The greatest changes in cooperative and condominium law this past year did not come from the legislature or from the courts but from the New York Attorney General’s office (NYAG). This article will review some of those changes and the most significant appellate cases affecting cooperatives and condominiums.
Buyouts and Conversions
With respect to cooperative and condominium conversions, the New York Attorney General’s Real Estate Finance Bureau (REFB) has focused its mission on 1) maintaining and protecting the rent regulated system and free market tenants in buildings converting to cooperative and condominium ownership and 2) increasing and maintaining the number of low and moderate income housing units. As a result, the REFB is shifting its focus away from protecting owners suffering from buying in poorly-built newly construction buildings.
Thus, in early 2015 the REFB’s heavily relied on a July 9th, 1986 internal Memorandum setting forth its rules with regard to buyout offers. That memorandum stated that “buy-out offers cannot be accepted by the tenants until the Black Book is out. There will be no exceptions to this policy—our experience of the past nine months has persuaded us that the only fair, even-handed way of enforcing this policy is not to allow any exceptions.” (emphasis supplied). This internal memorandum was first disclosed to the public on REFB’s website almost a year ago, but it had never been published before nor had it been codified into a formal regulation.
By way of background, two types of conversions may be proposed: eviction and non-eviction. Under an eviction plan, "a non-purchasing tenant may be evicted
from an apartment by the purchaser or the sponsor after a certain period of time." Under a non-eviction plan, a tenant may remain in the building as a renter after the conversion. Senior citizens (62 and older) and the disabled are protected from eviction although they may later buy their apartments at the price offered other tenants (at the time they make their decision). 3. The tenants usually organize themselves and hire architects, lawyers, etc., to examine the condition of the building and the offering plan itself. 4. After the Attorney General approves the "red herring" plan, a final offering plan is made by the sponsor. It has a black title replacing the red one of the "red herring," and is called a "black book."