New York Codes, Rules and Regulations
Title 13 - DEPARTMENT OF LAW
Chapter II - SECURITIES TRANSACTIONS AND PERSONNEL
Subchapter B - REAL ESTATE SYNDICATES
Part 23 - OCCUPIED CONDOMINIUMS
Section 23.9 - Applications for no-action letters
Universal Citation: 13 NY Comp Codes Rules and Regs ยง 23.9
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 enforcement action based on the transaction described in the application occurring without the filing of an offering plan pursuant to 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 offerors and all the offerees is of such a nature that
the offerees do not require the protection of an offering plan; and
(ii) the relationship between all offerees
and the condominium units being offered is such that all the offerees are aware
of the condition of the property which is the subject of the offering;
and
(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) The following transactions may
qualify for a no-action letter:
(i) Unsold
space in an existing condominium. The offering and sale by a condominium
established pursuant to an offering made in compliance with section 352-e of
the G.B.L. and the New York Condominium Act, of one or more units consisting of
space that was not sold under the original offering. Such space may include,
but shall not be limited to, a superintendent's apartment, parking spaces,
commercial space or professional offices (see subdivision [c] of this section
for specific requirements).
(ii) De
facto situation. The offering and sale of units in residential or commercial
property which is owned and occupied solely by the offerors as joint tenants,
tenants by the entirety, tenants-in-common, sole shareholders of a corporate
owner or sole partners in a partnership. All of the offerors must have acquired
title in one of the above forms at least two years prior to submission of the
application for the no-action letter; there must be no vacant or sublet units
of any kind in the building; and the proposed offerees must be identical to the
offerors (see subdivision [d] of this section for specific
requirements).
(iii)
Tenant-sponsored condominium. The offering and sale of units in commercial or
residential property proposed to be acquired by all tenants of a building under
a tenant-sponsored or promoted proposal. All tenants must join in the
application for a no-action letter; and there must be no vacant or sublet units
of any kind in the building (see subdivision [e] of this section for specific
requirements).
(3) A
no-action letter shall not be issued where 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 State Department of Law, Real Estate Finance
Bureau, 28 Liberty Street, New York, NY 10005.
(2) The application shall include a
transmittal letter signed by the attorney who prepared the application, which
states:
(i) the reasons why the transaction
described in the application meets the standards set forth in paragraph (a)(1)
of this section;
(ii) that the
attorney has no actual knowledge of any omission or untrue statement of a
material fact included in the application; and
(iii) that the attorney has prepared or
reviewed all legal documents necessary to form the condominium and believes it
to be a valid condominium under the New York Condominium Act (or the laws
regulating condominiums in the state where the property is located). If the
condominium is not in existence at the time the application is submitted, the
attorney will cause the condominium to be formed in conformity with applicable
law, including the New York Condominium Act (or the laws regulating
condominiums in the state where the property is located).
(3) An application must be accompanied by a
check in the amount required by G.B.L., section 352-e(7)(a) made payable to the
Department of Law.
(c) If unsold space in an existing condominium, as described by subparagraph (a)(2)(i) of this section, is being offered, the following requirements must be met:
(1) If the sale of unsold space results
in an alteration of the common interest appurtenant to each unit as expressed
in the declaration, written consent of all unit owners affected and holders of
all mortgages must be submitted with this application.
(2) The application must include an affidavit
from all members of the board of managers setting forth:
(i) the name, residence and business address
of each member of the board of managers;
(ii) a description of the proposed
transaction, the specific unit(s) being offered, the total number of units in
the building, the percentage of common interest allocated to each unit and a
schedule of tenancies. If the units being offered are vacant, describe how such
vacancies occurred;
(iii) the date
the condominium was formed;
(iv)
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. Alternatively, if the proposed use will not comply
with the legally permissible use, what steps must be taken to comply with or to
change the legally permissible use and the person responsible for taking such
steps;
(v) that the offeror(s) will
comply with G.B.L., sections 352-e(2)(b) and 352-h and hold all downpayments
for the purchase of units in trust for the benefit of the purchasers and that
such funds shall not be commingled with the monies of the offeror(s) until
actually employed in connection with the consummation of the
transaction;
(vi) that the
offeror(s) will provide to each offeree the following information:
(a) the purchase price;
(b) the percentage of common interest
allocated to the unit;
(c) the
estimated common charges and real estate taxes and the current or proposed
budget;
(d) a copy of any mortgage
or ground lease on the property;
(e) a copy of the most recent financial
statement of income and expenses for the operation of the property, if
applicable;
(f) information known
to the offeror(s) which may result in extraordinary expenses for unit owners or
for the condominium including, but not limited to, assessments, liabilities,
dangerous or hazardous conditions, pending litigation and administrative
proceedings;
(g) a copy of the
offering plan and all amendments;
(h) a copy of the certificate of occupancy
for the building; and
(i) such
other information as the Department of Law may require;
(vii) that the offeror will 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;
(viii) that the offeror will furnish, within
five days after a request by the Department of Law, copies, of executed offeree
affidavits required pursuant to subparagraph (x) of this paragraph;
(ix) whether the offeror or its principals,
have, within the preceding five years, 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 any
property which was the subject of such application or offering; and
(x) 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:
(a) the offeree's name, residence and
business address and legal status (corporation, partnership, individual,
etc.);
(b) that the offeree has
read the affidavit of the offeror submitted as part of the application for a
no-action letter and understands that no offering literature other than as
required by the no-action letter will be provided;
(c) that the offeree has inspected the
subject property; and
(d) that the
offeree is purchasing the unit(s) for personal occupancy and does not intend to
resell the unit within two years from the later of the closing or the date the
no-action letter is issued by the Department of Law.
(3) The application must include a
broker-dealer statement (form M-10) executed by a member of the board of
managers and accompanied by a check in the amount required by section
359-e
(5) of the General Business Law.
(d) If the application is submitted in a de facto situation, as described by subparagraph (a)(2)(ii) of this section, the following requirements must be met:
(1) The application must include an affidavit
signed by all unit owners setting forth:
(i)
that all units are currently and have been owned and occupied by the offerors
for at least two years; that there are no vacant units; and that there are no
units that are occupied by subtenants;
(ii) a description of the proposed
transaction;
(iii) that the
condominium has complied with the requirements of G.B.L., section 352-ee (if
applicable) or is an interim multiple dwelling duly registered with the New
York City Loft Board or has a temporary or permanent certificate of occupancy
or is otherwise legal for the proposed use;
(iv) the number of units in the building and
the name, residence and business address and legal status (corporation,
partnership, individual, etc.) of each unit owner;
(v) that the unit owners understand that no
offering literature other than as required by the no-action letter will be
provided and that they acknowledge that they have been informed that if this
transaction constituted a public offering within the meaning of G.B.L., article
23-A, they would be entitled to certain rights and protections pursuant to such
article;
(vi) if payment will be
made for the units, that the unit owners will comply with G.B.L., sections
352-e(2)(b) and 352-h and hold all downpayments for the purchase of units in
trust for the benefit of the purchasers and that such funds shall not be
commingled with the monies of the offeror(s) until actually employed in
connection with the consummation of the transaction;
(vii) that the unit owners will provide to
all future purchasers, prior to closing, the following information:
(a) the purchase price;
(b) the percentage of common interest
allocated to the unit;
(c) the
estimated common charges and real estate taxes and the current or proposed
budget;
(d) a copy of any mortgage
or ground lease on the property;
(e) a copy of the most recent financial
statement of income and expenses for the operation of the property, if
applicable;
(f) information known
to the unit owners which may result in extraordinary expenses for purchasers or
the condominium, including but not limited to assessments, liabilities,
dangerous or hazardous conditions, pending litigation and administrative
proceedings; and
(g) such other
information as the Department of Law may require to be presented to such
purchaser;
(viii) that
the unit owners agree to furnish a complete copy of the application for a
no-action letter and a copy of the no-action letter to each future purchaser
prior to accepting any downpayment; and
(ix) whether any unit owner has, within the
preceding five years, participated in any other application for a no-action
letter or has made any other offerings which were not pursuant to an offering
plan filed with the Department of Law and the address of any property which was
the subject of such application or offering.
(2) If requested, the application must
include a separate broker-dealer statement (form M-10) submitted by each unit
owner and accompanied by a check in the amount required by section
359-e
(5) of the General Business Law.
(e) If the condominium proposal is tenant-sponsored, as described by subparagraph (a)(2)(iii) of this section, the following requirements must be met:
(1) The
application must include an affidavit from the owner of the building setting
forth the following information:
(i) that the
proposal was initiated by the tenants; that a contract of sale has been
executed by the affiant and all tenants; and that there are no vacant or sublet
units in the building. The contract of sale should be annexed to the affidavit
as an exhibit;
(ii) the building
has complied with the requirements of G.B.L., section 352-ee (if applicable) or
is an interim multiple dwelling duly registered with the New York City Loft
Board or has a temporary or permanent certificate of occupancy or is otherwise
legal for the proposed use;
(iii) a
description of the proposed transaction;
(iv) that the owner will comply with G.B.L.,
sections 352-e(2)(b) and 352-h and hold all downpayments for the purchase of
units in trust for the benefit of the purchasers and that such funds shall not
be commingled with the monies of the owner until actually employed in
connection with the consummation of the transaction;
(v) whether the owner, within the preceding
five years, has participated in any other application for a no-action letter or
has made any other offering which was not pursuant to an offering plan filed
with the Department of Law and the address of the property which was the
subject of such application or offering; and
(vi) that the owner will provide to each
tenant the following information:
(a) the
purchase price;
(b) the percentage
of common interest in the unit;
(c)
the estimated common charges and real estate taxes and the current or proposed
budget;
(d) a copy of any mortgage
or ground lease on the property;
(e) a copy of the most recent financial
statement of income and expenses for the operation of the property, if
applicable;
(f) information known
to the owner which may result in extraordinary expenses for unit owners or for
the condominium, including but not limited to assessments, liabilities,
dangerous or hazardous conditions, pending litigation and administrative
proceedings; and
(g) such other
information as the Department of Law may require to be presented to each
tenant.
(2)
The application must also include an affidavit signed by all tenants setting
forth the following information:
(i) a
statement that they join in the application for a no-action letter and that
this proposal was initiated by the tenants;
(ii) the name, residence and business address
of each tenant;
(iii) a schedule
setting forth how long each tenant has been in occupancy;
(iv) that the tenants have read the affidavit
of the owner submitted as part of the application for a no-action
letter;
(v) that the tenants
understand that no offering literature other than as required by the no-action
letter will be provided and that they acknowledge that they have been informed
that if this transaction constituted a public offering within the meaning of
G.B.L., article 23-A, they would be entitled to certain rights and protections
pursuant to such article;
(vi) that
the tenants have inspected the subject property; and
(vii) that each tenant is purchasing the unit
for personal occupancy and does not have the intention of reselling the unit
within two years from the later of the closing or the date the no-action letter
is issued by the Department of Law.
(3) The application must include a
broker-dealer statement (form M-10) submitted on behalf of the sponsoring
entity, signed by each tenant-sponsor and accompanied by a check in the amount
required by section
359-e
(5) of the General Business Law. If no
sponsoring entity exists, a separate broker-dealer statement must be submitted
and signed by each tenant-sponsor.
(f) Conditions to the granting of a no-action letter.
(1) The granting of a
no-action letter shall 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 General Business Law 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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