Opinion ID: 771331
Heading Depth: 2
Heading Rank: 2

Heading: The Loan and Related Filings

Text: 9 On or about February 17, 1995 - three days after NHP III took title to the site - NHP III and NEBF entered into a building loan contract, pursuant to which NEBF agreed to loan to NHP III an amount not to exceed $12,080,000 for use in the construction of Section III. 1 In connection with this loan, NHP-III and NEBF executed a building loan contract that included two statements required by the New York Lien Law and intended to establish NEBF's priority over subsequent creditors. First, in accordance with the requirements of New York Lien Law § 13, 2 paragraph 12 of the building loan contract states that NHP III will hold the advances it receives or has a right to receive as a trust fund for the purpose of acquiring the Real Estate and paying the costs of construction of the Improvements. It further provides that the funds will be applied to those purposes ahead of all other purposes. 10 At the same time that it filed the building loan contract and recorded its mortgage, NEBF filed an affidavit sworn to by Henry Reiter, the manager of the corporation that was the general partner of NHP-III. Reiter's affidavit was filed for the purpose of complying with New York Lien Law § 22. That provision requires that the parties to a building loan contract file a certified statement setting forth, inter alia, the net sum available to the borrower for the improvement in the clerk's office in the county in which the property is located. N.Y. Lien Law § 22. The section 22 affidavit filed in connection with the Section III construction loan states that the net sum available to the borrower for the improvement is $5,809,000.00. 11 The loan closed on February 23, 1995. At the closing of the loan, NEBF advanced $6,639,234.59 to NHP-III for the project. The advance included $4,616,191.00 to reimburse ERA-II for the Common Site Work, $1.5 million for land acquisition, and approximately $500,000 for title fees, legal fees, and other costs. Immediately after the closing, NEBF perfected its security interest in Section III by filing the building loan contract and recording the mortgage in the Westchester County Clerk's office. 12 In December of 1995, NEBF increased its loan commitment to NHP III by an additional $1,920,000.00, raising the total amount available under the loan to $14 million. In connection with the increased loan commitment, another section 22 affidavit was filed in the Westchester County Clerk's office stating that an additional $1,393,000.00 was available to the borrower for the improvement. Thus, the two affidavits together stated that the total sum available to the borrower for the improvement was $7,202,000.00.