New York Codes, Rules and Regulations
Title 13 - DEPARTMENT OF LAW
Chapter II - SECURITIES TRANSACTIONS AND PERSONNEL
Subchapter B - REAL ESTATE SYNDICATES
Part 18 - OCCUPIED COOPERATIVES
Section 18.9 - Issuance of no-action letter
Universal Citation: 13 NY Comp Codes Rules and Regs ยง 18.9
Current through Register Vol. 46, No. 39, September 25, 2024
(a) Applicability.
Upon application made in accordance with the requirements of this section, the Department of Law may, in its discretion, issue a "no-action letter" stating that it will not take any enforcement action because the transaction described in the application occurs without the filing of an offering plan in compliance with section 352-e of the G.B.L.
(1) A no-action letter may be issued where
the Department of Law determines that:
(i) the
relationship between the offeror(s) and all the offerees is of such a nature
that the offerees do not require the protection of an offering plan;
(ii) the relationship between all offerees
and the cooperative interests being offered is such that all the offerees are
aware of the condition of the property which is the subject of the offering;
or
(iii) the filing of an offering
plan pursuant to G.B.L., section 352-e, is not necessary to effectuate the
purpose of G.B.L., article 23-A, or to protect the public interest.
(2) Following are examples of
transactions which may qualify for a no-action letter:
(i) the offering and sale by an apartment
corporation established either prior to the enactment of G.B.L., section 352-e,
or pursuant to an offering made in compliance with the G.B.L., of shares
allocated to space that was not sold under the original offering. Such space
may include, but shall not be limited to, space formerly used as a
superintendent's apartment, maids' rooms, commercial space or professional
offices;
(ii) the offering and sale
of shares allocated to units in property which is already owned and occupied
solely by the offerors as tenants-in-common, sole shareholders of the corporate
owner or sole partners in a partnership holding title to the property, where
title to the property was acquired by such offerors in one of the above forms
at least two years prior to submission of the application for a no-action
letter and the total number of dwelling units in the building does not exceed
10; and
(iii) the offering and sale
of shares allocated to units in property proposed to be acquired by all tenants
of a building under a tenant-sponsored or promoted proposal, where the total
number of dwelling units in the building does not exceed 10 and all tenants
join in the application for a no-action letter.
(3) A no-action letter shall not be issued
where the offering involves more than 10 residential units or the property was
acquired by all the offerees as tenants in common, sole shareholders of the
corporate owner or sole partners in a partnership holding title to the property
less than two years prior to submission of the application.
(b) Application procedure.
(1) An application for a
no-action letter shall be submitted to the New York Department of Law, Real
Estate Finance Bureau, 28 Liberty Street, New York, NY 10005.
(2) An application for a no-action letter
shall consist of the following:
(i) an
affidavit signed and sworn to by the offeror(s) which shall state:
(a) The name, residence and business address
and legal status (corporation, partnership, individual, etc.) of each offeror
and its principals, and the relationship of the offeror(s) to the property
which is the subject of the offering. If the offerors are rental tenants at the
property, state how long each tenant has been in occupancy at the
property.
(b) The specific unit or
units being offered, the total number of units being offered and the total
number of units in the building. If any vacant units are being offered,
describe how such vacancies occurred.
(c) The name, residence and business address
and legal status of each proposed offeree known to the offeror(s). State
whether the offering is limited to the offerees so identified. If the offering
is limited to known offerees, describe the nature and length of any
relationship between the offeror(s) and each offeree. If the offering is not
limited to known offerees, describe to whom and how the offering will be
made.
(d) A description of the
proposed transaction.
(e) If
payment will be made for the shares, that the offeror(s) will comply with
G.B.L., section 352-e(2)(b) and section 352-h, and hold all down payments for
the purchase of shares in trust for the benefit of the purchasers and that such
funds shall not be commingled with the moneys of the offeror(s) until actually
employed in connection with the consummation of the transaction.
(f) That the offeror(s) will provide to each
offeree the following information:
(1) the
purchase price;
(2) the estimated
maintenance and the current or proposed budget;
(3) a copy of any mortgage or ground lease on
the property;
(4) a copy of the
most recent financial statement of income and expenses for the operation of the
property, if applicable;
(5)
information known to the offeror(s) which may result in extraordinary expenses
for shareholders or for the apartment corporation including, but not limited
to, assessments, liabilities, dangerous or hazardous conditions, pending
litigation and administrative proceedings;
(6) a copy of the offering plan and all
amendments if one was previously filed with the Department of Law and is
available;
(7) a copy of the
certificate of occupancy for the building; and
(8) such other information as the Department
of Law may require to be presented to each offeree.
(g) That the offeror(s) agrees to furnish a
complete copy of the application for a no-action letter and a copy of the
no-action letter to each offeree prior to accepting any downpayment.
(h) That the offeror(s) agrees to furnish
within five days, after a request by the Department of Law, copies of executed
offeree affidavits required pursuant to clause (k) of this
subparagraph.
(i) That the use for
which the unit(s) and property are being offered will comply with the
property's certificate of occupancy, zoning, building and housing laws, rules
and regulations, or, if the proposed use will not comply with the legally
permissible use, discuss what steps must be taken to comply with or to change
the legally permissible use and identify which party will assume responsibility
to take such steps.
(j) Whether the
offeror(s) or its principals, within the preceding five years, have
participated in any other applications for a no-action letter or have made any
other offerings which were not pursuant to an offering plan filed with the
Department of Law and the address of the property/properties which were the
subject of such application(s) or offering(s).
(k) That an affidavit will be obtained from
each proposed offeree prior to the closing on a unit that is subject to this
application which will contain the following representations:
(1) the name, residence and business address
and legal status (corporation, partnership, individual, etc.) of each
offeree;
(2) that the offeree has
read the affidavit of the offeror(s) submitted as part of the application for a
no-action letter;
(3) that the
offeree understands that no offering literature other than as required by the
no-action letter will be provided. If the offeree is a tenant in occupancy of a
dwelling unit at the subject property, the offeree must state that he/she
acknowledges that he/she has been informed that if this transaction constituted
a public offering within the meaning of G.B.L., article 23-A, he/she would be
entitled to certain rights and protections pursuant to such article;
(4) that the offeree has inspected the
subject property; and
(5) that the
offeree is purchasing the unit(s) for personal occupancy and does not have the
intention of reselling the unit(s) within two years from the later of the
closing or the date the no-action letter is issued by the Department of Law.
This statement is not required if the application involves the type of
transaction described in subparagraph (a)(2)(ii) of this section;
(ii) A transmittal
letter addressed to the Department of Law that is signed by the attorney who
prepared the application which states:
(a) The
reasons why the transaction described in the application meets the standards
set forth in paragraph (a)(1) of this section.
(b) That the attorney has no actual knowledge
of any omission or untrue statements of a material fact included in the
application.
(c) That the attorney
has prepared or has reviewed all legal documents necessary to form an apartment
corporation and, in the attorney's opinion, the apartment corporation is duly
organized, validly existing and in good standing. If the apartment corporation
is not in existence at the time the application is submitted, state that
counsel will cause the apartment corporation to be formed in conformity with
applicable law.
(iii) A
check in the amount required by G.B.L., section 352-e(7)(a) made payable to the
Department of Law.
(iv) If
requested by the Department of Law, the offeror(s) must submit a Broker-Dealer
Statement (form M-10) for the offerors and such other documents and information
as the Department of Law may specify.
(v) If requested by the Department of Law, a
certified copy of the minutes of a duly held shareholders meeting at which
shareholders of the apartment corporation were informed of the proposed
transaction and the impact such transaction would have on the allowance of
deductions to tenant-stockholders under Internal Revenue Code, section 216. The
minutes shall reflect that the shareholders, after being informed of the
foregoing, approved by not less than a two-thirds vote, the consummation of the
proposed transaction.
(c) Conditions to the granting of a no-action letter.
(1) The granting of a
no-action letter may be on such terms and conditions as the Department of Law
may impose, in its discretion, in order to protect the public
interest.
(2) A no-action letter
shall not be granted if the Department of Law determines that such act may
contravene the rights under G.B.L., article 23-A, of any tenant who is not an
offeror.
(3) The issuance of a
no-action letter is based solely on the information provided in the
application. Any material misstatement or omission of a material fact required
by this Part may render the no-action letter void ab
initio.
(4) The issuance
of a no-action letter shall not be construed to be a waiver of or a limitation
on the Attorney General's authority to take enforcement action pursuant to
article 23-A of the G.B.L. and other applicable provisions of law, except as
expressly stated in such letter.
(5) The issuance of a no-action letter by the
Department of Law shall have no value as precedent and may not be relied upon
in the submission of any other application for such letter.
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