Tax Forclosure Sale ROFR

This week we wanted to bring your attention to a very interesting case decided by Justice Debra A. Martin in the Supreme Court, Monroe County. Justice Martin’s decision, in part, held that while an in-rem tax foreclosure sale failed to trigger a recorded Right of First Refusal (“ROFR”) to purchase the property in question, the Plaintiffs, as the acknowledged beneficiaries of the ROFR, were entitled to written notice of the foreclosure sale resulting in an Order setting aside the foreclosure deed and requiring that a new foreclosure sale be held in compliance with all notice requirements.

The relevant facts of, and a link to, the case are set forth below.

A right of first refusal (“ROFR”), enabling the Plaintiffs to purchase 145 acres of land if there was an offer to purchase the property, was recorded in the County Clerk’s office in 2016. In 2019 the land was sold at a county tax foreclosure sale to Defendant Thomas Kirik. The Plaintiffs did not receive notice of the tax foreclosure sale.
The Plaintiffs claimed (i) that the foreclosure sale triggered the ROFR and thus they could purchase the property from Kirik for the amount of his successful bid; (2) that Kirik could not sell the property without honoring the ROFR; and (3) that the tax sale should be invalidated because the “notice by request” provision of the Monroe County Tax Foreclosure Act, requiring the holder of an interest in property to file a notice with the County Director of Finance to receive notice of any foreclosure proceedings violated due process.
The Supreme Court, Monroe County, held that the tax foreclosure sale did not trigger the Plaintiffs’ rights under the ROFR and that Kirik was not bound to later offer the property to the Plaintiffs if it was to be re-sold; the ROFR did not “touch and concern” the land since it did not affect Kirik’s use of the land or substantially affect its value, which is required, according to the Court, to find that a covenant runs with the land.
However, the Court ruled that the Plaintiffs, beneficiaries of the recorded ROFR, “were entitled to advance written notice of the foreclosure sale.” Under Real Property Tax Law Section 1125 (“Personal notice of commencement of foreclosure proceeding”), personal notice of a tax foreclosure proceeding is to be afforded “each owner and any other person whose right, title, or interest was a matter of public record...” Further, under Chapter 635-1 Section 15 of the Monroe County Code, even when a person does not file notice of an interest in real property with the County Director of Finance, notice is to be given to a person having a claim to the real property at that person’s last known address as it “appears upon the current tax rolls or the records in the office of the director of finance…” The addresses of the Plaintiffs, the owners of property adjacent to the land subject to the ROFR, “were in the tax rolls, as well as on the ROFR…”11

As the Plaintiffs had not been afforded due process, the Court vacated the sale, set aside the referee’s deed and ordered the County to hold a new sale. Wilmot v. Kirik, 2021 NY Slip Op 51313, decided October 22, 2021, was posted on April 14, 2023 by the New York State Slip Opinion Service at https://www.nycourts.gov/reporter/3dseries/2021/2021_51313.htm