May 1, 2012
Building Loan Mortgages: Two significant cases relating to Building Loans have been decided recently. Both cases reinforce the proposition that when in doubt, file a building loan agreement! A) In Altschuler Shaham Provident Funds Ltd v GML Tower LLC, an existing first mortgage was taken by assignment, at which time the parties entered into an agreement, not filed, by which additional funds were to be advanced for construction on the premises.
Almost a year later the lender recorded a mortgage increase and modification agreement reflecting the total amount of the existing mortgage and the amounts subsequently advanced. In the ensuing foreclosure action, mechanics lienors established that the unfiled agreement was a building loan contract, the subsequent mortgage modification was a building loan mortgage, and the mechanics liens had priority over the entire amount of the mortgage, including the money advanced under the original first mortgage. Altshuler Shaham Provident Funds, Ltd. V. GML Tower LLC 28 Misc. 3d 475 (Sup. Ct., Onondaga Co., 2010), affd., 83 AD. 3d 1563 (4th Dep’t., 2011), app. denied, 926 N.Y.S. 2d 838 (N.Y. Ct. of App.). B) In Lehman Brothers Holdings Inc v 25 Broad, LLC, a mortgage was called a Project Mortgage, intending to secure periodic advances for non building loan “soft costs”, but the court, after reviewing the loan documents, determined that it was in fact a building loan mortgage, and since no building loan agreement was filed, the mechanics lienors had priority over the mortgage. Lehman Brothers Holdings. Inc. v. 25 Broad, LLC, S. Ct., NY Co., Index No. 100886/2009,6116/2011.
GMAC Mortgage files Bankruptcy: On May 14, 2012, Resolution Capital, LLC, GMAC Mortgage, and related parties filed a petition for protection under Chapter 11 of the Bankruptcy Code in the Bankruptcy Court for the Southern District of New York. On May 15, 2012, the Court issued an Interim Order, effective immediately, that the Debtors are authorized to sell in the ordinary course of business loans in foreclosure and REO free and clear of any and all liens, claims, and encumbrances against the bankrupt entity pursuant to Section 363(f) of the Bankruptcy Code.
Mortgage Tax: NYS Dept. of Taxation has issued TB-ST-331 entitled: Application of the Mortgage Recording Tax to Breakage Costs Secured Under Interest Rate Swap Agreements. This bulletin explains whether the mortgage recording tax applies to breakage costs under an interest rate swap agreement when the agreement is secured by a mortgage on real property. To view the bulletin see: http://www.tax.ny.gov/pubs_and_bulls/tg_bulletins/mrt/breakage_costs.htm
RESPA: The Supreme Court of the United States clarifies that RESPA outlaws the splitting of a fee with a party who does not actually perform the work that they are being paid for. If the fees are not split with another party, there is not a RESPA violation. See: http://www.supremecourt.gov/opinions/11pdf/10-1042.pdf ;
Title Insurance Video on Television: ALTA partnered with the Designing Spaces TV series on Lifetime to explain to homebuyers the closing process and the importance of purchasing an owner’s title insurance policy. The five-minute segment was broadcasted on June 1. You can paste this link to your browser to view the video see: http://www.youtube.com/watch?v=z-IBqVGk2Pg&feature=youtu.be
Judgments and Bankruptcy: This case, decided in the Appellate Division, reaffirmed the principle that a discharge in bankruptcy does discharge the debtors personal obligation to pay the debt and does NOT extinguish the judgment lien against the debtors real property. The court allowed the judgment creditor to renew their lien against a debtor who had been discharged in bankruptcy. Nelson, L.P. V. Jannace, 87 A.D. 3d 731 (2nd Dept., 2011)