Senate Bill S5983

                                 BILL NUMBER:  S5983

 TITLE OF BILL :
An act to amend chapter 231 of the laws of 1998 amending the real
property actions and proceedings law relating to mortgage foreclosure,
in relation to extending the expiration of the provisions thereof

 PURPOSE :
This bill extends, for an additional year, the provisions of Chapter
231 of the Laws of 1998, which established a non-judicial proceeding
for uncontested commercial mortgage foreclosure.

 SUMMARY OF PROVISIONS :
Section one of the bill amends §2 of Chapter 231 of 1998 by extending
the effective date of this law until July 1, 2010. Section two of the
bill provides that the bill will take effect immediately, provided
however that if it is enacted on or after July 1, 2009, it shall be
deemed to have been enacted and to be in full force and effect on and
after July 1, 2009.

 EXISTING LAW :
Chapter 231 was enacted in 1998 and extended in 2001 and 2005. It
repealed existing Article 14 of the Real Property Actions and
Proceedings Law and added a new Chapter 14 to permit foreclosure of
real property improved by a non-residential building or certain
multi-family buildings by the power of sale. It also contained
              

numerous exclusions designed to protect the rights of residential
tenants. This law is currently scheduled to expire on July 1, 2009.

 JUSTIFICATION :
This legislation would extend the provisions of Chapter 231 of 1998
for an additional year (to July 1, 2010). During the past decade since
Chapter 231 was enacted, the law has provided legal certainty for both
commercial mortgagors and mortgagees with regard to their respective
rights in commercial foreclosure proceedings.  Virtually all
commercial real estate loans and mortgages written today contain
clauses that contemplate the use of the power of sale in the event of
an uncontested foreclosure. In the absence of a mortgagee's ability to
use the power of sale in an uncontested proceeding, New York law
provided no convenient way for mortgagors to transfer ownership of a
building in foreclosure. Lengthy court proceedings and complex
procedures for uncontested foreclosures under the previous Article 14
RPAPL caused virtually all foreclosures to proceed through judicial
means, causing significant deterioration in many commercial properties
during the extended period in which these properties sat awaiting
foreclosure.  The existing owner had neither the resources nor the
incentive to maintain or improve the property, and the prospective
foreclosing mortgagee could not risk investing in the property while
awaiting the outcome of court proceedings.  The foreclosure by sale
provisions of Article 14 that were enacted by Chapter 231 of 1998
remedied this deficit by providing legal certainty for both lenders
and borrowers. It contributes to the maintenance of property during
foreclosure proceedings and shortens those proceedings materially. It
also provides additional leverage in real estate negotiations for
prospective borrowers, as lenders are willing to provide significant
concessions in loan negotiations in order to ensure that a foreclosure
by sale clause is included in loan documents.  By extending Article
14, this bill will continue to enhance the flow of credit to
commercial real property in New York and allow for more effective
planning of commercial real property developments.

 LEGISLATIVE HISTORY :
New bill.

 FISCAL IMPLICATIONS :.
None.
 LOCAL FISCAL IMPLICATIONS :
None.

 EFFECTIVE DATE :
Immediately, provided however that if it is enacted on or after July
1, 2009, it shall be deemed to have been enacted and to be in full
force and effect on and after July 1, 2009.