N.Y. Real Property Law § 126: Trust indentures

§ 126. Trust indentures. No trustee shall hereafter accept a trust

under any trust indenture or mortgage within the contemplation of this

article or act as trustee thereunder unless the instrument creating the

trust shall contain the following provisions, among others, which confer

the following powers and impose the following duties upon the trustees:

1. In the case of an event of default (as such term is defined in such

instrument), to exercise such of the rights and powers vested in the

trustee by such instrument, and to use the same degree of care and skill

in their exercise as a prudent man would exercise or use under the

circumstances in the conduct of his own affairs.

2. In considering what actions are or are not prudent in the

circumstances, to consider whether or not:

(a) to take such action as may be necessary or proper to sequester the

rents and income of the property;

(b) to procure from the owner of the property an assignment of rents

and/or a consent to enter into possession of the property and to collect

the rents therefrom;

(c) to apply to the court for the appointment of a receiver of the

rents and income of the property;

(d) to declare due and payable forthwith any principal amount

remaining due and unpaid and commence an action of foreclosure;

(e) to apply the moneys received as rents and income from the property

as well as moneys received by the trustee from any receiver appointed

for such property in his discretion, to the maintenance and operation of

such property, the payment of taxes, water rents and assessments levied

thereon and any arrears thereof, to the payment of underlying liens, and

to the creation and maintenance of a reserve or sinking fund.

3. If the trustee can obtain the information without unreasonable

effort or expense, to render annually to bondholders, after the

occurrence of a default, unless such default be previously cured, a

summarized statement of income and expenditures in connection with the

property.

4. To distribute the proceeds of any sale or other disposition of the

property ratably among the bondholders, subject to applicable mandatory

provisions of law.

5. To permit the obligor or other person in possession or control of

the property, or his successors in interest, to be free to select the

insurance broker or agent through whom any insurance of any kind is to

be placed or written on any property affected or covered by a mortgage

held by such trustee.