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 (G.B.L.) for a condominium that meets the requirements
set forth below is subject to this Part. Except as provided in paragraphs
(4)-(5) of this subdivision, offerings subject to this Part are not subject to
any other Part.
(1) One or more
individuals reside in the building or are entitled to residential occupancy on
the date the proposed offering plan is submitted to the Department of
Law.
(2) The condominium is not
organized as a time-sharing arrangement.
(3) One or more of the condominium units to
be offered are used for residential purposes or for combined residential/home
occupation purposes. A condominium offering for commercial use only is not
subject to this Part.
(4) The
conversion of an occupied 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 18 of this Title
(Occupied 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 who 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 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 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 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 who executes and
delivers to the sponsor or selling agent such a purchase agreement. To
purchase means to execute any such 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)
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.
(6)
Filing means the issuance of a letter from the Attorney
General stating that an offering plan or amendment has been accepted for
filing.
(7)
Digital
copy means a copy that 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
23.2(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).
(d)
Service.
(1) Unless otherwise
provided by statute or regulation, any document required to be served by this
Part shall be served on:
(i) one residential
tenant per unit;
(ii) purchasers
who have executed and delivered purchase agreements to the sponsor or selling
agent, and are not in default;
(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
23.3(ii) of this
Part. The date of 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 tenants and affidavit of service.
(1) Within three business days from the date
the proposed offering plan is first submitted to the Department of Law, the
sponsor shall serve each offeree, as defined in subdivision (d) of this
section, 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, commonly known as a "red
herring," for the conversion of (insert address and name of building,
if any) to a 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 enclosed for you to
comment on and to retain. Additional copies of the proposed offering plan are
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 Attorney General strongly urges you to read this
proposed offering plan carefully and to consult with an attorney to advise you
as to the meaning and consequences of this plan.
The law requires the Department of Law, within not less
than four months nor more than six months 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, no purchase agreements may be executed, and no downpayments may be
accepted unless and until the Department of Law files the final offering plan.
A copy of the filed plan will then be served on each 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.)
(2) If G.B.L., section 352-eee is applicable,
the notice shall also state that pursuant to G.B.L., section 352-eee(1)(i), a
copy of the notice will be sent to the clerk of the municipality where the
building or group of buildings is located.
(3) If G.B.L., section 352-eee or 352-eeee is
applicable, the notice shall also state:
Tenants or their representatives may physically inspect the
premises at any time subsequent to the submission of the plan to the Department
of Law, during normal business hours, upon written request made by them to the
sponsor or selling agent, provided tenants' representatives are registered
architects or professional engineers licensed to practice in the State of New
York. After a final offering plan is filed with the Department of Law, copies
of all postings required by section 352-eee or 352-eeee of the New York General
Business Law, which are described in the "Rights of Existing Tenants" section
on page __ of the plan, will be made available for inspection and copying at
the office of the Department of Law where the submission was made and at the
office of the sponsor or selling agent.
(4) An affidavit of service, together with a
copy of the notice, must be submitted to the Department of Law within three
business days following completion of service on all offerees.
(5) If the offering plan is submitted to the
Department of Law on or after September 1, 2016 subject to G.B.L. sections
352-e(2-a) or 352-eeee, and the sponsor executed a contract of sale for the
building or group of buildings or acquired the building or group of buildings
on or after September 1, 2016, the notice shall also state: If you are a senior
citizen or disabled tenant as defined by G.B.L. section 352-e(2-a)(a)(iii) and
352-eeee(1)(f) or G.B.L. section 352-e(2-a)(a)(iv) and 352-eeee(1)(g),
respectively, you have additional rights and protections, including the right
to elect to become a non-purchasing tenant within 60 days from the date you
receive the filed offering plan from the sponsor. Senior citizen and disabled
tenants are advised to read the section of the offering plan entitled "Rights
of Eligible Senior Citizens and Eligible Disabled Persons." If the offering
plan is submitted to the Department of Law on or after September 1, 2016
pursuant to G.B.L. sections 352-e(2-a) or 352-eeee, and the sponsor executed a
contract of sale for the building or group of buildings or acquired the
building or group of buildings on or after September 1, 2016, the notice shall
also include the eligible senior citizen and eligible disabled person election
forms promulgated by the Department of Law, forms SH-1 and SH-2,
respectively.
(6) If the offering
plan is submitted to the Department of Law on or after September 1, 2016
subject to G.B.L. sections 352-eee, and the sponsor executed a contract of sale
for the building or group of buildings or acquired the building or group of
buildings on or after September 1, 2016, the notice shall also state: If you
are a senior citizen or disabled tenant as defined by G.B.L. section
352-eee(1)(f) or G.B.L. section 352-eee(1)(g), respectively, you have
additional rights and protections, including the right to elect to become a
non-purchasing tenant. Senior citizen and disabled tenants are advised to read
the section of the offering plan entitled "Rights of Eligible Senior Citizens
and Eligible Disabled Persons." If the offering plan is submitted to the
Department of Law on or after September 1, 2016 subject to G.B.L. sections
352-eee, and the sponsor executed a contract of sale for the building or group
of buildings or acquired the building or group of buildings on or after
September 1, 2016, the notice shall also include the eligible senior citizen
and eligible disabled person election forms promulgated by the Department of
Law, forms SH-5 and SH-2, respectively.
(f)
No excessive long-term
vacancies.
If G.B.L., section 352-eee or 352-eeee is applicable to the
offering, within three business days following completion of service on all
offerees, as defined in subdivision (d) of this section, of a proposed offering
plan, sponsor shall submit an affidavit stating:
(1) the number of dwelling units in the
building;
(2) the number of
dwelling units in the building occupied by building staff who occupy their
apartments at little or no rent as part of their compensation;
(3) the number of dwelling units and the
identification of the units that were not leased or occupied by bona fide
tenants on the date that the proposed plan was first submitted to the
Department of Law;
(4) the number
of dwelling units and the identification of the units that were not leased or
occupied by bona fide tenants for more than five months prior to the date that
the proposed plan was first submitted to the Department of Law;
(5) the percentage obtained by dividing the
number of units identified in paragraph (4) of this subdivision by the number
of dwelling units identified in paragraph (1) of this subdivision minus the
number of dwelling units identified in paragraph (2);
(6) if the percentage set forth in paragraph
(5) of this subdivision exceeds 10 percent, state the normal average vacancy
rate for the building for the two years prior to the January preceding the date
of first submission, and state why such vacancy rate is normal and that said
percentage set forth in paragraph (5) of this subdivision does not exceed twice
said normal average vacancy rate;
(7) that, based on the information provided
in paragraphs (1) and (3)-(5) of this subdivision, an excessive number of
long-term vacancies did not exist on the date that the offering plan was first
submitted to the Department of Law; and
(8) the following information with respect to
any tenant who is the sponsor, the selling agent or the managing agent, or is
related to the sponsor, the selling agent, the managing agent or any principal
of the sponsor, the selling agent or the managing agent by blood, marriage or
adoption or as a business associate, an employee, a shareholder or a limited
partner:
(i) the identity of the
tenant;
(ii) the number of the unit
the tenant leases or occupies;
(iii) the nature of the relationship with
sponsor, the selling agent or the managing agent or any principal of the
sponsor, the selling agent, or the managing agent;
(iv) the date of the lease;
(v) the date the tenant took physical
occupancy of the unit; and
(vi)
whether or not the tenant has been counted as a bona fide tenant by the sponsor
for the purposes of this affidavit.
The Department of Law, in its discretion, may require such
further proof as it deems necessary to establish that there were no excessive
long-term vacancies.
(g)
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
sooner than four months and no later than six months after the date of
submission of the proposed offering plan. The Department of Law may issue a
deficiency letter whenever it appears:
(1) that the department cannot make any
finding mandated by law; or
(2)
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
23.2 of this Part, Procedure for
Submission.
(h)
Revisions.
Following submission of a proposed offering plan, revisions
must be made to reflect any material changes of facts or circumstances
pertaining to the proposed offering, the offerors, the property involved, the
condition of the premises, or the costs of ownership and operation of the
property, so that the offering plan may continue to comply with subdivision (b)
of this section. Such revisions shall be submitted to the attorney assigned by
the Department of Law to review the proposed offering plan. The Department of
Law, in its discretion, may require that a supplement to the proposed offering
plan be served on tenants containing the revised information. The Department of
Law may issue a deficiency letter and/or require resubmission of a new offering
plan if the revisions reflect matters of fact or circumstances which were known
or should have been known to the sponsor at the time of original submission, or
substantially change the nature or terms of the offering, or if the plan as
revised comes within the grounds stated in subdivision (g) of this section.
After the offering plan is filed, the plan must be amended periodically as
required by section
23.5 of this Part.
(i)
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 G.B.L. 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.
(j)
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 variation is consistent with the purpose
and intent of regulation and statute or unless prohibited from doing so by
statute or by final court order.
(k)
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 G.B.L. 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 23.4 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
(g) of this section. No additional fee is required for an exemption
application.
(l)
Out-of-state condominiums.
A sponsor of a condominium located outside of New York
State, who 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. Out-of-state conversion plans which have already become effective may be
submitted in compliance with this Part but will be subject to a 30-day review.
This circumstance should be noted in the attorney transmittal letter submitted
in compliance with section
23.2(c)(1) of
this Part.
(m)
Effectiveness of regulations.
The effective date of this Part is the date of filing with
the Secretary of State. As of such date:
(1) Part 23 is effective for offering plans
that meet the requirements of subdivision (a) of this section and are submitted
60 days after the effective date of this Part.
(2) Section
23.5 of this Part is effective for
amendments to plans submitted after the effective date of this Part that meet
the requirements of subdivision (a) of this section, regardless of when such
plans were filed.
(3) Section
23.6 of this Part is effective for
advertisements, appearing on or after the effective date, for offering plans
that meet the requirements of subdivision (a) of this section, regardless of
when such plans were filed.
(4)
Section 23.8 of this Part is effective on
the effective date for offering plans that meet the requirements of subdivision
(a) of this section, regardless of when such plans were filed, and to all sales
of units occupied by eligible senior citizens or eligible disabled
persons.
(n)
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 offerees in the manner specified by
paragraph (d)(1) of this section.
(2) If the offering plan is to be abandoned
after filing, 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 purchaser must be
disclosed. The funds must be returned within five days after the amendment
abandoning the plan has been accepted for filing. For purposes of G.B.L.,
section 352-eee(2)(a) and 352-eeee(2)(a), an offering plan will be considered
abandoned upon acceptance for filing by the Department of Law of the amendment
abandoning the plan.
(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 tenants in the manner specified by paragraph (d)(1) of
this section.
(o)
Postings of purchase percentages.
If G.B.L., section 352-eee or 352-eeee, is applicable, on
the 30th, 60th, 88th and 90th day after the date of presentation of the
offering plan and at least once every 30 days until the plan is declared
effective or is abandoned, and on the second day before the expiration date and
on the expiration date of any exclusive purchase period provided in an
amendment to the plan, the sponsor shall post before noon, in a prominent place
accessible to all tenants in the building, a statement under oath listing the
percentage(s) of bona fide tenants in occupancy on the filing date who have
signed subscription agreements as of a specified time on the date of the
statement. Such statement shall remain posted until the next statement must be
posted. The percentage(s) shall be computed in the same manner as the sponsor
must compute the minimum percentage(s) needed to declare the plan effective.
The statement shall also be filed with the Department of Law. The Department of
Law has issued model forms, which must be used by sponsors, for posting
statements. No postings are required after the plan is declared effective and
all exclusive purchase periods have expired. If the posting notices are to be
signed by the selling agent, the sponsor must provide written authorization to
the Department of Law. The statement shall include the following:
(1) the date and time of the
statement;
(2) the date the plan
was filed with the Department of Law;
(3) the date of presentation of the plan (and
the current amendment);
(4) the
last day of any exclusive purchase period(s);
(5) if an eviction plan, the last day for
eligible senior citizens or eligible disabled persons to elect not to purchase
pursuant to G.B.L., section 352-eeee, or the last day for eligible disabled
persons to elect not to purchase pursuant to G.B.L., section 352-eee;
(6) if the plan is subject to G.B.L., section
352-eeee, state the number of bona fide tenants in occupancy on the filing date
who have signed purchase agreements as of a time specified in the statement. If
the plan is a noneviction plan subject to G.B.L., section 352-eeee, also state
the number of bona fide nontenant purchasers who have represented that they or
member(s) of their immediate family intend to occupy the unit when it becomes
vacant. If the plan is an eviction plan subject to G.B.L., section 352-eee,
state the number of bona fide tenants in occupancy on the filing date who have
signed purchase agreements. If the plan is a noneviction plan subject to
G.B.L., section 352-eee, state the number of bona fide tenants in occupancy on
the filing date and also state the number of bona fide tenants who became
tenants in occupancy after the filing date who have signed purchase agreements.
Any purchaser who is required to be listed under section
23.5(e)(6)(vii)
of this Part shall not be included in the count unless the sponsor has
submitted proof satisfactory to the Department of Law establishing that the
purchaser is a bona fide tenant, or in a noneviction plan subject to G.B.L.,
section 352-eeee, unless the sponsor has submitted proof satisfactory to the
Department of Law establishing that the purchaser is a bona fide purchaser who
meets the requirements of section
23.5(e)(3)(iii)
of this Part;
(7) the number of
purchasers required to be listed under section
23.5(e)(6)(vii)
of this Part who may not be included in the count at the time of the posting,
but whom sponsor seeks to include in the future;
(8) the number of units or tenants counted in
the base. If the plan is an eviction plan under G.B.L., section 352-eee or
352-eeee, also state the number of tenants or units subtracted from the base to
date, and the basis in law for each subtraction;
(9) the percentage obtained by dividing the
number of purchasers to be counted towards effectiveness given in paragraph (6)
of this subdivision by the number of tenants or units counted in the base given
in paragraph (8); and
(10) if the
plan is an eviction plan subject to G.B.L., section 352-eee, also give the
percentage obtained by dividing:
(i) the
number of purchasers to be counted towards effectiveness given in paragraph (6)
of this subdivision
(ii) by the
number of tenants or units counted in the base given in paragraph (8) of this
subdivision, plus the eligible senior citizens and eligible disabled persons
who were bona fide tenants in occupancy on the filing date and had been
subtracted from the base in paragraph (8).
(p)
Disclaimers.
The requirements set forth in section
23.3 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 this Part.
