Audit Report on the Department of Housing Preservation and Development’s Efforts to Collect Outstanding Money Judgments

Executive Summary

The objective of this audit was to evaluate the Department of Housing Preservation and Development’s (HPD) efforts to collect outstanding money judgments resulting from assessed penalties.

HPD enforces compliance with the New York City (City) Housing Maintenance Code and the New York State (NYS) Multiple Dwelling Law.  To carry out its enforcement responsibilities, HPD’s Code Enforcement Unit (Code Enforcement) inspects residential multiple-dwellings in response to complaints from tenants and other sources or referrals from other units of HPD.  Code Enforcement issues Notices of Violation (NOVs) to building owners in response to observed violations.  When issued an NOV, a building owner must correct the cited conditions within a specified amount of time and certify to HPD—either by mail or online—that the violations have been corrected.^[1]  If a building owner fails to correct a violation or notify HPD of the correction, or if repeated violations are found, HPD may take a number of actions to enforce compliance, including seeking to have civil penalties imposed against the building owner.  Penalties can range up to $1,000 per offense or $1,000 per day until the violation is corrected.

As part of its enforcement efforts, HPD’s Housing Litigation Division (Housing Litigation) is authorized to initiate cases in Housing Court to compel building owners to correct violations and/or to enforce civil penalties.^[2]  When the court finds in favor of HPD and imposes a penalty, a judgment is entered against the building owner (the judgment debtor), and a judgment lien is attached to the subject property as well as all other real estate held in the judgment debtor’s name in that county.^[3]

When the judgment debtor (i.e., the owner) fails to pay a money judgment, enter into a stipulation agreement, or honor an existing agreement with HPD, Housing Litigation will transfer the case to its Judgment Enforcement Unit (JEU) for collection action.  Overall, the efforts that JEU undertakes to collect outstanding money judgments depend largely upon the amount of the judgment, the circumstances of the case, and the perceived likelihood of success of those collection efforts.

Audit Findings and Conclusion

JEU’s collection efforts, while undertaken in accordance with the New York Civil Practice Law and Rules (CPLR), did not result in the collection of the vast majority of the money judgments referred to JEU for collection.  However, we were unable to determine JEU’s overall rate of collection because HPD did not provide sufficient information about outstanding judgment balances and their related payments received by year from which such a calculation could be made.  We also noted that JEU has a limited number of legal staff assigned to pursue cases in court and its caseload was significantly backlogged with nearly half its total caseload remaining unassigned for an average of two years.  Consequently, cases are not acted upon in a timely manner, which limits HPD’s efforts to collect outstanding money judgments.

Audit Recommendations

To address these issues, the audit makes six recommendations, including the following:

• HPD should work with the Mayor’s Office of Operations (MOO) to: (1) identify the relevant City agencies that administer rental assistance, tax refunds, and other City payments to building owners; and (2) cross-check HPD’s list of judgment debtors with the building owners receiving payments from such City agencies.
• HPD should coordinate efforts with relevant City agencies to levy on non-exempt funds^[4] payable to HPD’s judgment debtors, assisted as needed by MOO, the City Law Department, the Department of Finance (DOF), its Office of the Sheriff, and the City marshals, and apply the net proceeds of such levies to the satisfaction of HPD’s outstanding judgments.
• HPD should consider hiring or reassigning some staff attorneys from other organizational areas to JEU to reduce the current backlog of JEU unassigned cases.
• HPD should consider transferring cases to either the City’s Law Department and/or an outside collection agency to expand the collection efforts of outstanding money judgments.

Agency Response

HPD officials agreed with all six of the recommendations made in this audit but disagreed with our methodology for calculating the agency’s collection rate on cases.  After carefully reviewing HPD’s analysis, we find no basis for changing our finding.

[1] Building owners can certify the correction of violating conditions through HPD’s online eCertification application.

[2] The Civil Court of the City of New York has jurisdiction over civil cases involving amounts up to $25,000 and other civil matters referred to it by the Supreme Court.  It includes a small claims part (Small Claims Court) for informal dispositions of matters not exceeding $5,000 and a property owner (landlord) and tenant/housing part (Housing Court) for landlord-tenant matters of unlimited amounts and housing code violations.

^[3] In accordance with CPLR Section §5222, HPD also sends a notice to the debtor  advising  the debtor that money or property that belongs to him/her may be taken or held to satisfy a judgment entered against him/her.  It also advises the debtor of certain money or property that is exempt from satisfying the judgment.

[4] §5222 of the CPLR establishes that State and federal laws prevent certain money or property from being taken to satisfy judgments or orders.  Such money or property is said to be “exempt,” and may include a debtor’s income from sources such as Social Security, Supplemental Security Income, (SSI), public assistance (welfare); spousal support, maintenance (alimony) or child support; unemployment benefits; disability benefits; workers’ compensation benefits; pensions; veterans benefits; railroad retirement benefits,  etc. (see more at: http://codes.findlaw.com/ny/civil-practice-law-and-rules/cvp-sect-5222.html#sthash.HKKUVcE5.dpuf)