N.Y. RPP Law § 254 — New York Code / Act RPP / Article 8 / Section 254
Construction of clauses and covenants in mortgages and bonds or notes
Status: in_force

§ 254. Construction of clauses and covenants in mortgages and bonds or\nnotes. In mortgages of real property, and in bonds and notes secured\nthereby or in assignments of mortgages and bonds and mortgages and\nnotes, or in agreements to extend or to modify the terms of mortgages\nand bonds and mortgages and notes, the following or similar clauses and\ncovenants must be construed as follows:\n  1. Clauses of mortgage. The words "This mortgage, made the ..........\n(A) ........ day of ........ (B) ........, nineteen hundred and ........\n(C) ........, between ........ (D) ........, the mortgagor, and ........\n(E) ........., residing at ......... (F) ........., the mortgagee,\nWitnesseth, that to secure the payment of an indebtedness in the sum of\n.........  (G) ........ dollars, lawful money of the United States, to be\npaid on the ........ (H) ........ day of ........ (I) ........, nineteen\nhundred and ........ (J) ........, with interest thereon to be computed\nfrom ......... (K) ........ at the rate of ........ (L) ........  per\ncentum per annum, and to be paid ........ (M) ........, according to a\ncertain bond, note or obligation bearing even date herewith, the\nmortgagor hereby mortgages to the mortgagee (description)," must be\nconstrued as equivalent in meaning to the words "This indenture, made\nthe ........ (A1) ...... day of ....... (B1) ........, in the year\nnineteen hundred and ........  (C1) ........ between ....... (D1)\n........., party of the first part, and ....... (E1) ........, of .......\n(F1) ........, party of the second part.\n  "Whereas, the said ........ (D1) ........ is justly indebted to the\nsaid party of the second part in the sum of ........ (G1) ........\ndollars, lawful money of the United States, secured to be paid by his\ncertain bond, note or obligation, bearing even date herewith,\nconditioned for the payment of the said sum of ......... (G1) ........\ndollars, on the ........ (H1) ....... day of ....... (I1) .......\nnineteen hundred and ........ (J1) ........ and the interest thereon, to\nbe computed from ........ (K1) ........, at the rate of ....... (L1)\n........ per centum per annum, and to be paid ....... (M1) .........\n  "It being thereby expressly agreed that the whole of the said\nprincipal sum shall become due after default in the payment of any\ninstallment of principal, interest, taxes or assessments, as hereinafter\nprovided.\n"Now this indenture witnesseth, that the said party of the first part,\nfor the better securing the payment of the said sum of money mentioned\nin the condition of the said bond, note or obligation, with interest\nthereon, and also for and in consideration of one dollar, paid by the\nsaid party of the second part, the receipt whereof is hereby\nacknowledged, doth hereby grant and release unto the said party of the\nsecond part, and to his heirs (or successors) and assigns for ever\n(description), together with the appurtenances, and all the estate and\nrights of the party of the first part in and to said premises, together\nwith all fixtures and articles of personal property attached to, or used\nin connection with, the premises. To have and to hold the above granted\npremises unto the said party of the second part, his heirs and assigns\nforever. Provided, always, that if the said party of the first part, his\nheirs, executors or administrators, shall pay unto the said party of the\nsecond part, his executors, administrators or assigns, the said sum of\nmoney mentioned in the condition of the said bond, note or obligation,\nand the interest thereon, at the time and in the manner mentioned in the\nsaid condition, that then these presents, and the estate hereby granted,\nshall cease, determine and be void."\n  (Explanation: Whatever words are inserted in the blank spaces above\nmarked (A), (B), (C), (D), (E), (F), (G), (H), (I), (J), (K), (L), and\n(M) respectively, shall be construed as being inserted in the\ncorresponding blank spaces above marked (A1), (B1), (C1), (D1), (E1),\n(F1), (G1), (H1), (I1), (J1), (K1), (L1) and (M1) respectively.)\n  2. Covenant that whole sum shall become due. A covenant "that the\nwhole of the said principal sum and interest shall become due at the\noption of the mortgagee: after default in the payment of any installment\nof principal or of interest for  ....... days; or after default in the\npayment of any tax, water rate or assessment for ....... days after\nnotice and demand; or after default after notice and demand either in\nassigning and delivering the policies insuring the buildings against\nloss by fire or in reimbursing the mortgagee for premiums paid on such\ninsurance, as hereinbefore provided; or after default upon request in\nfurnishing a statement of the amount due on the mortgage and whether any\noffsets or defenses exist against the mortgage debt, as hereinafter\nprovided," must be construed as meaning that should any default be made\nin the payment of any installment of principal or of any part thereof,\nor in the payment of the said interest, or any part thereof, on any day\nwhereon the same is made payable, or should any tax, water rate or\nassessment, and/or any installment of any assessment which has been\ndivided into annual installments pursuant to provision of law in such\ncases made and provided which now is or may be hereafter imposed upon\nthe premises hereinafter described, become due or payable, and should\nthe said installment of principal or interest remain unpaid and in\narrear for the space of ....... days, or such tax, water rate or\nassessment or annual installment remain unpaid and in arrear\nfor ....... days after written notice by the mortgagee or obligee, his\nexecutors, administrators, successors or assigns, that such tax or\nassessment and/or annual installment is unpaid, and demand for the\npayment thereof, or should any default be made after notice and demand\neither in assigning and delivering the policies insuring the buildings\nagainst loss by fire or in reimbursing the mortgagee for premiums paid\non such insurance, as hereinafter provided, or upon failure to furnish\nsuch statement of the amount due on the mortgage and whether any offsets\nor defenses exist against the mortgage debt, as hereinafter provided,\nafter the expiration of ....... days in case the request is made\npersonally, or after the expiration of ....... days after the mailing of\nsuch request in case the request is made by mail, then and from\nthenceforth, that is to say, after the lapse of either one of said\nperiods, as the case may be, the aforesaid principal sum, with all\narrearage of interest thereon, shall, at the option of the said\nmortgagee or obligee, his executors, administrators, successors or\nassigns, become and be due and payable immediately thereafter, although\nthe period above limited for the payment thereof may not then have\nexpired, anything thereinbefore contained to the contrary thereof in any\nwise notwithstanding.\n  3. Covenant to pay indebtedness. In default of payment, mortgagee to\nhave power to sell. A covenant "that the mortgagor will pay the\nindebtedness, as hereinbefore provided," must be construed as meaning\nthat the mortgagor for himself, his heirs, executors and administrators\nor successors, doth covenant and agree to pay to the mortgagee, his\nexecutors, administrators, successors and assigns, the principal sum of\nmoney secured by said mortgage, and also the interest thereon as\nprovided by said mortgage. And if default shall be made in the payment\nof the principal sum or the interest that may grow due thereon, or of\nany part thereof, or in case of any other default, that then and from\nthenceforth it shall be lawful for the mortgagee, his executors,\nadministrators or successors to enter into and upon all and singular the\npremises granted, or intended so to be, and to sell and dispose of the\nsame, and all benefit and equity of redemption of the said mortgagor,\nhis heirs, executors, administrators, successors or assigns therein, at\npublic auction, according to the act in such case made and provided, and\nas the attorney of the mortgagor for that purpose duly authorized,\nconstituted and appointed, to make and deliver to the purchaser or\npurchasers thereof a good and sufficient deed or deeds of conveyance for\nthe same in fee simple (or otherwise; as the case may be) and out of the\nmoney arising from such sale, to retain the principal and interest which\nshall then be due, together with the costs and charges of advertisement\nand sale of the said premises, rendering the overplus of the\npurchase-money, if any there shall be, unto the mortgagor, his heirs,\nexecutors, administrators, successors or assigns, which sale so to be\nmade shall forever be a perpetual bar both in law and equity against the\nmortgagor, his heirs, successors and assigns, and against all other\npersons claiming or to claim the premises, or any part thereof by, from\nor under him, them or any of them.\n  4. Mortgagor to keep buildings insured. (a) A covenant "that the\nmortgagor will keep the buildings on the premises insured against loss\nby fire for the benefit of the mortgagee; that he will assign and\ndeliver the policies to the mortgagee; and that he will reimburse the\nmortgagee for any premiums paid for insurance made by the mortgagee on\nthe mortgagor's default in so insuring the buildings or in so assigning\nand delivering the policies," shall be construed as meaning that the\nmortgagor, his heirs, successors and assigns will, during all the time\nuntil the money secured by the mortgage shall be fully paid and\nsatisfied, keep the buildings erected on the premises insured against\nloss or damage by fire, to an amount to be approved by the mortgagee not\nexceeding in the aggregate one hundred per centum of their full\ninsurable value and in a company or companies to be approved by the\nmortgagee, and will assign and deliver the policy or policies of such\ninsurance to the mortgagee, his executors, administrators, successors or\nassigns, which policy or policies shall have endorsed thereon the\nstandard New York mortgagee clause in the name of the mortgagee, so and\nin such manner and form that he and they shall at all time and times,\nuntil the full payment of said moneys, have and hold the said policy or\npolicies as a collateral and further security for the payment of said\nmoneys, and in default of so doing, that the mortgagee or his executors,\nadministrators, successors or assigns, may make such insurance from year\nto year, in an amount in the aggregate not exceeding one hundred per\ncentum of the full insurable value of said buildings erected on the\nmortgaged premises for the purposes aforesaid, and pay the premium or\npremiums therefor, and that the mortgagor will pay to the mortgagee, his\nexecutors, administrators, successors or assigns, such premium or\npremiums so paid, with interest from the time of payment, on demand, and\nthat the same shall be deemed to be secured by the mortgage, and shall\nbe collectible thereupon and thereby in like manner as the principal\nmoneys, and that should the mortgagee by reason of such insurance\nagainst loss by fire receive any sum or sums of money for damage by\nfire, and should the mortgagee retain such insurance money instead of\npaying it over to the mortgagor, the mortgagee's right to retain the\nsame and his duty to apply it in payment of or on account of the sum\nsecured by the mortgage and in satisfaction or reduction of the lien\nthereof shall be limited and qualified as hereafter in this paragraph\nprovided. Said insurance money so received by the mortgagee shall be\nheld by him as trust funds until paid over or applied as hereinafter\nprovided. If the mortgagor shall notify the mortgagee in writing within\nthirty days after the fire that the mortgaged premises have been damaged\nthereby, and shall thereafter make good the damage by means of such\nrepairs, restoration or rebuilding as may be necessary to restore the\nbuildings to their condition prior to the damage, then upon presentation\nto the mortgagee within three years after the fire of proof that the\ndamage has been fully made good (and if he so demands in writing within\nthirty days after such presentation of proof, then upon presentation to\nthe mortgagee within thirty days after such demand of proof also of the\nactual cost of such repairs, restoration and rebuilding and of the\nreasonable value of any part of the work so performed by the mortgagor)\nthe mortgagee, unless he rejects the proof submitted to him as\ninsufficient, shall pay over to the mortgagor so much of said insurance\nmoney theretofore received by the mortgagee as does not exceed the\nlesser of (1) the reasonable cost of such repairs, restoration and\nrebuilding or (2) the total amount actually paid therefor by the\nmortgagor, together with the reasonable value of any part of the work\ndone by him. Such proof shall be deemed sufficient unless, within sixty\ndays after presentation of all such proof to the mortgagee as aforesaid,\nhe shall notify the mortgagor in writing that the proof is rejected. Any\nexcess of said insurance money over the amount so payable to the\nmortgagor shall be applied in reduction of the principal of the\nmortgage. Provided, however, that if and so long as there exists any\ndefault by the mortgagor in the performance of any of the terms or\nprovisions of the mortgage on his part to be performed the mortgagee\nshall not be obligated to pay over any of said insurance money received\nby him. If the mortgagor shall fail to comply with any of the foregoing\nprovisions within the time or times hereinabove limited, or shall fail\nwithin sixty days after rejection of the proof so submitted to commence\nan action against the mortgagee to recover so much of said insurance\nmoney as is payable to the mortgagor as hereinabove provided, or if the\nentire principal of the mortgage shall have become payable by reason of\ndefault or maturity, the mortgagee shall apply said insurance money in\nsatisfaction or reduction of the principal of the mortgage; and any\nexcess of said insurance money over the amount required to satisfy the\nmortgage shall be paid to the mortgagor. Unless the court, in any such\naction, shall determine that the mortgagee's rejection of the proof\nsubmitted by the mortgagor prior to the commencement of the action was\nunreasonable, the mortgagee may offset the reasonable amount, as\ndetermined by the court, of his expense incident to the litigation, and\nmay reimburse himself out of the insurance money for the amount so\ndetermined. The term "mortgage," as hereinabove used, shall be deemed to\ninclude agreements extending or otherwise in any way modifying the terms\nor provisions of an existing mortgage. The term "mortgagor," as\nhereinabove used, shall mean the owner for the time being of the\nmortgaged fee or the junior mortgagee actually in possession of the\nmortgaged property, or the tenant for the time being in possession of\nthe property under a lease which has been mortgaged. The term\n"mortgagee," as hereinabove used, shall be deemed to include the\nsuccessors in interest of the mortgagee. In the event that there be more\nthan one mortgage covering the same premises, such covenant must be\nconstrued as hereinbefore prescribed in this paragraph, except that the\nmortgagor, his heirs, successors and assigns, notwithstanding such\nforegoing provisions, may not be required to provide such insurance, as\nto all the mortgagees combined, in the preferential order of their\npriority, for a total amount of more than one hundred per cent of the\ninsurable value of the buildings on the premises, and a second or\nsubordinate mortgagee shall be entitled to exercise the rights of a\nmortgagee with respect to the procurement of such insurance and the\nholding of the policy or policies thereof as hereinbefore prescribed in\nthis paragraph only when and to the extent that the mortgagor, his\nheirs, successors or assigns, as the case may be, does or do not furnish\nsatisfactory proof of such maximum insurance for the benefit of such\nsecond or subordinate mortgagee and one or more other mortgagees in the\npreferential order of their priority in a company or companies duly\nauthorized to do business in this state.\n  The limitations and qualifications hereinabove imposed on the\nmortgagee's right to retain proceeds of a fire insurance policy shall\napply only to mortgages or extensions or other modifications thereof\nmade after the effective date of this act.\n  (b) A covenant "that the mortgagor will keep the buildings on the\npremises insured against loss by flood if the premises are located in an\narea identified by the Secretary of Housing and Urban Development as an\narea having special flood hazards and in which flood insurance has been\nmade available under the National Flood Insurance Act of nineteen\nhundred sixty-eight; that he will assign and deliver the policies to the\nmortgagee; and that he will reimburse the mortgagee for any premiums\npaid for insurance made by the mortgagee on the mortgagor's default in\nso insuring the buildings or in so assigning and delivering the\npolicies," shall be construed as meaning that the mortgagor, his heirs,\nsuccessors and assigns will, during all the time until the money secured\nby the mortgage shall be fully paid and satisfied, keep the buildings\nerected on the premises insured against loss or damage by flood provided\nthe premises are located in an area identified by the Secretary of\nHousing and Urban Development of the United States as an area having\nspecial flood hazards and in which flood insurance is available under\nthe National Flood Insurance Act of nineteen hundred sixty-eight, to an\namount at least equal to the outstanding principal balance of the money\nsecured by the mortgage or the maximum limit of coverage available with\nrespect to the buildings under said Act, whichever is less, and in a\ncompany or companies to be approved by the mortgagee and will assign and\ndeliver the policy or policies of such insurance to the mortgagee, his\nexecutors, administrators, successors or assigns, which policy or\npolicies shall have endorsed thereon the standard New York mortgagee\nclause in the name of the mortgagee, so and in such manner and form that\nhe and they shall at all time and times, until the full payment of said\nmoney, have and hold the said policy or policies as a collateral and\nfurther security for the payment of said money, and in default of so\ndoing, that the mortgagee or his executors, administrators, successors\nor assigns may make such insurance from year to year, in the amount as\naforesaid, and pay the premium or premiums therefor, and that the\nmortgagor will pay to the mortgagee, his executors, administrators,\nsuccessors or assigns, such premium or premiums so paid, with interest\nfrom the time of payment, on demand, and that the same shall be deemed\nto be secured by the mortgage, and shall be collectible thereupon and\nthereby in like manner as the principal moneys, and that should the\nmortgagee by reason of such insurance receive any sum or sums of money\nfor damage by flood, the provisions for retention, holding application\nand payment of said insurance money shall be as set forth in paragraph\n(a) above with respect to loss by fire. The term "mortgage," as\nhereinabove used, shall be deemed to include agreements extending or\notherwise in any way modifying the terms or provisions of an existing\nmortgage. The term "mortgagor," as hereinabove used, shall mean the\nowner for the time being of the mortgaged fee or the junior mortgagee\nactually in possession of the mortgaged property, or the tenant for the\ntime being in possession of the property under a lease which has been\nmortgaged. The term "mortgagee," as hereinabove used, shall be deemed to\ninclude the successors in interest of the mortgagee. In the event that\nthere be more than one mortgage covering the same premises, such\ncovenant must be construed as hereinbefore prescribed in this paragraph\nexcept that the mortgagor, his heirs, successors and assigns,\nnotwithstanding such foregoing provisions, may not be required to\nprovide such insurance, as to all the mortgagees combined, in the\npreferential order of their priority, for a total amount greater than\nthe outstanding principal balance of the money secured by the mortgage\nor the maximum limit of coverage available with respect to the premises,\nwhichever is less, and a second or subordinate mortgagee shall be\nentitled to exercise the rights of a mortgagee with respect to the\nprocurement of such insurance and the holding of the policy or policies\nthereof as hereinbefore prescribed in this paragraph only when and to\nthe extent that the mortgagor, his heirs, successors or assigns, as the\ncase may be, does or do not furnish satisfactory proof of such maximum\ninsurance for the benefit of such second or subordinate mortgagee and\none or more other mortgagees in the preferential order of their priority\nin a company or companies duly authorized to do business in this state.\n  The limitations and qualifications hereinabove imposed on the\nmortgagee's right to retain proceeds of a flood insurance policy shall\napply only to mortgages or extensions or other modifications thereof\nmade after the effective date of this act.\n  4-a. Mortgagor to maintain premises and all improvements thereon in\ngood condition or repair. (a) A covenant contained in a mortgage on real\nproperty improved by a residence for four families or more that the\nmortgagor will maintain the premises and all improvements thereon in\n"good condition or repair" shall be construed as meaning that the\nmortgagor, his heirs, successors and assigns will, during all the time\nuntil the money secured by the mortgage shall be fully paid and\nsatisfied, keep the premises and the building or buildings erected\nthereon in good condition and repair and free from violations of\napplicable municipal or state laws, codes or regulations concerning the\nstate of such condition and/or repair. Upon a finding and certification\nby any such government or its agency of a violation of any such law,\ncode or regulation involving a serious danger to the health and safety\nof the occupants of such mortgaged premises and upon the service of one\ncopy thereof on the owner of record, or upon the appointment of an\nadministrator pursuant to article seven-A of the real property actions\nand proceedings law, such mortgagee may declare the entire balance of\nthe principal sum secured by such mortgage, together with all accrued\ninterest, immediately due and payable upon the following conditions: the\nmortgagee shall allow the mortgagor a reasonable opportunity to correct\nthe violation or, in the case of an administrator appointed pursuant to\narticle seven-A of the real property actions and proceedings law, to\nhave such administrator removed; the mortgagee may commence foreclosure\nproceedings upon failure of the mortgagor to make such corrections\nwithin the time period mandated by local law, rule or code enforcement\nagency, provided, however, no such action shall be commenced within\nthirty days of the expiration of the period, if any, specified by local\nlaw, rule or code enforcement regulation, or, in the case of an\nadministrator appointed pursuant to article seven-A of the real property\nactions and proceedings law, the mortgagee may commence foreclosure\nproceedings no earlier than sixty days after the appointment of such\nadministrator.\n  (b) Should any such mortgagee commence a foreclosure proceeding based\nupon such violation and not complete the same because such violation had\nbeen cured, the mortgagee shall be entitled to recover all reasonable\nattorney's fees and disbursements incurred in the bringing of such\nproceeding.\n  (c) Notwithstanding the provisions of this section, the mortgagee and\nthe mortgagor shall retain all existing interest and rights.\n  5. Mortgagor to warrant title. A covenant "that the mortgagor warrants\nthe title to the premises," must be construed as meaning that the\nmortgagor warrants that he has good title to said premises and has a\nright to mortgage the same and that the mortgagor shall and will make,\nexecute, acknowledge and deliver in due form of law, all such further or\nother deeds or assurances as may at any time hereafter be reasonably\ndesired or required for the more fully and effectually conveying the\npremises by the mortgage described, and thereby granted or intended so\nto be, unto the said mortgagee, his executors, administrators,\nsuccessors or assigns, for the purpose aforesaid, and unto all and every\nperson or persons, corporation or corporations, deriving any estate,\nright, title or interest therein, under the said indenture of mortgage,\nor the power of sale therein contained, and the said granted premises\nagainst the said mortgagor, and all persons claiming through him will\nwarrant and defend.\n  6. Mortgagor to pay all taxes, assessments or water rates. A covenant\n"that the mortgagor will pay all taxes, assessments or water rates and\nin default thereof, the mortgagee may pay the same" must be construed as\nmeaning that until the amount hereby secured is paid, the mortgagor will\npay all taxes, assessments and water rates which may be assessed or\nbecome liens on said premises, and in default thereof the holder of this\nmortgage may pay the same, and the mortgagor will repay the same with\ninterest, and the same shall be liens on said premises and secured by\nthe mortgage.\n  7. Statement of amount due. A covenant "that the mortgagor\nwithin ......  days upon request in person or within ...... days upon\nrequest by mail will furnish a written statement duly acknowledged of\nthe amount due on this mortgage and whether any offsets or defenses\nexist against the mortgage debt" must be construed as meaning that the\nmortgagor, and any subsequent owner of the premises described herein\nupon request, made either personally or by mail, shall certify, by a\nwriting duly acknowledged, to the mortgagee or to any proposed assignee\nof this mortgage, the amount of principal and interest then owing on\nthis mortgage and whether any offsets or defenses exist against the\nmortgage debt within ..... days in case the request is made personally,\nor within ...... days after the mailing of such request in case the\nrequest is made by mail.\n  8. Notice and demand. A covenant "that notice and demand or request\nmay be made in writing and may be served in person or by mail" must be\nconstrued as meaning that every provision for notice and demand or\nrequest shall be deemed fulfilled by written notice and demand or\nrequest personally served on one or more of the persons who shall at the\ntime hold the record title to the premises, or on their heirs or\nsuccessors, or mailed by depositing it in any post-office station or\nletter-box, enclosed in a post-paid envelope addressed to such person or\npersons, or their heirs or successors, at his, their or its address to\nthe mortgagee last known.\n  9. Power of attorney to assignee. The word "assign" or other words of\nassignment, when contained in an assignment of a mortgage and bond or\nmortgage and note, must be construed as having included in their meaning\nthat the assignor does thereby make, constitute and appoint the assignee\nthe true and lawful attorney, irrevocable, of the assignor, in the name\nof the assignor, or otherwise, but at the proper costs and charges of\nthe assignee, to have, use and take all lawful ways and means for the\nrecovery of the money and interest secured by the said mortgage and bond\nor mortgage and note, and in case of payment to discharge the same as\nfully as the assignor might or could do if the assignment were not made.\n  10. Mortgagee entitled to appointment of receiver. A covenant "that\nthe holder of this mortgage, in any action to foreclose it, shall be\nentitled to the appointment of a receiver," must be construed as meaning\nthat the mortgagee, his heirs, successors or assigns, in any action to\nforeclose the mortgage, shall be entitled, without notice and without\nregard to adequacy of any security of the debt, to the appointment of a\nreceiver of the rents and profits of the premises covered by the\nmortgage; and the rents and profits in the event of any default or\ndefaults in paying the principal, interest, taxes, water rents,\nassessments or premiums of insurance, are assigned to the holder of the\nmortgage as further security for the payment of the indebtedness.\n