Real estate investors get wake-up call.Real estate investors seeking to acquire tax liens on properties with unpaid local real estate taxes got a wake-up call recently when a U.S. District Judge ruled that FDIC FDIC See: Federal Deposit Insurance Corporation FDIC See Federal Deposit Insurance Corporation (FDIC). claims on a property take precedence over all other liens on that property. The case, Beal Bank Beal Bank is a Texas-based bank that was founded in 1988 by Texas banker and entrepreneur Andy Beal. With headquarters in Plano, Texas (just north of Dallas), Beal Bank has a total of six deposit branches spread throughout Texas (Dallas, Houston) and California (Los Angeles, Orange v. Nassau County, involved a Long Island restaurant that had defaulted on its tax payments. To mitigate the tax burden, Nassau County sold the tax lien on the property to the Medcor Holding Co. on February 18, 1992. Three days after Medcor took over the tax lien, the FDIC took over Dollar Dry Dock Bank, which held the restaurant's mortgage. As required by law, Medcor notified the FDIC that it was in possession of the tax lien, but the FDIC did not respond. Following the expiration of a two-year redemption period, Nassau County officially transferred the title on the property to Medcor on July 28, 1994. About a year later, on September 21, 1995, the FDIC assigned its mortgage to Beal Bank. "Under ordinary circumstances, the settlement of any liens on a property is done on a first-come first-served basis," said Matthew Hearle, a Harris Beach & Wilcox attorney based in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. , who represented Beal Bank in its efforts to reclaim the title to the property. "But when the FDIC takes over a mortgage, its interests always supersede To obliterate, replace, make void, or useless. Supersede means to take the place of, as by reason of superior worth or right. A recently enacted statute that repeals an older law is said to supersede the prior legislation. all other claims." Citing a statute from the Federal Institutions Reform, Recovery and Enforcement Act of 1989, which was designed to ensure a sound financial system for handling defaults on mortgages, Beal Bank argued that as an assignee assignee (assign) n. a person to whom property is transferred by sale or gift, particularly real property. (See: assign) ASSIGNEE. One to whom an assignment has been made. 2. of the FDIC it should be able to claim ownership of the property. Ruling in favor of Beal Bank, Judge Leonard Wexler agreed, noting that previous cases upheld the principle that local authorities cannot sell FDIC property without its consent, regardless of whether the tax lien was attached before or after the FDIC actually acquired the property. As a result of the case, Beal Bank was able to reclaim the mortgage with the understanding that it was obligated ob·li·gate tr.v. ob·li·gat·ed, ob·li·gat·ing, ob·li·gates 1. To bind, compel, or constrain by a social, legal, or moral tie. See Synonyms at force. 2. To cause to be grateful or indebted; oblige. to pay the tax lien held by Medcor. "This case is significant for real estate investors seeking to buy up tax liens as a property investment," said William M. O'Connor, managing partner of Harris Beach's New York New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of office. "Buyer beware: If the FDIC has any interest in the property, you will not be able to foreclose fore·close v. fore·closed, fore·clos·ing, fore·clos·es v.tr. 1. a. To deprive (a mortgagor) of the right to redeem mortgaged property, as when payments have not been made. b. against it." Harris Beach & Wilcox, headquartered in Rochester, NY, is a full-service law firm with almost 200 attorneys in eight offices throughout upper New York State, the New York City tri-state area, and Washington, D.C. |
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