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INSTRUCTIONS FOR COMPLETING MORTGAGE/DEED OF TRUST FORM
1. Legal Description
The "metes and bounds" legal description of the Real Estate
should be attached to the Mortgage/Deed of Trust Form as
Schedule A
. This description should match the legal description
which is attached to the Lender's title insurance policy
(typically as Schedule A). This description should ideally also
match: 1) the perimeter of the Real Estate as described in the
survey which is incorporated in the Lender's title insurance
policy, and 2) the legal description of the Real Estate in the deed into the Borrower.
2. Note
A copy of the note secured by the mortgage should be
attached as Schedule B
to the Mortgage/Deed of Trust Form. See
§ 6.02[2] of the main text of this book supra.
3. Title Exceptions
A copy of the title exceptions which the Lender has agreed
to take subject to should be annexed as Schedule C
to the
Mortgage/Deed of Trust Form. The Lender should not agree to
take subject to any title exceptions other than those exceptions set forth in its title insurance policy.
If the Lender's mortgage is a subordinate mortgage, then
the term "Prior Mortgage" should be defined in Schedule C
of the
Mortgage/Deed of Trust Form.
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LENDER'S OPTIONAL PROVISIONS FOR MORTGAGE/DEED OF TRUST FORM
1 Deed of Trust
If the instrument securing the Lender is required to be a
deed of trust rather than a mortgage, then make the following changes.
1.1 The following references should be changed:
- references in the Mortgage/Deed Of Trust Form and the Note to "Mortgage" should be changed to "Deed of Trust,"
- references in the Mortgage/Deed Of Trust Form and the Note to "Mortgaged Property" should be changed to "Trust Property,"
- references in the Mortgage/Deed Of Trust Form to "Mortgagor" should be changed to "Grantor," and
- references in the Mortgage/Deed Of Trust Form to "Mortgagee" should be changed to "Beneficiary."
1.2 The cover page (which names the parties, the address
of the Trust Property, and the "Record and Return to" address)
should be changed to reflect that the deed of trust is made by
the Grantor to a "Trustee" (i.e., a party other than the Lender
which can be expected to be loyal to the Lender, such as its
title insurance company or its law firm). While some deeds of
trust do not disclose the name and address of the Beneficiary,
other deeds of trust do disclose the Beneficiary's name and address. 1
In the latter case, the Deed Of Trust will recite (not
only on the cover page, but also in the "granting" and "To Have
And To Hold" clauses specified below) that it is made to the Trustee "for the benefit of the Beneficiary."
1.3 At the top of the first full page of the Mortgage/Deed
Of Trust Form (where the name and address of the Grantor and the
Beneficiary are specified), and in the "notice" provision (see Section
of the Mortgage/Deed Of Trust Form), the name and
address of the trustee should also be specified.
1.4 In the "granting" clause (which specifies that the
Grantor "grants, sells, assigns, [etc.]" the Trust Property) the
Deed of Trust should specify that the Trust Property is granted,
1 See §§ 6.02[6], 19.03[7][h][i-ii], and 21.04[7] of the main text of this book for
more details regarding the distinction between "disclosed beneficiary" and "undisclosed
beneficiary" deeds of trust.
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sold, assigned etc. to "the Trustee, and its successors and
assigns, in trust, with power of sale, with right of entry and
possession." Similarly, the "have and hold" clause (which is
the last paragraph in the current Section
of the Mortgage/Deed
Of Trust Form) should recite "TO HAVE AND TO HOLD the Trust
Property and all parts thereof unto the Trustee, and its
successors and assigns forever." One variation is for the deed
of trust to grant a security interest to the Beneficiary
directly , as a secured party, with respect to all personal property.
1.5 Each provision of the Deed of Trust dealing with title
(such as the warranty of title in Section
of the Mortgage/Deed
Of Trust Form) should acknowledge that title is held by the Trustee.
1.6 Insert (in alphabetical order) the following
definition to Section
("Definitions") of the Mortgage/Deed Of
Trust Form:
"Trustee
" means not only the Trustee specified at the
beginning of this Deed of Trust but also each successor and
additional trustee acting as the Trustee pursuant to this Deed of Trust.
1.7 Add the following as new subsections (which would be
numbered consecutively, beginning "4.8," in the current
Mortgage/Deed Of Trust Form) to the end of Section
("Events of
Default; Beneficiary's Remedies") of the Mortgage/Deed of Trust Form:
Power Of Sale
. Beneficiary may give such notice of
default and election to cause the Trust Property to be sold
as may be required by law or as may be necessary to cause
Trustee to exercise the power of sale granted herein.
Beneficiary may elect to invoke the power of sale,
whereupon Trustee shall give such notice of Trustee's sale
as then required by law and, after the expiration of such
time as may be required by law and, after first making or
causing to be made or given such demands or notices of the
time, terms and place of sale, and a description of the
property to be sold, by advertisement published as provided
by the laws of the State of {{{56/STATE IN WHICH REAL
ESTATE IS LOCATED}}} then in effect, may sell the Trust
Property at the customary time and place for such
proceedings in the county in which the Trust Property is
located as specified in the notice of sale, as a whole or
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in separate parcels as directed by Beneficiary, or by
Trustor to the extent required by law, at public auction to
the highest bidder, and the price bid shall be paid in
accordance with applicable law. Trustee, from time to
time, may postpone or continue the sale of all or any
portion of the Trust Property by public declaration at the
time and place last appointed for the sale. No other
notice of the postponed sale shall be required, unless
otherwise specified by applicable law. Upon any sale,
Trustee shall deliver its deed conveying the property sold,
without any covenant or warranty, express or implied, to
the purchaser or purchasers at the sale. The recitals in
such deed of any matters of facts shall be conclusive as to
the accuracy thereof. Any person, including Trustor and
Beneficiary, but excluding Trustee, may purchase at the
sale. Beneficiary may foreclose or cause to be foreclosed
the lien of this instrument, in whole or in part, through
judicial foreclosure or in any other manner as may at any
time be authorized under the statutes of the state in which
the Trust Property is located. Upon sale, the Trustee
shall execute and deliver a deed of conveyance of the
property sold to the purchaser or purchasers thereof, and
any statement or recital of fact in such deed, in relation
to the non-payment of the indebtedness secured hereby,
existence of such indebtedness, notice of advertisement,
sale and receipt of the proceeds of sale, shall be
presumptive evidence of the truth of such statements or
recital. The power of sale hereunder shall not be
extinguished by any one or more such sales (or attempts to
sell) as to all or any portion of the Trust Property which
remains unsold, but shall continue until all of the Trust
Property has been sold and all of the indebtedness secured
hereby shall have been paid in full. Any sale of the Trust
Property under this Deed of Trust shall, without further
notice, create the relation of landlord and tenant at
sufferance between the purchaser and Trustor or any person
holding possession of the Trust Property through Trustor,
and upon failure of Trustor or such person to surrender
possession thereof immediately, Trustor or such person may
be removed by a writ of possession of the purchaser in any
Court having venue. The Trustee may sell and convey the
Trust Property under the power aforesaid, although the
Trustee has been, may now be or may hereafter be an
attorney or agent of the Beneficiary in respect of the
indebtedness secured by this Deed of Trust or in respect to any matter of business whatsoever.
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Beneficiary Authorized to Execute Deeds
. Trustor
irrevocably appoints Beneficiary the true and lawful
attorney of Trustor, in its name and stead and on its
behalf, for the purpose of effectuating any sale,
assignment, transfer or delivery for the enforcement
hereof, whether pursuant to foreclosure or otherwise, to
execute and deliver all such deeds, bills of sale,
assignments, releases and other instruments as may be designated in any such request.
Resignation of Trustee; Appointment Of Replacement
Trustees . Trustee may resign at any time by written
instrument to that effect delivered to Beneficiary. As
provided below, Beneficiary may (for any reason satisfactory to Beneficiary and whether or not Trustee has
resigned by an instrument placed of record) appoint a
successor Trustee, who from and after the filing of such
appointment shall become vested with the title to the Trust
Property in trust and shall have all of the powers,
authority and duties vested in Trustee by this Deed of
Trust. In the event any foreclosure advertisement is
running or has run at the time of such appointment of a
successor Trustee, the successor Trustee may consummate the
advertised sale without the necessity of republishing such
advertisement. The making of oath or giving of bond by Trustee or any successor Trustee is expressly waived.
Power To Remove Trustee And Appoint Successor Trustee
.
Beneficiary shall have, and is hereby granted by Trustor
(with warranty of further assurances), the irrevocable
power to appoint a substitute trustee or trustees hereunder
and to remove trustees from time to time acting hereunder
without notice and without specifying any reason therefore,
by filing for record a deed of appointment in the office
where this instrument is recorded. Said power of removal
and appointment may be exercised as often and whenever
Beneficiary deems it advisable, and the exercise of said
power, no matter how often exercised, shall not result in
an exhaustion of said power. Upon the recordation of such
deed or deeds of appointment, the trustee or trustees so
appointed shall thereupon, without any further act or deed
or conveyance, become fully vested with identically the
same title and estate in and to the Trust Property and with
all of the identical rights, powers, trusts and duties of
their, his or its predecessor or predecessors in the Trust
Property with like effect as if originally named as trustee
or as one of the Trustees hereunder. Wherever in this Deed
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of Trust reference is made to Trustees, it shall be
construed to mean the trustee or trustees for the time
being, whether original or successors or successor in
trust. All title, estate, rights, powers, trusts and
duties hereunder given, appertaining to or devolving upon
the Trustees shall be in each of the Trustees so that any
action hereunder or purporting to be hereunder of either
one of the original or any successor trustees shall for all
purposes be considered to be, and shall be as effective as, the action of both trustees.
Acceptance by Trustee
. The acceptance by Trustee of
this trust shall be evidenced when this Deed of Trust, duly
executed and acknowledged, is made a public record as
provided by law. The trust created hereby is irrevocable by Trustor.
Ineffectiveness Of Deed Of Trust
. In addition, should
this instrument be or become ineffective as a deed of
trust, then these presents shall be construed and enforced
as a realty deed of trust with Trustor being the Mortgagor and Beneficiary being the Mortgagee.
Reconveyance by Trustee
. Trustee shall reconvey all
or any part of the Trust Property covered by this Deed of
Trust to the person entitled thereto on written request of
Beneficiary, or upon satisfaction of the obligation secured
hereby and written request for reconveyance made by Beneficiary or the person entitled thereto.
Permitted Actions By Trustee
. At any time, or from
time to time, without liability and without notice, upon
written request of the Beneficiary, and without affecting
the personal liability of any person for payment of the
Indebtedness or the effect of this Deed of Trust upon the
Trust Property, the Trustee may take such actions as
Beneficiary may request and which are permitted by this Deed of Trust.
1.8 The Trustee may be unwilling to serve unless the
following paragraph is added to the preceding paragraphs. The
Lender should consider including the following paragraph in its
Deed of Trust, and then requiring the Trustee to acknowledge its
obligations to the Beneficiary by a separate agreement (which
can be negotiated without the Trustor's consent). This separate
agreement can acknowledge the Trustee's fiduciary obligations to
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the Beneficiary, and the Trustee's agreement not to take any action unless specifically requested by the Beneficiary.
Indemnity And Exculpation Of Trustee
. The Trustee
shall not be liable for any act or omission or error of
judgment, unless caused directly by the Trustee's gross
negligence or willful tortious misconduct. The Trustee may
rely on any document believed by it in good faith to be
genuine. All money received by the Trustee shall, until
used or applied as provided in this Deed of Trust, be held
in trust, but need not be segregated (except to the extent
required by law), and the Trustee shall not be liable for
any interest on any such money unless and to the extent
such interest is actually received by the Trustee. The
Trustor shall protect, indemnify and hold harmless the
Trustee against all liability and expenses which the
Trustee may incur in the performance of the Trustee's duties under this Deed of Trust.
1.9 In Section
("No Action or Omission by Mortgagee Shall
Be A Waiver") of the Mortgage/Deed of Trust Form, "Mortgagee" should be replaced by "Beneficiary or Trustee".
1.10 The Deed of Trust typically provides for an assignment
by the Trustor to the Beneficiary of all right, title, and
interest of the Trustor in all leases and rents, with a license
back to the Trustor to collect such rents until an Event of
Default. Another alternative is the following language. If the
following language is used, then the "license back" language in
the Mortgage/Deed Of Trust Form and in the Assignment of Rents and Leases will have to be modified accordingly.
Lease Of Trust Property To Trustor
. The Trustee
hereby lets the Trust Property to the Trustor until a sale
be had under the foregoing provisions, upon the following
terms and conditions, such letting being to-wit: Trustor
and every and all persons claiming or possessing the Trust
Property, or any part thereof, by, through or under Trustor
shall pay rent therefor during said term at the rate of one
cent per month, payable monthly upon demand, and shall
surrender immediate peaceable possession of said premises,
to the purchaser thereof, under such sale, without notice
or demand therefor. Should possession not be surrendered
as provided for herein the purchaser shall be entitled to institute proceedings for possession as aforesaid.
4. Construction Mortgage
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2.1 In the second paragraph of Section
of the
Mortgage/Deed Of Trust Form (such paragraph begins "NOW
THEREFORE . . ."), add the following phrase after "United States of America,":
or so much of the Original Principal Amount as may be
advanced in accordance with the provisions of the Construction Loan Agreement (defined below),
2.2 Replace the following phrase - "the loan in the
principal sum of ${{{19/AMOUNT OF LOAN}}} made by the Mortgagee to the Mortgagor which is
evidenced by the Note (the "Loan
")," - which phrase appears in
Section 2.4
("Capital Adequacy Rules") of the Mortgage/Deed Of
Trust Form, with the following:
the loan in the aggregate principal sum of up to
${{{19/AMOUNT OF LOAN}}}
to be advanced by the Mortgagee to the Mortgagor
pursuant to the Construction Loan Agreement, which
loan is evidenced by the Note and secured by this Mortgage (the "Loan
"),
2.3 Add the following at the end of clause (1) of Section
of the Mortgage/Deed Of Trust Form (following the phrase "co- insurance requirements,"): and the Mortgagor shall also provide "all risk"
Builders Risk coverage with respect to the Mortgaged
Property (including, without limitation coverage against collapse and such other hazards as the
Mortgagee may, from time to time, require); and such
insurance shall, at the Mortgagee's request, be
written on a "completed value" - "non-reporting" form basis;
2.4 Add the following as a new subsection (which would be
numbered "2.24" in the current Mortgage/Deed Of Trust Form) at the end of Section 2
of the Mortgage/Deed Of Trust Form:
Construction Loan Agreement
. This Mortgage is a
construction loan mortgage, the proceeds of which are
loaned for the purpose of financing the construction
of certain improvements on the Real Estate. This
Mortgage is subject to all of the terms, covenants and
conditions of a certain construction loan agreement,
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dated the date of this Mortgage, entered into between
the Mortgagee and the Mortgagor (the "Construction
Loan Agreement "), which Construction Loan Agreement,
and all of its terms, covenants and conditions, are by
this reference incorporated in this Mortgage and made
a part of this Mortgage with the same force and effect
as if set forth at length in this Mortgage. The
proceeds of the construction loan secured by this
Mortgage (the "Construction Loan
") are to be advanced
by the Mortgagee to the Mortgagor in accordance with
the provisions of the Construction Loan Agreement.
The Mortgagor shall observe and perform all of the
terms, covenants, conditions, provisions and agreements of the Construction Loan Agreement on the
Mortgagor's part to be observed or performed. All
advances made, and all indebtedness arising and
accruing, under the Construction Loan Agreement from time to time shall be secured by this Mortgage.
2.5 Add the following at the end of Section
("Notice of
Default and Opportunity to Cure") in the Borrower's Rider to
Mortgage/Deed Of Trust Form (see below):
; provided, however, that nothing contained in this
Section shall be construed as having the effect of
extending the "Completion Date" (as defined in the Construction Loan Agreement);
2.6 Add the following at the end of Section
of the
Borrower's Rider to Mortgage/Deed Of Trust Form
(see below):
or (iv) if such fire or other casualty occurs prior to
the completion of construction of the improvements
being financed by the loan secured by this Mortgage
pursuant to the Construction Loan Agreement, the
Completion Date, as defined in the Construction Loan
Agreement, as the same may be extended pursuant to the provisions of the Construction Loan Agreement, (f) the Mortgagor shall deposit funds with the
Mortgagee in an amount equal to any Construction Costs Shortfall, 2
as defined in the Construction Loan
Agreement, caused as a result of such Damage in the
2 If this term is not defined in the Construction Loan Agreement, then it should be
redefined.
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manner and within the time period specified in the Construction Loan Agreement.
2.7 Add the following phrase at the end of subsection
in
the Borrower's Rider To Mortgage/Deed Of Trust Form
(see below):
or (4) if such Taking occurs prior to the completion
of construction of the improvements being financed by
the loan secured by this Mortgage pursuant to the
Construction Loan Agreement, the Completion Date, as
defined in the Construction Loan Agreement, as the
same may be extended pursuant to the provisions of the Construction Loan Agreement,.
2.8 Add the following as a new subparagraph after Section
in the Borrower's Rider To Mortgage/Deed Of Trust Form (see
below), and then consecutively number the subsequent subparagraphs:
[g] The Mortgagor shall pay any Construction Costs
Shortfall, as defined in the Construction Loan Agreement,
caused as a result of such Taking, in the manner and within
the same time period specified in the Construction Loan Agreement.
5. Leasehold Mortgage
If the Lender's Mortgage covers only a leasehold interest,
then the following provisions should be added to the Mortgage/Deed Of Trust Form:
3.1 Replace the "WHEREAS" clause in Section
of the
Mortgage/Deed Of Trust Form with the following clause:
WHEREAS the Mortgagor is the owner of a leasehold
estate in the premises described in Schedule A
attached hereto (the "Real Estate") under and pursuant
to the provisions of the lease described in Schedule B
attached hereto (the "Mortgaged Lease ");
3.2 Replace subsection (a) in Section
of the
Mortgage/Deed Of Trust Form (this subsection describes the "Real Estate") with the following:
(a)(1) the Mortgaged Lease and the leasehold
estate created under the Mortgaged Lease and all other
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interests created or acquired pursuant to the
Mortgaged Lease or such leasehold estate;
(a)(2) all modifications, extensions and
renewals of the Mortgaged Lease and all credits,
deposits, options, purchase options, privileges and
rights of the Mortgagor under the Mortgaged Lease,
including, but not limited to, the right, if any, to
renew or extend the Mortgaged Lease for a succeeding
term or terms or to acquire fee title to or other
interest in all or any portion of the Real Estate or
the Improvements or any portion of the Real Estate or other interest;
(a)(3) all of the Mortgagor's rights and
remedies at any time arising under or pursuant to
Section 365(h) of the Bankruptcy Code (defined below),
including, without limitation, all of the Mortgagor's
right under the Bankruptcy Code to remain in possession of the Real Estate and the Improvements;
3.3 Add the following phrase at the beginning of subsection
(g) (which includes the "Leases" and the "Rents" as part of the
Mortgaged Property) in Section
of the Mortgage/Deed Of Trust
Form:
except for the Mortgaged Lease,
3.4 Add the following sentence after the first sentence in
Section
of the Mortgage/Deed Of Trust Form:
The Mortgagor is also the holder of the tenant's interest under the Mortgaged Lease.
3.5 Add the following at the end of Section
of the
Mortgage/Deed Of Trust Form:
In addition, the Mortgagor represents and warrants
that: (i) the Mortgaged Lease is in full force and
effect and has not been modified in any manner
whatsoever, (ii) there is no default under the
Mortgaged Lease, and no event has occurred, which, but
for the passage of time, or notice, or both, would
constitute a default under the Mortgaged Lease,
(iii) all rent, additional rent and other sums due and
payable under the Mortgaged Lease have been paid in
full, and (iv) no action has been commenced, and no
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notice has been given or received, for the purpose of terminating the Mortgaged Lease.
3.6 Add the following phrase after "the terms of" in
clause (iii) of Section
in the Borrower's Rider To
Mortgage/Deed Of Trust Form :
"the Mortgaged Lease or"
3.7 Add the following phrase before "any mortgage or deed
of trust superior in lien" in Section
("Mortgagor's Right to
Contest Assessments") of the Borrower's Rider To Mortgage/Deed
Of Trust Form :
"the Mortgaged Lease and"
3.8 Add the following phrase after "the earliest date
required for such completion" in clause (3) of Section
of the
Borrower's Rider To Mortgage/Deed Of Trust Form
:
under the terms of the Mortgaged Lease or
3.9 Add the following as new subsections at the end of
Section 1
of the Mortgage/Deed Of Trust Form (and add "1.1 The
Mortgaged Property " as a heading after the "WHEREAS" clause in
Section
of the Mortgage/Deed Of Trust Form). The first of the
following new subsections would be numbered "1.2" in the current Mortgage/Deed Of Trust Form:
1.2 Leasehold Mortgage Provisions
[a] Mortgagor's Performance Of Obligations;
Notices . The Mortgagor shall: (i) pay all rents,
additional rents and other sums required to be paid by
the Mortgagor as lessee under and pursuant to the
provisions of the Mortgaged Lease, (ii) diligently
perform and observe (or cause to be performed or
observed) all of the terms, covenants and conditions
of the Mortgaged Lease to the extent the Mortgagor, as
lessee under the Mortgaged Lease, is obligated to
perform or observe such terms, covenants and
conditions, unless such performance or observance
shall be waived or not required in writing by the
lessor under the Mortgaged Lease, to the end that all
things shall be done which are necessary to keep
unimpaired the rights of the Mortgagor, as lessee,
under the Mortgaged Lease, (iii) promptly give Notice
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to the Mortgagee in writing of any default by the
Mortgagor or lessor under the Mortgaged Lease,
(iv) promptly A) give Notice to the Mortgagee of 1)
the giving of each notice by the lessor under the
Mortgaged Lease to the Mortgagor (other than notices
regarding monthly payments customarily sent on a
regular basis prior to any default by the Mortgagor)
and 2) any notice noting or claiming any default by
the Mortgagor under the Mortgaged Lease, and B)
deliver to the Mortgagee a true copy of each such
notice, (v) promptly A) give Notice to the Mortgagee
in writing of 1) the commencement of any litigation by
any party to the Mortgaged Lease, and 2) any request
made by either party to the Mortgaged Lease for
arbitration proceedings pursuant to the Mortgaged
Lease, and 3) the institution of any arbitration
proceedings, as well as of all other proceedings under
the Mortgaged Lease, and B) promptly deliver to the
Mortgagee a copy of each decision and each order of
the judge in each such litigation, and each
determination of the arbitrators in each such arbitration proceeding (the Mortgagee shall have the
right to participate in such litigation and such
arbitration proceedings, in association with the
Mortgagor, or on the Mortgagee's own behalf as an
interested party), (vi) furnish to the Mortgagee,
within ten (10) days after demand, proof of payment of
all items which are required to be paid by the
Mortgagor pursuant to the Mortgaged Lease, and
(vii) not consent to the subordination of the Mortgaged Lease to either A) any mortgage of the fee
interest in the Mortgaged Property (or any part
thereof or interest therein), or B) any interest of
the lessor under the Mortgaged Lease, except such as agreed to by the Mortgagee.
[b] Mortgagee's Right To Cure Mortgagor's
Defaults . If the Mortgagor shall default under the
Mortgaged Lease, or if the Mortgagee shall receive or
become aware of any notice or claim of any default by
the Mortgagor or any other party having an interest as
the tenant under the Mortgaged Lease, then, without
limiting the generality of the other provisions of
this Mortgage, and without waiving or releasing the
Mortgagor from any of its obligations under this
Mortgage (and even though such default or the nature
thereof is denied by the Mortgagor or any other
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person), the Mortgagee shall have the right, but shall
be under no obligation: 1) to pay any sums, and to
perform any act, or take any action, to perform any
one or more of the obligations of the Mortgagor under
the Mortgaged Lease, and 2) to take any other action
to keep the Mortgaged Lease in full force and effect
or to preserve any other rights of the Mortgagee with
respect to the Mortgaged Lease. All sums so paid by
the Mortgagee and all costs and expenses incurred by
the Mortgagee in connection with the performance of
any such act shall be paid by the Mortgagor to the
Mortgagee, upon demand by the Mortgagee, with interest
at the Default Rate from the date of such payment or
incurrence of each such sum, cost or expense. All
such sums, costs, and expenses shall be deemed to be
secured by this Mortgage and shall be a lien on the
Mortgaged Property prior to any right, title to,
interest in or claim upon the Mortgaged Property (or
any part thereof or interest therein) attaching
subsequent to the lien of this Mortgage. In any such
event (subject to the rights, if any, of lessees and
other occupants under the Leases), the Mortgagee and
any person designated by the Mortgagee shall have, and
are hereby granted, the right to enter upon the
Mortgaged Property at any time and from time to time
for the purpose of taking any such action. If the
lessor under the Mortgaged Lease shall deliver to the
Mortgagee a copy of any notice of default sent by said
lessor to the Mortgagor, as lessee under the Mortgaged
Lease, then the Mortgagee may rely on such notice and
assume that all defaults specified in such notice have
in fact taken place. The Mortgagee shall have no
liability to the Mortgagor or any other party for any
action taken or omitted to be taken by the Mortgagee, in good faith, in reliance on such notice.
[c] No Termination Or Modification
. The
Mortgagor, shall not, without the prior written
consent of the Mortgagee, surrender the leasehold
estate created by the Mortgaged Lease or terminate or
cancel the Mortgaged Lease or modify, change,
supplement, alter or amend the Mortgaged Lease, in any
respect, either orally or in writing. The Mortgagor
hereby assigns to the Mortgagee (as further security
for the payment of the Indebtedness and for the
performance and observance of the Mortgagor's obligations under this Mortgage), all of the rights,
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privileges and prerogatives of the Mortgagor, as
lessee under the Mortgaged Lease, A) to surrender the
leasehold estate created by the Mortgaged Lease or B)
to terminate, cancel, modify, change, supplement,
alter or amend the Mortgaged Lease, and any such
surrender of the leasehold estate created by the
Mortgaged Lease or termination, cancellation,
modification, change, supplement, alteration or amendment of the Mortgaged Lease without the prior
written consent of the Mortgagee shall be void and of no force and effect.
[d] Assignment of Mortgagor's Rights In Lessor's
Bankruptcy . Supplementing the provisions of
subsection [b] above, the Mortgagor shall not, without
the Mortgagee's prior written consent, elect to treat
the Mortgaged Lease as terminated under
Section 365(h)(1) of the Bankruptcy Code (or any
comparable or successor or replacement provision).
Any such election made without the Mortgagee's prior
written consent shall be void. The Mortgagor hereby
unconditionally assigns, transfers and sets over to
the Mortgagee all of the Mortgagor's claims and rights
to the payment of damages arising under the Bankruptcy
Code from any rejection by the lessor under the
Mortgaged Lease. The Mortgagee shall have the right
to proceed in its own name or in the name of the
Mortgagor in respect of any claim, suit, action or
proceeding relating to the rejection of the Mortgaged
Lease, including, without limitation, the right to
file and prosecute, to the exclusion of the Mortgagor,
any proofs of claim, complaints, motions, applications, notices and other documents, in any case
in respect of such lessor under the Bankruptcy Code.
This assignment constitutes a present, irrevocable and
unconditional assignment of each of the claims, rights
and remedies specified in this paragraph. This
assignment shall continue in effect until: 1) all of
the indebtedness and obligations secured by the
Mortgage shall have been satisfied and discharged in
full, and 2) the Mortgagee has no further obligation
under any of the Loan Documents or with respect to the
Mortgagor or the Indebtedness. Any amounts received
by the Mortgagee as damages arising out of the
rejection of the Mortgaged Lease as specified in this
paragraph shall be applied first to all costs and
expenses of the Mortgagee (including, without limitation, attorneys' fees) incurred in connection
- 16 -
with the exercise of any of its rights or remedies
under this Section and then shall be applied against
the Indebtedness in such order, priority and
proportion as the Mortgagee shall determine. 3
If any
action, motion or notice shall be commenced or filed
in respect of either the Mortgagor, as lessee under
the Mortgaged Lease, or the Mortgaged Property (or any
part thereof or interest therein) in connection with
any case under the Bankruptcy Code, then the Mortgagor
shall give the Mortgagee prompt written Notice of each
such action, motion or notice, and the Mortgagee shall
have the option, to the exclusion of the Mortgagor,
exercisable upon Notice from the Mortgagee to the
Mortgagor, to conduct and control any such litigation
with counsel of the Mortgagee's choice. However, if
the Mortgagor files a petition under the Bankruptcy
Code, or is adjudicated to be a debtor in an
involuntary case under the Bankruptcy Code, then the
Mortgagee may exercise such control over any such
litigation as is permitted by applicable laws. The
Mortgagee may proceed in its own name, or in the name
of the Mortgagor, in connection with any such
litigation, and the Mortgagor agrees to execute any
and all powers, authorizations, consents and other
documents required by the Mortgagee in connection with
any such litigation. The Mortgagor shall, upon
demand, pay to the Mortgagee all costs and expenses
(including attorneys' fees) paid or incurred by the
Mortgagee in connection with the prosecution or
conduct of each such litigation. All such costs or
expenses (except to the extent paid by the Mortgagor
as provided above in this paragraph) shall be secured
by the lien of the Mortgage and shall be added to the
Indebtedness. The Mortgagor shall not commence any
action, suit, proceeding or case, or file any
application or make any motion, in respect of the
Mortgaged Lease in any such case under the Bankruptcy
Code without the prior written consent of the
Mortgagee. The Mortgagor shall give notice by
telephone to the Mortgagee and its counsel of any
filing (by or against the lessor under the Mortgaged
Lease) of a petition under the Bankruptcy Code. Such
notice shall be given immediately after the Mortgagor
becomes aware of any such filing. The Mortgagor shall
3 Cf. Cherkis, Collier Real Estate Transactions and the Bankruptcy Code ¶
2.01[5] at 2-21 (1995).
- 17 -
thereafter (not later than five (5) days after such
telephonic notice) give written Notice of such filing
to the Mortgagee, setting forth the date of such
filing, the court in which the petition was filed and
the relief sought in such petition. The Mortgagor
shall promptly deliver to the Mortgagee a copy of each
notice, summons, pleading, application and other
document received by the Mortgagor in connection with
any such petition or any proceeding relating to such
petition (such copy shall be delivered to the
Mortgagee within five (5) days after such item is received by the Mortgagor).
[e] Power Of Attorney
. The Mortgagor hereby
irrevocably appoints the Mortgagee as the Mortgagor's
true and lawful attorney-in-fact, in the Mortgagor's
name or otherwise: 1) to do any and all acts and 2) to
execute any and all documents, which, in any such
case, in the reasonable opinion of the Mortgagee may
be necessary or desirable to preserve any rights of
the Mortgagor in, to or under the Mortgaged Lease, or
any occupancy lease, license or concession, including,
without limitation, the right (but not the obligation)
A) to cure any defaults of the Mortgagor as lessee
under the Mortgaged Lease, B) to preserve any rights
of the Mortgagor whatsoever in respect of the
Mortgaged Property (or any part thereof or interest
therein) or C) to execute an extension or renewal (or
exercise any option for such extension or renewal) of
the Mortgaged Lease as set forth below in this
paragraph. Such power of attorney shall be
irrevocable and shall be deemed to be coupled with an interest and granted for a valuable consideration.
[f] Estoppels
. The Mortgagor shall, within ten
(10) days of request by the Mortgagee, obtain from the
lessor under the Mortgaged Lease such certificates of
estoppel with respect to compliance by the Mortgagor
with the terms of the Mortgaged Lease as may be requested by the Mortgagee.
[g] Options
. The Mortgagor shall exercise each
individual option, if any, to extend or renew the term
of the Mortgaged Lease upon the earlier of: 1) within
ten (10) days after a demand by the Mortgagee, or 2)
thirty (30) days before the last day upon which any
such option may be exercised; provided, however, the
- 18 -
Mortgagor shall not be in default pursuant to this
paragraph for failing to extend or renew the term of
the Mortgaged Lease, as provided in this sentence, if
and to the extent that the Mortgagor is not entitled
to extend or renew the Mortgaged Lease as provided
above. The Mortgagor hereby expressly authorizes and
appoints the Mortgagee the Mortgagor's attorney-in-
fact to exercise, either jointly or individually, any
such option in the name of and upon behalf of the Mortgagor.
[h] Particular Provisions Not Limiting
Generality . The generality of the provisions of this
Section relating to the Mortgaged Lease shall not be
limited by other provisions of this Mortgage or any
other agreement between the Mortgagee and the Mortgagor, setting forth particular obligations of the
Mortgagor which are also required of the Mortgagor as tenant under the Mortgaged Lease.
1.3 New Lease
. If the Mortgaged Lease shall be
terminated prior to the natural expiration of its term due
to an event of default under the Mortgaged Lease, and if,
pursuant to any provision of the Mortgaged Lease, the
Mortgagee or its designee shall acquire, from the lessor
under the Mortgaged Lease, a new lease of the Real Estate
and the Improvements, then the Mortgagor shall have no
right, title or interest in or to such new lease or the
leasehold estate created thereby, or renewal privileges in such new lease.
1.4 No Merger
. So long as either any portion of the
Indebtedness shall remain unpaid, or the Mortgagee shall
have any obligation under the Loan Documents, and unless
the Mortgagee shall otherwise consent, 1) the fee title to
the Mortgaged Property, and 2) the leasehold estate created
pursuant to the Mortgaged Lease, shall not merge, but shall
always be kept separate and distinct, notwithstanding the
union of such estates in the Mortgagor or in any other
person, by purchase, operation of law or otherwise. If the
Mortgagee shall acquire the fee title to the Real Estate
and the Improvements and the leasehold estate created
pursuant to the provisions of the Mortgaged Lease, by
foreclosure of this Mortgage or otherwise, such estates
shall not merge as a result of such acquisition and shall
remain separate and distinct for all purposes after such
- 19 -
acquisition unless and until the Mortgagee shall elect to merge such estates.
3.10 Add the following paragraphs to the end of Section
("Definition of `Event of Default'") of the Mortgage/Deed Of Trust Form:
[r] if 1) the Mortgagor shall default in the
observance or performance of any term, covenant or
condition of the Mortgaged Lease on the part of the
Mortgagor, as ground lessee under the Mortgaged Lease, to
be observed or performed, unless any such observance or
performance shall have been waived or not required in
writing by the ground lessor under the Mortgaged Lease, or
2) any one or more of the events referred to in the
Mortgaged Lease shall occur which would or may cause the
Mortgaged Lease to terminate without notice or action by
the ground lessor under the Mortgaged Lease or which would
entitle the ground lessor under the Mortgaged Lease to
terminate the Mortgaged Lease, and the term of the
Mortgaged Lease, by giving notice to the Mortgagor, as
ground lessee under the Mortgaged Lease, or 3) the
leasehold estate created by the Mortgaged Lease shall be
surrendered, in whole or in part, or 4) the Mortgaged Lease
shall be terminated or cancelled for any reason or under
any circumstance whatsoever, or 5) any of the terms,
covenants or conditions of the Mortgaged Lease shall in any
manner be modified, changed, supplemented, altered or amended without the consent of the Mortgagee;
[s] if the Mortgagor shall, without the Mortgagee's
prior written approval, elect to treat the Mortgaged Lease
as terminated under Section 365(h)(1) of the Bankruptcy
Code (or any comparable or successor or replacement
provision) (any such election made by the Mortgagor, as
holder of the fee or leasehold estates in the Mortgaged
Property, without the Mortgagee's prior written consent, in
addition to constituting an Event of Default, shall be void);
3.11 Add the following at the end of Section
("Nonrecourse") of the Borrower's Rider To Mortgage/Deed Of
Trust Form (see below):
Notwithstanding the above, the foregoing provisions of this
paragraph shall not be applicable if the Mortgagor shall,
without the Mortgagee's prior written approval, elect to
- 20 -
treat the Mortgaged Lease as terminated under Section
365(h)(1) (or any comparable or successor or replacement provision) of the Bankruptcy Code.
2 Mortgage Against Condominium Units
4.1 Add the following sentence at the end of Section of
the Mortgage/Deed Of Trust Form:
In addition, the Mortgagee must be named as first mortgagee
and loss payee, as to the Mortgaged Property, under the
master condominium insurance policy maintained by either:
1) the owner's association or other entity or association
(the "Condominium Association
"), which acts for
{{{84.1/NAME OF CONDOMINIUM}}} (the "Condominium
"), or 2),
in the absence of a Condominium Association, the board of
managers or other association which acts on behalf of the Condominium.
4.2 Add the following phrase after "against the Mortgaged
Property" in Section
("Real Estate Taxes") of the Mortgage/Deed
Of Trust Form:
, and all common charges, dues and assessments imposed
(pursuant to the Condominium Instruments) against each
condominium unit (and its appurtenant common interest) which is part of the Mortgaged Property
4.3 Add the following new subsection (which would be
numbered "1.2" in the current Mortgage/Deed Of Trust Form) at
the end of Section 1
of the Mortgage/Deed Of Trust Form (and add
"1.1 The Mortgaged Property
" as a heading after the "WHEREAS"
clause in Section
of the Mortgage/Deed Of Trust Form):
Condominium Units
. The Mortgaged Property includes:
1) each condominium unit listed on Schedule A
in the
Condominium, together with 2) the common interest which is
appurtenant to each such unit in the common elements of the
Condominium, 3) the Mortgagor's interest in the Condominium
Association and 4) the uses, proceeds and benefits of such interests of the Mortgagor.
[a] The Mortgagor shall perform each and every
obligation on the part of the Mortgagor to be
performed in connection with (i) each declaration
establishing a plan for condominium ownership for the
premises of which the Mortgaged Property (or any part
- 21 -
thereof or interest therein) forms a part, (ii) the
bylaws of the Condominium Association and (iii) the
rules and regulations promulgated by the board of
managers or other executive body of the Condominium
Association from time to time, and all other
instruments of any nature (to the extent relating to
the Condominium or the Condominium Association)
affecting the Mortgaged Property (or any part thereof
or interest therein) from time to time, as the same
may be amended from time to time (all such documents
specified in (i)-(iii) above in this paragraph being collectively called the "Condominium Instruments
").
[b] The Mortgagor will not, without obtaining
the prior written consent of Mortgagee, initiate, join
in or consent to any amendment of any kind to: (i) the
Condominium Instruments, or (ii) any restrictive
covenant, declaration of covenants and restrictions,
zoning ordinance, or other public or private restrictions or covenants, limiting or affecting the
uses which may be made of the Mortgaged Property (or
any part thereof or interest therein) (all such
documents specified in (i)-(ii) above in this
paragraph being collectively called the "Covenants and
Restrictions ").
4.4 Add the following subparagraph (which would be
designated "[r]" in the current Mortgage/Deed Of Trust Form) to Section
("Definition of `Event of Default'") of the
Mortgage/Deed Of Trust Form:
if the Mortgagor shall fail to perform each and every
obligation on the part of the Mortgagor to be performed in
connection with each of the Condominium Instruments or,
without the prior written consent of the Mortgagee, shall
join in or consent to either any amendment of any
Condominium Instrument, or to any of the Covenants and
Restrictions or any amendment of any of the Covenants and Restrictions.
6. Mortgagor is Guarantor
5.1 All references in the Mortgage/Deed Of Trust Form to
{{{31/BORROWER}}}, {{{32/ADDRESS OF BORROWER}}}, and so on,
should be changed to {{{61/GUARANTOR}}}, {{{62/ADDRESS OF
GUARANTOR}}}, etc. These changes can be done by an automatic "search and replace" word processing function.
- 22 -
5.2 Replace the phrase "NOW THEREFORE, to secure" in the
second paragraph of Section
of the Mortgage/Deed Of Trust Form
with the following lines:
NOW THEREFORE, to secure the payment of a guarantee,
dated the date of this Mortgage, made by the Mortgagor to
the Mortgagee (the "Guarantee
"), which Guarantee, among
other things, guarantees
5.3 Add the following new subsection (which would be
numbered "2.24" in the current Mortgage/Deed Of Trust Form) at the end of Section 2
of the Mortgage/Deed Of Trust Form:
Guarantee
. This Mortgage secures the obligations of
the Mortgagor under the Guarantee. It is therefore
expressly understood and agreed by the Mortgagor and, as an
inducement to cause the Mortgagee to extend credit to the
Borrower and to accept the aforesaid guaranty or guaranties, that if the Mortgagor shall fail to make any
payment required to be made by the Mortgagor in accordance
with the terms of the said guaranty or guaranties then the
entire indebtedness secured by this Mortgage, or so much of
such indebtedness as shall then be outstanding, shall
become immediately due and payable and collectible under
this Mortgage, and the Mortgagee shall have the right to
avail itself of whatever remedies are available to the
Mortgagee by law, equity or by the terms of this Mortgage
(including, without limitation, the right to foreclose this
Mortgage and the right to the appointment of a receiver of
the Rents). This Mortgage shall remain in full force and
effect as a lien upon the Mortgaged Property until such
time as: 1) all obligations guaranteed by the Mortgagor
have been paid and discharged in full, and 2) the Mortgagee
has no obligation under the Loan Documents, at which time
the Mortgagee shall, at the request and at the expense of
the Mortgagor, execute and deliver to the Mortgagor a release of this Mortgage.
7. Mortgage Recording Tax
6.1 If the Mortgaged Property (or any part thereof or
interest therein) is located in a jurisdiction with a mortgage
recording tax, then the Lender should consider adding a
provision such as the following clause, which is in use in New
York State. This provision should be added, as a new paragraph,
- 23 -
following the paragraph beginning "TO HAVE AND TO HOLD . . . " at the end of Section
of the Mortgage/Deed Of Trust Form.
NOTWITHSTANDING ANYTHING CONTAINED IN THIS MORTGAGE TO
THE CONTRARY, the maximum amount of principal indebtedness
secured by this Mortgage at execution or which under any
contingency may become secured by this Mortgage at any time
hereafter is the Original Principal Amount plus all
interest, fees and charges payable in connection with the
Original Principal Amount (including, but not limited to,
all amounts expended by the Mortgagee pursuant to this Mortgage).
8. Note is Not Annexed to Mortgage/Deed Of Trust Form
If the Lender does not annex a copy of the Note to the
Mortgage/Deed Of Trust Form as Schedule B
(for example, in order
to keep the terms of a deal confidential), then the Lender
should at least disclose, in the Mortgage/Deed Of Trust Form,
the interest rate and the other material terms of the Note, such
as by the following clause, which can be added at the end of Section
of the Mortgage/Deed Of Trust Form:
The Note provides for a variable rate of interest per
annum which is equal to the sum of i)
% per annum plus
ii) the annual rate of interest as is publicly announced at
the Mortgagee's principal office from time to time by the
Mortgagee as its Reference Rate, provided, however, that
the interest rate increases to the Default Rate upon an Event of Default.
3 Material Agreements
If there are any important leases, franchise agreements,
servicing agreements, management agreements, or reciprocal
easement agreements which must continue in effect, following a
fire or other casualty, before the Lender is willing to make
insurance proceeds available for a "Restoration," then add the
following after "the end of Section
of the Borrower's Rider To
Mortgage/Deed Of Trust Form :
or under the terms of
.
4 New York Provisions
The following clauses are added to mortgages recorded in
New York State. See also Section
of these Lender's Optional
Provisions For Mortgage/Deed Of Trust Form .
- 24 -
9.1 Add the following at the end of Section
of the
Mortgage/Deed Of Trust Form:
The provisions of Section 254(4) of the Real Property
Law of New York (covering the insurance of buildings
against loss by fire) shall not apply to this Mortgage.
9.2 Add the following at the end of Section
("Leases and
Tenancies") of the Mortgage/Deed Of Trust Form:
The Mortgagee shall have all of the rights against
each tenant or other occupant of the Mortgaged
Property (or any part thereof or interest therein)
pursuant to Section 291-f of the Real Property Law of the State of New York.
9.3 Add the following at the end of Section 2
of the
Mortgage/Deed Of Trust Form as a new subsection (which would be numbered "2.24" in the current Mortgage/Deed Of Trust Form):
New York Lien Law Provisions
. Pursuant to
Section 13 of the Lien Law of New York, the Mortgagor
shall receive the advances secured by this Mortgage,
and shall hold the right to receive such advances, as
a trust fund to be applied first for the purpose of
paying the cost of the improvement of the Mortgaged
Property, and shall apply such advances first to the
payment of the cost of any such improvement on or to
the Mortgaged Property before using any part of such advances for any other purpose.
9.4 If the Mortgaged Property does not contain 1-6
dwelling units, then add the following subsection, as a new
subsection (which would be numbered "3.4" in the current
Mortgage/Deed Of Trust Form) at the end of Section 3
of the
Mortgage/Deed Of Trust Form. The following subsection permits
the Lender to avoid paying a 0.25% mortgage recording tax, which
applies if the Mortgaged Property contains 1-6 dwelling units.
If the Mortgaged Property does contain 1-6 dwelling units, then
the following clause should be revised by deleting "not" in the two places it appears:
Not 1-6 Dwelling Units
. This Mortgage does not
cover real property principally improved by one or
more structures containing in the aggregate six (6) or
- 25 -
less residential dwelling units having their own separate cooking facilities.
5 No Election of Remedies
The following clause should be used only in a jurisdiction
which allows a mortgage lender to sue the Borrower on the note
personally at the same time as the lender forecloses its
mortgage. In some jurisdictions, such as New York, the lender
must elect whether to sue the Borrower on the note personally or
to foreclose. Other jurisdictions may limit the lender's rights by "anti-deficiency" or "one action" rules. 4
The following should be added as a new subsection (which
would be numbered "4.8" in the current Mortgage/Deed Of Trust Form) at the end of Section
of the Mortgage/Deed Of Trust Form:
Mortgagee's Exercise of Rights and Remedies
. Upon the
occurrence of an Event of Default, the Mortgagee may at any
time, at its option and in its sole discretion, do any one
or more of the following: (i) bring an action in any court
of competent jurisdiction to foreclose this Mortgage or to
enforce the covenants of this Mortgage, (ii) exercise any
or all of the remedies available to a secured party under
the Uniform Commercial Code, or (iii) exercise any or all
of its other rights and remedies under the Mortgage, the other Loan Documents and applicable law.
6 Use of Insurance Proceeds For Restoration of Fire and
Casualty
Even if the Lender consents to allow insurance proceeds to
be used for restoration of the Mortgaged Property (see, for
example, Section
of the Borrower's Rider To Mortgage/Deed Of
Trust Form ), the Lender may require additional limitations. For
example, the Lender may:
- require a completion guaranty from the guarantors; 5
4 See § 6.01[1][h-i] of the main text of this book.
5 Such provision might state:
and shall execute
and deliver to the Mortgagee a completion guaranty (in form
and substance satisfactory to the Mortgagee and its
counsel) pursuant to which
and
shall jointly and severally guarantee to
the Mortgagee the lien-free completion by the Mortgagor of
- 26 -
- allow the Lender to apply the proceeds against the loan
if more than a certain percentage (based on floor area or
value) of the Mortgaged Property is damaged, or if leases
covering more than a certain percentage of the rentable square footage of the Mortgaged Property are terminated;
6
- if the loan is a construction loan, permit restoration of
the damage only if the damage occurs after the completion of the construction;
- require all conditions to the disbursement of insurance
funds (e.g., a maximum loan to value ratio, and a minimum
debt coverage ratio) to be met to the satisfaction of the Lender; and
- require the restoration of the damaged property to be
completed by the completion date provided in, and in
accordance with, all material reciprocal easement agreements, franchise agreements, and other significant agreements relating to the Mortgaged Property.
7 Permitted Transfers
The Lender, if it consents to allow the Borrower to make
certain transfers of the Mortgaged Property or interests in the
the Casualty Restoration of the Mortgaged Property in accordance with the provisions of this Section.
6 Language could be drafted as follows if the Lender has such objective:
the Mortgagee shall not be obligated to make the Insurance Funds
available for Casualty Restoration of the Mortgaged Property (or any
part thereof or interest therein) in accordance with the provisions of
this Section
, if more than % of the Mortgaged
Property (based on value or square footage) are taken or if
Leases, demising in the aggregate more the
% of the
total rentable space in the Mortgaged Property which has
been demised under executed and delivered Leases in effect
as of the date of the occurrence of any such Casualty, are
terminated as a result of any such Casualty, or will not
remain in full force and effect during and after the
completion of the Casualty Restoration of the Mortgaged
Property, or if the Mortgagor is unable to furnish to the
Mortgagee evidence satisfactory to the Mortgagee that
and : i) will continue
to develop, open and operate their respective department
stores, hotels, ___________________ in connection with the
Mortgaged Property notwithstanding the occurrence of any
such Casualty, and ii) will make all necessary Casualty Restoration thereto at their sole cost and expense.
- 27 -
Borrower, may want to require certain principals of the Borrower to retain a minimum equity interest in the Borrower.
7
8 Mortgage as Subordinate Mortgage
13.1 If the Lender's mortgage is subordinate to another
mortgage, then the term the "Prior Mortgage" should be defined
on Schedule C
of the Mortgage/Deed Of Trust Form. Also, add
"1.1
The Mortgaged Property
" as a heading after the "WHEREAS" clause
in Section
of the Mortgage/Deed Of Trust Form. Then, the
following provisions should be added as a new subsection (which
would be numbered "1.2" in
