§516-181 Interest acquired. (a) Upon acquisition of the leased fee interest in a residential houselot from the proceeds of an eligible loan, the property interest acquired shall be all of the right, title, and interest of the fee owner and all legal and equitable owners, if any, in and to the residential houselot acquired, subject to all covenants, conditions, easements, reservations, and restrictions of record running with the land or contained in the agreement of sale, deed, or other conveyance held by the fee owner and legal and equitable owners. The acquisition of a leased fee interest in a residential houselot from the proceeds of an eligible loan shall terminate all the right, title, and interest of the fee owner and all legal and equitable owners, whether the interest be a remainder, vested or contingent, a reversion, or other beneficial interest in the property, present or prospective.
(b) If the leasehold on property acquired from the proceeds of an eligible loan is subject to any mortgage, lien, or encumbrance suffered or permitted by the eligible borrower, including, but not limited to, rights arising through divorce, marriage, or assignment, the purchase of the leased fee interest in such residential houselot in no manner shall affect or impair the mortgage, lien, or encumbrance or the security afforded thereby to the holder thereof, and the leasehold shall continue, notwithstanding the purchase of the leased fee interest in such residential houselot by the eligible borrower, for the purposes and to the extent necessary to avoid any impairment of leasehold security, unless the holder of the mortgage, lien, or encumbrance on such leasehold and the corporation in writing shall consent to the transfer thereof to the fee. Upon the written consent by the holder thereof and the corporation, each such mortgage, lien, or encumbrance to which the leasehold is subject and to which such consent refers shall be transferred to and shall bind the fee acquired by the eligible borrower, and thereafter shall continue in full force and effect as a mortgage, lien, or encumbrance of the fee acquired by the eligible borrower, in the same order and priority among such mortgages, liens, and encumbrances so transferred to the fee as the same applied to and bound the eligible borrower's immediate, previous leased fee interest. [L 1983, c 270, pt of §1; am L 1987, c 337, §16; am L 1988, c 104, §2; am L 2005, c 196, §26(b); am L 2006, c 180, §16]