Assembly Bill A407

                             
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                    407
 
                        2023-2024 Regular Sessions
 
                           I N  A S S E M B L Y
 
                              January 9, 2023
                                ___________
 
 Introduced by M. of A. EPSTEIN, CRUZ, SIMON, L. ROSENTHAL, REYES, GLICK,
   CARROLL,  ANDERSON -- Multi-Sponsored by -- M. of A. COOK -- read once
   and referred to the Committee on Judiciary
 
 AN ACT to amend the real property law and the uniform  commercial  code,
   in relation to requiring the recording of mezzanine debt and preferred
   equity investments; and to amend the tax law, in relation to including
   mezzanine debt in the mortgage recording tax
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. The real property law is amended by adding  a  new  section
 291-k to read as follows:
   § 291-K. RECORDING OF MEZZANINE DEBT AND PREFERRED EQUITY INVESTMENTS.
 1.  WHENEVER  A  MORTGAGE  INSTRUMENT  IS  RECORDED IN THE OFFICE OF THE
 RECORDING OFFICER OF ANY COUNTY, ANY MEZZANINE DEBT OR PREFERRED  EQUITY
 INVESTMENT  RELATED TO THE REAL PROPERTY UPON WHICH THE MORTGAGE INSTRU-
 MENT IS FILED SHALL ALSO BE RECORDED WITH SUCH MORTGAGE INSTRUMENT.  FOR
 THE  PURPOSES  OF  THIS  SECTION, "MEZZANINE DEBT" AND "PREFERRED EQUITY
 INVESTMENTS" SHALL MEAN DEBT CARRIED BY A BORROWER THAT MAY BE  SUBORDI-
 NATE TO THE PRIMARY LIEN AND IS SENIOR TO THE COMMON SHARES OF AN ENTITY
 OR  THE  BORROWER'S  EQUITY  AND  REPORTED AS ASSETS FOR THE PURPOSES OF
 FINANCING SUCH PRIMARY LIEN.  THIS SHALL INCLUDE NON-TRADITIONAL FINANC-
 ING TECHNIQUES SUCH AS A DIRECT OR INDIRECT INVESTMENT  BY  A  FINANCING
 SOURCE  IN  AN ENTITY THAT OWNS THE EQUALITY INTERESTS OF THE UNDERLYING
 MORTGAGE WHERE THE FINANCING SOURCE  HAS  SPECIAL  RIGHTS  OR  PREFERRED
 RIGHTS  SUCH AS: (I) THE RIGHT TO RECEIVE A SPECIAL OR PREFERRED RATE OF
 RETURN ON ITS CAPITAL INVESTMENT; AND (II) THE RIGHT TO  AN  ACCELERATED
 REPAYMENT OF THE INVESTORS CAPITAL CONTRIBUTION.
   2. THIS SECTION SHALL APPLY TO BOTH MEZZANINE DEBT AND PREFERRED EQUI-
 TY  INVESTMENTS  IF  BOTH  USED  BY THE BORROWER OR MORTGAGOR, OR EITHER
 MEZZANINE DEBT OR PREFERRED DEBT, IF EITHER IS USED BY THE  BORROWER  OR
 MORTGAGOR.
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD00036-01-3
              

 A. 407                              2
 
   3. FOR PURPOSES OF THIS SECTION, "MEZZANINE DEBT" AND "PREFERRED EQUI-
 TY  INVESTMENTS"  SHALL NOT INCLUDE DEBT ON COOPERATIVE OR COMMON SHARES
 OF A RESIDENTIAL DWELLING WHERE THE UNIT OWNER OF A  COOPERATIVE  APART-
 MENT  IS  A SHAREHOLDER OF THE OWNERSHIP ENTITY, HAS EXCLUSIVE OCCUPANCY
 OF  SUCH DWELLING UNIT, AND HAS ESTABLISHED AND DELIMITED RIGHTS UNDER A
 PROPRIETARY LEASE.
   4. NO REMEDY OTHERWISE AVAILABLE TO A SECURED PARTY UNDER ARTICLE NINE
 OF THE UNIFORM COMMERCIAL CODE SHALL BE AVAILABLE TO ENFORCE A  SECURITY
 AGREEMENT PERTAINING TO MEZZANINE DEBT FINANCING AND/OR PREFERRED EQUITY
 INVESTMENTS  IN  RELATION TO REAL PROPERTY UPON WHICH A MORTGAGE INSTRU-
 MENT IS FILED THAT IS EVIDENCED BY A FINANCING  STATEMENT,  UNLESS  THAT
 FINANCING STATEMENT IS FILED AND THE TAX IMPOSED PURSUANT TO THE AUTHOR-
 ITY  OF  SUBDIVISION  FOUR OF SECTION TWO HUNDRED FIFTY-THREE OF THE TAX
 LAW, HAS BEEN PAID.
   § 2. Section 9-601 of the uniform commercial code is amended by adding
 a new subsection (h) to read as follows:
   (H) SECURITY INTEREST PERFECTED BY FINANCING STATEMENT. 1.    NOTWITH-
 STANDING  ANY  PROVISION  OF LAW TO THE CONTRARY, A SECURITY INTEREST IN
 MEZZANINE DEBT AND/OR PREFERRED EQUITY INVESTMENTS RELATED TO  THE  REAL
 PROPERTY  UPON  WHICH  A  MORTGAGE  INSTRUMENT  IS  FILED,  MAY  ONLY BE
 PERFECTED BY THE FILING OF A FINANCING STATEMENT UNDER SUBPART 1 OF PART
 5 OF THIS ARTICLE AND ONLY AFTER THE PAYMENT OF ANY TAXES  DUE  PURSUANT
 TO SECTION TWO HUNDRED NINETY-ONE-K OF THE REAL PROPERTY LAW.
   2.  FOR  PURPOSES  OF  THIS  SECTION,  THE  TERMS "MEZZANINE DEBT" AND
 "PREFERRED EQUITY INVESTMENTS" SHALL HAVE THE SAME MEANING  AS  PROVIDED
 IN SECTION TWO HUNDRED NINETY-ONE-K OF THE REAL PROPERTY LAW.
   3.  THIS SECTION SHALL NOT BE APPLICABLE TO ANY DEBT ON COOPERATIVE OR
 COMMON SHARES OF A RESIDENTIAL DWELLING WHERE THE UNIT OWNER OF A  COOP-
 ERATIVE  APARTMENT  IS A SHAREHOLDER OF THE OWNERSHIP ENTITY, HAS EXCLU-
 SIVE OCCUPANCY OF SUCH DWELLING UNIT, AND HAS ESTABLISHED AND  DELIMITED
 RIGHTS UNDER A PROPRIETARY LEASE.
   §  3. Paragraph (a) of subdivision 2 of section 250 of the tax law, as
 amended by section 1 of part Q of chapter 60 of the  laws  of  2004,  is
 amended to read as follows:
   (a)  (1)  The  term  "mortgage" as used in this article includes every
 mortgage or deed of trust which imposes a lien on or affects  the  title
 to  real property, notwithstanding that such property may form a part of
 the security for the debt or debts secured  thereby.  An  assignment  of
 rents  to  accrue  from  tenancies, subtenancies, leases or subleases of
 real property, within any city in the state having a population  of  one
 million  or more, given as security for an indebtedness, shall be deemed
 a mortgage of real property for  purposes  of  this  article.  Executory
 contracts for the sale of real property under which the vendee has or is
 entitled  to possession shall be deemed to be mortgages for the purposes
 of this article and shall be  taxable  at  the  amount  unpaid  on  such
 contracts.  A contract or agreement by which the indebtedness secured by
 any mortgage is increased or added to, shall be  deemed  a  mortgage  of
 real  property  for the purpose of this article, and shall be taxable as
 such upon the amount of such increase or addition.
   (2) Notwithstanding anything in this section or  section  two  hundred
 fifty-five  of  this  article  to  the contrary, a contract or agreement
 whereby the proceeds of any indebtedness secured by a mortgage  of  real
 property  in any city in the state having a population of one million or
 more are used to reduce all or any part of a mortgagee's equity interest
 in a wraparound or similar mortgage  of  such  real  property  shall  be
 deemed  a mortgage of real property for the purposes of this article and
 A. 407                              3
 
 shall be taxable as such to the extent of the amount of such proceeds so
 used, without regard to whether the  aggregate  amount  of  indebtedness
 secured by mortgages of such real property is increased or added to.
   (3)  NOTWITHSTANDING  ANY PROVISION TO THE CONTRARY IN THIS SECTION OR
 SECTION TWO HUNDRED FIFTY-FIVE OF THIS  ARTICLE,  "MEZZANINE  DEBT"  AND
 "PREFERRED  EQUITY INVESTMENTS" AS SUCH TERMS ARE DEFINED IN SUBDIVISION
 FOUR OF THIS SECTION, SHALL BE TAXABLE  AND  SHALL  APPLY  TO  TAXES  IN
 SUBDIVISIONS  ONE,  ONE-A  AND TWO OF SECTION TWO HUNDRED FIFTY-THREE OF
 THIS ARTICLE, BUT SHALL NOT APPLY TO ANY OTHER TAXES IN THIS ARTICLE  ON
 OR AFTER THE EFFECTIVE DATE OF THIS SUBPARAGRAPH.
   §  4.   Section 250 of the tax law is amended by adding a new subdivi-
 sion 4 to read as follows:
   4. THE  TERM "MEZZANINE DEBT" AND "PREFERRED ABILITY INVESTMENT" SHALL
 HAVE THE SAME MEANING AS PROVIDED IN SECTION 291-K OF THE REAL  PROPERTY
 LAW.
   §  5.   Section 253 of the tax law as amended by adding a new subdivi-
 sion 4 to read as follows:
   4. (A) A TAX, MEASURED BY THE AMOUNT OF  PRINCIPAL  DEBTOR  OBLIGATION
 WHICH  IS  UNDER  ANY  CONTINGENCY  MAY  BE  SECURED  AT THE DATE OF THE
 EXECUTION THEREOF, OR AT ANY TIME THEREAFTER, BY  A  SECURITY  AGREEMENT
 PERTAINING  TO  MEZZANINE DEBT FINANCING AND/OR PREFERRED EQUITY INVEST-
 MENTS IN RELATION TO REAL PROPERTY UPON WHICH A MORTGAGE  INSTRUMENT  IS
 FILED,  AS  EVIDENCED BY A FINANCING STATEMENT, IS IMPOSED ON THE FILING
 OF THE FINANCING STATEMENT.
   (B) THE RATE AND INCIDENCE OF THE TAX SHALL BE DETERMINED PURSUANT  TO
 THIS SECTION.
   (C)  EXCEPT  AS  OTHERWISE  PROVIDED  IN  THIS  SUBDIVISION,  ALL  THE
 PROVISIONS OF THIS ARTICLE RELATING TO OR  APPLICABLE  TO  THE  ADMINIS-
 TRATION,  COLLECTION,  DETERMINATION AND DISTRIBUTION OF THE TAX IMPOSED
 BY THIS SECTION SHALL APPLY TO THE TAX IMPOSED UNDER  THE  AUTHORITY  OF
 THIS  SUBDIVISION  WITH  SUCH  MODIFICATION AS MAY BE NECESSARY TO ADAPT
 SUCH LANGUAGE TO THE TAX SO AUTHORIZED. ANY REFERENCE TO A MORTGAGE WILL
 BE DEEMED TO BE A REFERENCE TO A FINANCING STATEMENT  THAT  EVIDENCES  A
 SECURITY  AGREEMENT. SUCH PROVISIONS SHALL APPLY WITH THE SAME FORCE AND
 EFFECT AS IF THOSE PROVISIONS HAD BEEN SET  FORTH  IN  THIS  SUBDIVISION
 EXCEPT  TO  THE  EXTENT THAT ANY PROVISION IS EITHER INCONSISTENT WITH A
 PROVISION OF THIS SUBDIVISION OR NOT RELEVANT TO THE TAX  AUTHORIZED  BY
 THIS SUBDIVISION.
   (D)  NO  REMEDY  OTHERWISE  AVAILABLE TO A SECURED PARTY UNDER ARTICLE
 NINE OF THE UNIFORM COMMERCIAL CODE SHALL  BE  AVAILABLE  TO  ENFORCE  A
 SECURITY   AGREEMENT  PERTAINING  TO  MEZZANINE  DEBT  FINANCING  AND/OR
 PREFERRED EQUITY INVESTMENTS IN RELATION TO REAL PROPERTY UPON  WHICH  A
 MORTGAGE INSTRUMENT IS FILED THAT IS EVIDENCED BY A FINANCING STATEMENT,
 UNLESS THAT FINANCING STATEMENT IS FILED AND THE TAX IMPOSED PURSUANT TO
 THE AUTHORITY OF THIS SUBDIVISION HAS BEEN PAID.
   (E) FOR THE PURPOSES OF THIS SUBDIVISION:
   (1) "MEZZANINE DEBT" AND "PREFERRED EQUITY INVESTMENTS" SHALL HAVE THE
 SAME MEANING AS PROVIDED IN SECTION TWO HUNDRED NINETY-ONE-K OF THE REAL
 PROPERTY LAW.
   (2)  "FINANCING  STATEMENT"  MEANS  A RECORD OR RECORDS COMPOSED OF AN
 INITIAL FINANCING STATEMENT AND ANY FILED RECORD RELATING TO THE INITIAL
 FINANCING STATEMENT.
   (3) "SECURITY AGREEMENT" MEANS AN AGREEMENT THAT CREATES  OR  PROVIDES
 FOR A SECURITY INTEREST.
   (F)  COUNTIES  OR CITIES AUTHORIZED UNDER THIS ARTICLE TO IMPOSE A TAX
 ARE AUTHORIZED AND EMPOWERED TO ADOPT AND AMEND LOCAL LAWS TO IMPOSE  IN
 A. 407                              4
 
 SUCH COUNTY OR CITY A TAX ON THE FILING OF FINANCING STATEMENTS PERTAIN-
 ING  TO  MEZZANINE DEBT FINANCING AND/OR PREFERRED EQUITY INVESTMENTS IN
 RELATION TO REAL PROPERTY UPON WHICH A MORTGAGE INSTRUMENT IS FILED. ANY
 TAX  THAT  HAS  BEEN  IMPOSED BY A COUNTY OR CITY UNDER THE AUTHORITY OF
 THIS ARTICLE SHALL BE DEEMED TO INCLUDE  THE  AUTHORITY  TO  IMPOSE  AND
 COLLECT  THE TAX ON THE RECORDING OF A FINANCING STATEMENT PERTAINING TO
 MEZZANINE DEBT FINANCING AND/OR PREFERRED EQUITY INVESTMENTS IN RELATION
 TO REAL PROPERTY UPON WHICH A MORTGAGE INSTRUMENT IS FILED IN  THE  SAME
 MANNER AS THE LOCAL MORTGAGE RECORDING TAX.
   § 6. Subdivision 1 and paragraph (a) of subdivision 2 of section 253-a
 of  the  tax  law,  as  amended  by chapter 343 of the laws of 1990, are
 amended to read as follows:
   1. Any city in this state having a population of one million or  more,
 acting  through  its  local  legislative  body, is hereby authorized and
 empowered to adopt and amend local laws imposing in any  such  city  (A)
 prior  to  February  first,  nineteen  hundred eighty-two a tax of fifty
 cents, (B) on or after February first, nineteen hundred  eighty-two  and
 before  July first, nineteen hundred eighty-two with respect to (i) one,
 two or three-family houses, individual cooperative apartments and  indi-
 vidual  residential condominium units, and (ii) real property securing a
 principal debt or obligation of less than five hundred thousand dollars,
 a tax of fifty cents, and with respect to all other real property a  tax
 of  one  dollar  and  twelve  and  one-half cents, (C) on and after July
 first, nineteen hundred eighty-two and  before  August  first,  nineteen
 hundred  ninety  with respect to real property securing a principal debt
 or obligation of less than five hundred thousand dollars, a tax of fifty
 cents, with respect to one, two or three-family houses, individual coop-
 erative apartments and individual residential condominium units securing
 a principal debt or obligation of five hundred thousand dollars or more,
 a tax of sixty-two and one-half cents, and with  respect  to  all  other
 real  property a tax of one dollar and twenty-five cents, and (D) on and
 after August first, nineteen hundred ninety with respect to real proper-
 ty securing a principal debt or obligation of  less  than  five  hundred
 thousand  dollars,  a  tax  of  one  dollar, with respect to one, two or
 three-family houses and individual residential condominium units  secur-
 ing  a  principal debt or obligation of five hundred thousand dollars or
 more, a tax of one dollar  and  twelve  and  one-half  cents,  and  with
 respect  to all other real property a tax of one dollar and seventy-five
 cents, for each one hundred dollars and each  remaining  major  fraction
 thereof of principal debt or obligation which is or under any contingen-
 cy may be secured at the date of execution thereof, or at any time ther-
 eafter,  by  a  mortgage on such real property situated within such city
 and recorded on or after the date upon which such tax takes effect and a
 tax of one dollar on such mortgage if the principal debt  or  obligation
 which  is  or by any contingency may be secured by such mortgage is less
 than one hundred dollars. In each instance where the tax imposed  pursu-
 ant to this subdivision is one dollar and twenty-five cents for each one
 hundred  dollars and each remaining major fraction thereof of such prin-
 cipal debt or obligation, fifty percent of the total amount of such tax,
 including fifty percent of any interest or penalties thereon,  shall  be
 set  aside  in  a special account by the commissioner of finance of such
 city. In each instance where the tax imposed pursuant to  this  subdivi-
 sion  is  one dollar and seventy-five cents for each one hundred dollars
 and each remaining major fraction thereof  of  such  principal  debt  or
 obligation,  thirty-five and seven-tenths percent of the total amount of
 such tax, including thirty-five and seven-tenths percent of any interest
 A. 407                              5
 
 or penalties thereon, shall also be set aside in such  special  account.
 Moneys in such account shall be used for payment by such commissioner to
 the  state  comptroller  for deposit in the urban mass transit operating
 assistance  account of the mass transportation operating assistance fund
 of any amount of insufficiency certified by the state comptroller pursu-
 ant to the provisions of subdivision six of  section  eighty-eight-a  of
 the  state  finance  law,  and, on the fifteenth day of each month, such
 commissioner shall transmit all funds in such account on the last day of
 the preceding month, except the amount required for the payment  of  any
 amount  of  insufficiency  certified  by  the state comptroller and such
 amount as he deems necessary for refunds and such other  amounts  neces-
 sary  to finance the New York city transportation disabled committee and
 the New York city paratransit system as established by section fifteen-b
 of the transportation law, provided, however, that  such  amounts  shall
 not exceed six percent of the total funds in the account but in no event
 be  less  than  two hundred twenty-five thousand dollars beginning April
 first, nineteen hundred eighty-six, and further that beginning  November
 fifteenth,  nineteen  hundred  eighty-four  and during the entire period
 prior to operation of such system, the total of such amounts  shall  not
 exceed  three  hundred seventy-five thousand dollars for the administra-
 tive expenses of such committee  and  fifty  thousand  dollars  for  the
 expenses of the agency designated pursuant to paragraph b of subdivision
 five of such section, and other amounts necessary to finance the operat-
 ing  needs  of  the  private bus companies franchised by the city of New
 York and eligible to receive state operating  assistance  under  section
 eighteen-b  of  the  transportation  law,  provided,  however, that such
 amounts shall not exceed four percent of the total funds in the account,
 to the New York city transit authority for mass transit within the city.
 THE TAX IMPOSED UNDER THE AUTHORITY OF PARAGRAPH (D) OF THIS SUBDIVISION
 IS DEEMED TO INCLUDE A TAX IMPOSED ON THE FILING OF FINANCING STATEMENTS
 EVIDENCING A SECURITY AGREEMENT PERTAINING TO MEZZANINE  DEBT  FINANCING
 AND/OR  PREFERRED  EQUITY  INVESTMENTS IN RELATION TO REAL PROPERTY UPON
 WHICH A MORTGAGE INSTRUMENT IS FILED.
   (a) For the purpose of determining whether a mortgage  is  subject  to
 the  tax authorized to be imposed by paragraph (B) or (C) of subdivision
 one of this section at a rate in excess of fifty cents, or by  paragraph
 (D)  of  subdivision  one  of  this  section  at a rate in excess of one
 dollar, for each one hundred dollars and each remaining  major  fraction
 thereof  of  principal  debt  or obligation, the principal debt or obli-
 gation which is or under any contingency may be secured at the  date  of
 execution  thereof, or at any time thereafter, by such mortgage shall be
 aggregated with the principal debt or obligation which is or  under  any
 contingency  may  be secured at the date of execution thereof, or at any
 time thereafter, by any other mortgage, where such mortgages  form  part
 of the same or related transactions and have the same or related mortga-
 gors  OR RELATED DEBTORS IN THE CASE OF A FINANCING STATEMENT EVIDENCING
 A SECURITY AGREEMENT  PERTAINING  TO  MEZZANINE  DEBT  FINANCING  AND/OR
 PREFERRED  EQUITY  INVESTMENTS IN RELATION TO REAL PROPERTY UPON WHICH A
 MORTGAGE INSTRUMENT IS  FILED.  If  the  commissioner  of  taxation  and
 finance  finds that a mortgage transaction or mortgage transactions have
 been formulated for the purpose of avoiding or evading  a  rate  of  tax
 authorized to be imposed under subdivision one of this section in excess
 of  the lowest such authorized rate, rather than solely for an independ-
 ent business or financial purpose, such commissioner shall treat all  of
 the  mortgages  forming  part  of  such transaction or transactions as a
 single mortgage for the purpose of determining the  applicable  rate  of
 A. 407                              6
 
 tax. For purposes of this subdivision, there shall be a presumption that
 all  mortgages  offered  for recording within a period of twelve consec-
 utive months having the same or related mortgagors  OR  RELATED  DEBTORS
 are  part of a related transaction, and such presumption may be rebutted
 only with clear and convincing evidence to the contrary. The commission-
 er of taxation and finance may require such affidavits  and  forms,  and
 may  prescribe such rules and regulations, as he determines to be neces-
 sary to enforce the provisions of this subdivision. ANY REFERENCE  TO  A
 MORTGAGE IN THIS SUBDIVISION INCLUDES A FINANCING STATEMENT EVIDENCING A
 SECURITY   AGREEMENT  PERTAINING  TO  MEZZANINE  DEBT  FINANCING  AND/OR
 PREFERRED EQUITY INVESTMENTS IN RELATION TO REAL PROPERTY UPON  WHICH  A
 MORTGAGE INSTRUMENT IS FILED.
   §  7.  Paragraph (a) of subdivision 1 of section 255 of the tax law is
 amended by adding a new subparagraph (iii) to read as follows:
   (III) NOTWITHSTANDING THE PROVISIONS OF SUBPARAGRAPH (I) OF THIS PARA-
 GRAPH, THE TAXES IMPOSED BY THE AUTHORITY UNDER  SUBPARAGRAPH  THREE  OF
 PARAGRAPH  (A)  OF  SUBDIVISION TWO OF SECTION TWO HUNDRED FIFTY OF THIS
 ARTICLE SHALL APPLY TO MEZZANINE DEBT AND/OR  PREFERRED  EQUITY  INVEST-
 MENTS AS SUCH TERMS ARE DEFINED BY SUBDIVISION FOUR OF SUCH SECTION.
   § 8. Section 257 of the tax law is amended to read as follows:
   § 257.  Payment  of  taxes. The taxes imposed by this article shall be
 payable on the recording of each mortgage of real  property  subject  to
 taxes  [thereunder]  UNDER THIS ARTICLE AND TO TAXES IMPOSED BY SUBPARA-
 GRAPH THREE OF PARAGRAPH (A) OF SUBDIVISION TWO OF SECTION  TWO  HUNDRED
 FIFTY  OF  THIS ARTICLE ON AND AFTER THE EFFECTIVE DATE OF SUCH SUBPARA-
 GRAPH. Such taxes shall be paid to the recording officer of  any  county
 in which the real property or any part thereof is situated.  It shall be
 the duty of such recording officer to indorse upon each mortgage AND ANY
 MEZZANINE  DEBT  INCLUDED WITH SUCH MORTGAGE a receipt for the amount of
 the tax so paid. Any mortgage so indorsed may thereupon or thereafter be
 recorded by any recording officer and the receipt for such tax  indorsed
 upon  each  mortgage  shall  be  recorded  therewith. The record of such
 receipt shall be conclusive proof that the amount of tax stated  therein
 has been paid upon such mortgage, INCLUDING ANY MEZZANINE DEBT.
   §  9. Subdivision 1 of section 258 of the tax law, as amended by chap-
 ter 241 of the laws of 1989, is amended to read as follows:
   1. No mortgage of real property shall be recorded by any county  clerk
 or  register,  unless there shall be paid the taxes imposed by and as in
 this article provided. No mortgage of real property which is subject  to
 the  taxes  imposed  by  this  article  shall be released, discharged of
 record or received in evidence in any action or  proceeding,  nor  shall
 any  assignment  of or agreement extending any such mortgage be recorded
 unless the taxes imposed thereon by this article shall have been paid as
 provided in this article.  FOR PURPOSES OF THE TAXES IMPOSED AND AUTHOR-
 IZED BY SUBPARAGRAPH THREE  OF  PARAGRAPH  (A)  OF  SUBDIVISION  TWO  OF
 SECTION  TWO HUNDRED FIFTY OF THIS ARTICLE, UNLESS SUCH TAXES SHALL HAVE
 BEEN PAID, NO MORTGAGE OF REAL PROPERTY SHALL BE RECORDED BY ANY  COUNTY
 CLERK  OR  REGISTER,  NOR  SHALL  SUCH MORTGAGE BE RELEASED, DISCHARGED,
 RECORDED OR RECEIVED IN EVIDENCE IN ANY ACTION OR PROCEEDING, NOR  SHALL
 ANY  ASSIGNMENT  OF  AGREEMENT  EXTENDING  SUCH  MORTGAGE  BE  RECORDED.
 Provided, however, except as otherwise provided in  subdivision  two  of
 this  section, in order to obtain a release or discharge of record where
 the mortgagor is not liable for the special additional tax imposed under
 subdivision one-a of section two hundred fifty-three  of  this  chapter,
 such  mortgagor  or  any subsequent owner of the mortgaged property or a
 part thereof may pay the tax imposed under such  subdivision  one-a  and
 A. 407                              7
 
 penalty,  and may either apply for the credit allowable under this chap-
 ter for payment of such additional tax or  may  maintain  an  action  to
 recover the amounts so paid against any person liable for payment of the
 tax  or  any  subsequent assignees or owners of such mortgage or consol-
 idated mortgage of which such mortgage is a part, as if such amounts  of
 tax and penalty were a debt personally owed by such persons to the mort-
 gagor  or subsequent owner.  No judgment or final order in any action or
 proceeding shall be made for the foreclosure or the enforcement  of  any
 mortgage  which  is subject to any tax imposed by this article or of any
 debt or obligation secured by  any  such  mortgage,  unless  the  taxes,
 INCLUDING  TAXES  AUTHORIZED  BY  SUBPARAGRAPH THREE OF PARAGRAPH (A) OF
 SUBDIVISION TWO OF SECTION TWO HUNDRED FIFTY OF THIS ARTICLE imposed  by
 this  article  shall  have  been  paid as provided in this article; and,
 except AS otherwise provided in subdivision two of this section, whenev-
 er it shall appear that any mortgage has been recorded  without  payment
 of  a  tax imposed by this article there shall be added to the tax a sum
 equal to one-half of one per centum thereof for each month  or  fraction
 of  a  month  for the period that the tax remains unpaid except where it
 could not be determined from the face of the instrument that a  tax  was
 due,  or where an advance has been made on a prior advance mortgage or a
 corporate trust mortgage without payment of the tax, in which case there
 shall be added to the tax a sum equal to one per centum thereof for each
 month or fraction of a month for the period that the tax remains unpaid.
 In any case where a mortgage of real property subject to a  tax  imposed
 by this article has heretofore been recorded or is hereafter recorded in
 good  faith,  and  the  county  clerk or register has held such mortgage
 nontaxable or taxable at one amount, and it shall later appear  that  it
 was taxable or taxable at a greater amount, the commissioner of taxation
 and  finance  may  remit  the penalties in excess of one-half of one per
 centum per month.
   § 10. This act shall take effect on the ninetieth day after  it  shall
 have become a law.