[§166E-13]  Rights of holders of securityinterests.  (a)  Prior board action shall be required when an institutionallender acquires the lessee's interest through a foreclosure sale, judicial ornonjudicial, or by way of assignment in lieu of foreclosure, or when theinstitutional lender sells or causes the sale of the lessee's interest in alease by way of a foreclosure sale, judicial or nonjudicial.  The institutionallender shall convey a copy of the sale or assignment as recorded in the bureauof conveyances.

(b)  Notwithstanding any provisions of thischapter, if any lease is subject to a security interest held by aninstitutional lender and if the institutional lender has given to the board acopy of the encumbrance as recorded in the bureau of conveyances:

(1)  If the lease is canceled for violation of anynon-monetary lease term or condition, or if the lease is deemed terminated orrejected under bankruptcy laws, the institutional lender shall be entitled toissuance of a new lease in its name for a term equal to the term of the leaseremaining immediately prior to the cancellation, termination, or rejection,with all terms and conditions being the same as in the canceled, terminated, orrejected lease, except only for the liens, claims, and encumbrances, if any,that were superior to the institutional lender before the cancellation,termination, or rejection.  If a lease is rejected or deemed rejected underbankruptcy law, the lease shall be deemed canceled and terminated for allpurposes under state law;

(2)  If the lessee's interest under a lease istransferred to an institutional lender, including by reason of the provisionsof paragraph (1), by reason of acquisition of the lessee's interest pursuant toa foreclosure sale, judicial or nonjudicial, and by reason of an assignment inlieu of foreclosure:

(A)  The institutional lender shall be liablefor the obligations of the lessee under the lease for the period of time duringwhich the institutional lender is the holder of the lessee's interest but shallnot be liable for any obligations of the lessee arising after the institutionallender has assigned the lease; and

(B)  The provisions of section 166E‑8(b)(1)and (2) shall not apply to the lease or the demised land during such time asthe institutional lender holds the lease; provided that:

(i)  For non-monetary lease violations, theinstitutional lender shall first remedy the lease terms that caused thecancellation, termination, or rejection to the satisfaction of the board; and

(ii)  The new lease issued to the institutionallender shall terminate one hundred twenty days from the effective date ofissuance, when the institutional lender shall either sell or assign the lease,

after which date section 166E‑8(b)(1)and (2) shall apply to the new lease;

(3)  As long as there is a delinquent loan balancesecured by a security interest, the lease may not be canceled or terminated,except for cancellation by reason of default of the lessee, and no increaseover and above the fair market rent, based upon the actual use of the landdemised and subject to the use restrictions imposed by the lease and applicablelaws, may be imposed or become payable, and no lands may be withdrawn from thelease, except by eminent domain proceedings beyond the control of the board,except with prior written consent by the institutional lender and that consentshall not be unreasonably withheld; and

(4)  If the lease contains any provision requiring thepayment of a premium to the lessor on assignment of the lease, any premiumshall be assessed only after all amounts owing by any debt secured by asecurity interest held by an institutional lender shall have been paid in full.

(c)  Ownership of both the lease and thesecurity interest by an institutional lender shall not effect or cause a mergerthereof, and both interests shall remain distinct and in full force and effectunless the institutional lender elects in writing to merge the estates with theconsent of the board.

(d)  The board may include in any consent formor document provisions consistent with the intent of this section as may berequired to make a lease mortgageable or more acceptable for mortgageability byan institutional lender.

(e)  The rights of a purchaser, assignee, ortransferee of an institutional lender's security interest, including a juniorlien holder, shall be exercisable by the purchaser, assignee, or transferee assuccessor in interest to the institutional lender; provided that:

(1)  The purchase, assignment, or transfer shallconform with subsection (b)(4); and

(2)  The purchase, assignment, or transfer of suchrights shall be reserved for and exercisable only by an institutional lender.

Other purchasers may not be precluded from acquiringthe institutional lender's security interest but shall not have exercisablerights as successor in interest to the original institutional lender.

(f)  For the purposes of this section:

"Institutional lender" means afederal, state, or private lending institution licensed to do business in the Stateand that makes loans to qualified applicants under this chapter on the basis ofa lease awarded pursuant to this chapter for security, in whole or in part,together with any other entity that acquires all or substantially all of aninstitutional lender's loan portfolio.

"Making a loan" means lending of newmoney or the renewal or extension of indebtedness owing by a qualifiedapplicant to an institutional lender, after June 30, 2006.

"Security interest" means anyinterest created or perfected by a mortgage, assignment by way of mortgage, orby a financing statement and encumbering a lease, land demised by the lease, orpersonal property located at, affixed or to be affixed to, or growing or to begrown upon the demised land. [L 2006, c 157, pt of §1]