Temporary New York State Policies Affecting the Sale and Marketing of Offered Units/Apartments/Homes

We understand that our Condominium and Cooperative clients have many questions regarding their rights and obligations during this difficult period. In this regard, we would like to advise you of the provisional policies (outlined below) that have been adopted by the Attorney General’s Office (“AG’s Office”) to temporarily streamline filing requirements and guide Sponsors’ business operations for the duration of the emergency (the “Relief Period”). The Relief Period is effective commencing March 25, 2020 and will continue until further notice from the AG’s Office.

It is also important to note that all of the AG’s staff is attempting to work remotely and the main office has effectively been shut down. As a result, the review of any amendment (“Amendment”) and/or offering plan (“Offering Plan”) that is pending or needs to be submitted during the Relief Period will likely be delayed.

General Scope of Temporary Relief

During the Relief Period, the AG’s Office will permit the following:

Marketing or sale of units/apartments/homes pursuant to an expired or Offering Plan that becomes stale during the Relief Period.
Price changes without the need to file “Price Change Only Amendments”. As a result, all increases, all across the board, decreases and all price changes that are advertised, will not require an Amendment during the Relief Period.

Accordingly, the AG’s Office has temporarily limited and/or postponed submission requirements and modified review procedures related to these activities. However, standard submission and review requirements remain applicable to other Sponsor activities. The chart below illustrates this distinction, listing which type of disclosures should, and should not. be submitted to the AG’s Office during the Relief Period.

ATTORNEY GENERAL NOT REQUIRING

Financial Update Amendments (solely to extend the term of the Offering Plan

Price Change Only Amendments

ATTORNEY GENERAL STILL REQUIRING

New Offering Plan Submissions

Effectiveness Amendments

Post-Closing Amendments

Amendments with material changes affecting Purchasers During the Relief Period*

*NOTE: Even during the Relief Period, the AG’s Office is still requiring material disclosures that require an Amendment. The failure to disclose a material and adverse change to a purchaser may require a right of rescission. The following is a non-exhaustive list of changes the AG’s Office deems to be “material and adverse”:

The Sponsor learns that the building’s actual cash operating expenses (excluding depreciation and extraordinary or non-recurring items, but including capital repairs, replacements, and improvements) for a fiscal year exceed its income by more than 15% percent.

Litigation is filed which may adversely affect the Sponsor’s capacity to perform all of its obligations.

The Sponsor learns, or should know, that the Condominium, Cooperative, Homeowners Association, Timeshare, or Senior Residential Community is not meeting its current obligations.

The Sponsor is not meeting its current obligations.

The Sponsor is subjected to a judgment in any civil or criminal action or proceeding which adversely affects the Offering Plan or the Sponsor’s fitness as an Offeror of real estate securities.

The Sponsor learns, or should know, of facts or circumstances which may in reasonable likelihood result in material increases in maintenance charges or common charges to the applicable community.

There is an increase of 25% or more in the budget or projected budget of the property.

There is an increase of 25% or more in the property’s projected or assessed property taxes.

The Sponsor makes a change in the size or number of units and/or their respective percentages of common

The Sponsor materially decreases the size or quality of common elements.

There is an architectural change to any common element or any unit/apartment/home being offered, other than a substitution of “equal or better quality” as defined in the Offering Plan.

There is a material decrease in the square footage of any unit/apartment/home being offered.

There is a change to the identities of the Sponsors or Principals of the Offering Plan.

In view of the significant consequences for failing to make disclosures as required under the AG’s temporary policies (i.e., the possible right of rescission to a purchaser), it is important that you contact us in each instance where you intend to make a material change, or in the event you determine same has occurred or will occur or in the event you are not sure if the change is material.

Temporary Submission and Review Policies

The AG’s Office is still continuing to accept and review new Offering Plan submissions during the Relief Period. Subject to further developments, the AG’s Office is requiring essentially the same process for the submission of Offering Plans that was required prior to the Relief Period.

COOPERATIVE POLICY STATEMENT/NO-ACTION APPLICATIONS

The AG’s Office is suspending the cooperative policy statement (“CPS”) until further notice. These would include new market test applications and Homeowner Associations with “de minimus”
CPS exemptions granted prior to the start of the Relief Period remain in full force and effect.
No-Action Letters.
During the Relief Period, the AG’s Office is still accepting applications for No-Action Letters.

DIFFICULTIES SECURING A NOTARY OR ORIGINAL “WET INK” SIGNATURES

During the Relief Period, original “wet ink” signatures are not required, and the AG’s Office will deem a photocopy or scanned copy of an original signature to be an original signature.
During the Relief Period, the AG’s Office will accept documents that need to be notarized as long as certain requirements for notarization are met pursuant to an Executive Order of the State. In the event you need assistance on this matter, please contact one of the Attorneys listed below.
In lieu of notarization, the AG’s Office may accept documents that previously required a notary as long as the document includes a signed declaration certifying the truth and accuracy of the document.

Please note that our office will revise the necessary document to provide the required language and procedure for the applicable documents.

ATTORNEY GENERAL‘S REQUIREMENTS SUBSEQUENT TO THE RELIEF PERIOD

Once the AG’s Office ends the Relief Period, the AG’s Office will require the following:

Price Change Amendments: All changes in prices of units during the Relief Period must be disclosed in a subsequent Amendment to the AG’s Office.

Extension Amendments: All procedures previously required by the AG’s Office regarding the extension of an Offering Plan that became stale during the Relief Period or are lapsing subsequent to the Relief Period will be required.

Paper copies of the Offering Plan: All prospective purchasers and purchasers of a unit during the Relief Period will be required to receive a paper copy of the Offering Plan.

OTHER ISSUES OR CONCERNS

We understand you may still have questions regarding your rights and obligations during this uncertain time. Accordingly, our Condominium/Cooperative attorneys and legal assistants are available to address any questions or concerns you may have. We will continue to keep you updated as things progress. Please feel free to contact any of the following attorneys in our department:

Ira Adler (516) 296-7099
iadler@certilmanbalin.com