BILL NUMBER:S3593

TITLE OF BILL:

An act to amend the general business law, in relation to the rights of
cooperative and condominium sponsors and purchasers regarding the
rental of vacant dwelling units

PURPOSE OR GENERAL IDEA OF BILL:

This bill establishes a mechanism for addressing the problems created
when a cooperative or condominium sponsor suspends efforts to sell
apartments in the building being converted.

SUMMARY OF SPECIFIC PROVISIONS:

The bill adds a new subdivision 8 to section 352-eeee of the General
Business Law to provide that any unsold dwelling unit in a cooperative
or condominium apartment building must be offered for sale when it
becomes vacant, unless: (a) the offering plan stated that unsold
dwelling units would not be sold when they became vacant and also
warned purchasers of the risks of ownership in a building where unsold
dwelling units are not offered for sale; or (b) the sponsor or unit
owner obtains the consent of a majority of the unaffiliated members of
the board of the cooperative or condominium.  If neither of these
conditions are met, then the apartment must be offered for sale for a
              

period of at least one year. If the apartment cannot be sold during
that time period, then the sponsor or unit owner may rent the
apartment for up to one yeas, and the sponsor must send a copy of the
lease to the board of directors of the cooperative corporation or the
board of managers of the condominium association.  After the
termination of the lease period, the apartment must be offered for
sale again for another one-year period. The prohibition against
renting the apartment, except with the permission of the board or
after a one-year sale period, continues to apply until the apartment
is sold.

The bill also includes an exemption from this sale requirement for
owners who have purchased a dwelling for their own personal use or the
use of a family member but who are not presently occupying the unit
pending approval of the co-op board. In addition, the requirement does
not apply to units owned by the cooperative corporation or the
condominium association. The term "unsold dwelling unit" is defined
for the purposes of this new subdivision as the shares and proprietary
lease in a cooperative or a unit in a condominium that was not sold by
the sponsor, and includes units designated by the sponsor as "unsold
shares" and "unsold units."

JUSTIFICATION:

Cooperative and condominium apartment ownership in New York State is
founded upon the principle of joint ownership of a building by its
tenants. This unique form of ownership allows individual residents to
hold an equity interest in their dwellings, while at the same time
creating a mutual interest among all of the unit owners in the care
and upkeep of the building. This concept of joint ownership forms the
basis for the offering plan which is filed with the Attorney General,


and which offers the dwelling units for sale to the public. As a
general rule, these offering plans explicitly state that the principal
purpose of the offering plan is to sell the apartments for use as
homes by purchasers.

Unfortunately, in some circumstances building sponsors have stopped
offering units for sale long before all the units have been sold. In
many instances the sponsor's intention in converting the building to
cooperative or condominium ownership was to remove vacant apartments
from the rent regulation laws, and to allow the sponsor to charge
market rents for the vacant apartments. As a result of the sponsor's
decision to rent the units rather than sell them, many apartment
purchasers have found that they are not residing in a building where
the other tenants are also owners, as was intended by the statutory
provisions authorizing building conversions. Instead, they are
minority owners in a building that remains operated as a rental by the
sponsor (who acts as the landlord) and in which vacant apartments are
rented rather than being offered for sale. The consequence of the
sponsor's action is that the building continues to be maintained by
the sponsor in the same manner as when the building was a rental, but
the purchasers are now required to contribute to the cost of its
maintenance and repair.

As minority shareholders or unit owners, however, these individuals
have virtually no control over how the building is operated.
Moreover, as a result of the large number of unsold apartments in
their building, the purchasers find themselves unable to sell or
refinance their apartments. These factors effectively trap the
purchasers into their existing apartments, which in many cases they
can no longer afford or are no longer adequate for their growing
families. These consequences are particularly inequitable because the
determination of the sponsor to stop selling apartments was never
disclosed to the purchasers of the initial apartments. These
purchasers were, in effect, defrauded into believing that ultimately
all of the apartments would be sold, and that they would be living in
a building that is entirely owned by individuals with common goals and
interests. This bill seeks to address this problem by establishing a
process for determining whether a building sponsor may choose not to
sell vacant apartments.

Specifically, the bill provides that vacant, unsold apartments must be
put on the market unless the offering plan specified that such
apartments would not be offered for sale. In the event the offering
plan did not contain the requisite disclosure, then a majority of the
members of the board of directors or board of managers who are not
affiliated with the sponsor must vote to permit the sponsor or other
unit owner to withhold the apartment or unit from sale. In those
circumstances where the apartment must be offered for sale, the
apartment must remain on the market for at least one year. If the
apartment remains unsold after that time period, then the sponsor or
unit owner may rent the apartment for up to one year, after which it
must be offered for sale again for another one-year period. The
prohibition against renting the apartment, except with the permission
of the board or after a one-year sale period, continues to apply until
the apartment is sold. The bill contains an exemption from this sale
requirement for owners who have purchased a dwelling for their own
personal use or the use of a family member but who are not presently


occupying the unit. Finally, the sale requirement does not apply to
units owned by the cooperative corporation or the condominium
association.

PRIOR LEGISLATIVE HISTORY:

2009-10 - A.835 Referred to Housing
2007-08 - A.3132 Referred to Housing
2005-06 - A.1462 Referred to Housing
2003-04 - A.3293A Referred to Housing
2001-02 - A.8986 Referred to Housing

FISCAL IMPLICATIONS:

None.

EFFECTIVE DATE:

This act takes effect immediately and applies to all dwelling units in
cooperative and condominium buildings that become vacant after such
effective date.