NY Real Prop L § 254 (2021)
2021 New York Laws RPP - Real Property Article 8 - Conveyances and Mortgages 254 - Construction of Clauses and Covenants in Mortgages and Bonds or Notes.

§ 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.