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Volume 7 - Opinions of Counsel SBEA No. 93

Opinions of Counsel index

Taxes (delinquent) (tax deed) (title conveyed - effect on private lien) - Real Property Tax Law, §§ 1020(1), 1464:

A village tax deed vests in the grantee an estate free and clear of all private liens, whether those liens were derived from the village or otherwise acquired. However, title conveyed by the tax deed would be subject to claims of a village, county or the State for taxes, liens or encumbrances.

We are asked whether section 1464 of the Real Property Tax Law would require the owner of a village tax lien certificate to “satisfy” all outstanding tax liens (whether held by a governmental unit or a private individual) as a prerequisite to obtaining a village tax deed.

Section 1464 sets forth the procedures governing the issuance of a village tax deed. Subdivision 3 of this section provides that a conveyance of title by village tax deed “shall vest in the grantee an absolute estate in fee, subject, however, to all claims the village, county or state may have thereon for taxes, liens or encumbrances” (emphasis added). This means that the grantee receives title free and clear of all claims other than those of “the village, county or state”. The question before us is whether a village tax deed extinguishes a lien privately held-though derived from one of those governmental entities listed in subdivision 2 of section 1464-or whether the title thereby conveyed is taken “subject to” such lien.

In Segar v. Youngs, 58 A.D.2d 368, 396 N.Y.S.2d 912 (3d Dept., 1977), aff’d 45 N.Y.2d 568, 383 N.E.2d 103,410 N.Y.S.2d 801 (1978), the courts reviewed a similar provision of Article 10 of the Real Property Tax Law, applicable to tax deeds issued by a county. At the time, subdivision 1 of section 1020 provided that a county tax deed vested in the grantee an absolute estate in fee subject to claims “of the county or state for taxes, liens or other encumbrances”. At issue were questions of whether tax liens held by a village and tax liens held by a private person but acquired from the village survived the issuance of the county tax deed.

The Appellate Division concluded that the lien still held by the village survived but that the private lien did not: “It has long been established that while sovereign liens are preferred, private liens are cut off by a tax sale” (369 N.Y.S.2d, at 913). The court added that “it is irrelevant that defendant . . . purchased her tax sale certificate from the Village which itself had previously bought the lien at a tax sale. It is still a private lien” (id., at 914 (emphasis added)).

On appeal, the Court of Appeals concluded that neither the village lien nor the private lien survived the issuance of the county tax deed, declaring that “the interests of the Village . . . did not survive the county tax deed . . . . And, since the rights of the [private] defendant . . . were derived from those of the village, her liens were also extinguished by the grant” (45 N.Y.2d, at 572).

There appears to be a distinction between the rationale of the Appellate Division and that of the Court of Appeals. The Appellate Division declared unequivocably that a private lien - whatever its source - could not survive the issuance of a county tax deed, given the narrow language of section 1020(1). The Court of Appeals, in contrast, seems to have determined that the private liens were extinguished because they were derived from those of the Village-and those of the Village did not survive the county tax deed.

Thus, the Court of Appeals’ opinion could be read to imply that if the village lien survived (which it would under § 1464(3)), then private rights derived from village liens would also survive. This interpretation would mean that since, under section 1464(3), village liens survive the issuance of a village tax deed, so do private claims derived from village tax liens.

Considered in its entirety, however, we do not believe that the Court of Appeals opinion should be so construed. Earlier in that opinion, the Court went to some length to distinguish the “county” from the “village”, as claims of the former but not the latter were declared to survive a county tax deed. Similarly, we believe that if asked to review the statutory language of section 1464(3), the Court would emphasize the reference to “claims the village . . . may have”, as limiting the statute to claims of the village and not claims derived from the village.

Had the Legislature intended to extend this protection to privately held liens, it could have easily done so. Indeed, in 1979, by Chapters 700 and 701, section 1020(1) was amended to ensure the survival of claims of “town, city [and] village”, against property acquired by county tax deed.

In conclusion, then, it is our opinion that a village tax deed vests in the grantee an estate free and clear of all private liens, whether such liens are derived from a village or otherwise acquired. Such title would, however, be subject to claims of a village, county or the State for taxes, liens or encumbrances.

June 18, 1982

Updated: