1. Does Filing a Foreclosure Change Property Ownership?
New York uses judicial foreclosure. A mortgage holder generally must proceed through court before the mortgaged property can be sold through foreclosure.
Defaulting on a mortgage or being sued does not by itself transfer title to the lender. Filing the action also does not by itself relieve the owner of existing property obligations, although a receiver or statutory maintenance duties imposed on a foreclosing plaintiff may alter who is responsible for particular functions. Separate questions about title, liens, and ownership interests may also require analysis under New York real estate law.
The 90-Day Notice Comes before the Lawsuit
For a mortgage that qualifies as a "home loan" under Real Property Actions and Proceedings Law § 1304, the lender, assignee, or mortgage loan servicer generally must send the statutory notice at least 90 days before starting a foreclosure action.
The notice warns that foreclosure may follow. It also tells the borrower that the borrower remains the legal owner and responsible for the property until a sale by the borrower or a court-ordered foreclosure sale.
Section 1304 does not govern every mortgage. Commercial and investment-property loans should not automatically be treated as subject to the same 90-day requirement.
A Lis Pendens Signals Pending Litigation
In a mortgage foreclosure action, the plaintiff must file a notice of pendency, commonly called a lis pendens, before the court enters the final judgment directing the sale.
The filing does not convey title. It gives notice that litigation affecting the property is pending.
That becomes significant during a sale or refinancing. The owner may still hold title, but a title search will reveal the pending action, and the foreclosure ordinarily must be addressed before the owner can complete a transaction requiring clear or marketable title.
2. Can the Owner Sell or Lease the Property during Foreclosure?
A pending foreclosure does not automatically eliminate every ownership right. It can, however, affect what can realistically be completed while the mortgage debt and court action remain unresolved.
A proposed transaction should therefore be evaluated against the mortgage balance, recorded liens, pending foreclosure filings, and any relevant court orders.
A Private Sale May Still Be Possible
An owner can potentially sell before the foreclosure auction. In residential cases covered by CPLR 3408, a short sale is one of the loss-mitigation options that may be discussed during the mandatory settlement conference process.
A conventional sale generally requires enough funds or another arrangement to address the mortgage and other liens at closing. If the expected proceeds will not cover the secured debt, lender approval may be necessary for a short sale.
The ability to sign a purchase agreement is therefore different from the ability to complete the closing. Deeds, liens, payoff demands, and closing conditions may involve separate property conveyance issues.
Existing Tenancies Do Not Automatically End
Filing the foreclosure action does not by itself terminate an existing lease or make the foreclosing lender the landlord.
The existing owner generally continues to have property and landlord responsibilities while the action remains pending. A court-appointed receiver, an assignment of rents, or statutory duties imposed on the foreclosing plaintiff can change who manages the property, performs certain maintenance functions, or receives rent.
Tenants who receive new payment instructions should therefore identify who issued them and the legal authority for the change.
3. What Changes after a Foreclosure Judgment and Sale?
A judgment of foreclosure and sale authorizes an auction. It is not the auction itself.
Before judgment, the court may issue an Order of Reference directing a referee to calculate the amount due. If the court later enters a judgment of foreclosure and sale, the referee may proceed with a public auction under the judgment.
Redemption Ends When the Foreclosure Sale Is Completed
Before the foreclosure sale concludes, the owner retains an equity of redemption and may stop the foreclosure by paying the amount legally required to redeem the property.
New York courts treat the equity of redemption as extinguished when the foreclosure sale is completed, even if the referee's deed has not yet been delivered. The deed then serves as the instrument conveying the foreclosed estate to the purchaser.
A borrower may also ask the court to stay a scheduled sale when there is a valid legal basis. Filing such a request does not itself stop the auction unless the court grants appropriate relief.
The Sale Can Create Surplus or Deficiency Issues
The auction price may produce money above the amounts payable through the foreclosure. Parties with an eligible interest may then seek surplus funds through the foreclosure proceeding.
If the sale proceeds are insufficient, the lender may seek a deficiency judgment if New York's statutory requirements are satisfied.
Bidding procedures, referee terms, and post-auction closing requirements are separate subjects addressed by the foreclosure auction process.
4. What Happens to Tenants after Foreclosure?
Foreclosure and eviction are separate legal processes. A tenant does not ordinarily have to leave merely because the landlord's mortgage lender has filed a foreclosure action.
New York law provides tenant notices and post-foreclosure occupancy rights. Federal law may provide additional protection for a bona fide tenancy.
New York Law Provides Post-Foreclosure Occupancy Rights
RPAPL § 1303 requires specified notice to tenants in residential foreclosure actions.
After a successor acquires the property, RPAPL § 1305 provides qualifying tenants in units not subject to rent control or rent stabilization with continued occupancy rights. Depending on when the tenancy began and whether the statutory requirements are satisfied, protection may extend for at least 90 days after the required notice or for the remaining lease term.
For certain tenants whose good-faith leases began after the foreclosure action commenced, the remaining-term protection may continue for up to three years. In specified circumstances, a successor who intends to occupy one unit as a primary residence may limit the protected period for that unit to 90 days.
Rent-regulated, subsidized, and otherwise protected tenancies may have additional rights and should not be reduced to a general 90-day rule.
Federal Law May Extend Tenant Protection
The federal Protecting Tenants at Foreclosure Act separately requires an immediate successor in interest to provide a bona fide tenant at least 90 days' notice before the effective date of a notice to vacate.
A qualifying lease generally may continue through the remaining lease term. An exception applies when the property is sold to a purchaser who will occupy the unit as a primary residence, although the 90-day notice requirement still applies.
State or local law can provide greater protection. Continued occupancy and any later removal proceeding may therefore require separate review of applicable tenant rights and protection.
5. Frequently Asked Questions
What Happens to the Lis Pendens After a Loan Modification?
A loan modification does not make the filed foreclosure record disappear on its own.
For cases governed by CPLR 3408, the plaintiff must file a notice of discontinuance and vacatur of the lis pendens within 90 days after a settlement agreement or loan modification is fully executed.
An owner preparing for a later refinancing or sale should therefore confirm both the loan resolution and the status of the foreclosure filings.
Which Court Handles a Foreclosure on New York City Property?
Mortgage foreclosure actions are generally brought in the New York State Supreme Court in the county where the property is located.
For property in New York City, that means the applicable Supreme Court in New York, Kings, Queens, Bronx, or Richmond County. The county determines the court file and certain local procedures, but the principal foreclosure rules discussed here arise under New York State law rather than separate foreclosure law for each borough.
6. Reviewing the Foreclosure Record before Making a Property Decision
The documents usually tell more than the label "foreclosure." Relevant records can include the mortgage and note, pre-foreclosure notices, summons and complaint, lis pendens, court orders, settlement or modification documents, judgment of foreclosure and sale, and auction records.
A NYC foreclosure lawyer can review those materials when a pending transaction, disputed title, rent issue, tenant occupancy question, or scheduled auction depends on the exact procedural stage. The available options can change substantially once the foreclosure sale occurs.
26 Oct, 2026
