Sec. 648.2. Procedure to follow when recording a mortgage for an indefinite amount

Tax Law, § 256

(a)

(1) When a mortgage for an indefinite amount is presented for recording, the mortgagee may file with the recording officer a sworn statement of the maximum amount secured or which under any contingency may be secured by the mortgage at the date of execution or any time thereafter. Provided, however, that the maximum amount secured or which under any contingency nay be secured by the mortgage at the date of execution or any time thereafter as set forth in such statement can in no event be less than that portion of such amount secured which is determinable by the terms of the mortgage. Such sworn statement may be a separate document or be contained in the mortgage instrument itself. If the sworn statement is filed or a statement is contained in the mortgage itself stating such maximum amount, the taxes described in Part 642 of this Title shall be based and computed on such maximum amount.

Example 1:

A mortgage is presented for recording which provides that it shall secure the repayment of a $3 million loan and also it shall stand as security for the repayment of further loans which shall be made by the mortgagee to the mortgagor. Such mortgage would be considered a mortgage for an indefinite amount. The mortgagee chooses to file the statement as to the maximum amount secured by the mortgage. Accordingly, such stated maximum amount cannot be less than $3 million.

(2) Where such sworn statement is filed by the mortgagee, the statement shall thereafter at all times be binding upon and conclusive against such owner, the holders of any bonds or obligations secured by such mortgage and all persons claiming through the mortgagee any interest in the mortgage or the mortgaged premises. Examples of statements that would have the effect of establishing the maximum amount of principal debt or obligation secured by a mortgage for purposes of measuring the tax imposed pursuant to section 253 of the Tax Law are as follows:

(i) notwithstanding anything contained to the contrary the maximum amount of principal indebtedness secured by this mortgage at the time of execution hereof or which under any contingency may become secured by this mortgage at any time hereafter is $___; or

(ii) notwithstanding anything contained herein to the contrary the maximum amount of principal indebtedness secured by this mortgage at the time of execution hereof or which under any contingency may become secured by this mortgage at any time hereafter is $____; plus

(a) taxes, charges or assessments which may be imposed by law upon the premises;

(b) premiums on insurance policies covering the premises;

(c) expenses incurred in upholding the lien of this mortgage, including, but not limited to:

(1) the expenses of any litigation to prosecute or defend the rights and lien created by this mortgage;

(2) any amount, cost or charges to which the mortgagee becomes subrogated, upon payment, whether under recognized principles of law or equity, or under express statutory authority; and

(3) interest at the default rate (or regular interest rate).

(b)

(1) If a sworn statement as to the maximum amount secured or which under any contingency may be secured by the mortgagee at the date of execution or any time thereafter, is not filed, the taxes described in Part 642 of this Title must be computed based upon the higher of:

(i) the fair market value of the mortgaged property on the date the mortgage was executed; or

(ii) the portion of such amount secured which is determinable by the terms of the mortgage.

(2) The fair market value of the property is determined by the recording officer to whom the mortgage is presented for recording. At the time the mortgage is presented for recording the mortgagor or mortgagee must provide to the recording officer such information as the recording officer deems necessary for the purpose of computing such fair market value of the property covered by the mortgage. The requested information must include sworn statements of appraisal, made by at least two competent persons who are not a party to the transaction related to the mortgage, which sets forth the fair market value of such property as of the date of execution of the mortgage.

(3) Where the appraisals differ as to the fair market value of the property, the appraisal which sets forth the highest fair market value shall be used for purposes of computing the taxes described in Part 642 of this Title.

Example 2:

Same facts as in example 1 of this section, except that a statement as to the maximum amount secured by the mortgage is not filed by the mortgagee when the mortgage is presented for recording and the fair market value of the property covered by the mortgage is $4 million. The mortgage recording taxes would be imposed and computed upon the higher of the portion of the amount secured which is determinable by the terms of the mortgage, which is $3 million, or the fair market value of the property, which is $4 million. Thus, the amount used to compute the taxes would be $4 million.

Example 3:

Same facts as in example 2, except that the fair market value of the property is $2 million. Thus, $3 million is used to compute the mortgage recording taxes.

(4) The determination by the recording officer of the value of the property covered by the mortgage and copies of the requested information used as the basis for computing the fair market value of the property and computing the taxes shall be forwarded to and subject to review by the commissioner.

(c) A mortgage for an indefinite amount shall not be recorded unless the sworn statement as described at subdivision (a) of this section or the information requested by the recording officer to whom the mortgage was presented for recording, as described in subdivision (b) of this section, is filed when the mortgage is presented for recording.