N.Y. Real Prop. Law § 254

Current through 2024 NY Law Chapter 443

Section 254 - Construction of clauses and covenants in mortgages and bonds or notes

In mortgages of real property, and in bonds and notes secured thereby or in assignments of mortgages and bonds and mortgages and notes, or in agreements to extend or to modify the terms of mortgages and bonds and mortgages and notes, the following or similar clauses and covenants must be construed as follows:

1.Clauses of mortgage. The words "This mortgage, made the .......... (A) ........ day of ........ (B) ........, nineteen hundred and ........ (C) ........, between ........ (D) ........, the mortgagor, and ........ (E) ........., residing at ......... (F) ........., the mortgagee, Witnesseth, that to secure the payment of an indebtedness in the sum of ........ (G) ........ dollars, lawful money of the United States, to be paid on the ........ (H) ........ day of ........ (I) ........, nineteen hundred and ........ (J) ........, with interest thereon to be computed from ......... (K) ........ at the rate of ........ (L) ........ per centum per annum, and to be paid ........ (M) ........, according to a certain bond, note or obligation bearing even date herewith, the mortgagor hereby mortgages to the mortgagee (description)," must be construed as equivalent in meaning to the words "This indenture, made the ........ (A1) ...... day of ....... (B1) ........, in the year nineteen hundred and ........ (C1) ........ between ....... (D1) ........, party of the first part, and ....... (E1) ........, of ....... (F1) ........, party of the second part.

"Whereas, the said ........ (D1) ........ is justly indebted to the said party of the second part in the sum of ........ (G1) ........ dollars, lawful money of the United States, secured to be paid by his certain bond, note or obligation, bearing even date herewith, conditioned for the payment of the said sum of ......... (G1) ........ dollars, on the ........ (H1) ....... day of ....... (I1) ....... nineteen hundred and ........ (J1) ........ and the interest thereon, to be computed from ........ (K1) ........, at the rate of ....... (L1) ....... per centum per annum, and to be paid ....... (M1) .........

"It being thereby expressly agreed that the whole of the said principal sum shall become due after default in the payment of any installment of principal, interest, taxes or assessments, as hereinafter provided. "Now this indenture witnesseth, that the said party of the first part, for the better securing the payment of the said sum of money mentioned in the condition of the said bond, note or obligation, with interest thereon, and also for and in consideration of one dollar, paid by the said party of the second part, the receipt whereof is hereby acknowledged, doth hereby grant and release unto the said party of the second part, and to his heirs (or successors) and assigns for ever (description), together with the appurtenances, and all the estate and rights of the party of the first part in and to said premises, together with all fixtures and articles of personal property attached to, or used in connection with, the premises. To have and to hold the above granted premises unto the said party of the second part, his heirs and assigns forever. Provided, always, that if the said party of the first part, his heirs, executors or administrators, shall pay unto the said party of the second part, his executors, administrators or assigns, the said sum of money mentioned in the condition of the said bond, note or obligation, and the interest thereon, at the time and in the manner mentioned in the said condition, that then these presents, and the estate hereby granted, shall cease, determine and be void."

(Explanation: Whatever words are inserted in the blank spaces above marked (A), (B), (C), (D), (E), (F), (G), (H), (I), (J), (K), (L), and (M) respectively, shall be construed as being inserted in the corresponding blank spaces above marked (A1), (B1), (C1), (D1), (E1), (F1), (G1), (H1), (I1), (J1), (K1), (L1) and (M1) respectively.)

2. Covenant that whole sum shall become due. A covenant "that the whole of the said principal sum and interest shall become due at the option of the mortgagee: after default in the payment of any installment of principal or of interest for ....... days; or after default in the payment of any tax, water rate or assessment for ....... days after notice and demand; or after default after notice and demand either in assigning and delivering the policies insuring the buildings against loss by fire or in reimbursing the mortgagee for premiums paid on such insurance, as hereinbefore provided; or after default upon request in furnishing a statement of the amount due on the mortgage and whether any offsets or defenses exist against the mortgage debt, as hereinafter provided," must be construed as meaning that should any default be made in the payment of any installment of principal or of any part thereof, or in the payment of the said interest, or any part thereof, on any day whereon the same is made payable, or should any tax, water rate or assessment, and/or any installment of any assessment which has been divided into annual installments pursuant to provision of law in such cases made and provided which now is or may be hereafter imposed upon the premises hereinafter described, become due or payable, and should the said installment of principal or interest remain unpaid and in arrear for the space of ....... days, or such tax, water rate or assessment or annual installment remain unpaid and in arrear for ....... days after written notice by the mortgagee or obligee, his executors, administrators, successors or assigns, that such tax or assessment and/or annual installment is unpaid, and demand for the payment thereof, or should any default be made after notice and demand either in assigning and delivering the policies insuring the buildings against loss by fire or in reimbursing the mortgagee for premiums paid on such insurance, as hereinafter provided, or upon failure to furnish such statement of the amount due on the mortgage and whether any offsets or defenses exist against the mortgage debt, as hereinafter provided, after the expiration of ....... days in case the request is made personally, or after the expiration of ....... days after the mailing of such request in case the request is made by mail, then and from thenceforth, that is to say, after the lapse of either one of said periods, as the case may be, the aforesaid principal sum, with all arrearage of interest thereon, shall, at the option of the said mortgagee or obligee, his executors, administrators, successors or assigns, become and be due and payable immediately thereafter, although the period above limited for the payment thereof may not then have expired, anything thereinbefore contained to the contrary thereof in any wise notwithstanding.

3. Covenant to pay indebtedness. In default of payment, mortgagee to have power to sell. A covenant "that the mortgagor will pay the indebtedness, as hereinbefore provided," must be construed as meaning that the mortgagor for himself, his heirs, executors and administrators or successors, doth covenant and agree to pay to the mortgagee, his executors, administrators, successors and assigns, the principal sum of money secured by said mortgage, and also the interest thereon as provided by said mortgage. And if default shall be made in the payment of the principal sum or the interest that may grow due thereon, or of any part thereof, or in case of any other default, that then and from thenceforth it shall be lawful for the mortgagee, his executors, administrators or successors to enter into and upon all and singular the premises granted, or intended so to be, and to sell and dispose of the same, and all benefit and equity of redemption of the said mortgagor, his heirs, executors, administrators, successors or assigns therein, at public auction, according to the act in such case made and provided, and as the attorney of the mortgagor for that purpose duly authorized, constituted and appointed, to make and deliver to the purchaser or purchasers thereof a good and sufficient deed or deeds of conveyance for the same in fee simple (or otherwise; as the case may be) and out of the money arising from such sale, to retain the principal and interest which shall then be due, together with the costs and charges of advertisement and sale of the said premises, rendering the overplus of the purchase-money, if any there shall be, unto the mortgagor, his heirs, executors, administrators, successors or assigns, which sale so to be made shall forever be a perpetual bar both in law and equity against the mortgagor, his heirs, successors and assigns, and against all other persons claiming or to claim the premises, or any part thereof by, from or under him, them or any of them.

4. Mortgagor to keep buildings insured.

(a) A covenant "that the mortgagor will keep the buildings on the premises insured against loss by fire for the benefit of the mortgagee; that he will assign and deliver the policies to the mortgagee; and that he will reimburse the mortgagee for any premiums paid for insurance made by the mortgagee on the mortgagor's default in so insuring the buildings or in so assigning and delivering the policies," shall be construed as meaning that the mortgagor, his heirs, successors and assigns will, during all the time until the money secured by the mortgage shall be fully paid and satisfied, keep the buildings erected on the premises insured against loss or damage by fire, to an amount to be approved by the mortgagee not exceeding in the aggregate one hundred per centum of their full insurable value and in a company or companies to be approved by the mortgagee, and will assign and deliver the policy or policies of such insurance to the mortgagee, his executors, administrators, successors or assigns, which policy or policies shall have endorsed thereon the standard New York mortgagee clause in the name of the mortgagee, so and in such manner and form that he and they shall at all time and times, until the full payment of said moneys, have and hold the said policy or policies as a collateral and further security for the payment of said moneys, and in default of so doing, that the mortgagee or his executors, administrators, successors or assigns, may make such insurance from year to year, in an amount in the aggregate not exceeding one hundred per centum of the full insurable value of said buildings erected on the mortgaged premises for the purposes aforesaid, and pay the premium or premiums therefor, and that the mortgagor will pay to the mortgagee, his executors, administrators, successors or assigns, such premium or premiums so paid, with interest from the time of payment, on demand, and that the same shall be deemed to be secured by the mortgage, and shall be collectible thereupon and thereby in like manner as the principal moneys, and that should the mortgagee by reason of such insurance against loss by fire receive any sum or sums of money for damage by fire, and should the mortgagee retain such insurance money instead of paying it over to the mortgagor, the mortgagee's right to retain the same and his duty to apply it in payment of or on account of the sum secured by the mortgage and in satisfaction or reduction of the lien thereof shall be limited and qualified as hereafter in this paragraph provided. Said insurance money so received by the mortgagee shall be held by him as trust funds until paid over or applied as hereinafter provided. If the mortgagor shall notify the mortgagee in writing within thirty days after the fire that the mortgaged premises have been damaged thereby, and shall thereafter make good the damage by means of such repairs, restoration or rebuilding as may be necessary to restore the buildings to their condition prior to the damage, then upon presentation to the mortgagee within three years after the fire of proof that the damage has been fully made good (and if he so demands in writing within thirty days after such presentation of proof, then upon presentation to the mortgagee within thirty days after such demand of proof also of the actual cost of such repairs, restoration and rebuilding and of the reasonable value of any part of the work so performed by the mortgagor) the mortgagee, unless he rejects the proof submitted to him as insufficient, shall pay over to the mortgagor so much of said insurance money theretofore received by the mortgagee as does not exceed the lesser of (1) the reasonable cost of such repairs, restoration and rebuilding or (2) the total amount actually paid therefor by the mortgagor, together with the reasonable value of any part of the work done by him. Such proof shall be deemed sufficient unless, within sixty days after presentation of all such proof to the mortgagee as aforesaid, he shall notify the mortgagor in writing that the proof is rejected. Any excess of said insurance money over the amount so payable to the mortgagor shall be applied in reduction of the principal of the mortgage. Provided, however, that if and so long as there exists any default by the mortgagor in the performance of any of the terms or provisions of the mortgage on his part to be performed the mortgagee shall not be obligated to pay over any of said insurance money received by him. If the mortgagor shall fail to comply with any of the foregoing provisions within the time or times hereinabove limited, or shall fail within sixty days after rejection of the proof so submitted to commence an action against the mortgagee to recover so much of said insurance money as is payable to the mortgagor as hereinabove provided, or if the entire principal of the mortgage shall have become payable by reason of default or maturity, the mortgagee shall apply said insurance money in satisfaction or reduction of the principal of the mortgage; and any excess of said insurance money over the amount required to satisfy the mortgage shall be paid to the mortgagor. Unless the court, in any such action, shall determine that the mortgagee's rejection of the proof submitted by the mortgagor prior to the commencement of the action was unreasonable, the mortgagee may offset the reasonable amount, as determined by the court, of his expense incident to the litigation, and may reimburse himself out of the insurance money for the amount so determined. The term "mortgage," as hereinabove used, shall be deemed to include agreements extending or otherwise in any way modifying the terms or provisions of an existing mortgage. The term "mortgagor," as hereinabove used, shall mean the owner for the time being of the mortgaged fee or the junior mortgagee actually in possession of the mortgaged property, or the tenant for the time being in possession of the property under a lease which has been mortgaged. The term "mortgagee," as hereinabove used, shall be deemed to include the successors in interest of the mortgagee. In the event that there be more than one mortgage covering the same premises, such covenant must be construed as hereinbefore prescribed in this paragraph, except that the mortgagor, his heirs, successors and assigns, notwithstanding such foregoing provisions, may not be required to provide such insurance, as to all the mortgagees combined, in the preferential order of their priority, for a total amount of more than one hundred per cent of the insurable value of the buildings on the premises, and a second or subordinate mortgagee shall be entitled to exercise the rights of a mortgagee with respect to the procurement of such insurance and the holding of the policy or policies thereof as hereinbefore prescribed in this paragraph only when and to the extent that the mortgagor, his heirs, successors or assigns, as the case may be, does or do not furnish satisfactory proof of such maximum insurance for the benefit of such second or subordinate mortgagee and one or more other mortgagees in the preferential order of their priority in a company or companies duly authorized to do business in this state.

The limitations and qualifications hereinabove imposed on the mortgagee's right to retain proceeds of a fire insurance policy shall apply only to mortgages or extensions or other modifications thereof made after the effective date of this act.

(b) A covenant "that the mortgagor will keep the buildings on the premises insured against loss by flood if the premises are located in an area identified by the Secretary of Housing and Urban Development as an area having special flood hazards and in which flood insurance has been made available under the National Flood Insurance Act of nineteen hundred sixty-eight; that he will assign and deliver the policies to the mortgagee; and that he will reimburse the mortgagee for any premiums paid for insurance made by the mortgagee on the mortgagor's default in so insuring the buildings or in so assigning and delivering the policies," shall be construed as meaning that the mortgagor, his heirs, successors and assigns will, during all the time until the money secured by the mortgage shall be fully paid and satisfied, keep the buildings erected on the premises insured against loss or damage by flood provided the premises are located in an area identified by the Secretary of Housing and Urban Development of the United States as an area having special flood hazards and in which flood insurance is available under the National Flood Insurance Act of nineteen hundred sixty-eight, to an amount at least equal to the outstanding principal balance of the money secured by the mortgage or the maximum limit of coverage available with respect to the buildings under said Act, whichever is less, and in a company or companies to be approved by the mortgagee and will assign and deliver the policy or policies of such insurance to the mortgagee, his executors, administrators, successors or assigns, which policy or policies shall have endorsed thereon the standard New York mortgagee clause in the name of the mortgagee, so and in such manner and form that he and they shall at all time and times, until the full payment of said money, have and hold the said policy or policies as a collateral and further security for the payment of said money, and in default of so doing, that the mortgagee or his executors, administrators, successors or assigns may make such insurance from year to year, in the amount as aforesaid, and pay the premium or premiums therefor, and that the mortgagor will pay to the mortgagee, his executors, administrators, successors or assigns, such premium or premiums so paid, with interest from the time of payment, on demand, and that the same shall be deemed to be secured by the mortgage, and shall be collectible thereupon and thereby in like manner as the principal moneys, and that should the mortgagee by reason of such insurance receive any sum or sums of money for damage by flood, the provisions for retention, holding application and payment of said insurance money shall be as set forth in paragraph (a) above with respect to loss by fire. The term "mortgage," as hereinabove used, shall be deemed to include agreements extending or otherwise in any way modifying the terms or provisions of an existing mortgage. The term "mortgagor," as hereinabove used, shall mean the owner for the time being of the mortgaged fee or the junior mortgagee actually in possession of the mortgaged property, or the tenant for the time being in possession of the property under a lease which has been mortgaged. The term "mortgagee," as hereinabove used, shall be deemed to include the successors in interest of the mortgagee. In the event that there be more than one mortgage covering the same premises, such covenant must be construed as hereinbefore prescribed in this paragraph except that the mortgagor, his heirs, successors and assigns, notwithstanding such foregoing provisions, may not be required to provide such insurance, as to all the mortgagees combined, in the preferential order of their priority, for a total amount greater than the outstanding principal balance of the money secured by the mortgage or the maximum limit of coverage available with respect to the premises, whichever is less, and a second or subordinate mortgagee shall be entitled to exercise the rights of a mortgagee with respect to the procurement of such insurance and the holding of the policy or policies thereof as hereinbefore prescribed in this paragraph only when and to the extent that the mortgagor, his heirs, successors or assigns, as the case may be, does or do not furnish satisfactory proof of such maximum insurance for the benefit of such second or subordinate mortgagee and one or more other mortgagees in the preferential order of their priority in a company or companies duly authorized to do business in this state.

The limitations and qualifications hereinabove imposed on the mortgagee's right to retain proceeds of a flood insurance policy shall apply only to mortgages or extensions or other modifications thereof made after the effective date of this act.

4-a. Mortgagor to maintain premises and all improvements thereon in good condition or repair.

(a) A covenant contained in a mortgage on real property improved by a residence for four families or more that the mortgagor will maintain the premises and all improvements thereon in "good condition or repair" shall be construed as meaning that the mortgagor, his heirs, successors and assigns will, during all the time until the money secured by the mortgage shall be fully paid and satisfied, keep the premises and the building or buildings erected thereon in good condition and repair and free from violations of applicable municipal or state laws, codes or regulations concerning the state of such condition and/or repair. Upon a finding and certification by any such government or its agency of a violation of any such law, code or regulation involving a serious danger to the health and safety of the occupants of such mortgaged premises and upon the service of one copy thereof on the owner of record, or upon the appointment of an administrator pursuant to article seven-A of the real property actions and proceedings law, such mortgagee may declare the entire balance of the principal sum secured by such mortgage, together with all accrued interest, immediately due and payable upon the following conditions: the mortgagee shall allow the mortgagor a reasonable opportunity to correct the violation or, in the case of an administrator appointed pursuant to article seven-A of the real property actions and proceedings law, to have such administrator removed; the mortgagee may commence foreclosure proceedings upon failure of the mortgagor to make such corrections within the time period mandated by local law, rule or code enforcement agency, provided, however, no such action shall be commenced within thirty days of the expiration of the period, if any, specified by local law, rule or code enforcement regulation, or, in the case of an administrator appointed pursuant to article seven-A of the real property actions and proceedings law, the mortgagee may commence foreclosure proceedings no earlier than sixty days after the appointment of such administrator.

(b) Should any such mortgagee commence a foreclosure proceeding based upon such violation and not complete the same because such violation had been cured, the mortgagee shall be entitled to recover all reasonable attorney's fees and disbursements incurred in the bringing of such proceeding.

(c) Notwithstanding the provisions of this section, the mortgagee and the mortgagor shall retain all existing interest and rights.

5. Mortgagor to warrant title. A covenant "that the mortgagor warrants the title to the premises," must be construed as meaning that the mortgagor warrants that he has good title to said premises and has a right to mortgage the same and that the mortgagor shall and will make, execute, acknowledge and deliver in due form of law, all such further or other deeds or assurances as may at any time hereafter be reasonably desired or required for the more fully and effectually conveying the premises by the mortgage described, and thereby granted or intended so to be, unto the said mortgagee, his executors, administrators, successors or assigns, for the purpose aforesaid, and unto all and every person or persons, corporation or corporations, deriving any estate, right, title or interest therein, under the said indenture of mortgage, or the power of sale therein contained, and the said granted premises against the said mortgagor, and all persons claiming through him will warrant and defend.

6. Mortgagor to pay all taxes, assessments or water rates. A covenant "that the mortgagor will pay all taxes, assessments or water rates and in default thereof, the mortgagee may pay the same" must be construed as meaning that until the amount hereby secured is paid, the mortgagor will pay all taxes, assessments and water rates which may be assessed or become liens on said premises, and in default thereof the holder of this mortgage may pay the same, and the mortgagor will repay the same with interest, and the same shall be liens on said premises and secured by the mortgage.

7. Statement of amount due. A covenant "that the mortgagor within ...... days upon request in person or within ...... days upon request by mail will furnish a written statement duly acknowledged of the amount due on this mortgage and whether any offsets or defenses exist against the mortgage debt" must be construed as meaning that the mortgagor, and any subsequent owner of the premises described herein upon request, made either personally or by mail, shall certify, by a writing duly acknowledged, to the mortgagee or to any proposed assignee of this mortgage, the amount of principal and interest then owing on this mortgage and whether any offsets or defenses exist against the mortgage debt within ..... days in case the request is made personally, or within ...... days after the mailing of such request in case the request is made by mail.

8. Notice and demand. A covenant "that notice and demand or request may be made in writing and may be served in person or by mail" must be construed as meaning that every provision for notice and demand or request shall be deemed fulfilled by written notice and demand or request personally served on one or more of the persons who shall at the time hold the record title to the premises, or on their heirs or successors, or mailed by depositing it in any post-office station or letter-box, enclosed in a post-paid envelope addressed to such person or persons, or their heirs or successors, at his, their or its address to the mortgagee last known.

9. Power of attorney to assignee. The word "assign" or other words of assignment, when contained in an assignment of a mortgage and bond or mortgage and note, must be construed as having included in their meaning that the assignor does thereby make, constitute and appoint the assignee the true and lawful attorney, irrevocable, of the assignor, in the name of the assignor, or otherwise, but at the proper costs and charges of the assignee, to have, use and take all lawful ways and means for the recovery of the money and interest secured by the said mortgage and bond or mortgage and note, and in case of payment to discharge the same as fully as the assignor might or could do if the assignment were not made.

10. Mortgagee entitled to appointment of receiver. A covenant "that the holder of this mortgage, in any action to foreclose it, shall be entitled to the appointment of a receiver," must be construed as meaning that the mortgagee, his heirs, successors or assigns, in any action to foreclose the mortgage, shall be entitled, without notice and without regard to adequacy of any security of the debt, to the appointment of a receiver of the rents and profits of the premises covered by the mortgage; and the rents and profits in the event of any default or defaults in paying the principal, interest, taxes, water rents, assessments or premiums of insurance, are assigned to the holder of the mortgage as further security for the payment of the indebtedness.

N.Y. Real Prop. Law § 254