A03139 Summary:

BILL NOA03139
 
SAME ASSAME AS S03074
 
SPONSOREpstein
 
COSPNSRCruz, Richardson, Simon, Rosenthal L, Reyes, Glick, Barron, Gottfried, Carroll, Anderson
 
MLTSPNSRCook, Frontus
 
Add 291-k, RP L; amd 250, 253, 253-a, 255, 257 & 258, Tax L; amd 9-601, UCC
 
Relates to requiring the recording of mezzanine debt and preferred equity investments and including mezzanine debt in the mortgage recording tax; defines mezzanine debt.
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A03139 Actions:

BILL NOA03139
 
01/22/2021referred to judiciary
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A03139 Committee Votes:

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A03139 Floor Votes:

There are no votes for this bill in this legislative session.
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A03139 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A3139
 
SPONSOR: Epstein
  TITLE OF BILL: An act to amend the real property law and the uniform commercial code, in relation to requiring the recording of mezzanine debt and preferred equity investments; and to amend the tax law, in relation to including mezzanine debt in the mortgage recording tax   PURPOSE OR GENERAL IDEA OF BILL: This bill would treat mezzanine debt and preferred equity investments used to finance real estate purchases like a mortgage, subjecting it to the same recording and taxation requirements.   SUMMARY OF PROVISIONS: Section 1 amends the real property law by adding a new section 291-k that defines "mezzanine debt" and "preferred equity investments" and requires that they be recorded concurrently with a mortgage instrument filed on a property with which mezzanine debt is associated Section 2 amends section 9-601 of the uniform commercial code by adding a new subsection (h) to provide that a security interest in mezzanine debt and/or preferred equity investment may only be perfected by the filing of a financing statement under subpart 1 of part 5 of the arti- cle. Section 3 amends paragraph (a) of subdivision 2 of section 250 of the tax law by providing that mezzanine debt and preferred equity invest- ments are taxable Section 4 amends section 250 of the tax law to reference the definitions of "mezzanine debt" and "preferred equity investment" Section 5 amends section 253 of the tax law to define terms and estab- lish the process by which mezzanine debt and preferred equity invest- ments are taxed. Section 6 amends subdivision 1 and paragraph (a) of subdivision 2 of section 253-a of the tax law to add a tax shall be imposed on the filing of certain financial statements. Section 7 amends paragraph (a) of subdivision 1 of section 255 of the tax law to establish that certain taxes shall apply to mezzanine debt and or preferred equity investments Section 8 amends section 257 of the tax law to provide for the payment of taxes on mezzanine debt and/or preferred equity investments. Section 9 amends subdivision 1 of section 258 of the tax law prohibits the recording of a mortgage of a property with related mezzanine debt and/or preferred equity investments unless certain taxes on such debts have been paid. Section 10 provides the effective date.   DIFFERENCE BETWEEN ORIGINAL AND AMENDED VERSION (IF APPLICABLE):   JUSTIFICATION: Mezzanine debt and preferred equity investment are forms of unsecured debt often used to fund the purchase of investment properties. Because these debts are not secured against a property like a traditional mort- gage, the lender's decision to issue the debt is based on the creditwor- thiness of the borrower. As a result, these types of debt instruments are not available to everyday homebuyers, but rather to the institu- tional investors and the extremely wealthy who purchase real estate with the goal of making a profit. While mezzanine debt and preferred equity investments used to finance real estate purchases serve the same purpose as a mortgage, they are not publicly recorded in the same way. The lack of transparency is problem- atic: real estate speculators have a history of financing their purchases of occupied rental housing with mezzanine debt--sometimes the only type of financing they can acquire due to the riskiness of their investments--and then rapidly raising rents to pay back the debt obli- gation. Regulators and advocates with access to publicly recorded mort- gage notes can calculate a property's debt service coverage ratio, which can help identify an overleveraged building where rents are likely to skyrocket, displacing tenants. But when a loan's term sheet is hidden, as is the case with mezzanine debt, the public remains in the dark and therefore vulnerable. Because the state lacks adequate oversight over these types of debt, real estate speculators who want to shroud their predatory business models from the public eye are incentivized to use these types of financing as opposed to funding their property acquisi- tions with a traditional bank-backed mortgage. Not only are mezzanine debt and preferred equity investments currently invisible to the public, they are also untaxed. With the astronomical sums trading hands in real estate transactions with mezzanine debt play- ing a major role, the state is currently forgoing possibly billions of dollars of potential tax revenue that the state badly needs to fund unmet capital needs in its public housing. This commonsense legislation simply creates parity between debt instru- ments that serve the same purpose but are currently treated differently under the law with the goal of steering real estate speculators towards ostensibly less volatile instruments provided by banks rather than private equity. This legislation also creates more transparency in the market, and raises badly needed tax revenue from corporations that can afford to pay their fair share.   PRIOR LEGISLATIVE HISTORY: 2020: A9041A/S.07231A - referred to judiciary/REFERRED TO JUDICIARY   FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: Potential to raise significant amount of new tax revenue.   EFFECTIVE DATE: 90 days after becoming law.
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A03139 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          3139
 
                               2021-2022 Regular Sessions
 
                   IN ASSEMBLY
 
                                    January 22, 2021
                                       ___________
 
        Introduced  by  M. of A. EPSTEIN, CRUZ, RICHARDSON, SIMON, L. ROSENTHAL,
          REYES, GLICK, BARRON, GOTTFRIED, CARROLL, ANDERSON --  Multi-Sponsored
          by -- M. of A.  COOK, FRONTUS -- read once and referred to the Commit-
          tee on Judiciary
 
        AN  ACT  to amend the real property law and the uniform commercial code,
          in relation to requiring the recording of mezzanine debt and preferred
          equity investments; and to amend the tax law, in relation to including
          mezzanine debt in the mortgage recording tax
 
          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1.  The  real property law is amended by adding a new section
     2  291-k to read as follows:
     3    § 291-k. Recording of mezzanine debt and preferred equity investments.
     4  1. Whenever a mortgage instrument is  recorded  in  the  office  of  the
     5  recording  officer of any county, any mezzanine debt or preferred equity
     6  investment related to the real property upon which the mortgage  instru-
     7  ment  is filed shall also be recorded with such mortgage instrument. For
     8  the purposes of this section, "mezzanine  debt"  and  "preferred  equity
     9  investments"  shall mean debt carried by a borrower that may be subordi-
    10  nate to the primary lien and is senior to the common shares of an entity
    11  or the borrower's equity and reported as  assets  for  the  purposes  of
    12  financing such primary lien.  This shall include non-traditional financ-
    13  ing  techniques  such  as a direct or indirect investment by a financing
    14  source in an entity that owns the equality interests of  the  underlying
    15  mortgage  where  the  financing  source  has special rights or preferred
    16  rights such as: (i) the right to receive a special or preferred rate  of
    17  return  on  its capital investment; and (ii) the right to an accelerated
    18  repayment of the investors capital contribution.
    19    2. This section shall apply to both mezzanine debt and preferred equi-
    20  ty investments if both used by the  borrower  or  mortgagor,  or  either
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD02149-01-1

        A. 3139                             2
 
     1  mezzanine  debt  or preferred debt, if either is used by the borrower or
     2  mortgagor.
     3    3. For purposes of this section, "mezzanine debt" and "preferred equi-
     4  ty  investments"  shall not include debt on cooperative or common shares
     5  of a residential dwelling where the unit owner of a  cooperative  apart-
     6  ment  is  a shareholder of the ownership entity, has exclusive occupancy
     7  of such dwelling unit, and has established and delimited rights under  a
     8  proprietary lease.
     9    4. No remedy otherwise available to a secured party under article nine
    10  of  the uniform commercial code shall be available to enforce a security
    11  agreement pertaining to mezzanine debt financing and/or preferred equity
    12  investments in relation to real property upon which a  mortgage  instru-
    13  ment  is  filed  that is evidenced by a financing statement, unless that
    14  financing statement is filed and the tax imposed pursuant to the author-
    15  ity of subdivision four of section two hundred fifty-three  of  the  tax
    16  law, has been paid.
    17    § 2. Section 9-601 of the uniform commercial code is amended by adding
    18  a new subsection (h) to read as follows:
    19    (h)  Security  interest perfected by financing statement. 1.  Notwith-
    20  standing any provision of law to the contrary, a  security  interest  in
    21  mezzanine  debt  and/or preferred equity investments related to the real
    22  property upon  which  a  mortgage  instrument  is  filed,  may  only  be
    23  perfected by the filing of a financing statement under subpart 1 of part
    24  5  of  this article and only after the payment of any taxes due pursuant
    25  to section two hundred ninety-one-k of the real property law.
    26    2. For purposes of  this  section,  the  terms  "mezzanine  debt"  and
    27  "preferred  equity  investments" shall have the same meaning as provided
    28  in section two hundred ninety-one-k of the real property law.
    29    3. This section shall not be applicable to any debt on cooperative  or
    30  common  shares of a residential dwelling where the unit owner of a coop-
    31  erative apartment is a shareholder of the ownership entity,  has  exclu-
    32  sive  occupancy of such dwelling unit, and has established and delimited
    33  rights under a proprietary lease.
    34    § 3. Paragraph (a) of subdivision 2 of section 250 of the tax law,  as
    35  amended  by  section  1  of part Q of chapter 60 of the laws of 2004, is
    36  amended to read as follows:
    37    (a) (1) The term "mortgage" as used in  this  article  includes  every
    38  mortgage  or  deed of trust which imposes a lien on or affects the title
    39  to real property, notwithstanding that such property may form a part  of
    40  the  security  for  the  debt or debts secured thereby. An assignment of
    41  rents to accrue from tenancies, subtenancies,  leases  or  subleases  of
    42  real  property,  within any city in the state having a population of one
    43  million or more, given as security for an indebtedness, shall be  deemed
    44  a  mortgage  of  real  property  for purposes of this article. Executory
    45  contracts for the sale of real property under which the vendee has or is
    46  entitled to possession shall be deemed to be mortgages for the  purposes
    47  of  this  article  and  shall  be  taxable  at the amount unpaid on such
    48  contracts. A contract or agreement by which the indebtedness secured  by
    49  any  mortgage  is  increased  or added to, shall be deemed a mortgage of
    50  real property for the purpose of this article, and shall be  taxable  as
    51  such upon the amount of such increase or addition.
    52    (2)  Notwithstanding  anything  in this section or section two hundred
    53  fifty-five of this article to the  contrary,  a  contract  or  agreement
    54  whereby  the  proceeds of any indebtedness secured by a mortgage of real
    55  property in any city in the state having a population of one million  or
    56  more are used to reduce all or any part of a mortgagee's equity interest

        A. 3139                             3
 
     1  in  a  wraparound  or  similar  mortgage  of such real property shall be
     2  deemed a mortgage of real property for the purposes of this article  and
     3  shall be taxable as such to the extent of the amount of such proceeds so
     4  used,  without  regard  to  whether the aggregate amount of indebtedness
     5  secured by mortgages of such real property is increased or added to.
     6    (3) Notwithstanding any provision to the contrary in this  section  or
     7  section  two  hundred  fifty-five  of this article, "mezzanine debt" and
     8  "preferred equity investments" as such terms are defined in  subdivision
     9  four  of  this  section,  shall  be  taxable and shall apply to taxes in
    10  subdivisions one, one-a and two of section two  hundred  fifty-three  of
    11  this  article, but shall not apply to any other taxes in this article on
    12  or after the effective date of this subparagraph.
    13    § 4.  Section 250 of the tax law is amended by adding a  new  subdivi-
    14  sion 4 to read as follows:
    15    4. The  term "mezzanine debt" and "preferred ability investment" shall
    16  have  the same meaning as provided in section 291-k of the real property
    17  law.
    18    § 5.  Section 253 of the tax law as amended by adding a  new  subdivi-
    19  sion 4 to read as follows:
    20    4.  (a)  A  tax, measured by the amount of principal debtor obligation
    21  which is under any contingency  may  be  secured  at  the  date  of  the
    22  execution  thereof,  or  at any time thereafter, by a security agreement
    23  pertaining to mezzanine debt financing and/or preferred  equity  invest-
    24  ments  in  relation to real property upon which a mortgage instrument is
    25  filed, as evidenced by a financing statement, is imposed on  the  filing
    26  of the financing statement.
    27    (b)  The rate and incidence of the tax shall be determined pursuant to
    28  this section.
    29    (c)  Except  as  otherwise  provided  in  this  subdivision,  all  the
    30  Provisions  of  this  article  relating to or applicable to the adminis-
    31  tration, collection, determination and distribution of the  tax  imposed
    32  by  this  section  shall apply to the tax imposed under the authority of
    33  this subdivision with such modification as may  be  necessary  to  adapt
    34  such language to the tax so authorized. Any reference to a mortgage will
    35  be  deemed  to  be a reference to a financing statement that evidences a
    36  security agreement. Such provisions shall apply with the same force  and
    37  effect  as  if  those  provisions had been set forth in this subdivision
    38  except to the extent that any provision is either  inconsistent  with  a
    39  provision  of  this subdivision or not relevant to the tax authorized by
    40  this subdivision.
    41    (d) No remedy otherwise available to a  secured  party  under  article
    42  nine  of  the  uniform  commercial  code shall be available to enforce a
    43  security  agreement  pertaining  to  mezzanine  debt  financing   and/or
    44  preferred  equity  investments in relation to real property upon which a
    45  mortgage instrument is filed that is evidenced by a financing statement,
    46  unless that financing statement is filed and the tax imposed pursuant to
    47  the authority of this subdivision has been paid.
    48    (e) For the purposes of this subdivision:
    49    (1) "mezzanine debt" and "preferred equity investments" shall have the
    50  same meaning as provided in section two hundred ninety-one-k of the real
    51  property law.
    52    (2) "financing statement" means a record or  records  composed  of  an
    53  initial financing statement and any filed record relating to the initial
    54  financing statement.
    55    (3)  "security  agreement" means an agreement that creates or provides
    56  for a security interest.

        A. 3139                             4
 
     1    (f) Counties or cities authorized under this article to impose  a  tax
     2  are  authorized and empowered to adopt and amend local laws to impose in
     3  such county or city a tax on the filing of financing statements pertain-
     4  ing to mezzanine debt financing and/or preferred equity  investments  in
     5  relation to real property upon which a mortgage instrument is filed. Any
     6  tax  that  has  been  imposed by a county or city under the authority of
     7  this article shall be deemed to include  the  authority  to  impose  and
     8  collect  the tax on the recording of a financing statement pertaining to
     9  mezzanine debt financing and/or preferred equity investments in relation
    10  to real property upon which a mortgage instrument is filed in  the  same
    11  manner as the local mortgage recording tax.
    12    § 6. Subdivision 1 and paragraph (a) of subdivision 2 of section 253-a
    13  of  the  tax  law,  as  amended  by chapter 343 of the laws of 1990, are
    14  amended to read as follows:
    15    1. Any city in this state having a population of one million or  more,
    16  acting  through  its  local  legislative  body, is hereby authorized and
    17  empowered to adopt and amend local laws imposing in any  such  city  (A)
    18  prior  to  February  first,  nineteen  hundred eighty-two a tax of fifty
    19  cents, (B) on or after February first, nineteen hundred  eighty-two  and
    20  before  July first, nineteen hundred eighty-two with respect to (i) one,
    21  two or three-family houses, individual cooperative apartments and  indi-
    22  vidual  residential condominium units, and (ii) real property securing a
    23  principal debt or obligation of less than five hundred thousand dollars,
    24  a tax of fifty cents, and with respect to all other real property a  tax
    25  of  one  dollar  and  twelve  and  one-half cents, (C) on and after July
    26  first, nineteen hundred eighty-two and  before  August  first,  nineteen
    27  hundred  ninety  with respect to real property securing a principal debt
    28  or obligation of less than five hundred thousand dollars, a tax of fifty
    29  cents, with respect to one, two or three-family houses, individual coop-
    30  erative apartments and individual residential condominium units securing
    31  a principal debt or obligation of five hundred thousand dollars or more,
    32  a tax of sixty-two and one-half cents, and with  respect  to  all  other
    33  real  property a tax of one dollar and twenty-five cents, and (D) on and
    34  after August first, nineteen hundred ninety with respect to real proper-
    35  ty securing a principal debt or obligation of  less  than  five  hundred
    36  thousand  dollars,  a  tax  of  one  dollar, with respect to one, two or
    37  three-family houses and individual residential condominium units  secur-
    38  ing  a  principal debt or obligation of five hundred thousand dollars or
    39  more, a tax of one dollar  and  twelve  and  one-half  cents,  and  with
    40  respect  to all other real property a tax of one dollar and seventy-five
    41  cents, for each one hundred dollars and each  remaining  major  fraction
    42  thereof of principal debt or obligation which is or under any contingen-
    43  cy may be secured at the date of execution thereof, or at any time ther-
    44  eafter,  by  a  mortgage on such real property situated within such city
    45  and recorded on or after the date upon which such tax takes effect and a
    46  tax of one dollar on such mortgage if the principal debt  or  obligation
    47  which  is  or by any contingency may be secured by such mortgage is less
    48  than one hundred dollars. In each instance where the tax imposed  pursu-
    49  ant to this subdivision is one dollar and twenty-five cents for each one
    50  hundred  dollars and each remaining major fraction thereof of such prin-
    51  cipal debt or obligation, fifty percent of the total amount of such tax,
    52  including fifty percent of any interest or penalties thereon,  shall  be
    53  set  aside  in  a special account by the commissioner of finance of such
    54  city. In each instance where the tax imposed pursuant to  this  subdivi-
    55  sion  is  one dollar and seventy-five cents for each one hundred dollars
    56  and each remaining major fraction thereof  of  such  principal  debt  or

        A. 3139                             5
 
     1  obligation,  thirty-five and seven-tenths percent of the total amount of
     2  such tax, including thirty-five and seven-tenths percent of any interest
     3  or penalties thereon, shall also be set aside in such  special  account.
     4  Moneys in such account shall be used for payment by such commissioner to
     5  the  state  comptroller  for deposit in the urban mass transit operating
     6  assistance account of the mass transportation operating assistance  fund
     7  of any amount of insufficiency certified by the state comptroller pursu-
     8  ant  to  the  provisions of subdivision six of section eighty-eight-a of
     9  the state finance law, and, on the fifteenth day  of  each  month,  such
    10  commissioner shall transmit all funds in such account on the last day of
    11  the  preceding  month, except the amount required for the payment of any
    12  amount of insufficiency certified by  the  state  comptroller  and  such
    13  amount  as  he deems necessary for refunds and such other amounts neces-
    14  sary to finance the New York city transportation disabled committee  and
    15  the New York city paratransit system as established by section fifteen-b
    16  of  the  transportation  law, provided, however, that such amounts shall
    17  not exceed six percent of the total funds in the account but in no event
    18  be less than two hundred twenty-five thousand  dollars  beginning  April
    19  first,  nineteen hundred eighty-six, and further that beginning November
    20  fifteenth, nineteen hundred eighty-four and  during  the  entire  period
    21  prior  to  operation of such system, the total of such amounts shall not
    22  exceed three hundred seventy-five thousand dollars for  the  administra-
    23  tive  expenses  of  such  committee  and  fifty thousand dollars for the
    24  expenses of the agency designated pursuant to paragraph b of subdivision
    25  five of such section, and other amounts necessary to finance the operat-
    26  ing needs of the private bus companies franchised by  the  city  of  New
    27  York  and  eligible  to receive state operating assistance under section
    28  eighteen-b of the  transportation  law,  provided,  however,  that  such
    29  amounts shall not exceed four percent of the total funds in the account,
    30  to the New York city transit authority for mass transit within the city.
    31  The tax imposed under the authority of paragraph (D) of this subdivision
    32  is deemed to include a tax imposed on the filing of financing statements
    33  evidencing  a  security agreement pertaining to mezzanine debt financing
    34  and/or preferred equity investments in relation to  real  property  upon
    35  which a mortgage instrument is filed.
    36    (a)  For  the  purpose of determining whether a mortgage is subject to
    37  the tax authorized to be imposed by paragraph (B) or (C) of  subdivision
    38  one  of this section at a rate in excess of fifty cents, or by paragraph
    39  (D) of subdivision one of this section  at  a  rate  in  excess  of  one
    40  dollar,  for  each one hundred dollars and each remaining major fraction
    41  thereof of principal debt or obligation, the  principal  debt  or  obli-
    42  gation  which  is or under any contingency may be secured at the date of
    43  execution thereof, or at any time thereafter, by such mortgage shall  be
    44  aggregated  with  the principal debt or obligation which is or under any
    45  contingency may be secured at the date of execution thereof, or  at  any
    46  time  thereafter,  by any other mortgage, where such mortgages form part
    47  of the same or related transactions and have the same or related mortga-
    48  gors or related debtors in the case of a financing statement  evidencing
    49  a  security  agreement  pertaining  to  mezzanine  debt financing and/or
    50  preferred equity investments in relation to real property upon  which  a
    51  mortgage  instrument  is  filed.  If  the  commissioner  of taxation and
    52  finance finds that a mortgage transaction or mortgage transactions  have
    53  been  formulated  for  the  purpose of avoiding or evading a rate of tax
    54  authorized to be imposed under subdivision one of this section in excess
    55  of the lowest such authorized rate, rather than solely for an  independ-
    56  ent  business or financial purpose, such commissioner shall treat all of

        A. 3139                             6
 
     1  the mortgages forming part of such  transaction  or  transactions  as  a
     2  single  mortgage  for  the purpose of determining the applicable rate of
     3  tax. For purposes of this subdivision, there shall be a presumption that
     4  all  mortgages  offered  for recording within a period of twelve consec-
     5  utive months having the same or related mortgagors  or  related  debtors
     6  are  part of a related transaction, and such presumption may be rebutted
     7  only with clear and convincing evidence to the contrary. The commission-
     8  er of taxation and finance may require such affidavits  and  forms,  and
     9  may  prescribe such rules and regulations, as he determines to be neces-
    10  sary to enforce the provisions of this subdivision. Any reference  to  a
    11  mortgage in this subdivision includes a financing statement evidencing a
    12  security   agreement  pertaining  to  mezzanine  debt  financing  and/or
    13  preferred equity investments in relation to real property upon  which  a
    14  mortgage instrument is filed.
    15    §  7.  Paragraph (a) of subdivision 1 of section 255 of the tax law is
    16  amended by adding a new subparagraph (iii) to read as follows:
    17    (iii) Notwithstanding the provisions of subparagraph (i) of this para-
    18  graph, the taxes imposed by the authority under  subparagraph  three  of
    19  paragraph  (a)  of  subdivision two of section two hundred fifty of this
    20  article shall apply to mezzanine debt and/or  preferred  equity  invest-
    21  ments as such terms are defined by subdivision four of such section.
    22    § 8. Section 257 of the tax law is amended to read as follows:
    23    § 257.  Payment  of  taxes. The taxes imposed by this article shall be
    24  payable on the recording of each mortgage of real  property  subject  to
    25  taxes  [thereunder]  under this article and to taxes imposed by subpara-
    26  graph three of paragraph (a) of subdivision two of section  two  hundred
    27  fifty  of  this article on and after the effective date of such subpara-
    28  graph. Such taxes shall be paid to the recording officer of  any  county
    29  in which the real property or any part thereof is situated.  It shall be
    30  the duty of such recording officer to indorse upon each mortgage and any
    31  mezzanine  debt  included with such mortgage a receipt for the amount of
    32  the tax so paid. Any mortgage so indorsed may thereupon or thereafter be
    33  recorded by any recording officer and the receipt for such tax  indorsed
    34  upon  each  mortgage  shall  be  recorded  therewith. The record of such
    35  receipt shall be conclusive proof that the amount of tax stated  therein
    36  has been paid upon such mortgage, including any mezzanine debt.
    37    §  9. Subdivision 1 of section 258 of the tax law, as amended by chap-
    38  ter 241 of the laws of 1989, is amended to read as follows:
    39    1. No mortgage of real property shall be recorded by any county  clerk
    40  or  register,  unless there shall be paid the taxes imposed by and as in
    41  this article provided. No mortgage of real property which is subject  to
    42  the  taxes  imposed  by  this  article  shall be released, discharged of
    43  record or received in evidence in any action or  proceeding,  nor  shall
    44  any  assignment  of or agreement extending any such mortgage be recorded
    45  unless the taxes imposed thereon by this article shall have been paid as
    46  provided in this article.  For purposes of the taxes imposed and author-
    47  ized by subparagraph three  of  paragraph  (a)  of  subdivision  two  of
    48  section  two hundred fifty of this article, unless such taxes shall have
    49  been paid, no mortgage of real property shall be recorded by any  county
    50  clerk  or  register,  nor  shall  such mortgage be released, discharged,
    51  recorded or received in evidence in any action or proceeding, nor  shall
    52  any  assignment  of  agreement  extending  such  mortgage  be  recorded.
    53  Provided, however, except as otherwise provided in  subdivision  two  of
    54  this  section, in order to obtain a release or discharge of record where
    55  the mortgagor is not liable for the special additional tax imposed under
    56  subdivision one-a of section two hundred fifty-three  of  this  chapter,

        A. 3139                             7
 
     1  such  mortgagor  or  any subsequent owner of the mortgaged property or a
     2  part thereof may pay the tax imposed under such  subdivision  one-a  and
     3  penalty,  and may either apply for the credit allowable under this chap-
     4  ter  for  payment  of  such  additional tax or may maintain an action to
     5  recover the amounts so paid against any person liable for payment of the
     6  tax or any subsequent assignees or owners of such  mortgage  or  consol-
     7  idated  mortgage of which such mortgage is a part, as if such amounts of
     8  tax and penalty were a debt personally owed by such persons to the mort-
     9  gagor or subsequent owner.  No judgment or final order in any action  or
    10  proceeding  shall  be made for the foreclosure or the enforcement of any
    11  mortgage which is subject to any tax imposed by this article or  of  any
    12  debt  or  obligation  secured  by  any  such mortgage, unless the taxes,
    13  including taxes authorized by subparagraph three  of  paragraph  (a)  of
    14  subdivision  two of section two hundred fifty of this article imposed by
    15  this article shall have been paid as  provided  in  this  article;  and,
    16  except as otherwise provided in subdivision two of this section, whenev-
    17  er  it  shall appear that any mortgage has been recorded without payment
    18  of a tax imposed by this article there shall be added to the tax  a  sum
    19  equal  to  one-half of one per centum thereof for each month or fraction
    20  of a month for the period that the tax remains unpaid  except  where  it
    21  could  not  be determined from the face of the instrument that a tax was
    22  due, or where an advance has been made on a prior advance mortgage or  a
    23  corporate trust mortgage without payment of the tax, in which case there
    24  shall be added to the tax a sum equal to one per centum thereof for each
    25  month or fraction of a month for the period that the tax remains unpaid.
    26  In  any  case where a mortgage of real property subject to a tax imposed
    27  by this article has heretofore been recorded or is hereafter recorded in
    28  good faith, and the county clerk or  register  has  held  such  mortgage
    29  nontaxable  or  taxable at one amount, and it shall later appear that it
    30  was taxable or taxable at a greater amount, the commissioner of taxation
    31  and finance may remit the penalties in excess of  one-half  of  one  per
    32  centum per month.
    33    §  10.  This act shall take effect on the ninetieth day after it shall
    34  have become a law.
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