Real Property Law Section Blog

Revised Form TP-584, New York State's "Combined Real Estate Transfer Tax Return, Credit Line Mortgage Certificate, and Certificate of Exemption from the Payment of Estimated Personal Income Tax", is being issued effective April 15, 2013. Subject to the grace period noted below, the revised form is to be submitted when required in all counties, except for Bronx, Kings, New York and Queens counties, recordings as to which are under the jurisdiction of the New York City Register, on and after April 15, 2013. The new TP-584 will set forth a "4/13" date in the upper left hand corner of the first page; the form now in use displays a date of "3/07".

New York State's Department of Taxation and Finance is also issuing revised "Instructions for Form TP-584" (TP-584-I). No change is being made to the exiting version of TP-584-1, the "Real Estate Transfer Tax Return Supplemental Schedules", last dated "11/09."

The Form TP-584 currently in use will be accepted by a County recording office (other than the New York City Register) for transfers prior to April 15 for sixty days after April 15. That date being June 15, which is a Saturday, the last date for submission of the 3/07 version of the TP-584 may, in most counties, be Friday, June 14. Rockland County has advised that its cut-off date will be June 13, 2013.

Revised Form TP-584 will be included in the Westchester County Prep ("Property Records Electronic Portal") system on April 15. It is not yet known if information entered in PREP before April 15, 2013 for a TP-584 which has not been not "completed" in PREP, and printed by April 15, will need to be re-entered.

The New York City Register has advised that revised Form TP-584 will first be available in ACRIS in an updated version of ACRIS expected to be on-line on or about May 6. The current version of the form, if it is "finalized" in ACRIS before ACRIS is updated, and printed, will be accepted by the City Register until June 28, presumably, subject to confirmation, only for transfers prior to the date on which the revised form is available in ACRIS. If the current form is not "finalized" in ACRIS when ACRIS is updated, and printed, all information will need to be re-entered.

Significant changes being made to Form TP-584 are the following:

1. "Single member LLC" checkboxes are being added to the "Grantor/Transferor" and to the "Grantee/Transferee" sections of Schedule A ("Information relating to conveyance"). If that box is checked, the member's name and the member's EIN or SSN are to be entered.

2. The SWIS ("Statewide Information System") Code for the property being transferred must be entered in Schedule A. It is expected that ACRIS, and perhaps PREP, will automatically enter the SWIS Code once certain other information is entered. The SWIS Code is a six-digit number assigned by the State's Office of Real Property Tax Services as a unique identifier for every municipality in the State. It can be located on the property's real estate tax bill, by contacting the local tax assessor, and on the Office of Real Property Tax Services web site at
http://orpts.tax.ny.gov/cfapps/MuniPro/swis/index.cfm

3. "Conveyance pursuant to divorce or separation" has been added as a "Condition of conveyance" in Schedule A of revised FormTP-584.

4. Revised Schedule D ("Certificate of Exemption from the payment of estimated personal income tax") directs the person completing the form to check the second box under "Exemptions for nonresident transferor(s)/seller(s)" in Schedule D if the property is being conveyed by a referee in a foreclosure. It also states that, in such a case, a signature must be entered at the end of the "Exemptions" section in Schedule D.

5. Revised TP-584-I, "Instructions for Schedule A", "Name and Address Box", includes the following statement: "If the conveyance is pursuant to a mortgage foreclosure or any other action governed by the Real Property Actions and Proceedings Law, the defaulting mortgagor or debtor is the grantor."

Revised Forms TP-584 and TP-584-I have been posted to the First American-New York web site at:

http://www.firstamny.com/doc/866.pdf and http://www.firstamny.com/doc/865.pdf

Vacant land in the Town of Chester, in Warren County, was taken by the Town for failure to pay real estate taxes and then sold at auction in 1999. Plaintiffs, the owners of the property, who lived in New Jersey, asserted that the attempts to afford them notice of the foreclosure were constitutionally inadequate, and sought a declaration that they still owned the property. The Supreme Court, Warren County, granted the County's motion for summary judgment; the Appellate Division, Third Department, affirmed, as did the Court of Appeals.

The Plaintiffs moved from South Orange, New Jersey, to which tax bills were sent, to Milburn, New Jersey; their direction to the post office to forward mail to their new address expired and mailed notices were returned as undeliverable. The Plaintiffs contended that the tax collector was required to either find some means of making personal service, to address a notice to occupant at their former address, or to search New Jersey public records for their new address. The Court of Appeals held that such actions were not constitutionally required and that the Plaintiffs were not deprived of their property without due process of law. Mac Naughton v. Warren County, decided December 11, 2012, is reported at 2012 WL 6115650.

A Bankruptcy Trustee sought to avoid a mortgage filed pre-petition which had been improperly indexed due to an error on the recording cover page, claiming, under the Trustee's "strong arm" powers, that the Trustee was a bona fide purchaser without knowledge of the mortgage as of the date on which the bankruptcy was commenced. The Trustee also asserted that the correction to the recording made post-petition was an impermissible post-petition transfer of an asset of the bankruptcy estate. The Bankruptcy Court Judge denied the Trustee's motion and granted the mortgagee's motion to dismiss the adversary proceeding.

Since a second mortgage, later executed to the same lender as the misindexed mortgage but properly indexed, referenced an "Existing Indebtedness" and its principal balance, the Bankruptcy Court held that the Trustee could not be deemed a bona fide purchaser without notice of the first mortgage. The District Court, Eastern District of New York, affirmed, stating that "the absence of prior proper recording did not entitle the Trustee as putative purchaser to close his eyes as to what the Second Mortgage revealed."

Further, according to the District Court,"[w]hether or not the post-petition correction...was an improper conveyance of a property interest held by the debtors' estate is immaterial...the voiding of the correction does not supply a ground to extinguish the Trustee's constructive notice of the underlying encumbrance, itself." O'Connell, as Trustee v. JPMorgan Chase Bank, National Association, decided December 11, 2012, is reported at 2012 WL 6151972.

The County Clerk, Orange County, has issued a notice regarding Form RP-5217 PDF (the State Board of Real Property Services' "Real Property Transfer Report"), stating the following:

"Please be advised that effective immediately the single page RP-5217 PDF will be an acceptable form of RP-5217 accompanying deeds for recording on or after February 7, 2012."

"The RP-5217 PDF form and instructions can be found on the New York State Office of Real Property Services website:
http://www.tax.ny.gov/research/property/assess/rp5217/index.htm. This form may be printed on legal size paper (8 ½ X 14) and utilize a computer as the venue for completion. A completed RP-5217 PDF form is not acceptable when typed or handwritten."

"The standard four part RP-5217 may still be used when recording Deed conveyances and may be handwritten or typed. Fees for both types of RP-5217 remain the same."

The ORPS website indicates that RP-5217 PDF is being accepted for transfers of real property in twelve upstate counties.

Affirming a ruling of the Supreme Court, Kings County, the Appellate Division, Second Department, held that a deed conveying all or substantially all of the assets of a entity formed under New York's Not-For-Profit Corporation Law ("NPCL"), executed without Supreme Court approval as required under NPCL Sections 510 ("Disposition of all or substantially all assets") and 511 ("Petition for leave of court"), and a mortgage made by the grantee of such deed, were void. Real Property Law Section 266 ("Rights of purchaser or incumbrancer for valuable consideration protected") applies only when the challenged conveyance is voidable. Further, the conveyance may not be ratified by the Supreme Court under Religious Corporation Law Section 12(9) ("Sale, mortgage and lease of real property of religious corporation") since the transferor is not a religious corporation. Solar Line, Universal Great Brotherhood, Inc. v. Prado, decided November 21, 2012, is reported at 100 A.D. 3d 862 and 2012 WL 5870703.

The promissory note for a ten year loan made in 2003, secured by a mortgage, permitted the borrower to prepay before maturity, provided there was not a continuing Event of Default and the maturity date had not been accelerated. The note required the payment of a yield maintenance amount, which was to be calculated during the first six years of the loan as of "the actual date of default under the loan." Voluntary payment of the loan did not constitute an Event of Default.

On refinancing with another lender in 2005, notwithstanding that there had not been a default, the loan servicer demanded that the borrower pay yield maintenance. The borrower paid under protest and commenced a breach of contract Action seeking a refund of the yield maintenance amount paid. The Supreme Court, New York County, granted the Defendant-lender's motion to dismiss, holding that it would be "absurd and illogical" to conclude that a yield maintenance amount was not owed absent a default. The Appellate Division, First Department, reversed and granted the Plaintiff-borrower's motion for summary judgment, stating, at 922 N.Y.S. 2d at 568, that "it is not a court's function to imply a term to save a defendant from the consequences of an agreement that it drafted..."

The Court of Appeals affirmed. "Application of the Note's literal language relative to voluntary prepayment and the yield maintenance amount does not result in either absurdity or an unenforceable agreement...The Note, as written, is enforceable according to its terms." Jade Realty LLC v. Citigroup Commercial Mortgage Trust 2005-EMG, decided November 19, 2012, is reported at 2012 WL 5833613.

Local Law No. 9-2012 of the Village of Hempstead in Nassau County, effective January 1, 2013, requires a mortgagee commencing an action to foreclose a mortgage on property within the Village to notify the Village Clerk, on a form prescribed by the Village Clerk, of the name of and contact information for the plaintiff, the name of the defendant, the address and tax lot identification of the property, the date on which and the court in which the action was commenced, and "such other information as the department may require by rule." The Clerk is also to be notified if the action is discontinued, a judgment has been issued, or the property is sold in foreclosure. "The failure to notify shall not be deemed to affect in any way any pending legal proceeding related to such residential real property." Notice is not required for foreclosures commenced prior to September 30, 2010 or brought by a governmental entity.

The Local Law is posted at http://ecode360.com/16263636.

A foreclosing mortgagee sought a declaration of the relative priorities of the mortgages on the property. The Plaintiff's mortgage was subordinate to a mortgage (the "Senior Mortgage") held by assignment by Empire State Bank, N.A. ("Empire"), which Senior Mortgage was consolidated with another, subordinate mortgage made to Empire. The Plaintiff asserted that since Empire accepted a deed in lieu of foreclosure, Empire's its entire consolidated mortgage was extinguished by merger. The Supreme Court, Rockland County, granted the Plaintiff's motion for summary judgment but the Appellate Division, Second Department, awarded summary judgment to Empire, holding that the Senior Mortgage had priority over the Plaintiff's mortgage.

According to the Appellate Division, "the plaintiff submitted no evidence of Empire's intent to merge its mortgage and ownership interests when it accepted the deed in lieu of foreclosure. Moreover, a merger would injure Empire by subordinating its prior assigned mortgage to the plaintiff's subsequent mortgage, and the plaintiff would not be unjustly enriched if a merger is not recognized, given that it accepted its mortgage interest with the knowledge that the previously assigned mortgage was superior." Congregation Beth Medrosh of Monsey, Inc. v. Rolling Acres Chestnut Ridge, LLC, decided December 12, 2012, is reported at 2012 WL 6176651.

Real Property Actions and Proceedings Law Section 1303, as amended by Chapter 507 of the Laws of 2009, effective January 14, 2010, requires the plaintiff in an action to foreclose a mortgage on property improved by a one-to-four family dwelling to serve on any mortgagor, with the summons and complaint, a statutory "Help for Homeowners in Foreclosure Notice." In an Action brought to impress and foreclose on an equitable mortgage, the Supreme Court, Queens County, dismissed the complaint and canceled the notice of pendency due to the Plaintiff's failure to comply with the notice requirement of Section 1303. According to the Court, "[p]roper service of [the] RPAPL §1303 notice with the summons and complaint is a condition precedent to the commencement of the action, and noncompliance results in dismissal of the complaint."Landau v. Haglili, decided September 10, 2012 and reported at 21012 NY Slip OP 32758, is posted at:

http://www.courts.state.ny.us/reporter/pdfs/2012/2012_32758.pdf.

Under Real Property Actions and Proceedings Law Section 1307 ("Duty to maintain foreclosed property"), effective April 14, 2010, a foreclosing mortgagee which has obtained a judgment of foreclosure on residential real property that is or becomes vacant, or occupied by a tenant but abandoned by the mortgagor, "shall maintain such property until such time as ownership has been transferred...and the deed for such property has been recorded..."

The Plaintiff in an Action to foreclose a mortgage on property in Albany sought an Order vacating the judgment of foreclosure entered September 22, 2010. It asserted that it was "'unfair' to require it to continue to maintain the property" since there were no bids at auction, the property was vacant since the commencement of the Action, was subject to numerous tax liens, and the mortgagee had to make repairs required by the municipality.

The Supreme Court, Albany County, denied the motion to vacate the judgment. According to the Court, "This statute was in effect for approximately five months when [the] judgment [of foreclosure] was entered...Only one public auction has been held and two years have transpired without any further effort to transfer the property. Moreover, plaintiff has documented only limited maintenance repairs, apparently expending $431.30 during this period. On balance, plaintiff's duty to maintain the property in furtherance of the statutory objective of preserving the State's neighborhoods, outweighs the maintenance burden imposed." Trustco Bank v. Franklin, decided November 15, 2012 and reported as 2012 NY Slip Op 32758, is posted at 2012 WL 5681315.