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2006 New York Code - Construction Of Clauses And Covenants In Mortgages And Bonds Or Notes.
§ 254. Construction of clauses and covenants in mortgages and bonds or
notes. In mortgages of real property, and in bonds and notes secured
thereby or in assignments of mortgages and bonds and mortgages and
notes, or in agreements to extend or to modify the terms of mortgages
and bonds and mortgages and notes, the following or similar clauses and
covenants must be construed as follows:
1. Clauses of mortgage. The words "This mortgage, made the ..........
(A) ........ day of ........ (B) ........, nineteen hundred and ........
(C) ........, between ........ (D) ........, the mortgagor, and ........
(E) ........., residing at ......... (F) ........., the mortgagee,
Witnesseth, that to secure the payment of an indebtedness in the sum of
........ (G) ........ dollars, lawful money of the United States, to be
paid on the ........ (H) ........ day of ........ (I) ........, nineteen
hundred and ........ (J) ........, with interest thereon to be computed
from ......... (K) ........ at the rate of ........ (L) ........ per
centum per annum, and to be paid ........ (M) ........, according to a
certain bond, note or obligation bearing even date herewith, the
mortgagor hereby mortgages to the mortgagee (description)," must be
construed as equivalent in meaning to the words "This indenture, made
the ........ (A1) ...... day of ....... (B1) ........, in the year
nineteen hundred and ........ (C1) ........ between ....... (D1)
........, party of the first part, and ....... (E1) ........, of .......
(F1) ........, party of the second part.
"Whereas, the said ........ (D1) ........ is justly indebted to the
said party of the second part in the sum of ........ (G1) ........
dollars, lawful money of the United States, secured to be paid by his
certain bond, note or obligation, bearing even date herewith,
conditioned for the payment of the said sum of ......... (G1) ........
dollars, on the ........ (H1) ....... day of ....... (I1) .......
nineteen hundred and ........ (J1) ........ and the interest thereon, to
be computed from ........ (K1) ........, at the rate of ....... (L1)
....... per centum per annum, and to be paid ....... (M1) .........
"It being thereby expressly agreed that the whole of the said
principal sum shall become due after default in the payment of any
installment of principal, interest, taxes or assessments, as hereinafter
provided.
"Now this indenture witnesseth, that the said party of the first part,
for the better securing the payment of the said sum of money mentioned
in the condition of the said bond, note or obligation, with interest
thereon, and also for and in consideration of one dollar, paid by the
said party of the second part, the receipt whereof is hereby
acknowledged, doth hereby grant and release unto the said party of the
second part, and to his heirs (or successors) and assigns for ever
(description), together with the appurtenances, and all the estate and
rights of the party of the first part in and to said premises, together
with all fixtures and articles of personal property attached to, or used
in connection with, the premises. To have and to hold the above granted
premises unto the said party of the second part, his heirs and assigns
forever. Provided, always, that if the said party of the first part, his
heirs, executors or administrators, shall pay unto the said party of the
second part, his executors, administrators or assigns, the said sum of
money mentioned in the condition of the said bond, note or obligation,
and the interest thereon, at the time and in the manner mentioned in the
said condition, that then these presents, and the estate hereby granted,
shall cease, determine and be void."
(Explanation: Whatever words are inserted in the blank spaces above
marked (A), (B), (C), (D), (E), (F), (G), (H), (I), (J), (K), (L), and
(M) respectfully, shall be construed as being inserted in the
corresponding blank spaces above marked (A1), (B1), (C1), (D1), (E1),
(F1), (G1), (H1), (I1), (J1), (K1), (L1) and (M1) respectfully.)
2. Covenant that whole sum shall become due. A covenant "that the
whole of the said principal sum and interest shall become due at the
option of the mortgagee: after default in the payment of any installment
of principal or of interest for ....... days; or after default in the
payment of any tax, water rate or assessment for ....... days after
notice and demand; or after default after notice and demand either in
assigning and delivering the policies insuring the buildings against
loss by fire or in reimbursing the mortgagee for premiums paid on such
insurance, as hereinbefore provided; or after default upon request in
furnishing a statement of the amount due on the mortgage and whether any
offsets or defenses exist against the mortgage debt, as hereinafter
provided," must be construed as meaning that should any default be made
in the payment of any installment of principal or of any part thereof,
or in the payment of the said interest, or any part thereof, on any day
whereon the same is made payable, or should any tax, water rate or
assessment, and/or any installment of any assessment which has been
divided into annual installments pursuant to provision of law in such
cases made and provided which now is or may be hereafter imposed upon
the premises hereinafter described, become due or payable, and should
the said installment of principal or interest remain unpaid and in
arrear for the space of ....... days, or such tax, water rate or
assessment or annual installment remain unpaid and in arrear
for ....... days after written notice by the mortgagee or obligee, his
executors, administrators, successors or assigns, that such tax or
assessment and/or annual installment is unpaid, and demand for the
payment thereof, or should any default be made after notice and demand
either in assigning and delivering the policies insuring the buildings
against loss by fire or in reimbursing the mortgagee for premiums paid
on such insurance, as hereinafter provided, or upon failure to furnish
such statement of the amount due on the mortgage and whether any offsets
or defenses exist against the mortgage debt, as hereinafter provided,
after the expiration of ....... days in case the request is made
personally, or after the expiration of ....... days after the mailing of
such request in case the request is made by mail, then and from
thenceforth, that is to say, after the lapse of either one of said
periods, as the case may be, the aforesaid principal sum, with all
arrearage of interest thereon, shall, at the option of the said
mortgagee or obligee, his executors, administrators, successors or
assigns, become and be due and payable immediately thereafter, although
the period above limited for the payment thereof may not then have
expired, anything thereinbefore contained to the contrary thereof in any
wise notwithstanding.
3. Covenant to pay indebtedness. In default of payment, mortgagee to
have power to sell. A covenant "that the mortgagor will pay the
indebtedness, as hereinbefore provided," must be construed as meaning
that the mortgagor for himself, his heirs, executors and administrators
or successors, doth covenant and agree to pay to the mortgagee, his
executors, administrators, successors and assigns, the principal sum of
money secured by said mortgage, and also the interest thereon as
provided by said mortgage. And if default shall be made in the payment
of the principal sum or the interest that may grow due thereon, or of
any part thereof, or in case of any other default, that then and from
thenceforth it shall be lawful for the mortgagee, his executors,
administrators or successors to enter into and upon all and singular the
premises granted, or intended so to be, and to sell and dispose of the
same, and all benefit and equity of redemption of the said mortgagor,
his heirs, executors, administrators, successors or assigns therein, at
public auction, according to the act in such case made and provided, and
as the attorney of the mortgagor for that purpose duly authorized,
constituted and appointed, to make and deliver to the purchaser or
purchasers thereof a good and sufficient deed or deeds of conveyance for
the same in fee simple (or otherwise; as the case may be) and out of the
money arising from such sale, to retain the principal and interest which
shall then be due, together with the costs and charges of advertisement
and sale of the said premises, rendering the overplus of the
purchase-money, if any there shall be, unto the mortgagor, his heirs,
executors, administrators, successors or assigns, which sale so to be
made shall forever be a perpetual bar both in law and equity against the
mortgagor, his heirs, successors and assigns, and against all other
persons claiming or to claim the premises, or any part thereof by, from
or under him, them or any of them.
4. Mortgagor to keep buildings insured. (a) A covenant "that the
mortgagor will keep the buildings on the premises insured against loss
by fire for the benefit of the mortgagee; that he will assign and
deliver the policies to the mortgagee; and that he will reimburse the
mortgagee for any premiums paid for insurance made by the mortgagee on
the mortgagor's default in so insuring the buildings or in so assigning
and delivering the policies," shall be construed as meaning that the
mortgagor, his heirs, successors and assigns will, during all the time
until the money secured by the mortgage shall be fully paid and
satisfied, keep the buildings erected on the premises insured against
loss or damage by fire, to an amount to be approved by the mortgagee not
exceeding in the aggregate one hundred per centum of their full
insurable value and in a company or companies to be approved by the
mortgagee, and will assign and deliver the policy or policies of such
insurance to the mortgagee, his executors, administrators, successors or
assigns, which policy or policies shall have endorsed thereon the
standard New York mortgagee clause in the name of the mortgagee, so and
in such manner and form that he and they shall at all time and times,
until the full payment of said moneys, have and hold the said policy or
policies as a collateral and further security for the payment of said
moneys, and in default of so doing, that the mortgagee or his executors,
administrators, successors or assigns, may make such insurance from year
to year, in an amount in the aggregate not exceeding one hundred per
centum of the full insurable value of said buildings erected on the
mortgaged premises for the purposes aforesaid, and pay the premium or
premiums therefor, and that the mortgagor will pay to the mortgagee, his
executors, administrators, successors or assigns, such premium or
premiums so paid, with interest from the time of payment, on demand, and
that the same shall be deemed to be secured by the mortgage, and shall
be collectible thereupon and thereby in like manner as the principal
moneys, and that should the mortgagee by reason of such insurance
against loss by fire receive any sum or sums of money for damage by
fire, and should the mortgagee retain such insurance money instead of
paying it over to the mortgagor, the mortgagee's right to retain the
same and his duty to apply it in payment of or on account of the sum
secured by the mortgage and in satisfaction or reduction of the lien
thereof shall be limited and qualified as hereafter in this paragraph
provided. Said insurance money so received by the mortgagee shall be
held by him as trust funds until paid over or applied as hereinafter
provided. If the mortgagor shall notify the mortgagee in writing within
thirty days after the fire that the mortgaged premises have been damaged
thereby, and shall thereafter make good the damage by means of such
repairs, restoration or rebuilding as may be necessary to restore the
buildings to their condition prior to the damage, then upon presentation
to the mortgagee within three years after the fire of proof that the
damage has been fully made good (and if he so demands in writing within
thirty days after such presentation of proof, then upon presentation to
the mortgagee within thirty days after such demand of proof also of the
actual cost of such repairs, restoration and rebuilding and of the
reasonable value of any part of the work so performed by the mortgagor)
the mortgagee, unless he rejects the proof submitted to him as
insufficient, shall pay over to the mortgagor so much of said insurance
money theretofore received by the mortgagee as does not exceed the
lesser of (1) the reasonable cost of such repairs, restoration and
rebuilding or (2) the total amount actually paid therefor by the
mortgagor, together with the reasonable value of any part of the work
done by him. Such proof shall be deemed sufficient unless, within sixty
days after presentation of all such proof to the mortgagee as aforesaid,
he shall notify the mortgagor in writing that the proof is rejected. Any
excess of said insurance money over the amount so payable to the
mortgagor shall be applied in reduction of the principal of the
mortgage. Provided, however, that if and so long as there exists any
default by the mortgagor in the performance of any of the terms or
provisions of the mortgage on his part to be performed the mortgagee
shall not be obligated to pay over any of said insurance money received
by him. If the mortgagor shall fail to comply with any of the foregoing
provisions within the time or times hereinabove limited, or shall fail
within sixty days after rejection of the proof so submitted to commence
an action against the mortgagee to recover so much of said insurance
money as is payable to the mortgagor as hereinabove provided, or if the
entire principal of the mortgage shall have become payable by reason of
default or maturity, the mortgagee shall apply said insurance money in
satisfaction or reduction of the principal of the mortgage; and any
excess of said insurance money over the amount required to satisfy the
mortgage shall be paid to the mortgagor. Unless the court, in any such
action, shall determine that the mortgagee's rejection of the proof
submitted by the mortgagor prior to the commencement of the action was
unreasonable, the mortgagee may offset the reasonable amount, as
determined by the court, of his expense incident to the litigation, and
may reimburse himself out of the insurance money for the amount so
determined. The term "mortgage," as hereinabove used, shall be deemed to
include agreements extending or otherwise in any way modifying the terms
or provisions of an existing mortgage. The term "mortgagor," as
hereinabove used, shall mean the owner for the time being of the
mortgaged fee or the junior mortgagee actually in possession of the
mortgaged property, or the tenant for the time being in possession of
the property under a lease which has been mortgaged. The term
"mortgagee," as hereinabove used, shall be deemed to include the
successors in interest of the mortgagee. In the event that there be more
than one mortgage covering the same premises, such covenant must be
construed as hereinbefore prescribed in this paragraph, except that the
mortgagor, his heirs, successors and assigns, notwithstanding such
foregoing provisions, may not be required to provide such insurance, as
to all the mortgagees combined, in the preferential order of their
priority, for a total amount of more than one hundred per cent of the
insurable value of the buildings on the premises, and a second or
subordinate mortgagee shall be entitled to exercise the rights of a
mortgagee with respect to the procurement of such insurance and the
holding of the policy or policies thereof as hereinbefore prescribed in
this paragraph only when and to the extent that the mortgagor, his
heirs, successors or assigns, as the case may be, does or do not furnish
satisfactory proof of such maximum insurance for the benefit of such
second or subordinate mortgagee and one or more other mortgagees in the
preferential order of their priority in a company or companies duly
authorized to do business in this state.
The limitations and qualifications hereinabove imposed on the
mortgagee's right to retain proceeds of a fire insurance policy shall
apply only to mortgages or extensions or other modifications thereof
made after the effective date of this act.
(b) A covenant "that the mortgagor will keep the buildings on the
premises insured against loss by flood if the premises are located in an
area identified by the Secretary of Housing and Urban Development as an
area having special flood hazards and in which flood insurance has been
made available under the National Flood Insurance Act of nineteen
hundred sixty-eight; that he will assign and deliver the policies to the
mortgagee; and that he will reimburse the mortgagee for any premiums
paid for insurance made by the mortgagee on the mortgagor's default in
so insuring the buildings or in so assigning and delivering the
policies," shall be construed as meaning that the mortgagor, his heirs,
successors and assigns will, during all the time until the money secured
by the mortgage shall be fully paid and satisfied, keep the buildings
erected on the premises insured against loss or damage by flood provided
the premises are located in an area identified by the Secretary of
Housing and Urban Development of the United States as an area having
special flood hazards and in which flood insurance is available under
the National Flood Insurance Act of nineteen hundred sixty-eight, to an
amount at least equal to the outstanding principal balance of the money
secured by the mortgage or the maximum limit of coverage available with
respect to the buildings under said Act, whichever is less, and in a
company or companies to be approved by the mortgagee and will assign and
deliver the policy or policies of such insurance to the mortgagee, his
executors, administrators, successors or assigns, which policy or
policies shall have endorsed thereon the standard New York mortgagee
clause in the name of the mortgagee, so and in such manner and form that
he and they shall at all time and times, until the full payment of said
money, have and hold the said policy or policies as a collateral and
further security for the payment of said money, and in default of so
doing, that the mortgagee or his executors, administrators, successors
or assigns may make such insurance from year to year, in the amount as
aforesaid, and pay the premium or premiums therefor, and that the
mortgagor will pay to the mortgagee, his executors, administrators,
successors or assigns, such premium or premiums so paid, with interest
from the time of payment, on demand, and that the same shall be deemed
to be secured by the mortgage, and shall be collectible thereupon and
thereby in like manner as the principal moneys, and that should the
mortgagee by reason of such insurance receive any sum or sums of money
for damage by flood, the provisions for retention, holding application
and payment of said insurance money shall be as set forth in paragraph
(a) above with respect to loss by fire. The term "mortgage," as
hereinabove used, shall be deemed to include agreements extending or
otherwise in any way modifying the terms or provisions of an existing
mortgage. The term "mortgagor," as hereinabove used, shall mean the
owner for the time being of the mortgaged fee or the junior mortgagee
actually in possession of the mortgaged property, or the tenant for the
time being in possession of the property under a lease which has been
mortgaged. The term "mortgagee," as hereinabove used, shall be deemed to
include the successors in interest of the mortgagee. In the event that
there be more than one mortgage covering the same premises, such
covenant must be construed as hereinbefore prescribed in this paragraph
except that the mortgagor, his heirs, successors and assigns,
notwithstanding such foregoing provisions, may not be required to
provide such insurance, as to all the mortgagees combined, in the
preferential order of their priority, for a total amount greater than
the outstanding principal balance of the money secured by the mortgage
or the maximum limit of coverage available with respect to the premises,
whichever is less, and a second or subordinate mortgagee shall be
entitled to exercise the rights of a mortgagee with respect to the
procurement of such insurance and the holding of the policy or policies
thereof as hereinbefore prescribed in this paragraph only when and to
the extent that the mortgagor, his heirs, successors or assigns, as the
case may be, does or do not furnish satisfactory proof of such maximum
insurance for the benefit of such second or subordinate mortgagee and
one or more other mortgagees in the preferential order of their priority
in a company or companies duly authorized to do business in this state.
The limitations and qualifications hereinabove imposed on the
mortgagee's right to retain proceeds of a flood insurance policy shall
apply only to mortgages or extensions or other modifications thereof
made after the effective date of this act.
4-a. Mortgagor to maintain premises and all improvements thereon in
good condition or repair. (a) A covenant contained in a mortgage on real
property improved by a residence for four families or more that the
mortgagor will maintain the premises and all improvements thereon in
"good condition or repair" shall be construed as meaning that the
mortgagor, his heirs, successors and assigns will, during all the time
until the money secured by the mortgage shall be fully paid and
satisfied, keep the premises and the building or buildings erected
thereon in good condition and repair and free from violations of
applicable municipal or state laws, codes or regulations concerning the
state of such condition and/or repair. Upon a finding and certification
by any such government or its agency of a violation of any such law,
code or regulation involving a serious danger to the health and safety
of the occupants of such mortgaged premises and upon the service of one
copy thereof on the owner of record such mortgagee may declare the
entire balance of the principal sum secured by such mortgage, together
with all accrued interest, immediately due and payable upon the
following conditions: the mortgagee shall allow the mortgagor a
reasonable opportunity to correct the violation and may commence
foreclosure proceedings upon failure of the mortgagor to make such
corrections within the time period mandated by local law, rule or code
enforcement agency, however, no such action shall be commenced within
thirty days of the expiration of the period, if any, specified by local
law, rule or code enforcement regulation.
(b) Should any such mortgagee commence a foreclosure proceeding based
upon such violation and not complete the same because such violation had
been cured, the mortgagee shall be entitled to recover all reasonable
attorney's fees and disbursements incurred in the bringing of such
proceeding. (c) Notwithstanding the provisions of this section, the
mortgagee and the mortgagor shall retain all existing interest and
rights.
5. Mortgagor to warrant title. A covenant "that the mortgagor warrants
the title to the premises," must be construed as meaning that the
mortgagor warrants that he has good title to said premises and has a
right to mortgage the same and that the mortgagor shall and will make,
execute, acknowledge and deliver in due form of law, all such further or
other deeds or assurances as may at any time hereafter be reasonably
desired or required for the more fully and effectually conveying the
premises by the mortgage described, and thereby granted or intended so
to be, unto the said mortgagee, his executors, administrators,
successors or assigns, for the purpose aforesaid, and unto all and every
person or persons, corporation or corporations, deriving any estate,
right, title or interest therein, under the said indenture of mortgage,
or the power of sale therein contained, and the said granted premises
against the said mortgagor, and all persons claiming through him will
warrant and defend.
6. Mortgagor to pay all taxes, assessments or water rates. A covenant
"that the mortgagor will pay all taxes, assessments or water rates and
in default thereof, the mortgagee may pay the same" must be construed as
meaning that until the amount hereby secured is paid, the mortgagor will
pay all taxes, assessments and water rates which may be assessed or
become liens on said premises, and in default thereof the holder of this
mortgage may pay the same, and the mortgagor will repay the same with
interest, and the same shall be liens on said premises and secured by
the mortgage.
7. Statement of amount due. A covenant "that the mortgagor
within ...... days upon request in person or within ...... days upon
request by mail will furnish a written statement duly acknowledged of
the amount due on this mortgage and whether any offsets or defenses
exist against the mortgage debt" must be construed as meaning that the
mortgagor, and any subsequent owner of the premises described herein
upon request, made either personally or by mail, shall certify, by a
writing duly acknowledged, to the mortgagee or to any proposed assignee
of this mortgage, the amount of principal and interest then owing on
this mortgage and whether any offsets or defenses exist against the
mortgage debt within ..... days in case the request is made personally,
or within ...... days after the mailing of such request in case the
request is made by mail.
8. Notice and demand. A covenant "that notice and demand or request
may be made in writing and may be served in person or by mail" must be
construed as meaning that every provision for notice and demand or
request shall be deemed fulfilled by written notice and demand or
request personally served on one or more of the persons who shall at the
time hold the record title to the premises, or on their heirs or
successors, or mailed by depositing it in any post-office station or
letter-box, enclosed in a post-paid envelope addressed to such person or
persons, or their heirs or successors, at his, their or its address to
the mortgagee last known.
9. Power of attorney to assignee. The word "assign" or other words of
assignment, when contained in an assignment of a mortgage and bond or
mortgage and note, must be construed as having included in their meaning
that the assignor does thereby make, constitute and appoint the assignee
the true and lawful attorney, irrevocable, of the assignor, in the name
of the assignor, or otherwise, but at the proper costs and charges of
the assignee, to have, use and take all lawful ways and means for the
recovery of the money and interest secured by the said mortgage and bond
or mortgage and note, and in case of payment to discharge the same as
fully as the assignor might or could do if the assignment were not made.
10. Mortgagee entitled to appointment of receiver. A covenant "that
the holder of this mortgage, in any action to foreclose it, shall be
entitled to the appointment of a receiver," must be construed as meaning
that the mortgagee, his heirs, successors or assigns, in any action to
foreclose the mortgage, shall be entitled, without notice and without
regard to adequacy of any security of the debt, to the appointment of a
receiver of the rents and profits of the premises covered by the
mortgage; and the rents and profits in the event of any default or
defaults in paying the principal, interest, taxes, water rents,
assessments or premiums of insurance, are assigned to the holder of the
mortgage as further security for the payment of the indebtedness.
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