The closure of the offices of local recorders and county clerks as a result of COVID-19 and the prospect of future closures are having a profound impact on commercial real estate transactions. This is especially true in New York, where closures prevent the filing of mechanical liens and construction loan contracts and, in some cases, prevent the start of new construction projects. 22. Home savings contract. A construction loan agreement with or without the sale of land and any modification thereof must be duly acknowledged in writing and must include a genuine affidavit, which will be verified by the borrower, indicating the consideration paid or payable for the loan described therein and showing all other costs incurred. or in that context, and the net amount available to the borrower for improvement, which must be deposited no later than the date of registration of the hypothec granted under that hypothec in the office of the clerk of the county where part of the property is located, except that any subsequent amendment to such a construction loan agreement within ten days of the implementation of such an amendment. Such a construction loan agreement or any amendment thereto may not be submitted to the county registration office. If this is not the case, the interest of each party to such a contract in the property concerned is subject to the lien and claim of a person who subsequently files a notice of lien under this chapter. Any modification of such a contract will not affect or affect the right or interests of any person who had provided or contractually agreed to material prior to the submission of such change, or who had made or contractually agreed to improve the property, but such right or interest will be determined by the original contract. The clerk of the county is entitled to a fee of twenty-five dollars, except in the counties of New York City, where the fee is fifty dollars, for the filing of such a contract or amendment. Except where the district clerk keeps a ward register, such contracts and their amendments shall be indexed in a book provided for that purpose in alphabetical order of the names of the persons to whom such loans are to be granted. No transfer of funds due or accumulated under a construction loan agreement under the provisions of Division twenty-six of this section, as well as any payment to the holder of such an assignment, or shall be construed as an amendment to a construction loan agreement within the meaning of this division and the performance and delivery of an obligation and hypothec.

under the provisions of Division twenty-six of this section or payments under this section shall not be construed or construed as entering into a construction loan agreement within the meaning of this section. As a result, lenders and borrowers do not know at the time of this letter how to amend construction loan agreements and what collateral, if any, is available if the requirements of Section 22 of the New York Lien cannot be met. Officials in New York have not yet provided guidance on a possible exemption from the 10-day period under article 22, and there has been no indication as to whether certain closed offices will be reopened in any way to process such filings. In addition, securities companies may not be able to provide a workaround to protect lenders. i N.Y. Link § 22.ii Id.; Parties to a construction loan agreement and those contemplating a change should consult with their attorney and title company about the implications of filing or amending a loan notice pursuant to the New York Lien Act § 73.iii MLF3 Airitan LLC v. 2338 Second Ave. Mazal LLC, 55 Misc.3d 241, 247, 45 N.Y.S.3d 759, 766 (N.Y. Sup. 2016).iv Id.v See Id.

at 768.vii Id. (delimited by Yankee Bank for Fin. & Sav., FSB v. Task Assoc., Inc., 731 F.Supp. 64 [N.D.N.Y.1990]); See also Howard Sav. Bank v. Lefcon Partnership, 209 A.D.2d 473, 475, 618 N.Y.S.2d 910 (2d Dept.1994). Although Article 22 states that modifications to construction loans must be submitted, it should be noted that the Courts of New York have recognized an exception for modifications to “non-material” construction loans.iii “An amendment to a construction loan agreement is `material` if it: Some examples of “non-material” construction loan modifications include simply extending the term, extending the project completion date, and making a lender`s decision, enforcing or enforcing construction loan agreements that do not affect the amounts available to pay for improvements.v For example, in MLF3 Airitan LLC v. 2338 Second Ave. Mazal LLC, the New York Supreme Court, noted that a lender`s failure to execute certain loan agreements is not considered a material change if “the construction loan agreement expressly states that third parties have no claim against the lender or borrower.” vi There, the court distinguished the facts from another case in which the construction loan agreement expressly established rights to third parties and thus the amendment affected the rights of third party beneficiaries.vii Although they are open to judicial interpretation, some exceptions to the jurisprudence may offer some assurance that lenders would have to accept a change in the construction loan as a result of COVID-19. In any case, parties to a construction loan agreement in New York should consult carefully with their attorney and title companies to discuss the possibility of a change. If the county clerk indexes the privileges in a block index, any construction loan agreement submitted to the secretary to be eligible for the bid must include or have noted on the main portion a designation of the number of each block on the map of the county affected by the construction loan agreement.

The District Clerk shall ensure that this construction loan agreement is entered in the block index under the block number of each designated block. In cases where a construction loan agreement must have been submitted without such a designation or with an erroneous designation, the district clerk must, upon presentation of appropriate evidence, enter this deed in the correct register under the correct block number of each block in which the land in question is located, and at the same time enter that entry and its timing in any place, to which that document may have been indexed in error, at the registration of that registration and on the document itself, if it is in its possession or has been submitted to it for that purpose, and the filing of such document is an implied notification of ownership in the block which is not properly designated at the time of filing only from the moment: to which it must be properly indexed. Except that this section does not apply to mortgages taken into by the Homeowners` Loan Company, a corporation incorporated by an Act of Congress known as the “Homeowners Loan Act of Nineteen Hundred and Thirty-three” and the “Homeowners Loan Act of Nineteen Hundred and Thirty-Three, as amended”, and that such hypothec prevails over all liens issued after the date of incorporation of this Mortgage, that the money and/or debt securities for which the hypothec was taken out as security must have been advanced at the time of performance of that mortgage or a subsequent hypothec, and it is not necessary to execute and deposit a construction loan contract or any other contract in accordance with this section or any part thereof. For ongoing construction projects in New York, current conditions are likely to cause borrowers to request changes to their existing construction loan agreements. However, section 22 of the New York Lien requires that any amendment to a construction loan agreement be filed within 10 days of the execution of the amendment with an updated affidavit under section 22.i If the amendment is not filed within that 10-day period, a construction loan hypothec may lose some or all of its priority over the liens. of mechanic dropped off later…. A district official may introduce a new indexing system that uses electromechanical, electronic or any other method he deems appropriate to maintain the indices. Sign up for our Coronavirus Roundup email. Visit our coronavirus resources page… .

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