BILL NUMBER:S3256

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 year, 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.