nys ag coop.condo handbook

8/6/2019 NYS AG Coop.condo Handbook

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Introduction

1

Types of CooperativeHousing OwnershipCooperativesCondominiumsHomeowners' Associations 3

2

Basic New York LawsMartin Act

Cooperative and Condominium Conversion ActsRent Stabilization LawRent Control LawEmergency Tenant Protection ActCondominium Act 6

3

The Conversion Process StepBy StepRed Herrings

Eviction and Non-Eviction PlansSenior Citizens and Disabled PersonsBlack Books 8

4

Tenants' RightsNew York CityNassau, Rockland, and Westchester CountiesSuffolk County and Upstate New York 15

Glossary 24

February 2008


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Introduction

The conversion of a rental apartment building to a cooperative or condominium is a technical

and complex process. New York State's laws governing such conversions generally providemore protection for tenants than those of any other state. However, within the state, lawsand regulations differ according to the geographical location of the building or development.

This handbook has been prepared to help tenants make informed and intelligentdecisions when faced with conversion plans.

Section 1 defines the different types of home ownership regulated by the AttorneyGeneral of New York State.

Section 2 describes the basic laws that govern cooperative and condominiumconversions in New York State.

Section 3 presents a step-by-step overview of the conversion process and answerssome of the questions most frequently asked by tenants about co-ops and condos.

Section 4 summarizes the rights of a tenant residing in a building undergoingconversion. It outlines the relevant guidelines in effect in different areas of New York State,and explains their application to eviction and non-eviction plans. Tenants' rights dependupon the laws governing the conversion process in their area.

A glossary at the end of this book provides a handy reference to the terminology ofthe conversion process.

Experience has shown that a tenant, whose building is being converted to a co-opor condo may want to consult a lawyer to ensure that his/her rights are being protected. Anattorney familiar with the conversion process will be able to explain it completely, and maybe retained to represent the tenants in their negotiations with the building owner. If you areconsidering buying your apartment, you should also consult a lawyer and an accountant, justas you would if you were buying a house. An accountant will aid you in understanding thefinancial statements contained in the offering plan you receive before purchasing. Thispurchase may be the most important financial transaction of your life, and you should haveall the facts needed to make an intelligent and well-informed decision.


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Section 1

Types of CooperativeHousing OwnershipCooperatives

When a building is converted to cooperative ownership, legal title to the building istransferred to an apartment corporation which has been formed to take over ownership ofthe property. The residents of a cooperative do not actually buy their individual apartments.Rather, they buy the shares in the apartment corporation allocated to a particular apartment.The number of shares allocated to each apartment must be fair and reasonable, based onsuch factors as the number of rooms and the location and size of each unit. Ownership ofthe shares entitles the purchaser to a long-term proprietary lease for the apartment. Thislease defines the purchaser's rights and obligations with respect to the possession, use andoccupancy of the apartment.

The cooperative corporation that owns the building must make the payments on anymortgages on the building, and pay the real estate taxes, fuel costs, payroll expenses forbuilding employees, insurance, and the other expenses of operating the building. Theseexpenses are referred to as the maintenance charges. The amount of these charges paidby the owner of each individual apartment is based upon the number of shares in thecorporation allocated to the apartment.

Maintenance charges will be increased periodically if taxes rise, if the costs offinancing or services required to maintain the building increase, or if the tenant-shareholdersdecide to increase the level of services or to make major repairs.

The purchaser of a co-op apartment often obtains a loan to finance the purchase ofthe shares allocated to the apartment, pledging the shares of stock and proprietary leaseas security for the loan. Payments on such a loan, plus the monthly maintenance chargespaid to the cooperative, constitute the owner's total carrying costs for the apartment.

Owning a cooperative apartment may provide tax advantages similar to thoseenjoyed by owners of single family homes. If the requirements of the federal tax laws are

met, apartment buyers may be able to deduct the portion of their maintenance charges usedto pay interest on the building's mortgage and the real estate taxes paid by the cooperativecorporation. In addition, the interest (but not the principal) that an individual pays on a loanto finance the purchase of shares is deductible. The value of the deduction, however, isdependent upon each co-op owner's tax bracket. Each offering plan must explain these tax


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deductions. The tax laws are complex and the Attorney General advises the purchaser toconsult an attorney or accountant.

The cooperative corporation that owns the apartment building is governed by a boardof directors, elected by the owners of the shares of the corporation. The board's powers and

responsibilities are spelled out in a detailed set of by-laws, a copy of which must be includedin the offering plan. The rights and obligations of individual apartment owners are alsoexplained in the by-laws of the corporation and in the proprietary lease. For example, mostco-ops restrict the rights of tenant-shareholders to sell or lease their apartments, requiringother cooperators to approve a new building resident.

Many cooperative corporations hire managing agents to operate the buildings. Themanaging agent collects maintenance charges from residents, supervises employees of thecorporation, and receives a fee from the corporation for performing these services.

Condominiums

When a building is converted to condominium ownership, the purchaser buys an apartment.At the same time, the purchaser, together with the other unit owners, buy an "undividedinterest" in the common elements of the building or development. Common elementsgenerally include the land on which the building stands, the lobby, public halls, driveways,access roads and parking areas; and the electrical, mechanical, heating and air conditioningsystems that service the building.

Rather than owning shares in a cooperative corporation, condominium buyers owntheir individual units outright and receive deeds for them. Each of the unit owners isresponsible for paying a proportionate share of the building's fuel costs, building employee

salaries, and other expenses of operation. These costs are known as common charges.Additionally, each condominium owner pays real estate taxes, separately assessed againsteach unit, and the cost of any mortgage obtained to finance the original purchase. Thecondominium owner may deduct these tax payments and the payments of interest (but notprincipal) on the mortgage, from taxable income.

The condominium is governed by a board of managers elected by the unit owners.The board's authority to operate the building is explained in detail in the condominiumdeclaration and by-laws, a copy of which is included in the offering plan. These providerules and procedures for conducting the affairs of the condominium, and define the rightsand obligations of unit owners. For example, the by-laws may restrict the right of unit

owners to make certain kinds of alterations to their units or to lease or mortgage them.


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Homeowners' Associations

A homeowners' association owns and operates the areas and facilities common to a groupof single family homes, condominiums, cooperatives or any combination of the three.

Membership in a homeowners' association entitles the unit owner to the use of recreationalfacilities, roads, parks and similar amenities in a development. It also obligates thehomeowners to pay for the maintenance of these facilities and for necessary services suchas snow removal or road repairs.

Many new townhouse and condominium developments form homeowners'associations to facilitate unified planning and operation. The rights and obligations of thehomeowners, and the budget of the association, must be included in the offering plan.Membership fees in these associations are not tax-deductible.


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Section 2

BasicNew York Laws

Different laws apply in various parts of New York State to the conversion of rental apartmentbuildings to cooperatives and condominiums. The laws' basic provisions are summarizedhere, and they are explained in detail in Section 4.

The Martin Act

The Martin Act (Article 23-A of the General Business Law) applies to the sale of all types ofcooperatively owned real estate. The sale of co-op shares, condo units, or interests inhomeowners' associations is subject to the Martin Act, as is the sale of other securities, suchas stocks and bonds. The law requires that a complete description of these kinds of realestate interests be fully disclosed in an offering plan. No advertising or sales may take placeunless the offering plan or prospectus, containing all the detailed information necessary fora purchaser to make a reasoned judgement about the decision to buy or not to buy, hasbeen accepted for filing by the Attorney General.

The Cooperative and Condominium

Conversion Act

The Cooperative and Condominium Conversion Act, also part of the General Business Law,specifically regulates the conversion of existing rental buildings to cooperative forms ofownership. One section (352-eeee) governs the conversion of residential apartmentbuildings in New York City. A second (352-eee) applies to those cities, towns and villagesin the counties of Nassau, Rockland and Westchester that have passed resolutions adoptingthe coverage of the law. A third (352-e(2a)) protects senior citizens and disabled tenantsin the municipalities throughout the state that have adopted the law.

These laws provide specific protection for tenants living in buildings undergoing

conversion, and require that offering plans include explanations of the rights and obligationsof both purchasers and non-purchasers. These protections are explained further in Section3.


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The Rent Stabilization Law and Code andThe Rent Control Law

The Rent Stabilization Law and Code and the Rent Control Law offer additional protection

for New York City tenants living in rent-stabilized and rent-controlled apartments undergoingconversion.

The Emergency Tenant Protection Act andThe Emergency Housing Rent Control Law

The Emergency Tenant Protection Act (ETPA) and the Emergency Housing Rent ControlLaw (EHRC) provide certain rights to tenants living in buildings outside New York City thatare covered by these laws.

The Condominium Act

The Condominium Act details requirements for condominiums throughout the state (Article9B of the Real Property Law).


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Section 3

The ConversionProcess Step By StepQuestions & Answers

Proposed Offering Plans or Red Herrings

What is a red herring?Before owners or sponsors may convert a rental apartment building, they must

present an offering plan to each tenant and to the Attorney General. This plan is only apreliminary prospectus of the proposed conversion. It is referred to as a red herring

because the legend on its cover must be printed in bold red lettering.

Can an apartment be sold on the basis of the red herring?No. As the red legend indicates, the information contained in the red herring is

subject to review and may be supplemented or changed as determined by the AttorneyGeneral. The sponsor may also change the terms of the red herring. Until the review iscompleted, and the final version of the plan is accepted for filing, no sales or advertisementsare permitted.

What exactly is the role of the Attorney General in the conversion process?In New York, interests in a cooperative, condominium or homeowners' association

may not be sold, or even offered for sale, until an offering plan -- disclosing all the materialfacts and complying with all of the laws -- has been submitted to, and accepted for filing bythe Attorney General.

Before accepting a plan for filing, the Attorney General's office reviews the offeringplan and supporting documents submitted by the sponsor to determine whether the sponsorhas complied with tenant protection laws and whether the plan appears to disclose all of theinformation required by the laws and regulations issued by the Attorney General. Byaccepting a plan for filing, the Attorney General is indicating only that the sponsor appearsto have complied with the law. Responsibility for full compliance lies with the sponsor.Acceptance does not constitute a value judgment on the plan. It does not mean the

Attorney General has approved the financial terms, the price, the description of the building'scondition or any other aspect of the plan.


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Is it wise for tenants to begin their independent evaluation of the property as soon asthe red herring is submitted?

Yes. The review period gives tenants an opportunity to gather information to helpthem make well-informed decisions about buying their apartment. Tenants often organize

themselves and hire professionals, such as attorneys and engineers, to help them evaluatethe plan and assess the condition of the building.

Tenants in New York City and the three suburban counties of Nassau, Rockland andWestchester must be informed by the sponsor of their right to have the building inspectedby registered architects or professional engineers at any time after a red herring is submittedto the Attorney General. The inspection must be made during normal business hours, uponwritten request to the sponsor.

Since the Attorney General's office cannot investigate all of the information containedin each plan, tenants or their attorney should notify the Attorney General of important factsthey believe may have been omitted from the plan. If there are significant differencesbetween the information submitted by the sponsor and that submitted by the tenants, theAttorney General may require a further investigation.

After the red herring is submitted, how long does it take the Attorney General toaccept a plan for filing?

When the Attorney General's office determines that all of the material factsconcerning the building appear to have been adequately disclosed, and makes all thefindings required by law, the offering plan is accepted for filing. In the case of buildingsoccupied entirely or partly for residential purposes, the Attorney General may not accept theplan in less than four months after its submission. In no more than six months, the sponsormust by law be informed that the plan is either accepted for filing or is deficient and must be

modified.

Eviction and Non-Eviction Plans

How is the type of conversion plan determined?The sponsor may choose to convert the building under either an eviction plan or non-

eviction plan. A sponsor who presents the tenants with an eviction plan may subsequentlychange it, by amendment, to a non-eviction plan.

Such a change might occur, for example, if the number of tenants who agree to

purchase their apartments is below the minimum required to put an eviction plan into effect.However, a plan which is initially presented as a non-eviction plan may not be changed toan eviction plan.


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What is an eviction plan and what rights does it provide?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. However, the conditionsgoverning an eviction plan differ according to the location of the building and laws and

regulations in effect in that community. For more specific information about your rightsunder an eviction plan, see Section 4 for the applicable guidelines.

What is a non-eviction plan? May I be evicted if I choose not to purchase myapartment?

Under a non-eviction plan, non-purchasing tenants may not be evicted for failure tobuy their apartments; they may continue to occupy them as rental tenants. For morespecific information about your rights under a non-eviction plan, see Section 4 for theapplicable guidelines.

Senior Citizens and Disabled PersonsWhat are the rights of senior citizens?

Senior citizens in New York City; in the Nassau, Rockland and Westchester Countymunicipalities that have adopted the conversion laws; and in municipalities elsewhere in thestate that have adopted the senior citizen and disabled tenant protection law, are protectedagainst eviction if they choose not to purchase their apartments. However, to be eligible forthis protection, a senior citizen, or his or her spouse, must be renting an apartment in NewYork City, or in an upstate municipality that has adopted the law, and must be at least 62years old on the date the plan is accepted for filingby the Attorney General. In the threesuburban counties, the tenant must be at least 62 on the date the plan is declared effective.

How is this protection for senior citizens secured?In New York City and upstate municipalities, the senior citizen must complete a

special exemption form and submit it to the sponsor or the sponsor's representative (not tothe Attorney General) within 60 days of having received the final offering plan. A blankexemption form must be contained in the copies of the plan distributed to tenants by thesponsor.

Protection against eviction is automatic for those senior citizens in municipalities inNassau, Rockland, and Westchester counties who are 62 years old on the date the plan isdeclared effective. They need not submit an exemption form; however, they are stronglyadvised to submit one to ensure that the sponsor knows they are protected against eviction.

To find out whether your city, town or village has adopted the statute, see the list on pages21 and 22, or call your local government office or the Attorney General's Real EstateFinance Bureau Public Information Office, (212) 416-8121.


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If senior citizens elect exemption, may they later purchase their apartments?Yes. Eligible senior citizens may change their minds and become purchasers. They

can purchase at the price offered to other tenants in the building at the time they inform thesponsor of their decision to buy.

What are the rights of eligible senior citizens who decide to stay in their apartmentsas non-purchasing tenants?

As a person exempt from eviction, a senior citizen may stay in the apartment afterthe building is converted, as long as rent is paid and other obligations are met. Theapartment may be sold, in which case the buyer becomes the senior citizen's new landlord.All of the responsibilities of the previous landlord to repair and paint the apartment becomethe responsibility of the new owner. If the apartment was covered by rent control, rentstabilization or ETPA before the conversion, that law continues to apply after the conversion.

Are there special protections for disabled persons?Yes. To be eligible for protection against eviction, a disable person must satisfy all

fourof the following conditions as of the date the offering plan is accepted for filing by theAttorney General:

1. The tenant or spouse must have an impairment which results from anatomical,physiological or psychological conditions, other than addiction to alcohol, gambling or anycontrolled substance, which is demonstrable by medically acceptable clinical and laboratorydiagnostic techniques; and

2. The impairment must be expected to be permanent; and

3. The impairment must prevent the tenant from engaging in any substantial

gainful employment; and

4. The tenant or spouse must elect not to purchase the apartment by completinga special form distributed by the sponsor in the final offering plan. The completed form mustbe given to the sponsor or the sponsor's representative within 60 days of the date theaccepted plan was presented to the tenants.

Tenants who first become disabled after the plan is accepted for filing may still qualifyas eligible disabled persons, subject to certain legal conditions. They must complete theappropriate forms within 60 days following the onset of the disability. Consult your attorneyor the Public Information Office of the Real Estate Finance Bureau if you have questions

about these conditions.


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What are the rights of eligible disabled persons to buy their apartments at a laterdate? What are their rights as non-purchasing tenants?

They are similar to the rights described for eligible senior citizens.

Is there any procedure for the sponsor to dispute the eligibility of a senior citizen or

disabled person?Yes. Within 30 days of having received an exemption form, a sponsor must informthe Attorney General that he or she disputes the eligibility of a person claiming senior citizenor disabled status. After reviewing all of the relevant documentation, the Attorney Generalwill issue a determination as to the eligibility of the individual in question.

The Final Offering Plan or Black Book

What is a black book?A black book is a final offering plan for a co-op or condo that has been accepted for

filing by the Attorney General's office. In place of the red legend that appeared on the coverof the red herring, this plan will have a statement in black lettering indicating that the planconstitutes the sponsor's offer to sell co-op or condo units on the terms and conditions setforth in the plan.

How will I know that the plan has been accepted for filing?You will receive a copy of the black book from the sponsor. The date of the Attorney

General's acceptance of the plan for filing will be shown on the cover.

Does acceptance of the plan by the Attorney General automatically mean that thebuilding will be converted?

No. A specified number of apartments must be purchased before the plan can bedeclared effective and the building actually converted. The laws in effect in the particulararea of the state where the building is located must be explained in the offering plan. SeeSection 4 for details. The sponsor may also choose to abandon the offering plan andcontinue to operate the building as a rental property.

Do the tenants living in the building have any special rights to buy their apartments?

Yes. the conversion laws in New York City and Nassau, Rockland and WestchesterCounties, and the Attorney General's regulations give tenants the exclusive right to buy theirapartments for a certain period of time after the black book is presented to them.

For 90 days from the date the black book is presented to them, tenants who were inoccupancy on the date the offering plan was accepted for filing, including rent-controlled andrent-stabilized tenants, have the exclusive right to purchase their apartments or the


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corresponding shares. During this 90-day period, the tenant's apartment may not be shownto a prospective buyer unless the tenant has, in writing, waived the right to purchase.

For six months following the expiration of the 90-day exclusive purchase period,tenants facing eviction plans in New York City, as well as Nassau, Rockland and

Westchester Counties may still purchase their apartments, but they must be willing to do soon the same terms as non-tenants. Sponsors who sell an apartment to an outsidepurchaser during this six-month period must notify the tenant that a contract has beensigned for its sale; the tenant then has 15 days to match the terms of the contract andpurchase the apartment.

Tenants of apartments covered by the state rent control law also have the right tomatch an outside offer for purchase of their apartments.

If the minimum number of subscription agreements is signed before the end of the90-day exclusive buying period, do the remaining tenants still have until the end ofthe period to buy?

Yes.

Can the exclusive buying period, during which tenants may purchase their ownapartments, be extended?

Yes. The addition of a "substantial" amendment to the plan (such as an increase inthe reserve fund or a decrease in the mortgage, or a change from an eviction plan to a non-eviction plan) requires that the original exclusive buying period be extended for another 30days. The 30-day amendment will never cut short the original exclusive buying period; it willserve only to extend it. If the amendment is presented after the 90-day period has expired,tenants are given an additional 30-day exclusive period.

If a sponsor in New York City, or in electing localities of Nassau, Rockland andWestchester Counties substitutes a non-eviction plan for an eviction plan, any tenant whopurchased under the original eviction plan has 30 days from the date the amended plan isreceived in which to rescind the purchase agreement. Tenants elsewhere in the state haveat least 15 days to rescind.

How can I find out how many tenants have agreed to purchase their apartments?

In New York City and areas covered by the conversion laws, the sponsor must postthe percentage of tenants who have signed subscription agreements in a prominent placein the building. This must be done every 30 days until the plan is either declared effective

or abandoned. This list must also be filed with the Attorney General. However, no postingis required in buildings located in areas not covered by the conversion laws. SeeSection 4.


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What is the status of vacant apartments in a building undergoing conversion?

Apartments unsold at the time a plan is declared effective remain the property of thesponsor, who may sell them for whatever the market will bear.

Because the law specifies that the conversion plan may only be declared effectiveafter a specified percentage of the tenants of occupied apartments have agreed topurchase, the owner of a building who contemplates submitting a plan for its conversion toco-op or condo ownership might have some incentive to discourage renting vacantapartments. In New York City, Nassau, Rockland and Westchester Counties, this practice,called "warehousing", is restricted; a conversion plan may be rejected by the AttorneyGeneral if he finds that excessive warehousing has occurred.

Specifically, if the Attorney General determines that during the five monthsimmediately preceding submission of the red herring, the number of vacant apartments hasexceeded 10% of the total number of rental units in the building, and if that rate is more thandouble the "normal" average vacancy rate for the previous two calendar years the plan willnot be accepted for filing.

Apartments that first become vacant after the red herring is submitted are notconsidered "warehoused" units.

What are the protections against harassment?

The conversion laws in New York City and Nassau, Rockland and WestchesterCounties specifically prohibit any person from interrupting, discontinuing or interfering withany essential service which substantially disturbs the comfort or peace and quiet of any

tenant who uses or occupies an apartment. The tenant, or the Attorney General, may takelegal action to stop harassment.


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Section 4

Tenants' RightsNew York CityEviction Plan

For an eviction plan to be declared effective, 51% of the bona fide tenants in occupancy(excluding from the calculation eligible senior citizen and disabled tenants) of all the dwellingunits on the date the Attorney General accepts the offering plan for filing (the "acceptancedate") must sign written purchase agreements.

The percentage of tenants of rent-controlled apartments who purchase is notcomputed separately to determine if an eviction plan may be declared effective.

The terms of the offering must be stated in good faith without fraud and with nodiscriminatory repurchase agreement or other discriminatory inducement. If the sponsordoes not obtain the required percentage of purchase agreements within 15 months from theacceptance date, the conversion plan is considered abandoned, and no new conversionplan may be submitted to the Attorney General for at least one year.

Bona Fide Tenants

The sponsor or a principal of the sponsor who purchases an apartment will not be countedtoward the 51% needed to declare the plan effective. A sponsor's or selling agent's relativeby blood, marriage or adoption; an employee, shareholder, limited partner or businessassociate of the sponsor or the selling agent; or the selling agent will not be counted towardthe 51% unless the sponsor can prove that they are bona fide tenants of the building.

Protected Occupancy for Non-Purchasers

Non-purchasing tenants may not be evicted for a minimum of three years from the date an

eviction plan is declared effective. Eligible senior citizen and disabled tenants may not beevicted at any time unless they breach their leases. Rent-stabilized tenants whose leasesexpire less than three years after the date the plan is declared effective are entitled torenewals, subject to rent increases authorized by the Rent Stabilization Law, extending the


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lease to the end of the full three-year period. Rent-stabilized tenants whose leases alreadyextend beyond three-year period may not be evicted until their leases expire.

Rights of Non-Purchasing Tenants

The building's management must provide all services and facilities required by law topurchasing and non-purchasing tenants on a non-discriminatory basis. The sponsor isresponsible for seeing that these services are provided until the co-op or condominium unitowners assume control of the board of directors or board of managers.

Apartments subject to government regulation continue to be covered by those lawsuntil the tenant moves out or until government regulation of the apartment ends. However,even in the case of apartments that are not subject to government regulation, owners maynot charge unconscionable rents, that is, charge beyond ordinary rentals for comparableapartments. Complaints about unconscionable rents should be made in writing to the RealEstate Financing Bureau of the Attorney General's office.

Non-purchasing tenants may be subject to eviction for non-payment of rent, illegaluse or occupancy of the premises, refusal of reasonable access to the owner or a similarbreach by the tenant of obligations under the rental agreement. However, the apartment'sowner may not evict a non-purchasing tenant merely because the owner or the owner'sfamily wishes to occupy the apartment.

Non-Eviction Plans

For a non-eviction plan to be declared effective, at least 15% of the dwelling units must be

sold to bona fide tenants or non-tenant purchasers who intend, or whose family membersintend, to live in the unit. The percentage may include sales of vacant and occupiedapartments. However, an outside purchaser of an occupied apartment may not evict thetenant living in the apartment. The tenant may continue in occupancy as a rent-stabilizedor rent-controlled tenant, paying rent to the outside purchaser or the sponsor, who mustprovide all the services required under applicable laws.


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Tenants' RightsNassau, Rockland andWestchester Counties

Tenants living in apartments subject to the state rent program should read this sectiontogether with the discussion in the following section.

Cities, towns and villages in Nassau, Rockland and Westchester Counties are permitted bylaw to adopt General Business Law Section 352-eee. (See Section 2, page 6.) A list of themunicipalities that have adopted the law is on pages 21 and 22, and an updated list ismaintained by the Attorney General's Real Estate Financing Bureau.

Municipalities in these three counties also have the option of adopting the EmergencyTenant Protection Act (ETPA), the suburban rent-stabilization program. A list of thesecommunities is on pages 22 and 23.

The state rent control program is in effect in a small number of municipalities in thethree suburban counties, and other communities have adopted the special senior citizen anddisabled tenant protection law.

This section is applicable only to those cities, towns and villages in Nassau, Rocklandand Westchester Counties that have adopted General Business Law Section 352-eee.Rent-controlled tenants should also see the next section.

For a discussion of the rights of tenants living in suburban municipalities that havenot adopted Section 352-eee, see pages 19 through 21.

Eviction Plans

For an eviction plan to be declared effective, the sponsor must have obtained signedpurchase agreements from: (1) 51% of the bond fide tenants in occupancy on theacceptance date, excluding from the percentage calculation the apartments of eligible seniorcitizen and disabled tenants; and (2) 35% of the bona fide tenants in occupancy on the

acceptance date, including the apartments of eligible senior citizen and disabled tenants.

The terms of the offering must be set forth in good faith, and fraud, discriminatoryrepurchase agreements, and other discriminatory inducements are prohibited. If the


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sponsor fails to obtain the required percentage of purchase agreements within one yearfrom the acceptance date, the plan is considered abandoned, and no new conversion planmay be submitted to the Attorney General for at least 15 months.

Bona Fide Tenants

The sponsor or a principal of the sponsor who purchases an apartment will not be countedtoward the percentages needed to declare the plan effective. A sponsor's or selling agent'srelative by blood, marriage or adoption; an employee, shareholder, limited partner orbusiness associate of the sponsor or the selling agent; or the selling agent will not becounted towards those percentages unless the sponsor can prove that they are bona fidetenants of the building.

Protected Occupancy For Non-Purchasers

Non-purchasing tenants may not be evicted for a minimum of three years from the date aeviction plan is declared effective. Eligible senior citizens and disabled persons may not beevicted any time unless they breach their leases. The tenant of an apartment covered byETPA, and for which the lease expires less than three years after the effective date of theplan, is entitled to a renewal extending the lease, subject to ETPA. Thereafter, the tenantmay be evicted upon 90-days notice by a purchaser who seeks the apartment for personalor family use. Rent-controlled tenants should see page 20.

The tenant of a non-ETPA apartment is not entitled to a renewal lease, but may notbe evicted before the end of the three-year period. So long as the tenant remains in theapartment the rent may not be increased unconscionably.

Rights of Non-Purchasing Tenants

The building management must provide all services and facilities required by law topurchasing and non-purchasing tenants on a non-discriminatory basis. The sponsor isresponsible for seeing that these services are provided until the co-op or condominium unitowners assume control of the board of directors or board of managers.


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Apartments subject to government regulation continue to be covered by those lawsuntil the tenant moves out or until government regulation of the apartment ends. However,even in the case of apartments not subject to government regulation, owners may notcharge unconscionable rents, that is, rent beyond ordinary rentals for comparableapartments.

Non-purchasing tenants may be subject to eviction for non-payment of rent, illegaluse or occupancy of the premises, refusal of reasonable access to the owner or a similarbreach by the tenant of obligations under the rental agreement. However, the apartment'sowner may not evict a non-purchasing tenant merely because the owner or the owner'sfamily wishes to occupy the apartment.

Non-Eviction Plans

For a non-eviction plan to be declared effective, at least 15% of the bona fide tenants inoccupancy must sign written purchase agreements. The calculation of the percentage mayinclude tenants who move into the building after the black book is presented.

Non-purchasing tenants who choose not to buy may not be evicted for that reason.They may continue in occupancy as rent-controlled or ETPA tenants.

Tenants' Rights

Municipalities in Upstate New York, AndNassau, Rockland, Suffolk and WestchesterCounties That Have Not Adopted General

Business Law Section 352-eee.

Several complex and overlapping laws and regulations govern the rights of tenants in areasof New York State not covered by General Business Law Section 352-eee or Section 352-eeee. This discussion explains the rights of tenants (1) living in apartments in Nassau,Rockland and Westchester County communities that have adopted the Emergency TenantProtection (ETPA) but have not adopted Section 352-eee; (2) tenants living in apartmentscovered by the state rent control program; and (3) tenants living in municipalities that haveadopted the law protecting senior citizens and disabled tenants.


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Eviction Plans


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Before an eviction plan may be declared effective, the sponsor must have obtained signedpurchase agreements for at least 15% if the units in the building from bona fide tenants, orfrom purchasers who intend, or whose families intend, to occupy the building.

If the sponsor has failed to obtain purchase agreements for the requisite number of

rent-controlled tenants within six months after the date the black book has been presented,the plan is considered abandoned with respect to the rent-controlled apartments in thebuilding, and those tenants may continue in occupancy indefinitely.

During the first 90 days after the plan is presented, tenants have an exclusive rightto purchase their apartments. If the plan is declared effective, rent-controlled tenants havean additional 30-day period during which they have the exclusive right to purchase theirapartments under the original terms.

There is no time limit for obtaining the required number of purchase agreements forapartments not covered by rent control.

Rights of Possession UnderAn Eviction Plan

Generally, non-purchasing tenants may not be evicted from their apartments before theexpiration of their leases or rental agreements. However, an ETPA tenant's lease maycontain a clause permitting its termination by the purchaser of the apartment, once the planhas been declared effective on 90-days notice.

Rights of Senior Citizens and

Disabled Tenants

Some senior citizens and disabled tenants are entitled to greater protections than other non-purchasing tenants faced with eviction plans. If a city, town or village adopts the lawthat became effective on July 29, 1983, tenants 62 years of age or older and disabledtenants who do not purchase their apartments may not be evicted for that reason. Theymay remain in their apartments as long as they do not breach their leases. A list of themunicipalities that have adopted the law is on page 21-23, and an updated list is maintainedby the Attorney General's Real Estate Financing Bureau.

Tenants who wish to claim the protection of the law should follow the procedures

described in the offering plan.

Non-Eviction Plans


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At least 15% of all units in the building must be sold to bona fide tenants or purchasers whointend that they or a family member will live in the apartment.

Non-purchasing tenants may not be evicted, although their apartments or sharescorresponding to their apartments may be sold. Tenants whose apartments are subject to

ETPA or rent control may continue in occupancy as ETPA or rent-controlled tenants, payingrent to the purchaser of the apartment. Tenants whose apartments are not rent regulatedmay remain in their apartments, and they may not be charged unconscionable rents.

Municipalities in Nassau, Rockland and Westchester Counties


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That Have Adopted General Business Law Section 352-eee as of December 2007.

Nassau County Westchester County

Village of Baxter Estates Town of Bedford

Village of Cedarhurst Village of Briarcliff ManorInc. Village of Farmingdale Village of BronxvilleInc. Village of Floral Park Inc. Village of Croton-on-HudsonInc. Village of Freeport Inc. Village of Dobbs FerryCity of Glen Cove Town of EastchesterVillage of Great Neck Town of GreenburghVillage of Great Neck Estates Town of HarrisonInc. Village of Great Neck Plaza Village of Hastings-On-HudsonTown of Hempstead Inc. Village of IrvingtonVillage of Hempstead Village of LarchmontVillage of Lawrence Town of LewisboroCity of Long Beach Town of MamaroneckInc. Village of Lynbrook Village of MamaroneckVillage of Manorhaven Village of MineolaVillage of Mount Kisco City of Mount VernonTown of North Hempstead City of New RochelleTown of Oyster Bay Inc. Village of North TarrytownInc. Village of Port Washington Inc. Village of OssiningVillage of Rockville Centre City of PeekskillInc. Village of Roslyn Village of PelhamInc. Village of Russell Gardens Village of Pelham ManorVillage of Thomaston Inc. Village of PleasantvilleVillage of Valley Stream Inc. Village of Port Chester

Village of Westbury City of RyeInc. Village of Woodburgh Village of Scarsdale

Inc. Village of TarrytownInc. Village of TuckahoeCity of White PlainsCity of YonkersTown of Yorktown

Rockland CountyTown of HaverstrawInc. Village of NyackTown of Orangetown

Inc. Village of South NyackVillage of Spring ValleyVillage of SuffernInc. Village of West Haverstraw


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Municipalities In Nassau, Rockland, and Westchester CountiesThat Have Adopted Emergency Tenant Protection Act of 1974 as of December 2007.(Unless otherwise noted, ETPA is applicable in buildings of six or more units.)

Nassau County Westchester County

City of Glen Cove (100 or more) City of Mount VernonCity of Long Beach (60 or more) City of New Rochelle

City of White PlainsTown of North Hempstead City of YonkersTown of Oyster Bay Town of EastchesterVillage of Baxter Estates Town of GreenburghVillage of Bellerose Town of HarrisonVillage of Cedarhurst Town of MamaroneckVillage of Floral Park Village of Ardsley

Village of Dobbs FerryVillage of Freeport Village of Hastings-on-HudsonVillage of Great Neck Village of Irvington (20 or more)Village of Great Neck Plaza Village of LarchmontVillage of Hempstead Village of MamaroneckVillage of Lynbrook Village of Mt. Kisco (16 or more)

Village of North TarrytownVillage of Mineola Village of Pleasantville (20 or more)Village of New Hyde Park Village of Port Chester (12 or more)Village of Rockville Centre Village of Tarrytown

Village of TuckahoeVillage of Russell Gardens

Village of Sea CliffVillage of ThomastonVillage of Valley StreamVillage of WestburyVillage of Williston Park

Rockland County

Town of HaverstrawVillage of Spring Valley

NOTE: PLEASE CONFIRM WITH YOUR COUNTY, CITY, TOWN OR VILLAGE FORUPDATE.


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Glossary

Acceptance For Filing:The formal act by which the Attorney General authorizes the public offering of interests ina plan for a cooperative, condominium or homeowners' association.

Black Book:The offering plan accepted for filing by the Attorney General and used by the sponsor as thesales document for a cooperative, condominium or homeowner's association.

By-laws:The framework of rules and regulations adopted by a cooperative corporation orcondominium board of managers which governs the meetings and internal operations of theboard of directors or managers.

Closing Date:In a condominium, the date on which title to property passes from the seller to the buyer.In the case of most cooperatives, the date on which title passes from the sponsor to thecooperative corporation, and also the approximate date the shares are issued to theindividual purchasers.

Condominium Declaration:The document which legally establishes a condominium. The declaration, together with theby-laws, contains conditions, covenants and restrictions governing the sale, ownership, useand disposition of property within the framework of the New York State Condominium Act.

Declaring the Plan Effective:The sponsor's statement that subscription agreements for at least the required number ofapartments have been obtained to permit the building's conversion. An amendmentdisclosing or confirming the effectiveness of the plan must be accepted for filing by theAttorney General and presented to the tenants before any closing may occur.

Eviction Plan:A plan for the conversion of residential property to cooperative or condominium ownershipwhich provides that non-purchasing tenants will be subject to eviction after the expiration ofspecific time periods set by law.

Maintenance Charges:Monthly payments made by tenant-shareholders in a cooperative corporation for theexpenses of operating the building, including real estate taxes, mortgage payments, fuel andbuilding employee salaries.


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Glossary (continued)

Non-Eviction Plan:A plan for the conversion of a residential property to a cooperative or condominiumownership which provides that tenants may not be evicted for failure to buy their apartments.

Presentation of the Plan:The date on which the final offering plan or black book is given to the tenants by thesponsor.

Proprietary Lease:The agreement between a cooperative tenant-shareholder and the cooperative corporationwhich defines the rights and obligations of each party regarding use and occupancy of thecooperative apartment.

Red Herring:The proposed (or preliminary) offering plan of cooperative or condominium ownership whichis submitted by the sponsor to the Attorney General and to tenants, and which is subject tomodification.

Reserve or Working Capital Fund:A fund set aside by the sponsor from the purchase price of the property for use by thecooperative corporation or condominium for future capital improvements or expenses.

Sponsor:

The individual, partnership, corporation or other legal entity that offers to sell interests in acooperative, condominium, timeshare or homeowners' association.

Subscription Agreement or Purchase Agreement:The contract which constitutes the agreement by a purchaser to buy shares of stock in acooperative corporation or a condominium unit.December 1999

February 2008


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COOPERATIVE

AND

CONDOMINIUM

CONVERSION HANDBOOK

State of New York

Office of the Attorney GeneralReal Estate Finance Section

120 Broadway, 23rd floorNew York, N.Y. 10271

(212) 416-8121http://www.ag.ny.gov/realestate/realestate.html

nys ag coop.condo handbook

Documents