Relates to notices filed of the payment of mortgage recording tax on an instrument not entitled to be recorded

1 Co-sponsor

• Michael H. Ranzenhofer

BILL NUMBER:S4532

Title of bill

An act to amend the tax law, in relation to the treatment of notices filed of the payment of mortgage recording tax on an instrument not entitled to be recorded

Purpose

To clarify that a notice filed under Tax Law, including a notice recorded under the authority of section 258-a, does not constitute notice to a bona fide purchaser of an interest in real property.

Summary of provisions

Section 1 of the bill amends section 258-a of the tax law by amending that section to provide that the filing or recording of a notice of payment of tax is Ineffective to give notice under Article 9 of the real property law of an estate or interest in the real property affected by the instrument on which tax is being raid or to create a duty or inquiry with regard thereto. This amendment would take effect immediately and shall apply to notices now or hereafter filed or recorded under section 258-a

Justification

Under Tax Law Section 256-a, when mortgage recording tax is being paid on an instrument not entitled to be recorded, but which is not lost or destroyed, the tax may be paid to the recording officer. A copy of the instrument upon which tax is paid "shall be filed with the recording officer and preserved among his mortgage tax records." If, however, the unrecorded instrument has been lost or destroyed the State Department of Taxation and Finance determines the amount of tax due and "by order authorize the recording officer to receive and receipt for the tax as fully and with the same force and affect, as far as this article is concerned, as if the instrument has been duly recorded and the tax thereon paid." Section 258-a does not require a recording officer to record a Section 258-a notice. Accordingly, the section does not deal with issues of actual or constructive notice to a bona fide purchaser if a Section 258-a notice is recorded.

However, if a Section 258-a notice is recorded, as has recently been done in a number of counties, the holder of the related, unrecorded instrument may assert the priority of its lien claiming that an otherwise bona fide purchaser for value has, by reason of the recording of the Section 258-a notice, actual or constructive notice of the instrument to which the notice relates. In addition to the litigation that is likely to ensue until the courts rule on whether the recording of a Section 258-a notice is notice under the Recording Act or even appropriate to record, the recording of a Section 258-a notice will impact the marketability of the title to real property against which Section 258-a notices are recorded.

LEGISLATIVE HISTORY:; This is a new bill.

Fiscal implications

None.

Effective date

Immediately and shall apply to notices now or hereafter filed.