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



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



(1)  If the lease is canceled for violation of any
non-monetary lease term or condition, or if the lease is deemed terminated or
rejected under bankruptcy laws, the institutional lender shall be entitled to
issuance of a new lease in its name for a term equal to the term of the lease
remaining immediately prior to the cancellation, termination, or rejection,
with all terms and conditions being the same as in the canceled, terminated, or
rejected 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 under
bankruptcy law, the lease shall be deemed canceled and terminated for all
purposes under state law;



(2)  If the lessee's interest under a lease is
transferred to an institutional lender, including by reason of the provisions
of paragraph (1), by reason of acquisition of the lessee's interest pursuant to
a foreclosure sale, judicial or nonjudicial, and by reason of an assignment in
lieu of foreclosure:



(A)  The institutional lender shall be liable
for the obligations of the lessee under the lease for the period of time during
which the institutional lender is the holder of the lessee's interest but shall
not be liable for any obligations of the lessee arising after the institutional
lender 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 as
the institutional lender holds the lease; provided that:



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



(ii)  The new lease issued to the institutional
lender shall terminate one hundred twenty days from the effective date of
issuance, 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 balance
secured by a security interest, the lease may not be canceled or terminated,
except for cancellation by reason of default of the lessee, and no increase
over and above the fair market rent, based upon the actual use of the land
demised and subject to the use restrictions imposed by the lease and applicable
laws, may be imposed or become payable, and no lands may be withdrawn from the
lease, except by eminent domain proceedings beyond the control of the board,
except with prior written consent by the institutional lender and that consent
shall not be unreasonably withheld; and



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



(c)  Ownership of both the lease and the
security interest by an institutional lender shall not effect or cause a merger
thereof, and both interests shall remain distinct and in full force and effect
unless the institutional lender elects in writing to merge the estates with the
consent of the board.



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



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



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



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



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



(f)  For the purposes of this section:



"Institutional lender" means a
federal, state, or private lending institution licensed to do business in the State
and that makes loans to qualified applicants under this chapter on the basis of
a 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 an
institutional lender's loan portfolio.



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



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