Mortgage Tax on Unrecorded Instruments
In the last several months, documents like this one
have started to appear in the land records
of the Suffolk County Clerk’s Office. All the documents brought to the attention of Constructive Notice are on the same template, differing only in the handwritten details. Before starting discussion of any possible effect of this recording, it must be observed that the document lacks any acknowledgement or “proof” as required by RPL Article 9. Is it possible that there is a different statutory authorization for recording this document?
The document itself makes several references to Tax Law §258-a. According to the language of the statute, §258-a addresses the “payment of tax on instruments not recorded.” There are two categories: an instrument “which is not entitled to be recorded” and an instrument that “has been lost or destroyed.” The category into which the instrument falls determines the procedure for calculating and collecting the tax due.
If an instrument “is not entitled to be recorded,” the original instrument is to be “presented to the recording officer of the county,” the amount of tax determined, and paid. Once the tax is paid, “it shall be the duty of the recording officer to indorse upon the instrument a receipt for the amount of the tax so paid.” A “copy of [the] instrument shall be filed with the recording officer and preserved among his mortgage tax records.” The Regulations promulgated by the NYS Dept. of Taxation and Finance spell out the procedure almost verbatim. See 20 NYCRR 650.1.
If an instrument “has been lost or destroyed” the NYS Tax Commission must get involved. The Tax Commission, “upon presentation of proper proofs, may determine the taxable amount of such instrument and by order authorize the recording officer to receive and receipt for such tax....” The regulations in this instance spell out the “proofs” that the commissioner is required to examine, whereupon he is to “issue a determination ... fixing the amount of tax due....” The “determination” is then presented to the recording officer of the county who collects the tax and “shall (i) indorse upon the determination a receipt of the amount of tax so paid; and (ii) keep a copy of the determination among the mortgage recording tax records....” See 20 NYCRR 650.2.
Finally, both §258-a and the Regulations speak to “the force and effect” of compliance with the procedures, but only insofar as “article 11 of the Tax Law is concerned....” There is nothing to suggest that these procedures determine the validity of the instrument, any defenses thereto or any priority among competing liens.
There appears to be no statutory basis for recording the annexed document in the land records. Indeed, the document also doesn’t comply with any of the criteria set set out in Tax Law §258-a or the Regulations, and its intended purpose remains obscure. It seems like the proponent is attempting to “clarify” lien priorities following a “non-standard” mortgage modification. So the question lingers: now that this document and others like it are already in the land records, what effect, if any, should they be accorded? It will be interesting to see how title insurers and courts respond. And, lest you think this is only a “Suffolk County problem,” a source, with knowledge of the underlying facts, informed Constructive Notice that similar tax payments were made in counties throughout New York State. The source was unsure if similar documents had been recorded in the land records of any other county.