Overview of New Mexico Abandoned Property Law
Abandoned property law in New Mexico sets forth the necessary requirements of the possessor to hold title to and dispose of abandoned property. Abandoned property, i.e., personal property, is controlled by Chapter 48, Article 6 of the New Mexico Statutes Annotated. When an owner has placed property into the "care" of another party and that property has been "abandoned" by the owner and is now in the possession of a third party (the "Possessor"), this act falls under New Mexico’s Abandoned Property Law. Essentially the law imposes a public duty on a Possessor of abandoned property when it is a burden or detriment to the property where the property is located to give notice and thus a chance to retrieve the property, or risk forfeiting it to the prior owner.
There are several situations where the owner of the property has not physically abandoned the property, but has at least constructively abandoned the property , thus creating a duty on the part of the current possessor of the abandoned property. Situations include: 1) when a tenant abandons personal property left on leased premises; 2) property sold at public auction and no one comes to pick it up; 3) when the police store property; 4) tort actions where private property is wrongfully used; 5) property left or used on leased or rented premises; 6) when the property is found on the side of the road; 7) when the property is loaned to someone and that person never returns it as was agreed; 8) when property is found in a dumpster; and lastly, 9) when property is lost or misplaced.
The basic requirements of the New Mexico Abandoned Property Statute are:
(1) Provide notice to the owner of the abandoned property; and
(2) Dispose of the abandoned property within 30 days following notice to the owner, and if not so disposed of within 30 days, return the abandoned property to the owner or his or her authorized representative.
Defining Abandoned Property
The legal definition of abandoned property, or unclaimed property, in New Mexico is found in section 7-8A (6) of the New Mexico Statutes Annotated. In New Mexico, unclaimed property is defined as "any financial asset that has not been claimed by its owner for a specified period of time that has been presumed abandoned pursuant to the [Uniform Unclaimed Property Act]." This definition covers a broad range of property, and virtually anything of value can be considered unclaimed property, subject to certain limitations. New Mexico’s act lists the following types of property as specifically bringing them within the scope of the act: "a checking, savings or other financial account located in this state; a demand deposit or checking account; an amount payable under a matured or terminated policy, annuity, or similar agreement; a deposit held by a financial organization; an amount owed by an issuer or its subsidiary or predecessor corporation to a public safety officer as wages, pension, retirement pay, insurance or any combination thereof; a life insurance policy or annuity where the issuer of the policy or annuity has lost contact with the insured or annuitant under the policy, the beneficiary whose relationship with the insured or annuitant is unknown to the insurer or annuitant, or the beneficiary of a survivor benefit awarded to a beneficiary whose relationship to the designated employee is unknown to the issuer; a traveler’s check, money order, or similar instrument that has been issued by a person other than the issuer; to name a few.
Once property is deemed unclaimed, a presumption is created that the property has been abandoned. New Mexico has established time periods in which possession of property by any person or organization will establish a presumption of abandonment, after which the property passes to the custodian of an individual acting in loco parentis regarding miscellaneous property, or the Director of the Department of Finance and Administration, in the case of intangible property. New Mexico’s act lists mixtures of property in Item 19, Section 5, which includes in its list of 64 types of property that will be deemed abandoned after having been unclaimed for more than five years, the following: a money order; a deposit held by a financial organization; funds in financial organizations held in a safe keeping obligation or otherwise; money, currency, any amount payable on check or money ordering instrument; all tangible personal property; credit balances; stocks; bonds; negotiable instruments; unredeemed gift certificates; all intangible personal property; and any account payable in the ordinary course of business.
Once property in New Mexico is claimed to be abandoned, the statute places a duty on the holder of the property to take certain actions with respect to the property within 60 days such as "exercise reasonable diligence to locate the owner of the property; … send written notice electronically, by certified mail, return receipt requested or by prominently posting the property on its website no later than two hundred seventy days after the holder has the duty to report the property, and no later than fifteen days prior to the expiration of the 90-day period," including a statement indicating that there is property owing to the person subject to the Uniform Unclaimed Property Act. The statute also requires that "the notice contain a statement consistent with the provisions of Section 7-8A-34" of the act, which provides guidance as to the filing of a claim with the office; and "provide access to the claimant on its website to a form by which the claimant may initiate a claim for the property."
How to Recover Your Abandoned Property
In New Mexico, a person seeking to recover abandoned property must file an action in a district court. NMSA 1978 § 42-1-2. The lawsuit must be commenced in the district court in the district where the defendant last addressed the property. NMSA 1978 § 42-1-4. However, for livestock disputes, the action must be instituted in the district court in the county where the defendant has undertaken possession of the animals. NMSA 1978 § 42-1-1.
The action must be brought against all known persons who have been in possession or claim of the property within six years before the action is commenced. NMSA 1978 § 42-1-5. If the whereabouts of any of the defendants are unknown, service of process by publication may be used. NMSA 1978 § 42-1-6. A plaintiff may also prompt a writ of attachment in the proceedings. NMSA 1978 § 42-1-7.
If the property is of the kind that acquires a lien, such as horses, cattle, and mules, then the plaintiff may have a receiver appointed. NMSA 1978 § 42-1-8. A receiver may also be appointed if the property has been concealed and the plaintiff requests the appointment. NMSA 1978 § 42-1-9. The plaintiff may also request in his complaint that the district court sell the property upon the judgment of recovery. NMSA 1978 § 42-1-10. If a plaintiff obtains judgment in his favor he may be entitled to both costs and reasonable attorney fees. NMSA 1978 § 42-1-11. However, if a party requests a jury trial and the verdict favors the adverse party, the adverse party may recover reasonable attorney fees and costs. NMSA 1978 § 42-1-12.
Obligations for Owners of Abandoned Property
Property owners’ responsibilities and obligations under New Mexico law concerning the handling of abandoned property are outlined in a series of statutes. Laws governing the process can be found within the New Mexico Statutes Annotated at sections 42-9-1 through 42-9-19. Once a landlord believes that a tenant has vacated a rental unit or apartment, the next step is to determine whether the unit is truly abandoned. Sometimes, a landlord can simply contact the person by email, phone, or another way to ask whether the unit is abandoned. More difficult cases, however, require additional work and effort on the owner or agent’s part.
Under NMSA 42-9-5, the owner must clearly mark and label on the outer door of the apartment or house that the personal property inside has been abandoned. The owner must then call the local police department to schedule a time to have a police officer present to supervise during the entry and removal of abandoned property. To make sure both the police and the owner are at the property at the appointed time, the owner must provide at least 48 hours’ notice to the police department as required by NMSA 42-9-6. When the owner and the police arrive on the appropriate date as scheduled, the owner must personally be present to collect and remove any abandoned property. If the owner does not appear, then the 72-hour waiting period under section 42-9-6 will not have been completed and another police appointment will need to be made. After the police officer supervises the removal of all property from the premises, the owner must then give the tenant 30 days’ notice of the removal. This step is necessary even if the property remaining behind has had its own issues requiring systematic disposal over the course of several weeks or months.
If the abandoned property includes money, firearms, narcotics, explosives, or some similar items, and can be seized, the owner does not have to follow steps numbers one through three under section 42-9-4. Instead, to handle these items, the owner or agent must notify the police department of the existence of the property within 30 days after the owner has taken possession of the property in order to allow the police department to remove any such property. Then, the property must be accounted for and disposed in the same way as abandoned property. The owner may charge the tenant for costs in connection with removing the abandoned property under section 42-9-17. Property disposed under the applicable statute is the responsibility of the landlord, and the tenant must bear the costs of disposal only if the lease provides for such a charge. Otherwise, the landlord cannot charge the tenant for the costs of storage, resale, or disposal of abandoned property.
Comparison Between State and Private Abandonment Cases
Differences exist in the legal procedures for abandoned properties that are being foreclosed upon by the State of New Mexico, versus foreclosures for private entities such as private lenders, LLCs and banks. When a government entity has obtained a judgment, in most cases, judicial sales occur at the Court house steps, which are arranged (as directed by the Court) by private companies who act as special masters to carry out the directives of the Court. In these instances, people get notices from the court house from the special master and all funds are paid to the Clerk of the Court. Once the judgment gets paid, the Clerk of the Court handles distribution, not the homeowner. The object of the foreclosure process is to obtain a new buyer who, in obtaining a deed from the Clerk of the Court will then own the property free and clear of the previous encumbrances, such as liens, mortgages, assignments, etc.
In a private foreclosure, however, if there is no federal money involved, a private lender may use an Order of Sale based upon the Judgment to become the owner of the property without going through the process of obtaining legal possession or ownership by judicial sale . These types of foreclosures usually are uncontested because the lender has foreclosed on the property in good faith and with the proper documentation through another law firm and has given the debtor numerous chances to cure his/her default. So long as the debtor has not satisfied their debt or come to an arrangement with the lender, the lender now obtains the right to execute on the property and foreclose, in order to collect the debt.
In a private foreclosure situation, the lender pays the Sheriff’s department their fee for enforcing the writ of execution, the homeowner pays nothing. The order to execute must be obtained from the Court over the course of about 60-90 days from the point of filing of the suit, to the point of obtaining the judgment, to the judgment becoming final, and the lender bringing the order to execute to the Sheriff’s department for them to foreclose upon the property. In this situation, the Sheriff would then foreclose upon the property much as a government entity would. According to state statute, this is an expedited process, however many times the Sheriff’s department is delayed in carrying out judicial foreclosures because of large caseloads.
Common Legal Controversies and Resolutions
There are a number of common legal disputes that must be resolved relating to abandoned property. As always, the strategy for each situation will depend on the context and facts associated with the dispute. New Mexico statutes require that conveyances from an abandoned "spouse" "to any person (a]re void." Because state law does not address many of the issues that arise with respect to an abandoned spouse, New Mexico common law applies to many issues. Because service is only possible by publication, these disputes can often become protracted. A professional should be consulted if an abandoned spouse is suspected to exist. New Mexico law permits lienors to sales property after twelve months have passed since mailing a notice of default to both the borrower and the property owner. In fact, it is strongly in a lienor’s interest to sell the property within one year of such notice even though it need not do so, because the borrower’s time to redeem the property ends one year after such sale. If ownership of property by adverse possession or lost instrument is established, title to property can be quieted under NMSA 1978, § 39-3-12. Prior liens will be affected, as recorded property interests are set as prior claims of record are extinguished. Before new title is granted via a quiet title action, a property owner or purchaser will request the court to issue a preliminary injunction restraining adverse claims. Often, when ownership is transferred prior to the issue of the injunction, the new owner will need to obtain permission to intervene in the case.
How Abandoned Property Laws Impact Real Estate
Understanding New Mexico’s Abandoned Property Law requires navigating through a maze of legislative intent and public policy. Abandoned property laws influence the real estate market by imposing requirements that affect not only the buyer, seller, or lender, but also the surrounding community.
Our case had a rental property that was up for foreclosure. The tenant had moved out and left most of their property. The bank was foreclosing on the property in early 2012. But before the property sold at foreclosure there was a Metropolitan Redevelopment Act sale ("MRA Sale") scheduled which the tenant was still in the process of vacating and taking their things. The bank wanted to proceed with the MRA Sale but it did not know who owned what and could not determine if the tenant had abandoned their property. If the tenant had not abandoned their property, the bank had to take their property into account when determining how much equity they had in the property and if the MRA Sale proceeds would go to them or the tenant. As a result, the bank was at an impasse between doing the foreclosure or the MRA Sale. The bank contacted the city to determine what procedures it needed to follow in the event the tenant had abandoned their property.
In New Mexico, abandoned property is defined as any personal property that has been left without any indication as to its intended disposition. NMSA Section 47-18-4(A); NMSA Section 47-18-4(B). When a tenant vacates a rental without removing their property, they are presumed to have abandoned that property and the landlord needs to follow the outline procedures under New Mexico’s Disposition of Abandoned Property Act ("Act").
If real property is abandoned, but is within two (2) years of the time allotted for the general property statute of limitations to run, the law presumes the property is abandoned and the property owner must take steps to prevent its forfeiture. NMSA Section 37-1-14. The Act requires a property owner to inventory and store abandoned property for two (2) months. NMSA Section 47-18-4.
Following the two (2) month period, the property owner must take the abandoned property to a public facility that is adequate to allow interested parties to claim the property during the next two (2) months. Interested parties may include the debtor, lienholder, or any creditor whose claim has been filed with the county clerk. NMSA Section 47-18-5. After the two (2) months are up, the property can be sold, used, or disposed of at the discretion of the owner. NMSA Section 47-18-6.
New Mexico’s abandoned property laws affect the real estate market in many ways. Foreclosure property needs to be taken care of with caution and needs to be handled in a way that still allows the borrower to redeem the property to ensure that the sale still meets bank policy for making loans and selling property.
Recent Reforms and Future Possibilities
The New Mexico Legislature recently provided further limits on the rights of association to require members to submit their units for foreclosure beyond a two-year period. These recent changes are consistent with trends in other states national trends in limiting association rights to foreclose on member’s units.
In the 2019 Legislative Session, the New Mexico Legislature approved SB 394, which was signed into law on April 3, 2019. SB 394 limits the super priority lien statutes for assessments to six months of regular and special assessments. SB 394 also places a two-year statute of limitations on any effort to seek a deficiency judgment against a debtor in a residential association collection action.
SB 394 expands upon the Federal Housing Finance Agency’s ("FHFA") requirements for certain lending institutions to purchase loans within a time period that coincides with SB 394. When FHFA issued its rules, it adopted a "one-size-fits-all" approach to all 50 states, but did provide modifications for a limited number of states. FHFA’s rules provide that a security interest in a common area property or a lien on a super-priority lien place or created under state law must be recorded , perfected, or acquired within the applicable preference period for the law to support an insurance claim. With the enactment of SB 394, New Mexico has a state law that is more protective of the owner of the underlying property. Now, when dealing with foreclosures in New Mexico only those associations that have perfected the foreclosure within a two-year period would be required by FHFA to satisfy its requirements. This means only associations that have to collect assessments on a six-month basis are given a super priority status.
SB 394 carries certain limitations to its application. The provisions in SB 394 do not apply to Section 2128 of the federal Housing and Economic Recovery Act of 2008, the Federal Homeowners Protection Act of 1994, or to those foreclosure actions based on liens or encumbrance that were filed with the district court prior to the effective date of July 1, 2019.
Based on the recent legislative activity in New Mexico, it appears the state will continue with legislation to make it more consistent with FHFA’s rules governing super priority status.