Senate Bill S2117

                                 
BILL NUMBER: S2117

SPONSOR: FAHY
 
TITLE OF BILL:

An act to amend the real property actions and proceedings law, in
relation to prosecution by the department of financial services and
municipalities of certain violations regarding residential real proper-
ties

 
PURPOSE:

Relates to prosecution by the Department of Financial Services and muni-
cipalities of certain violations regarding residential real property by
requiring the department to set standards of review when determining to
prosecute such violations and coordinate with municipalities when prose-
cuting such violations and allowing for the proceeds that the department
receives upon Successful prosecution of such violations to be redirected
from the general fund to the department to prosecute future violations.

 
SUMMARY OF SPECIFIC PROVISIONS:

              

Section 1: The actual property actions and proceedings law is amended by
adding a new section 1360.

(1) Requires the superintendent of financial services to promulgate
standards of review for determinations by the Department of Financial
Services regarding the prosecution of certain residential real property
violations.

(2) Clarifies that the Department of Financial Services must not seek to
prosecute violations of certain real property violations under this act
unless the municipality receives confirmation that the municipality does
not intend to prosecute such violations.

(3) In instances where the Department of Financial Services prosecutes
violations of certain real property violations under this act and where
the court finds in favor of the Department, proceeds of any civil penal-
ty issued pursuant to such decision will be payable to the department
for the purposes of prosecuting future violations.

(4) Defines the term "residential real property" as it pertains to the
new section of law. Section 2: Sets the effective date.

 
JUSTIFICATION:

Zombie properties are mortgage-delinquent properties that have been
abandoned by the owner but languish for years in disrepair and neglect
until the mortgagee completes the foreclosure process.  Current law
authorizes the Department of Financial Services ("DFS" or the "Depart-
ment") and municipalities to prosecute violations of certain residential
real property violations, referred to as "zombie property cases." Howev-
er, due to financial constraints, ambiguity in the law, and other
reasons, DFS has not exercised its authority. In instances where the
Department prosecutes zombie properties and where the court finds in
favor of the Department, proceeds of any civil penalty issued pursuant
to such decision are awarded to the state's general fund, while the
Department of Financial Services has no budget to under-take these pros-
ecutions.  This has created an unfunded mandate for the Department,
which has not prosecuted zombie properties in recent years and left
enforcement of zombie property laws up to municipalities, many of which
do not have the resources to pursue these cases. This bill requires DFS
to set a standard of review when determining whether to prosecute such
violations and to coordinate with municipalities when prosecuting such
violations. It allows for the proceeds that the Department receives upon
successful prosecution of such violations to be redirected from the
general fund to the Department for the purposes of prosecuting future
violations. When the Department successfully prosecutes a zombie proper-
ty, this bill will ensure that the resultant funds are returned to the
department for further zombie property prosecution instead of the gener-
al fund where the funding is currently allocated. Depending on agency
feedback, a portion of these funds might also be allocated to munici-
palities in need of said funds.

 
LEGISLATIVE HISTORY:

A5938 (2023-24)

 
FISCAL IMPLICATIONS:

To be determined.

 
EFFECTIVE DATE:
This act shall take effect on the sixtieth day after it becames law.
Effective immediately, the addition, amendment, and/or repeal of any
rule or regulation necessary for the implementation of this act on its
effective date are authorized to be made and completed on or before such
effective date.