Plans subject to this Part must comply with the format and minimal disclosure requirements set forth in subdivisions (a) through (hh) of this section, in addition to the requirements of article 23-A of the G.B.L.
The outside front cover of the offering plan shall contain the following information in the following order:
THIS IS AN EVICTION PLAN. SEE PAGE__.
If G.B.L. section 352-eee, 352-eeee or 352-e(2-a) is applicable, also state:
NON-PURCHASING TENANTS OTHER THAN ELIGIBLE SENIOR CITIZENS AND ELIGIBLE DISABLED PERSONS WILL BE EVICTED.
THIS IS A NON-EVICTION PLAN. NO NON-PURCHASING TENANT WILL BE EVICTED BY REASON OF CONVERSION TO COOPERATIVE OWNERSHIP.
The total of the minimum cash amount and of the mortgage(s) may also be included.
The amount of reserve fund shall be in compliance with the applicable local law. If there is a working capital fund and this fund may be diminished or depleted for closing adjustments, so indicate. If there is not a working capital fund or reserve fund, indicate -0-.
Telephone numbers may also be included. The address of the sponsor must not be in care of sponsor's attorney.
The term of the initial offer is 12 months commencing on the date indicated in the letter from the Department of Law stating that the plan is filed. The term may be extended by an amendment to the offering plan. The date of the plan should be left blank at submission to the Department of Law and completed when the plan is filed.
THIS IS A PROPOSED OFFERING PLAN ("RED HERRING") TO CONVERT THIS BUILDING TO A COOPERATIVE. IT HAS BEEN SUBMITTED TO THE NEW YORK STATE DEPARTMENT OF LAW, REAL ESTATE FINANCE BUREAU. APARTMENTS MAY NOT BE SOLD OR OFFERED FOR SALE UNTIL THE OFFERING PLAN IS FILED WITH THE DEPARTMENT OF LAW.
THIS OFFERING PLAN IS THE ENTIRE OFFER TO SELL THESE COOPERATIVE APARTMENTS. NEW YORK LAW REQUIRES THE SPONSOR TO DISCLOSE ALL MATERIAL INFORMATION IN THIS PLAN AND TO FILE THIS PLAN WITH THE NEW YORK STATE DEPARTMENT OF LAW PRIOR TO SELLING OR OFFERING TO SELL ANY APARTMENTS. FILING WITH THE DEPARTMENT OF LAW DOES NOT MEAN THAT THE DEPARTMENT OR ANY OTHER GOVERNMENT AGENCY HAS APPROVED THIS OFFERING.
The format and order set forth below shall be followed in the table of contents. Include headings for the subjects not marked with an asterisk. In addition, a limited number of headings may be added to the plan. Headings for subjects that are marked with an asterisk may be omitted if the subject matter is not applicable to the offering. Omissions, other than headings marked with an asterisk on the table of contents, and additions, should be expressly noted and explained in the transmittal letter. Alternative wording for headings to meet particular facts are set forth in parentheses. Documentation listed in Part II of the table of contents shall be included in full in Part II of the plan. The texts of such documents which will be binding upon the sponsor or the apartment corporation, such as the subscription agreement, the proprietary lease, and the bylaws of the apartment corporation, shall be consistent with the disclosures in the plan and shall conform to the requirements with respect thereto set forth in this section.
TABLE OF CONTENTS
PART I PAGE ______________________________
* SPECIAL RISKS
__________________________________________________
__________________________________________________
* ELECTION FORMS FOR ELIGIBLE SENIOR CITIZENS AND DISABLED PERSONS
__________________________________________________
INTRODUCTION AND SUMMARY
__________________________________________________
OFFERING PRICES AND SHARE ALLOCATION, SCHEDULE A
__________________________________________________
BUDGET FOR FIRST YEAR OF COOPERATIVE OPERATION, SCHEDULE B
__________________________________________________
ACCOUNTANT'S CERTIFIED STATEMENTS OF OPERATION
__________________________________________________
CHANGES IN PRICES AND UNITS
__________________________________________________
__________________________________________________
* RIGHTS OF ELIGIBLE SENIOR CITIZENS AND ELIGIBLE
DISABLED PERSONS
__________________________________________________
RIGHTS OF EXISTING TENANTS
__________________________________________________
OBLIGATIONS OF OWNERS OF SHARES OF DWELLING UNITS
OCCUPIED BY NON-PURCHASING TENANTS
__________________________________________________
__________________________________________________
* INTERIM LEASES
__________________________________________________
PROCEDURE TO PURCHASE
__________________________________________________
ASSIGNMENT OF SUBSCRIPTION AGREEMENTS
__________________________________________________
EFFECTIVE DATE
__________________________________________________
__________________________________________________
* TERMS OF MORTGAGES
__________________________________________________
__________________________________________________
* FINANCING FOR QUALIFIED PURCHASERS
__________________________________________________
SUMMARY OF PROPRIETARY LEASE
__________________________________________________
APARTMENT CORPORATION
__________________________________________________
HOLDERS OF UNSOLD SHARES
__________________________________________________
PURCHASERS FOR INVESTMENT OR RESALE
__________________________________________________
RESERVE FUND
__________________________________________________
WORKING CAPITAL FUND
__________________________________________________
CONTRACT OF SALE (OR EXCHANGE)
__________________________________________________
__________________________________________________
* SPECIAL TAX CONSEQUENCES OF CONTRACT OF EXCHANGE
* MANAGEMENT AGREEMENT, CONTRACTS AND LEASES IDENTITY OF PARTIES
__________________________________________________
SPONSOR'S PROFIT
__________________________________________________
REPORTS TO SHAREHOLDERS
__________________________________________________
DOCUMENTS ON FILE
__________________________________________________
GENERAL
__________________________________________________
__________________________________________________
* RESERVATION OF AIR AND DEVELOPMENTAL RIGHTS
__________________________________________________
SPONSOR'S STATEMENT OF BUILDING CONDITION
__________________________________________________
__________________________________________________
PART II ___________________________________
* OPINION OF REASONABLE RELATIONSHIP
__________________________________________________
__________________________________________________
* ATTORNEY'S INCOME TAX OPINION
__________________________________________________
SUBSCRIPTION AGREEMENT (OR PURCHASE AGREEMENT)
__________________________________________________
__________________________________________________
* PURCHASER'S AFFIDAVIT OF INTENTION TO RESIDE
__________________________________________________
FORM OF STOCK CERTIFICATE
__________________________________________________
__________________________________________________
* FORM OF MORTGAGE, NOTE AND RELATED PRINCIPAL DOCUMENTS
__________________________________________________
DESCRIPTION OF PROPERTY AND BUILDING CONDITION
__________________________________________________
ASBESTOS REPORT
__________________________________________________
CERTIFICATE OF INCORPORATION OF APARTMENT CORPORATION
__________________________________________________
PROPRIETARY LEASE (AND HOUSE RULES)
__________________________________________________
BYLAWS OF THE APARTMENT CORPORATION
__________________________________________________
__________________________________________________
* APPLICABLE RENT REGULATIONS
__________________________________________________
__________________________________________________
* GENERAL BUSINESS LAW SECTION 352-e eee, 352-eee or 352-e(2-a)
__________________________________________________
__________________________________________________
* PART 18.8 ELIGIBLE SENIOR CITIZENS AND
ELIGIBLE DISABLED PERSONS
__________________________________________________
ESCROW AGREEMENT
__________________________________________________
CERTIFICATIONS
__________________________________________________
SPONSOR AND PRINCIPALS
__________________________________________________
SPONSOR'S ENGINEER (OR ARCHITECT)
__________________________________________________
SPONSOR'S EXPERT CONCERNING ADEQUACY OF BUDGET
__________________________________________________
__________________________________________________
This is a very important section, if applicable, and must be on a separate page following the table of contents. All features of a plan which involve significant risk, or are reasonably probable to affect disproportionately or unusually the maintenance charges or obligations of shareholders in future years of cooperative operation, must be conspicuously disclosed and highlighted. A brief description of the nature of the risk should be given in this section and a more thorough description should be given in a referenced later section. Uncertainties as to whether a risk should be described in this section should be resolved in favor of inclusion.
BECAUSE SPONSOR IS RETAINING THE RIGHT TO RENT MORE THAN 49 PERCENT OF THE UNITS IN THE BUILDING OR BUILDINGS BEING CONVERTED TO COOPERATIVE OWNERSHIP, FUTURE MARKETABILITY OF ALL UNITS MAY BE ADVERSELY AFFECTED AND PURCHASERS MAY NEVER GAIN EFFECTIVE CONTROL OF THE COOP BOARD OF DIRECTORS. (SEE SPECIAL RISKS SECTION.)
Disclose that a result of sponsor retaining more than 49 percent of the units, marketability of the units may be adversely affected. Explain that certain institutional lenders may be unwilling to make loans for the purchase of units in a cooperative in which the sponsor and/or holders of unsold shares retain more than 49 percent of the units and that purchasers may therefore be unable to obtain institutional financing for their own purchase. Disclose that if they do close title and subsequently seek to sell their apartments, prospective purchasers may be unable to obtain institutional financing solely on the basis of sponsor's holding more than 49 percent of the units in the cooperative corporations, regardless of the credit worthiness of the prospective purchaser. If the sponsor is able to demonstrate that an institutional lender has approved the project for coop loans to qualified purchasers, a disclosure identifying the lender, the terms of the loans to be offered, eligibility criteria and other material aspects of the lender's commitment to the project should be included.
If sponsor makes a bulk sale of all or some of its unsold shares, the transferee is bound by sponsor's representation regarding its commitment to sell units as they become vacant.
THIS PLAN DOES NOT GUARANTEE THAT OWNER-OCCUPANTS WILL EVER CONSTITUTE A MAJORITY OF THE COOP BOARD OF DIRECTORS. (SEE SPECIAL RISKS SECTION OF PLAN.)
Disclose that unless and until a majority of the Board are residents of the building unrelated to the sponsor, owner-occupants will not gain effective control and management of the cooperative. Disclose that owner-occupants and non-resident shareholders, including sponsor, may have inherent conflicts on how the cooperative should be managed because of their different reasons for purchasing, i.e. purchase as a home as opposed to as an investment.
The introduction must:
From time to time the Department of Law may promulgate model forms for the description of the basic aspects involved in a cooperative conversion for a non-eviction plan under various laws. The transmittal letter from the attorney who prepared the plan shall note if the applicable model forms are used.
THE PURCHASE OF A COOPERATIVE APARTMENT HAS MANY SIGNIFICANT LEGAL AND FINANCIAL CONSEQUENCES. THE ATTORNEY GENERAL STRONGLY URGES YOU TO READ THIS OFFERING PLAN CAREFULLY AND TO CONSULT WITH AN ATTORNEY BEFORE SIGNING A SUBSCRIPTION (OR PURCHASE) AGREEMENT.
The plan must describe all projected income and expenses for the first year of cooperative operation in Schedule B.
SCHEDULE B
Budget for First Year of Cooperative Operation
Beginning __1, 20_
Projected Income
Maintenance Charges
* Commercial_ $__ _________________________________
* Laundry_ $__ ____________________________________
* Other (explain)_ $__ _______________________________
TOTAL
$__
Projected Expense
* Labor_ $__ ______________________________________
_______________________________________________
Heating
$__
_______________________________________________
Utilities (Electricity and gas)
$ __
_______________________________________________
Water charges and sewer rents
$ __
_______________________________________________
Repairs, maintenance and supplies
$ __
_______________________________________________
* Service contracts_ $__ _____________________________
_______________________________________________
Insurance
$__
_______________________________________________
* Management fees_ $__ ____________________________
Legal fees and audit fees
$ __
_______________________________________________
Franchise and corporate taxes
$ __
_______________________________________________
Real estate taxes
$__
_______________________________________________
* Mortgage payments_ $__ ___________________________
* Other (explain)_ $__ _______________________________
* Contingency_ $__ _________________________________
_______________________________________________
TOTAL
$__
Unless the plan states that purchasers are not expected to be entitled to deductions under Internal Revenue Code section 216, include an opinion from a licensed real estate broker, or other expert appraiser, as to whether the "reasonable relationship" test under Internal Revenue Code section 216 will be met.
Include certified statements of income and expenses, for the two most recent fiscal years of operation, prepared by an independent certified public accountant. No report need be filed for a fiscal year which ends less than three months before the date the proposed offering plan is submitted to the Department of Law. If the building has been in operation for less than two years, include a statement for the period since the building began operations. If, after the plan is filed but before it is declared effective, a more recent fiscal year has ended and the sponsor has had three additional months after the end of the more recent fiscal year to prepare a certified statement, sponsor must amend the plan to include the certified statement for the more recent fiscal year.
Discuss in easily understandable language the specific requirements of Internal Revenue Code section 216 for the apartment corporation to qualify as a cooperative housing corporation, and for tenant-stockholders to be entitled to deduct a proportionate share of real estate taxes and interest. Discuss any issues in qualifying under section 216 presented by the particular plan, including problems raised by the share allocations, existing or proposed apartment uses, the legality of such uses under the certificate of occupancy, and income from sources other than tenant-stockholders.
If the offering plan is submitted to the Department of Law on or after September 1, 2016 subject to G.B.L., section 352-e(2-a), 352-eee or 352-eeee, and the sponsor executed a contract of sale for the building or group of buildings or acquired the building or group of buildings on or after September 1, 2016, include the following information on the rights of eligible senior citizens and eligible disabled persons.
The discussion of the obligations of holders of shares of dwelling units occupied by nonpurchasing tenants shall include:
Describe the essential terms of the subscription (purchase) agreement which must comply with this Part. State the purchase procedure, including to whom and when the subscription agreement must be returned and the deposit payment made.
The following requirements apply to all offerings and shall be fully disclosed in all offering plans subject to this Part:
State whether sponsor will permit the assignment or transfer of subscription agreements by tenants prior to the declaration of effectiveness. If they will be permitted:
The plan must explain that the offer to sell is contingent upon the plan being declared effective and upon compliance with the relevant conditions and time periods described in the offering plan. Sponsor must conform with the following provisions in determining whether, when and how the plan will be declared effective.
Disclose the terms of each mortgage that will encumber the property after the closing date. Include the following information:
State the date of the mortgage, estimated balance at anticipated date of closing, maturity date, total scheduled unpaid balance at maturity and amount per share. If any mortgage has been extended, consolidated or otherwise modified, explain the present terms of the mortgage as modified. If the mortgage is not self-liquidating over the term, project the amount of the balance or "balloon" due on maturity, and explain the risk that refinancing may not be available on the same or better terms. Highlight as a special risk if the term for a mortgage that is not self-liquidating is for less than five years from the anticipated date of closing, unless the estimated balance due at the date of closing is less than 10 percent of the minimum cash amount of the offering. In view of the potential risks to the apartment corporation in some short-term mortgages, the attorney who prepared the plan must note any short-term mortgage in the transmittal letter to the Department of Law required by section 18.2(c)(1) of this Part.
State the annual interest rate(s) over the term of the loan. State the initial interest rate, or (if not a fixed rate) explain how it will be established. If the loan has a variable or adjustable rate, explain the method of calculating adjustments, any limits on increases or decreases, when adjustments may be made, and the impact that adjustments will have on payments and the principal balance. Highlight as a special risk if the variable or adjustable rate could increase by more than five percent within a 30-month period or if the variable or adjustable rate is not subject to a specific limit on increases. If the sponsor procures financing at an interest rate that is below the prevailing rate offered by the lender, disclose the prevailing rate offered by the lender and the interest on the loan to the apartment corporation. If the mortgage is not self-liquidating, also disclose any limitations on the ability of the apartment corporation to refinance on the same or better terms.
State the amount of each payment, when payments are due, and how payments are applied to interest and principal. For variable rate or adjustable rate mortgages, disclose the impact that interest rate changes will have on the allocation of payments to interest and principal and on itemized deductions available to shareholders. Highlight as a special risk if payments will increase in the first 10 years of operation due to a fixed amount increase.
State whether and when the unpaid principal balance may be prepaid in whole or in part, the number of days of prior notice that must be given and any charges for prepayment. Disclose any restrictions on the apartment corporation to prepay the entire unpaid principal at any time.
The insurance coverage reflected in Schedule B must be sufficient to satisfy the requirements of the mortgagee.
Describe the requirements for escrow and reserve deposits, including any for taxes, water and sewer charges, insurance, capital reserves or otherwise, and whether and how such requirements may be increased or modified.
Describe the amount of late charges, if any, and how they are assessed.
State whether subordinate mortgages are permitted. Describe the lien priority of subordinate mortgages. Discuss whether junior mortgages are subordinate to refinancing if prior mortgages come due first in time, and disclose any limitations on refinancing. Highlight as a special risk if a subordinate mortgage does not continue to be subordinate when it is time to refinance prior mortgages.
If any mortgage is a "negative amortization" mortgage, highlight as a special risk and explain the meaning of a negative amortization mortgage and the additional risks and costs to the apartment corporation as a result of such negative amortization mortgage. Include a discussion of the potential increase in the principal balance over the term of the mortgage and any limitations on the increase in interest payments. In view of the potential risks to the apartment corporation in some negative amortization mortgages, the attorney who prepared the plan must note any negative amortization mortgage in the transmittal letter to the Department of Law required by section 18.2(c)(1) of this Part.
For each mortgage, describe the material events of default entitling the lender to accelerate the mortgage indebtedness and describe grace periods granted to the apartment corporation. Sponsor must either state affirmatively that there is not a due-on-sale clause in the mortgage or disclose the existence of such a clause, and state that the sponsor has obtained the necessary consents or that sponsor will replace or satisfy the mortgage at closing if the consents are not obtained, or give an assurance satisfactory to the Department of Law that sponsor will replace the mortgage if a default is declared. Sponsor must state that, except as discussed above, no default will exist at closing.
Describe important restrictions on the apartment corporation's right to alter, improve, sell, occupy or mortgage the property.
Disclose the terms of any commitment by sponsor or a lender procured by sponsor to finance the purchase of shares allocated to units. The plan must be amended to include the terms of financing if not fully described in the offering plan. The terms shall include, and are not limited to, the following:
State the maximum amount (which may be expressed as a percentage of the cash purchase price) available for shares allocated to a unit and the minimum term of the loan. If the financing offered is not self-liquidating over the term, state how the amount of the balance or "balloon" due on maturity will be calculated, and explain the risk that refinancing may not be available on the same or better terms. Highlight as a special risk if the principal balance is due in less than three years. If the sponsor is providing the financing, state whether the sponsor will refinance or extend the loan at maturity. State the maximum amount of financing available to purchasers generally through a bulk commitment.
Sponsor must discuss whether financing is available to all purchasers. If not, discuss the method of allocation of such financing which shall not constitute a discriminatory inducement to tenant purchasers.
State the annual interest rate over the term of the loan. If the loan has a variable or adjustable rate, indicate the initial interest rate or (if not a fixed rate) explain how it will be established, the method of calculating adjustments, any limits on increases or decreases, when adjustments may be made, and the impact adjustments will have on debt service payments and the principal balance. If sponsor structures the financial terms of the transaction in such a manner as to result in possible taxable income to a purchaser, the financial and tax implications of such structuring must be disclosed. If the sponsor procures financing at an interest rate that is below the prevailing rate offered by the lender, disclose the prevailing interest rate and the interest rate offered to purchasers. If the loan is not self-liquidating, also disclose any limitation on the ability of the purchasers to refinance on the same or better terms.
State when payments are due, and how payments are applied to interest and principal. For variable rate or adjustable rate loans, disclose how initial payments are allocated to interest and principal, disclose the impact that interest rate changes will have on the allocation of payments to interest and principal and on itemized deductions available to shareholders.
State whether and when the unpaid principal balance may be prepaid in whole or in part, the number of days of prior notice that must be given, and any charges for prepayment. Disclose any restrictions on the ability of a purchaser to prepay the entire unpaid principal at any time.
State when the financing commitment expires.
Describe the amount of late charges and how they are assessed.
Disclose the amount of additional costs or charges to purchasers in connection with such financing, including, for example, points, origination fees, lender's or any other legal fees, processing fees, application fees, insurance and appraisal fees.
Describe major restrictions on a shareholder's right to alter, improve, sell, sublease, purchase, own, occupy, finance or otherwise acquire, use or dispose of a unit.
Describe the material events of default entitling the lender to accelerate the principal indebtedness, and describe grace periods granted to purchasers.
Summarize the important provisions of the proprietary lease, including the following:
Describe how the affairs of the apartment corporation will be governed. Summarize the important sections of the bylaws and the certificate of incorporation, including the following:
A purchaser for investment or resale is a purchaser who purchases shares allocated to three or more apartments, which are not for occupancy by such purchaser or persons related by blood, marriage or adoption to such purchaser. In connection with the sale of such shares:
The offering plan must state whether the apartment corporation will have funds for working capital and/or as a reserve for capital expenditures. The offering plan must comply with any applicable law concerning reserve funds and/or working capital funds. If such funds are provided, state the amount of the funds; whether the sponsor and purchasers contribute to the funds; what restrictions there are on the use of each fund; and when the funds will be available to the apartment corporation. If a fund is called a reserve fund, it may be used only for capital expenditures, and the apartment corporation's bylaws shall contain a provision authorizing the establishment of such a fund. Discuss whether the reserve fund (if any) will be sufficient to pay for the replacement of capital items likely to be needed as disclosed in the Description of Property and Building Condition.
State the material terms of the contract of sale or exchange under which the apartment corporation will acquire the property, including the following (unless stated elsewhere in the plan):
State that it is the obligation of the apartment corporation to give all shareholders annually:
State that sponsor shall keep copies of the plan, all documents referred to in the plan and all exhibits submitted to the Department of Law in connection with the filing of the plan, on file, and available for inspection without charge, and copying at a reasonable charge, at a specified location for six years from the date of closing.
Describe any other material facts concerning the sponsor, the selling agent, the managing agent, any of their principals, the property, the offering and a prospective purchaser's rights and obligations, including the following:
Include the following provisions:
N.Y. Comp. Codes R. & Regs. Tit. 13 § 18.3