Current through Register Vol. 46, No. 39, September 25, 2024
(a)
Applicability.
The offering statement or "offering plan" required by
section
352-e of
the General Business Law ("GBL") for a condominium that meets the requirements
set forth below is subject to this Part, newly constructed, vacant or
non-residential condominiums. Except as provided in paragraphs (4) and (5) of
this subdivision, offerings subject to this Part are not subject to any other
Part.
(1) The building is completely
vacant of individuals residing in the building or entitled to residential
occupancy on the date the proposed offering plan is submitted to the Department
of Law or the building is to be newly constructed. In the case of a newly
constructed out-of-state condominium, the building may be partially occupied by
out-of-state purchasers.
(2) The
condominium is not organized as a time-sharing arrangement.
(3) A condominium offering for vacant or
occupied commercial or professional use only is subject to this Part, newly
constructed, vacant or non-residential condominiums. In the case of a mixed use
building the residential units must be completely vacant of individuals
residing in the building or entitled to residential occupancy on the date the
proposed offering plan is submitted to the Department of Law.
(4) The conversion of a newly constructed,
vacant or non-residential building to two or more condominium units along with
the conversion of one or more of the condominium units to a cooperative
apartment corporation ("condo-coop") is also subject to Part 21 of this Title,
newly constructed, vacant or non-residential cooperatives.
(5) If membership in a homeowners association
or similar entity is included or is to be sold in conjunction with the offering
of condominium units, the offering plan must also comply with the requirements
of Part 22 of this Title, homeowners associations.
(b)
Standard of compliance.
An offering plan must, at a minimum:
(1) contain in detail the terms of the
transaction and be complete, current and accurate;
(2) afford potential investors, purchasers,
and participants an adequate basis upon which to found their
judgment;
(3) not omit any material
fact;
(4) not contain any untrue
statement of a material fact;
(5)
not contain any fraud, deception, concealment, suppression, false pretense or
fictitious or pretended purchase or sale;
(6) not contain any promise or representation
as to the future which is beyond reasonable expectation or unwarranted by
existing circumstances; and
(7) not
contain any representation or statement which is false, where the sponsor or
the person who made such representation or statement:
(i) knew the truth;
(ii) with reasonable effort could have known
the truth;
(iii) made no reasonable
effort to ascertain the truth; or
(iv) did not have knowledge concerning the
representation or statement made.
(c)
Definitions.
As used in this Part:
(1)
Sponsor means any
person, partnership, joint venture, corporation, company, trust, association or
other entity which makes or takes part in a public offering or sale in or from
the State of New York of securities consisting primarily of shares or
participation interests or investments in real estate including condominium
units and other cooperative interests in realty. Sponsor's obligations as
sponsor continue until all units are sold. Sponsor shall not
be deemed to include a selling agent who has complied with section
359-e of
the General Business Law or an attorney or other expert retained by the sponsor
solely to render professional advice or opinions in connection with the
offering. Sponsor shall also be deemed to include owners of at
least 10 units or 20 percent of the total number of units in the condominium,
whichever is less, which are not purchased for occupancy by the owner or one or
more members of his or her immediate family; such sponsor will be deemed,
however, to be a sponsor with the obligations of a sponsor only in relationship
to the units which such sponsor owns.
(2)
Principal(s) means all
individual sponsors, all general partners of sponsors that are partnerships,
all officers, directors and shareholders of a corporate sponsor that are
actively involved in the planning or consummation of the offering, and all
other individuals who both (i) own an interest in or control sponsor and (ii)
actively participate in the planning or consummation of the offering,
regardless of the form of organization of sponsor.
(3)
Purchase agreement means
any executed written agreement to purchase a condominium unit.
Purchaser means any person, partnership, joint venture,
corporation, company, trust, association or other entity which executes and
delivers to the sponsor or selling agent a purchase agreement. To
purchase means to execute a purchase agreement.
(4)
Presentation date means
the date of completion of service, as defined in subdivision (d) of this
section, of a copy of the plan or amendment filed with the Department of
Law.
(5)
Building
means building or group of buildings.
(6)
Consummation of the plan
means filing the declaration of condominium and the first transfer of title to
a condominium unit to at least one purchaser under the plan following a
declaration of effectiveness by the sponsor and acceptance of the amendment by
the Department of Law confirming or declaring the plan effective.
(7)
Filing means the
issuance of a letter from the Attorney General stating that an offering plan or
amendment has been accepted for filing.
(8)
Digital copy means a
copy is identical in content to a paper copy except that it is recorded
electronically in read-only .pdf format or other electronic format that the
Department of Law determines to be acceptable. Digital copies of the plan shall
include all the supporting documents included in Part II of the plan. Digital
copies of the exhibits to the plan shall include all documents referenced in
section 20.2(c)(5) of
this Part, as applicable. Digital copies of the amendment shall include all
exhibits, back-up documents, and other supplemental documents annexed to the
amendment, as applicable. The Department of Law shall periodically issue a
Guidance Document as defined by State Administrative Procedure Act section
102(14), setting forth particular guidelines and procedures for the submission
of digital copies. Such Guidance Document will be available on the Department
of Law's website, as required by State Administrative Procedure Act section
202(e).
(9)
Interim
lessee means a purchaser under the plan who takes occupancy to his or
her contracted-for unit prior to closing title. The rights and obligations of
the interim lessee must be set forth in writing executed by both sponsor and
purchaser.
(d)
Service.
(1) Unless otherwise
provided by statute or regulation, any document required to be served by this
Part shall be served on:
(i) commercial or
professional tenants;
(ii)
purchasers who have executed and delivered purchase agreements to the sponsor
or selling agent and whose purchase agreements are in effect;
(iii) unit owners; and
(iv) any other person entitled to service
pursuant to local law or regulation (collectively "offerees"), in the following
manner:
(a) personal delivery; or
(b) mailing by regular mail or registered or
certified mail with or without return receipt requested, addressed to the
offeree at the last known residence of such offeree or, if the offeree has
provided written information of an alternative address for notices, addressed
to the offeree at the alternative address. If sponsor has no information of the
last known residence address, but has written information of the place of
business or employment of such offeree, the mailing shall be addressed to such
last business or employment address.
(2) Service by personal delivery shall be
deemed complete upon delivery. Service by mailing shall be presumed complete on
the fifth day after the date of mailing. An affidavit of service identifying
the offerees served, stating the manner of service and the date of service is a
document required to be retained under section
20.3(ad) of this
Part. The completion of service shall be the latest date on which service upon
all offerees is deemed or presumed complete.
(3) Service on unit owners may be satisfied
by service on the board of managers if the sponsor is no longer in control of
the board of managers and the amendment is solely limited to price
changes.
(e)
Notice to commercial or professional tenants and affidavit of
service.
Within three business days from the date the proposed
offering plan is first submitted to the Department of Law, sponsor shall serve
each commercial or professional tenant with a copy of the proposed offering
plan together with the following notice:
Date of Notice:
___________________________________________
"We have submitted to the New York State Department of Law,
Real Estate Finance Bureau, a proposed offering plan for the conversion of
(insert address and name of building, if any) to a commercial or professional
condominium. The final offering plan has not yet been filed with the Department
of Law. The law requires us to disclose all material information concerning the
building and the conversion process in this proposed offering plan. A copy of
the proposed offering plan is available for inspection and copying at the
office of sponsor (or selling agent) located at (insert address of sponsor or
selling agent) and the Department of Law. The law requires the Department of
Law, within not more than 30 days from the date of submission of the proposed
offering plan, either to file the offering plan or to indicate how the offering
plan is deficient. No condominium units may be sold or offered for sale and no
purchase agreements may be executed unless and until the Department of Law
files the final offering plan. A copy of the filed plan will then be served on
each commercial or professional tenant. You may send written comments on the
proposed offering plan to the New York State Department of Law, Real Estate
Finance Bureau, 28 Liberty Street, New York, NY 10005. You may also send your
written comments to (insert name and address of sponsor or selling agent)." An
affidavit of service of the notice must be submitted to the Department of Law
within three (3) business days following completion of service on all
commercial or professional tenants.
(f)
Time of review.
After submission of the proposed offering plan for filing,
the Department of Law shall issue a letter to the sponsor or sponsor's attorney
stating that the plan is filed, or indicating deficiencies. The Department of
Law shall issue such a letter for an offering plan subject to this Part no
later than 30 days after submission of the proposed offering plan. The
Department of Law may issue a deficiency letter whenever it appears that the
proposed offering plan is deficient in one or more respects. The Department of
Law may, in its discretion, deem an offering plan as not submitted if the
proposed offering plan and exhibits are incomplete and therefore do not meet
the requirements of section
20.2 of this Part, procedure for
submission.
(g)
Statutory compliance.
Unless expressly provided herein, nothing contained in this
Part shall be construed as limiting the requirements set forth in article 23-A
of the General Business Law, and in article 9B of the Real Property Law ("the
New York Condominium Act") or the laws regulating condominiums in the State
where the property is located.
(h)
Waiver.
In the interests of justice, the Department of Law may
waive compliance with any provision of these regulations and can permit
variations of regulations so long as the variation is consistent with the
purpose and intent of the regulation and statute or unless prohibited from
doing so by statute or by final court order.
(i)
Exemptions.
Upon written application of the sponsor, or sponsor's
attorney, the Department of Law, in its discretion, may exempt a plan from the
application of any provision of this Part where it is found that enforcement of
the provision is not necessary to effectuate the purposes of the General
Business Law or to protect the investing public. The application shall:
(1) be annexed to and be submitted with the
attorney's transmittal letter;
(2)
set forth the provisions from which the exemption is sought and the grounds for
the exemption; and
(3) be signed by
sponsor or the sponsor's attorney.
The transmittal letter and certifications required by
section 20.4 of this Part shall be in the
form required by this Part, without modification, and shall be based on the
assumption that any exemption sought pursuant to this section has been granted.
In the event that the Department of Law denies the application for exemption,
the Department of Law may issue a deficiency letter as provided in subdivision
(f) of this section. No additional fee is required for an exemption
application.
(j)
Out-of-state condominiums.
A sponsor of a condominium located outside of New York
State which makes or takes part in a public offering or sale in or from the
State of New York of condominium units must file an offering plan with the
Department of Law. To comply with this requirement, the sponsor of an
out-of-state plan may file a complete offering plan drafted in accordance with
New York law and this Part. In the alternative, the Department of Law may, in
its discretion, allow the sponsor to file the offering plan approved by or
filed with the state or jurisdiction in which the condominium is located and an
addendum with such additional information as is required by the Department of
Law. Sponsor must represent that the plan complies with all applicable local
laws.
(k)
Effectiveness of regulations.
The effective date of these regulations is the date of
filing with the Secretary of State. As of such date:
(1) This Part is effective immediately for
offering plans that meet the requirements of subdivision (a) of this
section.
(2) Section
20.5 of this Part is effective for
amendments to plans submitted after the effective date of these regulations
that meet the requirements of subdivision (a) of this section, regardless of
when such plans were filed.
(3)
Section 20.6 of this Part is effective for
advertisements, appearing on or after the effective date of these regulations,
for offering plans that meet the requirements of subdivision (a) of this
section, regardless of when such plans were filed.
(l)
Withdrawals, abandonments and
rejections.
(1) If the offering plan is
withdrawn prior to filing, written notice thereof shall be served
simultaneously by the sponsor on the Department of Law and on all commercial or
professional tenants, if any, in the manner specified by paragraph (d)(1) of
this section.
(2) If the offering
plan is to be abandoned after filing and the sponsor has accepted purchase
agreements, the sponsor shall promptly submit an amendment to the Department of
Law together with form RS-3 as promulgated by the Department of Law. If
payments under purchase agreements have been received, the amount of such funds
and the manner and time when these funds will be returned to purchasers must be
disclosed. The funds must be returned within five days after the amendment
abandoning the plan has been accepted for filing. If there are no outstanding
purchase agreements the sponsor need not submit an amendment but shall submit a
form RS-3 to the Department of Law which shall be served simultaneously by the
sponsor on all commercial or professional tenants, if any, in the manner
specified by paragraph (d)(1) of this section.
(3) If the offering plan is finally rejected
by the Department of Law and there is no outstanding right to cure defects, the
sponsor shall promptly serve notice of such rejection on all commercial or
professional tenants, if any, in the manner specified by paragraph (d)(1) of
this section.
(m)
Disclaimers.
The requirements set forth in section
20.3 of this Part apply to the
offering plan generally and shall not be negated or contradicted by
inconsistent provisions in other portions of the offering plan, or by
provisions purporting to discharge liability or to terminate the continuing
effect of representations in the offering plan upon an event such as the
closing or the delivery of the deed. Disclaimer provisions, either direct or
indirect, through stated reliance on an expert with respect to factual matters
required to be represented or set forth in the offering plan, may not be
included except as and to the extent permitted in these
regulations.
