower’s right to redeem had been foreclosed. It binds parties “duly summoned.”
- The referee pays city agency liens that rank ahead of the mortgage in New York City and in certain other large cities, as defined by population in the payment rule.
- The IRS 25-day advance notice of sale applies to sales outside court. It is not how a New York court foreclosure deals with a federal lien.
- The 2022 appeals decision on left-out lienholders quotes an earlier 1999 appeals decision.
Official sources
- RPAPL § 1305, § 1311, § 1331, § 1352, § 1353(3), § 1354(2), § 1361, § 1503, § 1523(2) (foreclosure is a court action under RPAPL Article 13)
- CPLR 6501: notice of pendency
- RPTL 902: lien date for real property taxes
- Lien Law § 13(1): priority of mechanic’s liens
- Real Property Law § 339-z: condominium common charge liens
- NYC Administrative Code § 11-301 (unofficial copy)
- 28 U.S.C. § 2410(a), (b), (c) and 26 U.S.C. § 7425(a)(1), (a)(2), (c)
- 517-525 W. 45 LLC v Avrahami, 202 AD3d 611 (1st Dept 2022), quoting 6820 Ridge Realty v Goldman, 263 AD2d 22 (2d Dept 1999)
- Bank of N.Y. v Karistina Enters., LLC, 209 AD3d 820 (2d Dept 2022)
- Bass v D. Ragno Realty Corp., 111 AD3d 863 (2d Dept 2013)
- U.S. Bank N.A. v Lomuto, 198 AD3d 707 (2d Dept 2021)
- Bank of Am., N.A. v Castillo, 227 AD3d 760 (2d Dept 2024)
- Bank of N.Y. v Ortiz, 30 AD3d 551 (2d Dept 2006)
- Matter of Dutchess County (Putnam County Natl. Bank of Carmel), 107 AD3d 989 (2d Dept 2013)
- JPMorgan Chase Bank v Gerasimowicz, 2016 NY Slip Op 31029(U) (Sup Ct NY County)