Provides for correction of all code violations prior to transfer to cooperative or condominium ownership

BILL NUMBER:S2585

Title of bill

An act to amend the general business law, in relation to the physical condition of a building being converted to cooperative or condominium ownership

Purpose/summary of provisions

This bill would require a sponsor of a cooperative or condominium conversion to correct, or' promise to correct, serious violations of local and state codes concerning building and housing conditions before the sponsor's conversion plan could be accepted for filing by the Attorney General.

Justification

In 1982 the Attorney General formalized a long-standing practice by promulgating regulations requiring that an offering plan for a building undergoing conversion to cooperative or condominium ownership state that "prior to closing or within a reasonable period of time thereafter,sponsor will cause to be cured all violations of record as of the closing date (except violations caused by the acts or omissions of tenants of the building in their own units) and will eliminate all dangerous or hazardous conditions that sponsor has notice of and comply with all work orders from mortgages." 13 NYCRR SS18.3(hh) (3). These regulations were challenged by sponsors unwilling to do the work needed to make their buildings safe. A lower court held by the Attorney General had no authority to promulgate and enforce the regulations. COUNCIL FOR OWNER HOUSING, INC. V. ABRAMS, 506 N.Y.S. 2d 1014 (Supreme Court, Albany County, 1987). An appeal was taken to the Appellate Division, Third Department, which unanimously affirmed, 125 A. D. 2d 10. On November 22, 1988, the Court of Appeals affirmed the Appellate Division decision, thus barring the Attorney General from thereafter' enforcing the regulations. 72 N.Y.2d (1988).

As a result of this decision, sponsors of buildings undergoing conversion will not be required to correct conditions in such buildings which have been determined by local building inspectors to be in violations of law, or which would constitute such violations. Many of the violations may be dangerous or hazardous to the health and safety of the prospective purchasers of the cooperative shares or condominium units (whether resident tenants or outside purchasers), as well as to non-purchasers tenants who remain there. Furthermore, the legal obligation to correct such conditions -- and liability for not doing so -- passes to those purchasers.

This bill will ensure that no conversion in New York City or in municipalities in Nassau, Rockland or Westchester Counties which have adopted General Business Law Section 352-e, will be completed, i.e. title may not be transferred, unless

(1) all serious violations of record and all dangerous or hazardous conditions that would constitute violations are cured or

(2) the Sponsor has set aside in an escrow account enough money to Cure all such violations and conditions, or has placed into a reserve fund an amount in excess of that required by state or local law which is specifically allocated and adequate to cure all such violations and conditions.

All sponsors of offering plans which were not declared effective as of November 22, 1988 are now free to amend their plans to remove their obligation to Cure violations. Section 3 of this bill clarifies that all plans which are not yet declared effective would be subject to its provisions.

Fiscal implications

None.

Effective date

This act shall take effect immediately and shall apply to every offering statement or prospective submitted to the attorney general on and after such date and to every offering statement or prospectus submitted to the attorney general which has not yet been declared effective.