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Sale of Municipal Property with a Purchase Money Mortgage is Not an Illegal Gift or Loan

By Steven Silverberg and Katherine Zalantis

The New York Court of Appeals held today that a municipality may sell municipal real property and take back a purchase money mortgage without violating the State Constitutional prohibition against municipalities making a gift or loan. In Matter of 10 E. Realty LLC v. Incorporated Village of Valley Stream, the court found that: "the Village made no loan of money or property to the purchaser. The fact that the consideration in this sale mentions an interest rate and a term of payment, or that a mortgage was taken as a security interest, does not make this transaction involving a deferred payment plan an unconstitutional loan." The Village had sold a parcel of municipal property for $275,000 with payment deferred over fifteen years, with interest at 5% and took back a mortgage to secure the payments...continue to full post

Full post as published by New York Zoning and Municipal Law Blog on March 31, 2009 (boomark / email).