New York’s Statute of Limitations ("SOL") is designed to protect homeowners from the unfairness that might otherwise result from foreclosures concerning defaults that occurred so long ago that the homeowner may no longer possess documents, evidence or proof of payments made.
CPLR 213 provides that actions to enforce contracts (such as Notes and Mortgages) must be commenced within six (6) years, or the defendant may raise the affirmative defense that the SOL has expired and the case will be forever dismissed.
There are, however, exceptions to this rule, such as the following:
- Each payment required is considered a separate cause of action, so unless the entire balance has been accelerated, only those payments that were due more than six years ago are barred.
- Each time the borrower submits a payment, the six (6) years begin to run anew.
If the borrower files a bankruptcy petition, the SOL is tolled during the time bankruptcy is pending.
If the borrower signs a written document (including Forbearance Agreements, Loan Mods, or even correspondence) acknowledging the debt, the six (6) years will begin to run anew from the date of this acknowledgment.
Furthermore, pursuant to CPLR 205(A), if an action is dismissed for any reason, other than the four (4) exceptions listed below, a party may commence a new action within six (6) months of the dismissal even though the SOL may have expired. The exceptions are dismissals based upon:
Lack of jurisdiction
The merits of the case
Failure to prosecute
Therefore, it is crucial to avoid voluntary discontinuing a foreclosure if a SOL issue exists! If you discover a procedural defect in a foreclosure action, but the SOL has expired while it was pending, DO NOT discontinue the defective foreclosure voluntarily, but wait for the Court to do so to ensure that a new foreclosure can be commenced in the next six (6) months. (And don’t forget that you may need to send a new 90 Day Notice, per RPAPL 1304)
As a result of the “extended timeline” in New York, SOL issues are becoming more and more “routine.” Be careful not to handle them routinely, however, or you may discover a whole new meaning for SOL!