Bulletin: NY000148

Dear Associates:

In an effort to finance the development of condominium units and increase ownership opportunities in distressed neighborhoods throughout the City of New York, a new subdivision (E) was added to Section 339 (ff) of the Real Property Law, authorizing the City of New York and its Housing Development Corporation to invest in bonds and notes securing subordinate mortgages on dwelling units and their appurtenant common interests. This development should be of great interest to the business segment of our Industry. In another change, one more likely to interest the title underwriters and clearance officers, Paragraph 1 of Section 339-z of the Real Property Law was amended to provide that the unpaid amount of a subordinate mortgage of record held by the City of New York Housing Development Corporation, and, in a city having a population of a million people or more (which essentially means the City of New York), the Department of Housing, Preservation and Development, has priority over the lien for common charges in favor of the Condominium Board of Managers. The amendments (Chapter 349 of the Laws of 1997) were signed into law by Governor Pataki on August 5, 1997, and are effective as of that date.

Prior to the amendments, a condominium common charge lien had priority over all other liens affecting a condo unit except for taxes, first mortgages of record and all sums unpaid on a subordinate mortgage of record held by the New York Job Development Authority or the New York State Urban Development Corporation. This recent amendment adds one more "carve-out" or exception to the statutory priority afforded to a condominium common charge lien.

Chapter 346 of the Laws of 1997, signed into law and which became effective on August 5, 1997, amends paragraph 7 of Section 339-n of the Real Property Law and designates the Secretary of State (of New York) as agent of a Condominium's Board of Managers upon whom service of process against the Board may be served. Service upon the Board of Managers is deemed complete when the Secretary of State has been so served. This change was designed to eliminate the difficulty in serving the Board of Managers where the board member who had been designated as agent for service in the Declaration of Condominium has moved, died or is otherwise unavailable for service. The Legislature concluded that for the purpose of service of process, a condominium should be treated the same as a corporation, namely, to allow service to be made upon it by serving the Secretary of State. This change should be helpful to title underwriters and clearance officers in their review of legal actions and proceedings involving condominiums.

The amendment also requires the Board of Managers to file with the Secretary of State the name and address of the party to whom the Secretary should mail copy of the process. This change does not affect the right to serve process on the Board of Managers in any other manner presently permitted under the law.

Should you have any questions regarding this bulletin, please contact Company Counsel.