When Are Banks Liable for Injuries on A Foreclosed Property?

As New Jersey continues to address the glut of abandoned, a foreclosed property, liability issues are arising over who is responsible when injuries occur.

In a recent decision, the Appellate Division refused to impose liability on Bank of America, N.A. (BOA) for a slip-and-fall injury that occurred on an icy sidewalk abutting a foreclosed property. The decision in McRoy v. Eskander turned on whether the bank was considered a “mortgagee in possession.”

The Facts of the Case

The plaintiff, Matthew McRoy, injured his arm when he slipped and fell on snow and ice that had accumulated on a sidewalk abutting a four-unit apartment building owned by defendant Waheed Z. Eskander. Eskander and his wife executed a note and mortgage to BOA, using the building as collateral. After they defaulted, a final judgment of foreclosure was entered in favor of BOA for $583,362.14. When the plaintiff fell, the sheriff’s sale had not yet occurred, and the building was vacant.

The plaintiff began a personal injury suit against Eskander and BOA, alleging they were negligent in maintaining the premises, including the sidewalk. According to the court’s opinion. BOA did not maintain the premises or the sidewalk, with the exception of performing yard work on one occasion. BOA did inspect the foreclosed property periodically to ensure it was vacant and paid property taxes and a water bill.

The Court’s Decision

The appeals court affirmed the trial court’s order, which dismissed the case against BOA on summary judgment. The panel agreed that the mortgage lender was not liable for the plaintiff’s injuries.

The decision cited long-standing precedent in New Jersey that when the mortgagee takes the management and control of the property out of the hands of the mortgagor, the mortgagee becomes a mortgagee in possession. The Appellate Division further noted that the duty of a mortgagee in possession is that of a provident owner, which includes the management and preservation of the property. A mortgagee in possession is liable for injuries arising from its failure to perform legal duties imposed upon the owner of the property.

In this case, the appeals court concluded that there was no evidence that BOA exercised the requisite dominion and control over the premises to be deemed a mortgagee in possession. As further explained in the opinion:

“BOA never supplanted or supplemented Eskander’s control or management of the property, who chose to let the building be vacant and ignored his duties as a landowner by failing to remove snow and ice from the abutting sidewalk. But for one instance when BOA’s agent did some yard work, BOA never expended any effort to preserve or improve the premises, including the adjoining sidewalk, in any respect.”

The appeals court also found that paying the water bill and property taxes, as well as periodically verifying that the property was vacant, were undertaken to protect the lender’s collateral. Because these actions were not intended to exert any control over the management of the property, they did not convert BOA into a mortgagee in possession.