A09041 Summary:

BILL NOA09041A
 
SAME ASSAME AS S07231-A
 
SPONSOREpstein
 
COSPNSRCruz, Richardson, Simon, Rosenthal L, D'Urso, Mosley, Reyes, Glick, Barron, Simotas, Gottfried, Jaffee, Carroll
 
MLTSPNSRCook, Frontus, Lentol
 
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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A09041 Actions:

BILL NOA09041A
 
01/10/2020referred to judiciary
08/17/2020amend (t) and recommit to judiciary
08/17/2020print number 9041a
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A09041 Committee Votes:

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A09041 Floor Votes:

There are no votes for this bill in this legislative session.
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A09041 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                         9041--A
 
                   IN ASSEMBLY
 
                                    January 10, 2020
                                       ___________
 
        Introduced  by  M. of A. EPSTEIN, CRUZ, RICHARDSON, SIMON, L. ROSENTHAL,
          D'URSO, MOSLEY, REYES,  GLICK,  BARRON,  SIMOTAS,  GOTTFRIED,  JAFFEE,
          CARROLL  --  Multi-Sponsored  by  -- M. of A. COOK, FRONTUS, LENTOL --
          read once and referred to the  Committee  on  Judiciary  --  committee
          discharged, bill amended, ordered reprinted as amended and recommitted
          to said committee

        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
    21  mezzanine  debt  or preferred debt, if either is used by the borrower or
    22  mortgagor.
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD14340-05-0

        A. 9041--A                          2
 
     1    3. For purposes of this section, "mezzanine debt" and "preferred equi-
     2  ty investments" shall not include debt on cooperative or  common  shares
     3  of  a  residential dwelling where the unit owner of a cooperative apart-
     4  ment is a shareholder of the ownership entity, has  exclusive  occupancy
     5  of  such dwelling unit, and has established and delimited rights under a
     6  proprietary lease.
     7    4. No remedy otherwise available to a secured party under article nine
     8  of the uniform commercial code shall be available to enforce a  security
     9  agreement pertaining to mezzanine debt financing and/or preferred equity
    10  investments  in  relation to real property upon which a mortgage instru-
    11  ment is filed that is evidenced by a financing  statement,  unless  that
    12  financing statement is filed and the tax imposed pursuant to the author-
    13  ity  of  subdivision  four of section two hundred fifty-three of the tax
    14  law, has been paid.
    15    § 2. Section 9-601 of the uniform commercial code is amended by adding
    16  a new subsection (h) to read as follows:
    17    (h) Security interest perfected by financing statement. 1.    Notwith-
    18  standing  any  provision  of law to the contrary, a security interest in
    19  mezzanine debt and/or preferred equity investments related to  the  real
    20  property  upon  which  a  mortgage  instrument  is  filed,  may  only be
    21  perfected by the filing of a financing statement under subpart 1 of part
    22  5 of this article and only after the payment of any taxes  due  pursuant
    23  to section two hundred ninety-one-k of the real property law.
    24    2.  For  purposes  of  this  section,  the  terms "mezzanine debt" and
    25  "preferred equity investments" shall have the same meaning  as  provided
    26  in section two hundred ninety-one-k of the real property law.
    27    3.  This section shall not be applicable to any debt on cooperative or
    28  common shares of a residential dwelling where the unit owner of a  coop-
    29  erative  apartment  is a shareholder of the ownership entity, has exclu-
    30  sive occupancy of such dwelling unit, and has established and  delimited
    31  rights under a proprietary lease.
    32    §  3. Paragraph (a) of subdivision 2 of section 250 of the tax law, as
    33  amended by section 1 of part Q of chapter 60 of the  laws  of  2004,  is
    34  amended to read as follows:
    35    (a)  (1)  The  term  "mortgage" as used in this article includes every
    36  mortgage or deed of trust which imposes a lien on or affects  the  title
    37  to  real property, notwithstanding that such property may form a part of
    38  the security for the debt or debts secured  thereby.  An  assignment  of
    39  rents  to  accrue  from  tenancies, subtenancies, leases or subleases of
    40  real property, within any city in the state having a population  of  one
    41  million  or more, given as security for an indebtedness, shall be deemed
    42  a mortgage of real property for  purposes  of  this  article.  Executory
    43  contracts for the sale of real property under which the vendee has or is
    44  entitled  to possession shall be deemed to be mortgages for the purposes
    45  of this article and shall be  taxable  at  the  amount  unpaid  on  such
    46  contracts.  A contract or agreement by which the indebtedness secured by
    47  any mortgage is increased or added to, shall be  deemed  a  mortgage  of
    48  real  property  for the purpose of this article, and shall be taxable as
    49  such upon the amount of such increase or addition.
    50    (2) Notwithstanding anything in this section or  section  two  hundred
    51  fifty-five  of  this  article  to  the contrary, a contract or agreement
    52  whereby the proceeds of any indebtedness secured by a mortgage  of  real
    53  property  in any city in the state having a population of one million or
    54  more are used to reduce all or any part of a mortgagee's equity interest
    55  in a wraparound or similar mortgage  of  such  real  property  shall  be
    56  deemed  a mortgage of real property for the purposes of this article and

        A. 9041--A                          3
 
     1  shall be taxable as such to the extent of the amount of such proceeds so
     2  used, without regard to whether the  aggregate  amount  of  indebtedness
     3  secured by mortgages of such real property is increased or added to.
     4    (3)  Notwithstanding  any provision to the contrary in this section or
     5  section two hundred fifty-five of this  article,  "mezzanine  debt"  and
     6  "preferred  equity investments" as such terms are defined in subdivision
     7  four of this section, shall be taxable  and  shall  apply  to  taxes  in
     8  subdivisions  one,  one-a  and two of section two hundred fifty-three of
     9  this article, but shall not apply to any other taxes in this article  on
    10  or after the effective date of this subparagraph.
    11    §  4.   Section 250 of the tax law is amended by adding a new subdivi-
    12  sion 4 to read as follows:
    13    4. The  term "mezzanine debt" and "preferred ability investment" shall
    14  have the same meaning as provided in section 291-k of the real  property
    15  law.
    16    §  5.   Section 253 of the tax law as amended by adding a new subdivi-
    17  sion 4 to read as follows:
    18    4. (a) A tax, measured by the amount of  principal  debtor  obligation
    19  which  is  under  any  contingency  may  be  secured  at the date of the
    20  execution thereof, or at any time thereafter, by  a  security  agreement
    21  pertaining  to  mezzanine debt financing and/or preferred equity invest-
    22  ments in relation to real property upon which a mortgage  instrument  is
    23  filed,  as  evidenced by a financing statement, is imposed on the filing
    24  of the financing statement.
    25    (b) The rate and incidence of the tax shall be determined pursuant  to
    26  this section.
    27    (c)  Except  as  otherwise  provided  in  this  subdivision,  all  the
    28  Provisions of this article relating to or  applicable  to  the  adminis-
    29  tration,  collection,  determination and distribution of the tax imposed
    30  by this section shall apply to the tax imposed under  the  authority  of
    31  this  subdivision  with  such  modification as may be necessary to adapt
    32  such language to the tax so authorized. Any reference to a mortgage will
    33  be deemed to be a reference to a financing statement  that  evidences  a
    34  security  agreement. Such provisions shall apply with the same force and
    35  effect as if those provisions had been set  forth  in  this  subdivision
    36  except  to  the  extent that any provision is either inconsistent with a
    37  provision of this subdivision or not relevant to the tax  authorized  by
    38  this subdivision.
    39    (d)  No  remedy  otherwise  available to a secured party under article
    40  nine of the uniform commercial code shall  be  available  to  enforce  a
    41  security   agreement  pertaining  to  mezzanine  debt  financing  and/or
    42  preferred equity investments in relation to real property upon  which  a
    43  mortgage instrument is filed that is evidenced by a financing statement,
    44  unless that financing statement is filed and the tax imposed pursuant to
    45  the authority of this subdivision has been paid.
    46    (e) For the purposes of this subdivision:
    47    (1) "mezzanine debt" and "preferred equity investments" shall have the
    48  same meaning as provided in section two hundred ninety-one-k of the real
    49  property law.
    50    (2)  "financing  statement"  means  a record or records composed of an
    51  initial financing statement and any filed record relating to the initial
    52  financing statement.
    53    (3) "security agreement" means an agreement that creates  or  provides
    54  for a security interest.
    55    (f)  Counties  or cities authorized under this article to impose a tax
    56  are authorized and empowered to adopt and amend local laws to impose  in

        A. 9041--A                          4
 
     1  such county or city a tax on the filing of financing statements pertain-
     2  ing  to  mezzanine debt financing and/or preferred equity investments in
     3  relation to real property upon which a mortgage instrument is filed. Any
     4  tax  that  has  been  imposed by a county or city under the authority of
     5  this article shall be deemed to include  the  authority  to  impose  and
     6  collect  the tax on the recording of a financing statement pertaining to
     7  mezzanine debt financing and/or preferred equity investments in relation
     8  to real property upon which a mortgage instrument is filed in  the  same
     9  manner as the local mortgage recording tax.
    10    § 6. Subdivision 1 and paragraph (a) of subdivision 2 of section 253-a
    11  of  the  tax  law,  as  amended  by chapter 343 of the laws of 1990, are
    12  amended to read as follows:
    13    1. Any city in this state having a population of one million or  more,
    14  acting  through  its  local  legislative  body, is hereby authorized and
    15  empowered to adopt and amend local laws imposing in any  such  city  (A)
    16  prior  to  February  first,  nineteen  hundred eighty-two a tax of fifty
    17  cents, (B) on or after February first, nineteen hundred  eighty-two  and
    18  before  July first, nineteen hundred eighty-two with respect to (i) one,
    19  two or three-family houses, individual cooperative apartments and  indi-
    20  vidual  residential condominium units, and (ii) real property securing a
    21  principal debt or obligation of less than five hundred thousand dollars,
    22  a tax of fifty cents, and with respect to all other real property a  tax
    23  of  one  dollar  and  twelve  and  one-half cents, (C) on and after July
    24  first, nineteen hundred eighty-two and  before  August  first,  nineteen
    25  hundred  ninety  with respect to real property securing a principal debt
    26  or obligation of less than five hundred thousand dollars, a tax of fifty
    27  cents, with respect to one, two or three-family houses, individual coop-
    28  erative apartments and individual residential condominium units securing
    29  a principal debt or obligation of five hundred thousand dollars or more,
    30  a tax of sixty-two and one-half cents, and with  respect  to  all  other
    31  real  property a tax of one dollar and twenty-five cents, and (D) on and
    32  after August first, nineteen hundred ninety with respect to real proper-
    33  ty securing a principal debt or obligation of  less  than  five  hundred
    34  thousand  dollars,  a  tax  of  one  dollar, with respect to one, two or
    35  three-family houses and individual residential condominium units  secur-
    36  ing  a  principal debt or obligation of five hundred thousand dollars or
    37  more, a tax of one dollar  and  twelve  and  one-half  cents,  and  with
    38  respect  to all other real property a tax of one dollar and seventy-five
    39  cents, for each one hundred dollars and each  remaining  major  fraction
    40  thereof of principal debt or obligation which is or under any contingen-
    41  cy may be secured at the date of execution thereof, or at any time ther-
    42  eafter,  by  a  mortgage on such real property situated within such city
    43  and recorded on or after the date upon which such tax takes effect and a
    44  tax of one dollar on such mortgage if the principal debt  or  obligation
    45  which  is  or by any contingency may be secured by such mortgage is less
    46  than one hundred dollars. In each instance where the tax imposed  pursu-
    47  ant to this subdivision is one dollar and twenty-five cents for each one
    48  hundred  dollars and each remaining major fraction thereof of such prin-
    49  cipal debt or obligation, fifty percent of the total amount of such tax,
    50  including fifty percent of any interest or penalties thereon,  shall  be
    51  set  aside  in  a special account by the commissioner of finance of such
    52  city. In each instance where the tax imposed pursuant to  this  subdivi-
    53  sion  is  one dollar and seventy-five cents for each one hundred dollars
    54  and each remaining major fraction thereof  of  such  principal  debt  or
    55  obligation,  thirty-five and seven-tenths percent of the total amount of
    56  such tax, including thirty-five and seven-tenths percent of any interest

        A. 9041--A                          5
 
     1  or penalties thereon, shall also be set aside in such  special  account.
     2  Moneys in such account shall be used for payment by such commissioner to
     3  the  state  comptroller  for deposit in the urban mass transit operating
     4  assistance  account of the mass transportation operating assistance fund
     5  of any amount of insufficiency certified by the state comptroller pursu-
     6  ant to the provisions of subdivision six of  section  eighty-eight-a  of
     7  the  state  finance  law,  and, on the fifteenth day of each month, such
     8  commissioner shall transmit all funds in such account on the last day of
     9  the preceding month, except the amount required for the payment  of  any
    10  amount  of  insufficiency  certified  by  the state comptroller and such
    11  amount as he deems necessary for refunds and such other  amounts  neces-
    12  sary  to finance the New York city transportation disabled committee and
    13  the New York city paratransit system as established by section fifteen-b
    14  of the transportation law, provided, however, that  such  amounts  shall
    15  not exceed six percent of the total funds in the account but in no event
    16  be  less  than  two hundred twenty-five thousand dollars beginning April
    17  first, nineteen hundred eighty-six, and further that beginning  November
    18  fifteenth,  nineteen  hundred  eighty-four  and during the entire period
    19  prior to operation of such system, the total of such amounts  shall  not
    20  exceed  three  hundred seventy-five thousand dollars for the administra-
    21  tive expenses of such committee  and  fifty  thousand  dollars  for  the
    22  expenses of the agency designated pursuant to paragraph b of subdivision
    23  five of such section, and other amounts necessary to finance the operat-
    24  ing  needs  of  the  private bus companies franchised by the city of New
    25  York and eligible to receive state operating  assistance  under  section
    26  eighteen-b  of  the  transportation  law,  provided,  however, that such
    27  amounts shall not exceed four percent of the total funds in the account,
    28  to the New York city transit authority for mass transit within the city.
    29  The tax imposed under the authority of paragraph (D) of this subdivision
    30  is deemed to include a tax imposed on the filing of financing statements
    31  evidencing a security agreement pertaining to mezzanine  debt  financing
    32  and/or  preferred  equity  investments in relation to real property upon
    33  which a mortgage instrument is filed.
    34    (a) For the purpose of determining whether a mortgage  is  subject  to
    35  the  tax authorized to be imposed by paragraph (B) or (C) of subdivision
    36  one of this section at a rate in excess of fifty cents, or by  paragraph
    37  (D)  of  subdivision  one  of  this  section  at a rate in excess of one
    38  dollar, for each one hundred dollars and each remaining  major  fraction
    39  thereof  of  principal  debt  or obligation, the principal debt or obli-
    40  gation which is or under any contingency may be secured at the  date  of
    41  execution  thereof, or at any time thereafter, by such mortgage shall be
    42  aggregated with the principal debt or obligation which is or  under  any
    43  contingency  may  be secured at the date of execution thereof, or at any
    44  time thereafter, by any other mortgage, where such mortgages  form  part
    45  of the same or related transactions and have the same or related mortga-
    46  gors  or related debtors in the case of a financing statement evidencing
    47  a security agreement  pertaining  to  mezzanine  debt  financing  and/or
    48  preferred  equity  investments in relation to real property upon which a
    49  mortgage instrument is  filed.  If  the  commissioner  of  taxation  and
    50  finance  finds that a mortgage transaction or mortgage transactions have
    51  been formulated for the purpose of avoiding or evading  a  rate  of  tax
    52  authorized to be imposed under subdivision one of this section in excess
    53  of  the lowest such authorized rate, rather than solely for an independ-
    54  ent business or financial purpose, such commissioner shall treat all  of
    55  the  mortgages  forming  part  of  such transaction or transactions as a
    56  single mortgage for the purpose of determining the  applicable  rate  of

        A. 9041--A                          6
 
     1  tax. For purposes of this subdivision, there shall be a presumption that
     2  all  mortgages  offered  for recording within a period of twelve consec-
     3  utive months having the same or related mortgagors  or  related  debtors
     4  are  part of a related transaction, and such presumption may be rebutted
     5  only with clear and convincing evidence to the contrary. The commission-
     6  er of taxation and finance may require such affidavits  and  forms,  and
     7  may  prescribe such rules and regulations, as he determines to be neces-
     8  sary to enforce the provisions of this subdivision. Any reference  to  a
     9  mortgage in this subdivision includes a financing statement evidencing a
    10  security   agreement  pertaining  to  mezzanine  debt  financing  and/or
    11  preferred equity investments in relation to real property upon  which  a
    12  mortgage instrument is filed.
    13    §  7.  Paragraph (a) of subdivision 1 of section 255 of the tax law is
    14  amended by adding a new subparagraph (iii) to read as follows:
    15    (iii) Notwithstanding the provisions of subparagraph (i) of this para-
    16  graph, the taxes imposed by the authority under  subparagraph  three  of
    17  paragraph  (a)  of  subdivision two of section two hundred fifty of this
    18  article shall apply to mezzanine debt and/or  preferred  equity  invest-
    19  ments as such terms are defined by subdivision four of such section.
    20    § 8. Section 257 of the tax law is amended to read as follows:
    21    § 257.  Payment  of  taxes. The taxes imposed by this article shall be
    22  payable on the recording of each mortgage of real  property  subject  to
    23  taxes  [thereunder]  under this article and to taxes imposed by subpara-
    24  graph three of paragraph (a) of subdivision two of section  two  hundred
    25  fifty  of  this article on and after the effective date of such subpara-
    26  graph. Such taxes shall be paid to the recording officer of  any  county
    27  in which the real property or any part thereof is situated.  It shall be
    28  the duty of such recording officer to indorse upon each mortgage and any
    29  mezzanine  debt  included with such mortgage a receipt for the amount of
    30  the tax so paid. Any mortgage so indorsed may thereupon or thereafter be
    31  recorded by any recording officer and the receipt for such tax  indorsed
    32  upon  each  mortgage  shall  be  recorded  therewith. The record of such
    33  receipt shall be conclusive proof that the amount of tax stated  therein
    34  has been paid upon such mortgage, including any mezzanine debt.
    35    §  9. Subdivision 1 of section 258 of the tax law, as amended by chap-
    36  ter 241 of the laws of 1989, is amended to read as follows:
    37    1. No mortgage of real property shall be recorded by any county  clerk
    38  or  register,  unless there shall be paid the taxes imposed by and as in
    39  this article provided. No mortgage of real property which is subject  to
    40  the  taxes  imposed  by  this  article  shall be released, discharged of
    41  record or received in evidence in any action or  proceeding,  nor  shall
    42  any  assignment  of or agreement extending any such mortgage be recorded
    43  unless the taxes imposed thereon by this article shall have been paid as
    44  provided in this article.  For purposes of the taxes imposed and author-
    45  ized by subparagraph three  of  paragraph  (a)  of  subdivision  two  of
    46  section  two hundred fifty of this article, unless such taxes shall have
    47  been paid, no mortgage of real property shall be recorded by any  county
    48  clerk  or  register,  nor  shall  such mortgage be released, discharged,
    49  recorded or received in evidence in any action or proceeding, nor  shall
    50  any  assignment  of  agreement  extending  such  mortgage  be  recorded.
    51  Provided, however, except as otherwise provided in  subdivision  two  of
    52  this  section, in order to obtain a release or discharge of record where
    53  the mortgagor is not liable for the special additional tax imposed under
    54  subdivision one-a of section two hundred fifty-three  of  this  chapter,
    55  such  mortgagor  or  any subsequent owner of the mortgaged property or a
    56  part thereof may pay the tax imposed under such  subdivision  one-a  and

        A. 9041--A                          7
 
     1  penalty,  and may either apply for the credit allowable under this chap-
     2  ter for payment of such additional tax or  may  maintain  an  action  to
     3  recover the amounts so paid against any person liable for payment of the
     4  tax  or  any  subsequent assignees or owners of such mortgage or consol-
     5  idated mortgage of which such mortgage is a part, as if such amounts  of
     6  tax and penalty were a debt personally owed by such persons to the mort-
     7  gagor  or subsequent owner.  No judgment or final order in any action or
     8  proceeding shall be made for the foreclosure or the enforcement  of  any
     9  mortgage  which  is subject to any tax imposed by this article or of any
    10  debt or obligation secured by  any  such  mortgage,  unless  the  taxes,
    11  including  taxes  authorized  by  subparagraph three of paragraph (a) of
    12  subdivision two of section two hundred fifty of this article imposed  by
    13  this  article  shall  have  been  paid as provided in this article; and,
    14  except as otherwise provided in subdivision two of this section, whenev-
    15  er it shall appear that any mortgage has been recorded  without  payment
    16  of  a  tax imposed by this article there shall be added to the tax a sum
    17  equal to one-half of one per centum thereof for each month  or  fraction
    18  of  a  month  for the period that the tax remains unpaid except where it
    19  could not be determined from the face of the instrument that a  tax  was
    20  due,  or where an advance has been made on a prior advance mortgage or a
    21  corporate trust mortgage without payment of the tax, in which case there
    22  shall be added to the tax a sum equal to one per centum thereof for each
    23  month or fraction of a month for the period that the tax remains unpaid.
    24  In any case where a mortgage of real property subject to a  tax  imposed
    25  by this article has heretofore been recorded or is hereafter recorded in
    26  good  faith,  and  the  county  clerk or register has held such mortgage
    27  nontaxable or taxable at one amount, and it shall later appear  that  it
    28  was taxable or taxable at a greater amount, the commissioner of taxation
    29  and  finance  may  remit  the penalties in excess of one-half of one per
    30  centum per month.
    31    § 10. This act shall take effect on the ninetieth day after  it  shall
    32  have become a law.
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