USA – NEW YORK Law and Practice Contributed by: Lindsey Haubenreich, Joseph Heins, Timothy Moriarty, Kimberly Nason and Matthew Fitzgerald, Phillips Lytle LLP
3.8 Lenders’ Liability Under Environmental Laws Lenders are generally exempt from liability under federal and state environmental laws as long as the lender does not take title to, or “participate in the management” of, a contaminated property. Requir - ing a borrower to take action to address contamina - tion, or renegotiating the terms of the secured inter - est, does not generally equate to “participating in the management” and will not subject a lender to liability. However, holding decision-making control over day- to-day activities or the environmental compliance of the site (ie, hazardous waste management), control - ling expenditures or taking title to the property may make a lender liable. 3.9 Effects of a Borrower Becoming Insolvent When a security interest is created and a foreclosure action is commenced prior to the filing of a bankruptcy by the borrower, the mortgage lien is generally secure and will typically survive the bankruptcy unless dis - charged by payment during bankruptcy. However, attempts to enforce the mortgage or pursue the fore - closure action are generally stayed unless and until the automatic bankruptcy stay is lifted. 3.10 Taxes on Loans On 22 January 2021, New York State Assembly mem - bers reintroduced legislation which would require the recording of, and payment of recording tax on, mez - zanine debt and preferred equity investments related to the real property whenever a mortgage is recorded with respect to the property. However, this legislation was not enacted.
widely based on the type of mortgage or other docu - ment being recorded, and the length of the document. 3.5 Legal Requirements Before an Entity Can Give Valid Security Generally, an entity can give a valid security inter - est over real estate assets if it owns the real estate and has complied with its charter documents and applicable law. Certain charitable entities may also be required to obtain the permission of the Supreme Court of the State of New York or the New York State Attorney General before granting a security interest in real estate assets. 3.6 Formalities When a Borrower Is in Default In New York, a mortgage is used to create a security interest in real property. A mortgage is perfected upon its recording in the local county clerk’s office. Prior to enforcement, it is a customary requirement in a commercial mortgage for a lender to be required to send a notice of default and provide the borrower with an opportunity to cure the default. If the mortgage is considered a “home loan” under New York law, then an additional 90-day statutory notice is required to be sent before the foreclosure of a mortgage can com - mence. The length of a mortgage foreclosure action may vary greatly depending on the jurisdiction within the State of New York, the type of mortgage involved and the litigiousness of the parties. Once commenced, a com - mercial mortgage foreclosure action may take as little as one year to complete. Conversely, in the City of New York, it is estimated that a standard foreclosure of a home loan will take approximately six years. Generally, the administrative laws and orders that restricted mortgage foreclosure actions during the COVID-19 pandemic have been lifted or removed. 3.7 Subordinating Existing Debt to Newly Created Debt It is possible for existing secured debt to become sub - ordinated to newly created debt in any circumstances, but ideally parties should take several steps in their documentation to avoid pitfalls.
4. Planning and Zoning 4.1 Planning and Zoning Framework
The primary policy that regulates land use in New York is the “Home Rule” concept, under which each indi - vidual municipality in the State (City, Town or Village) is entitled to regulate land use and make land use deci - sions. As a result, even though zoning is a police pow - er vested in the State, various enabling acts adopted by the State Legislature vest primary land use author - ity in local municipalities. Each municipality typically has a Planning Board and a Zoning Board of Appeals
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