N.Y. Comp. Codes R. & Regs. tit. 13 § 19.2

Current through Register Vol. 46, No. 45, November 2, 2024

Section 19.2 - Contents of offering plan

(a)Cover.

(1) The lower portion of the outside front cover of every offering plan shall contain the following statement in capital letters printed in boldface roman type of at least 10-point modern and at least two points leaded:

THIS OFFERING PLAN IS THE SPONSOR'S ENTIRE OFFER TO SELL THESE CONDOMINIUM APARTMENTS. NEW YORK LAW REQUIRES THE SPONSOR TO DISCLOSE ALL MATERIAL INFORMATION CONCERNING THE CONDOMINIUM APARTMENTS IN THIS PLAN AND TO FILE THIS PLAN WITH THE NEW YORK STATE DEPARTMENT OF LAW PRIOR TO SELLING OR OFFERING TO SELL ANY APARTMENT. FILING WITH THE DEPARTMENT OF LAW DOES NOT MEAN THAT THE DEPARTMENT OR ANY OTHER GOVERNMENT AGENCY APPROVED THIS OFFERING.

(2) There shall be set forth on the outside front cover page of every offering plan the following information:

(i) the amount of money sought to be raised;

(ii) the names and addresses of the sponsors, promoters, offerors, selling agents and principal distributors;

(iii) the name and designation of the condominium regime; and

(iv) the date of the offering plan, followed by a statement that the offering plan may not be used for a period of more than 12 months from the filing date indicated in the letter from the Department of Law. (See section 19.5 of this Part.)

(3) If there is no bond, escrow of money or other security which is adequate to assure the return of all monies in the event of the failure, discontinuance or abandonment of the offering, the following statement shall be prominently made in the offering plan in italicized letters:

If this offering plan is not consummated for any reason, you may lose all or part of your investment.

(4) If the right is reserved to change the price of any condominium interest from that listed in the offering plan, then such fact and the effects thereof shall be set forth within the plan (caution: under rent control applicable local or State regulations govern). In addition, in such case, the following statement shall be included on the front cover in bold easily readable print:

The prices for these condominium interests may be changed so that purchasers may pay different prices for similar interests [except where the property is subject to rent control and the purchaser is a tenant who was in occupancy on the date when the offering plan was filed]. The effect of this is set forth on page (indicate page).

(5) In addition, the following statement shall appear on each page of the offering plan containing a list of prices for the condominium interests:

See page (indicate page) for possible changes in these prices.

(6) The foregoing shall not constitute a limitation on the contents of the front cover where additional material is essential for full and fair disclosure.

(b)Body.

(1) A detailed table of contents shall be included on the inside front cover or next immediate page.

(2) Where applicable, the following facts (in addition to those expressly required in subdivision 1[b] of section 352-e of the New York General Business Law) shall be set forth in detail with respect to every offering of condominium interests:

(i) Whether there is a statute concerning condominiums in effect in the State or territory in which the condominium project is or is to be located.

(ii) The nature and scope of the interest in an apartment, general common elements, limited common elements, and otherwise (which interest is hereinafter referred to as "condominium interest"), to be offered pursuant to the offering plan, including whether same is a fee or leasehold interest. If a leasehold interest is to be offered, the offering plan should set forth the effect of a default in payment of rent by a purchaser of such condominium interests upon other such purchasers.

(iii) Whether each condominium interest is to be separately assessed for real estate taxes, and the effect upon an owner of such interest of the nonpayment of real estate taxes by any other such owner.

(iv)

(a) Any restrictions upon the mortgaging of an individual condominium interest, and whether a mortgage of one condominium interest constitutes a lien upon other condominium interests or personal property therein within the condominium project; the relationship of the lien under such mortgage to any liens for the payment of common charges; the requirements for the payment of common charges by one who acquires a condominium interest subsequent to the initial sale whether in a judicial sale or otherwise.

(b) Whether banks, insurance companies and other institutional lenders in the State or territory in which the condominium interest is located may invest in mortgages on individual condominium interests; details concerning proposed mortgage financing.

(v) Restrictions on the alienation, conveyance, sale, lease, purchase or ownership of condominium interests, or the occupancy of apartments or other subdivisions in the condominium project.

(vi) The recordability with the appropriate local governmental body of relevant documents and amendments thereto relating to the condominium project, including the following: building plans, surveys, deeds and mortgages of individual condominium interests, the bylaws and rules and regulations of the condominium regime, corporation, association, organization, group or entity (hereinafter referred to as "condominium regime") representing the owners of condominium interests in the condominium project which will control the management or operation of any aspect of the condominium project.

(vii) Detailed definitions of the condominium interests to be offered, apartments or other subdivisions, general common elements, limited common elements, and all other applicable terms relevant to the ownership of interests in the condominium project.

(viii) Detailed description of the physical aspects of the condominium project including:

(a) uses or intended uses of the property (such as for residential, commercial or industrial use), and the persons or parties who may use the property or facilities therein;

(b) the land on which any apartment or other structures are to be erected, including, where applicable, type of land-fill and other material particulars;

(c) the design and structural details, including number of stories in each structure, number of units in each structure, the basic materials used for exterior and interior construction, and a brief description of interior walls and facing, floors and ceiling, bathrooms, painting and papering, roof, insulation and heating systems, windows and doors, kitchen equipment, bathroom equipment, patios, sundecks and terraces, wiring, lighting fixtures, ventilators, air-conditioning, companies supplying water, electricity, gas or other utilities, sanitary sewage system, garbage disposal facilities and service, plumbing, storm water disposal, T.V. antennas, laundry facilities, elevators, description of landscaping and grounds, public halls, stairways, entrance and exits, closet space in apartments, storage space per apartment or other subdivisions, general storage facilities, detailed description of recreational facilities and equipment in the condominium projects including size of swimming pool, if any, and materials used therefor, date of construction or scheduled completion;

(d) the surrounding areas including zoning classifications, shopping facilities, schools, public transportation facilities, fire fighting services, police protection; the assessed valuation, real estate tax rate and real estate taxes for the past two years (if an existing property), or a projection thereof by a competent real estate expert based on existing practices.

(ix) Detailed description of the nature of the expenditures for operation and management of the condominium project, and of reserved funds, working capital and other charges (all of the above are hereinafter referred to as "common charges") required to be contributed by all of the owners of condominium interests in the condominium project, the purposes for which such common charges may be assessed, and the details concerning any distributions required to be made to such owners by the condominium regime, where applicable.

(x) A detailed description of services to be performed by the condominium regime.

(xi) Whether each owner of a condominium interest is to be entitled to exclusive ownership and possession of his apartment or other subdivisions; a detailed description of the rights acquired by a purchaser of such interests, including the right to vote in the condominium regime, rights to distributions by the regime, and rights upon liquidation of the condominium project.

(xii) Percentages, including the basis upon which such percentages are computed, of each owner's:

(a) interest in the common elements;

(b) contribution for the payment of aggregate common charges of the condominium regime;

(c) share of distributions by the condominium regime to which each owner is entitled.

The offering plan should state whether the above percentages or numbers are alterable and if so the details thereof.

(xiii) Whether the common elements are subject to partition; severability of interests in the common elements from interests in the apartments or other subdivisions.

(xiv) Whether liens or liabilities exist or may arise with relation to the common elements or one or more of the apartments or other subdivisions, or maintenance charges paid by owners of condominium interests, for either work performed or materials supplied to any portion of the common elements, apartments or other subdivisions or for personal injury or property damage occurring in any portion of the condominium project.

(xv) Whether a lien may arise on a condominium interest as a result of a default in the payment of common charges allocated to such condominium interest by the condominium regime; and any priority of such lien over liens for real estate taxes, liens from mortgages on such condominium interest and other liens and encumbrances thereon. The type of procedure necessary in order to foreclose such lien should be set forth.

(xvi) Liability of an owner of a condominium interest for the payment of common charges incurred subsequent to the transfer, sale or other conveyance of such condominium interest or prior to the acquisition of such interest.

(xvii) The legal obligation of owners of condominium interests to comply with and abide by the bylaws, rules and regulations of the condominium regime and to pay common charges levied by such regime; methods of enforcing compliance.

(xviii) The effect of a waiver of the use of common elements or of the abandonment of a condominium interests [sic] or conveyance of a condominium interest to the condominium regime by an owner of such condominium interest.

(xix) Insurance required to be provided by the condominium regime for the benefit of all owners of condominium interests and the allocation of the cost of premiums for such insurance among the owners of condominium interests.

(xx) Deductions available to the owners of condominium interests for income tax purposes, of their payment of real estate taxes and interest on mortgages on condominium interests or their proportionate share of payments by the condominium regime for real estate taxes or mortgage interests, where applicable; the liability of such regime for the payment of income taxes.

(xxi) Conformance with all applicable laws, rules, regulations and requirements including those governing zoning and construction, by the builders, sponsors, selling agents, distributors and all other persons or parties connected with the offering; the condominium regime or the improvement of property constituting all or part of the condominium project. Whether a certificate of occupancy and certificates from boards of fire underwriters or similar groups and all other necessary certificates of local authorities relevant to a condominium interest must be issued before the closing of title to such interest.

(xxii) The details on liens, easements, restrictions and encumbrances affecting any owner of a condominium interests [sic], the condominium regime or the condominium project.

(xxiii) Relevant details concerning the condominium regime should be set forth, including the following: (The material required in [a] through [p] hereafter, or elsewhere in this Part, need not be included if a true copy of the bylaws is contained within the offering plan or attached thereto, containing such information.)

(a) The legal right of such regime to control the administration, maintenance and repair of common elements, to govern the conduct of owners of condominium interests and to levy common charges upon such owners, to replace or alter portions of the condominium project.

(b) A summary in the offering plan of the bylaws, rules and regulations of the condominium regime.

(c) The manner of election of the board or other governing group of such condominium regime, and the compensation payable to such group or board.

(d) The details concerning the governing board or group of such condominium regime including the number of members therein, the qualifications required of such members, terms of office, powers and duties, manner of removal of such members and quorum required for meetings.

(e) Provisions for meetings of owners of condominium interests including the notices required for such meetings and the conduct of such meetings, and the rights and powers of such owners.

(f) The method of allocating common charges for the condominium project among the owners of condominium interests.

(g) Provisions regarding the adoption and amendment of house rules governing the conduct of owners of condominium interests or other occupants of apartments or other subdivisions, the maintenance of apartments or other subdivisions, and common elements and all other relevant matters.

(h) Any undertaking to maintain records of the actions of the board or other governing group of the condominium regime and of meetings of such group or of owners of condominium interests, and of financial records and books of account of the condominium regime including a chronological listing of receipts and expenditures, an account for each condominium interest which shall contain the amount of each assessment of common charges thereon, the dates when due, the amounts paid thereon, and the balance due, copies of the declaration of condominium ownership (or other legal instrument submitting the property to condominium ownership), bylaws, rules and regulations and floor plans of apartments or other subdivisions, and whether such will be held available for inspection by owners of condominium interests and their agents.

Note:

The offering plan should also contain an undertaking to have the books of account of the condominium regime audited by an independent public accountant and to furnish all owners of condominium interests with annual verified statements by such accountants of the financial condition and receipts and expenditures of the condominium regime for the preceding fiscal year, in accordance with the statutory requirements of article 23-A of the General Business Law.

(i) Details concerning the hiring and firing of managers and other employees, and the powers and duties which may be delegated to them.

(j) The percentage or number of votes required of the owners of condominium interests or of the board or managing group of the condominium regime for all actions, including elections of officers, amendments of bylaws, capital expenditures, reconstruction of damaged or destroyed units, merger of units, abandonment of the condominium form of ownership.

(k) Details concerning the operations and management of the condominium project by the condominium regime.

(l) Procedure and conditions required for the severance of some of the condominium interests from the condominium regime, or for the abandonment of the condominium form of ownership, the division of proceeds of the sale, if any, of all condominium interests upon such abandonment, and the disposal of existing liens on the condominium interests upon abandonment.

(m) A detailed delineation of the portions of the real property to be maintained and repaired by the condominium regime and those portions which are required to be maintained by the owners of the individual common interests, including outside walls, interior walls between apartments, interior partitions within apartments, pipes and wires within walls and partitions and fixtures.

(n) Rights of entry into apartments or other portions of the condominium project for the purpose of making emergency or other repairs; responsibility for the payment of such repairs and for damages as a result of the foregoing.

(o) Details of provisions regarding damage or destruction of apartments or other portions of the condominium project, including provision for reconstruction and the votes required therefor, the application of insurance proceeds received upon such damage or destruction, the assessment of owners of condominium interests for additional moneys required for reconstruction and the method of apportioning such insurance proceeds or such assessments among such owners, and the effect of failure to reconstruct.

(p) A provision for representative actions by or against the condominium regime or the owners of condominium interests.

(xxiv) Warranties, if any, concerning the construction of the structures and personal property therein.

(xxv) Estimates of the aggregated common receipts and expenditures of the condominium regime for the first year of operations and estimates of the common charges and other expenditures for each individual condominium interest for such period, together with the qualifications of the party making such estimates.

(xxvi) For existing properties, a fair reflection of the operations thereof, with historical operating figures for at least two years or the life of the property where it has been in existence for a shorter period, including profit and loss statements prepared by an independent public accountant, audited and prepared in accordance with standard accounting procedures consistently applied. The operating figures provided as aforesaid shall cover a period ending not more than six months prior to the date of the offering plan. However, unaudited operating figures shall be provided for any subsequent period not covered by such figures, up to three months prior to the date of the offering plan.

(xxvii) A summary of the provisions of any agreement for management of the property of the condominium project including the assignability or cancelability of such agreement.

(xxviii) Whether any of the employees or managers will be bonded and the details thereof.

(xxix) Names and addresses, background and experience of all sponsors and other promoters, prior relationship to each other and to the promotion or offering. Indicate whether this is a profit or nonprofit venture.

(xxx) A summary of all material clauses in any relevant agreements or legal instruments such as certificates of incorporation, contracts of sale, and mortgages, which are not covered in the offering plan.

(xxxi) The experience and background of the person, party or other entity that will manage the condominium project.

(xxxii) The existence of any lawsuits or other legal proceedings which could materially affect the offering, the purchasers of condominium interests, the condominium project or operation thereof.

(xxxiii) The status of any existing construction.

(xxxiv) A separate schedule which shall set forth the following with regard to each condominium interest, where applicable; designation of each apartment or other subdivision; number of rooms and baths in each; the percentage of appurtenant interest in general, common and limited elements; price of each condominium interest; the estimated common charges for the first year for maintenance payable to the condominium regime; and the estimated expenditures payable to others for real estate taxes, utilities, heating and other expenses.

(xxxv) Expenses and closing costs to be borne by the purchaser of the condominium interest.

(xxxvi) Provisions for condominium interests unsold at the time of closing of title to the first such interest, including the name of the person or party who will hold title to unsold interests, the voting rights applicable to such interests, the obligations of sponsors or other promoters to pay common charges applicable to such interests, and whether bond or other security is required to be posted to assure payment of such charges; changes in prices of such units and the effect, if any, [of] such changes upon common charges payable by the owners of such interests, and owners of other interests, and whether sponsor may have voting control of the condominium regime.

(xxxvii) Where the rents of the apartments constituting all or part of the condominium interests offered are subject to governmental rent control, the offering plan should set forth a summary of the rights of present tenants and other occupants thereof who do not wish to purchase condominium interests, a summary of applicable regulations of the governmental subdivision having jurisdiction, the amount of rents payable for such apartments, the procedure required in order to obtain possession of such apartments and the obligations for the payment of common charges by purchasers of condominium interests which include such apartments.

(xxxviii) The nature of any contractual undertakings or obligations of sponsors, promoters or other persons and bonds or other securities posted to assure payment of such obligations or undertakings, and the conditions or limitations thereon, which would affect the purchaser.

(xxxix) The offering plan should contain a representation that all moneys paid by purchasers of condominium interests offered pursuant to such plan shall be held in trust by the offeror in a special account in a specified bank and will not be commingled with any other funds and will be expended only for the purposes specified in the offering plan in connection with the consummation of the plan. The name and address of an attorney-at-law, whose signature shall be required for the expenditure of such trust funds shall also be set forth.

(xl) The offering plan shall contain a representation as to the physical condition of existing property and the equipment therein.

(xli)

(a) The date when all moneys received from purchasers are to be returned in the event that the property is not consummated.

(b) The dates and conditions upon which the plan may and shall be declared effective and subsequent to which the offering may not be abandoned or otherwise terminated.

(c) The date of closing of title to the condominium interests offered, together with the conditions which must exist and the requirements which must be met before such closing takes place.

(xlii) All other information material to the offering.

(xliii) Notwithstanding any other provision of this Part, in the case of a wholly nonresidential condominium project or development offering, the filing and delivery of an offering plan consisting of true copies of the declaration and bylaws may be accepted by the Attorney General as adequate.

(xliv) For existing properties, a statement whether or not such property is subject to the provisions of the Emergency Housing Rent Control Law (or in cases where the property is located in the City of New York, whether or not the property is subject to the provisions of the City Rent and Rehabilitation Law). Where the property is subject to such control, a statement of the maximum rents in effect for each unit shall be set forth. In addition the following statement shall be included in bold easily readable print:

The property is subject to rent control and the purchaser's right of possession of any unit occupied by a tenant is subject to the restrictions against eviction imposed by the (insert either Emergency Housing Rent Control Law or City Rent and Rehabilitation Law, whichever is appropriate).

(xlv)

(a) A special risk section that, if applicable, must be on a separate page, immediately following the table of contents. All features of a plan which involve significant risk or will disproportionately or unusually affect common charges or obligations of unit owners in future years of condominium operation must be conspicuously disclosed and highlighted. A brief description of the risk should be given in this section and a more thorough description should be given in a referenced later section. Questions as to whether a risk should be highlighted in this section should be resolved in favor of inclusion. Special risks include, but are not limited to, the example set forth in clause (b) of this subparagraph.

(b) If the purchase agreement is not contingent on obtaining financing, the purchaser's obligations to pay the balance of the purchase price without regard to the availability of financing and purchaser's maximum loss upon failure to pay the balance of the purchase price must be explained.

(c)Exhibits required.

The offering plan submitted to the Department of Law must contain the exhibits described below and provide that all exhibits are part of the offering plan required by General Business Law article 23-A and subject to the requirements and sanctions of the law. Whenever an exhibit document is marked "Original" (orig.), it means that all copies must be duly executed, original documents. Whenever a document is marked "copy", it means that a true and complete copy of the document should be included. Two copies of parts A (Certifications) and B (General) of the exhibits are required, indexed with numbered tabs and secured in a folder so that documents can easily be removed. In addition, conformed or photostatic copies of the part A certifications should appear in the body of the plan. Inapplicable exhibits should be expressly noted and explained in the transmittal letter.

(1) Part A of the exhibits (Certifications) shall include:

(i)

(A-1) -certification by sponsor and sponsor's principals (orig.); and

(ii)

(A-2) -certification by sponsor's engineer or architect (orig.).

(2) Part B of the exhibits (General) shall include:

(i)

(B-1) -copy of title company report dated within 30 days of submission;

(ii)

(B-2) -copy of specimen title policy for all individual units which unconditionally insures that a valid condominium has been established and that the policy will not contain an exception indicating the existence of a mortgage or other liens affecting the unit insured and any other unit;

(iii)

(B-3) -original letter from title company stating it has reviewed declaration, bylaws and other relevant documents and is prepared to insure title to purchasers of units in accordance with exhibit B-2;

(iv)

(B-4) -copy of proposed management agreement;

(v)

(B-5) -copies of all contracts which will be binding on the board of managers or board of directors of a homeowners' association, for $2,500 or more per year, such as service, union, washing machine, television antennae, cable television, snow removal, landscaping, security, exterminating, elevator, heating and air conditioning contracts;

(vi)

(B-6) -copies of proposed insurance policies, including fire, liability, officers' and directors' liability (if any), and other insurance policies including a written opinion from a licensed insurance broker, insurance appraiser or real estate appraiser concerning adequacy of coverage to avoid being a coinsurer;

(vii)

(B-7) -if a homeowners' association is part of the offering, include copies of certificate of incorporation, receipt from New York Secretary of State or equivalent proof of filing for out-of-state plans, bylaws and other relevant organizational documents;

(viii)

(B-8) -copy of G.B.L. section 352-b designation of Secretary of State as agent (for out-of-state issuers, sponsors, principals and selling agents);

(ix)

(B-9) -worksheets which set forth bases for projections and method and calculations used to prepare first-year operating budget;

(x)

(B-10) -copies of all professional and commercial leases;

(xi)

(B-11) -certified rent roll, including the name of each tenant, apartment number, rent, term and termination date of lease, and status under any rent regulatory laws for the month in which the offering plan was submitted to the Department of Law. Indicate vacant apartments and the date on which each such apartment first became vacant. Include an affidavit setting forth the identity of any tenants who are related by blood, marriage or adoption to the sponsor or selling agent, or are principals, employees, shareholders, limited partners or business associates of the sponsor or selling agent;

(xii)

(B-12) -copy of contract to acquire property if not currently owned by sponsor;

(xiii)

(B-13) -where the condominium is located outside the State of New York, a copy of the statute and regulations, if any, of the state or territory in which it is located governing condominiums or other matters contained in the offering plan;

(xiv)

(B-14) -declaration of submission to condominium ownership or other documents of similar nature;

(xv)

(B-15) -mortgages relating to the condominium;

(xvi)

(B-16) -agreements or other documents of local taxing authorities relating to the separate assessment of each condominium unit for real estate taxes;

(xvii)

(B-17) -copy of the mortgage and note or bond required by sponsor if sponsor is offering financing, or required by a mortgage lender procured by sponsor, together with any other document which significantly affects a purchaser's obligations for financing offered or procured by sponsor. If the documents are not available at the time of submission to the Department of Law, so indicate and forward when available; and

(xviii)

(B-18) -other material document(s), each of which should be described in transmittal letter.

(3) Two copies of part C (Engineering) of the exhibits in a separate folder similarly secured and indexed. Part C of the exhibits shall include:

(i)

(C-1) -architect's or engineer's detailed description of the physical aspects of the condominium with the architect's or engineer's stamp and original signature; and

(ii)

(C-2) -copy of certificate of occupancy, if available.

(4) Two copies of the exhibits, part D (Fees, and other information) in a separate folder similarly secured and indexed. Part D of the exhibits shall include:

(i)

(D-1) -personal or certified checks for one half the filing fees due under General Business Law section 352-e(7)(a) and the entire amount of the fees due under General Business Law section 359-e(5), both payable to the New York State Department of Law and placed within an envelope together with the form of receipt issued by the Department of Law;

(ii)

(D-2) -signed M-10 forms, registration for broker-dealer, for the selling agent(s) (orig.), and signed M-2 forms, salesman statement, for all individual employees who act as salesmen for selling agents. Forms do not have to be submitted if currently valid registration forms are on file with the Department of Law from prior public offerings;

(iii)

(D-3) -signed M-10 form(s), registration for broker-dealer, for all principals of the sponsor (orig.). Forms do not have to be submitted if currently valid registration forms are on file with the Department of Law from prior public offerings;

(iv)

(D-4) -signed RI-1 forms, registrant information form(s) concerning prior convictions, judgments, administrative actions, bankruptcy, employment and business affiliations for all principals of the sponsor (orig.);

(v)

(D-5) -proof of financial responsibility of sponsor (sponsor's certified statement or sponsor's affidavit of net worth) and sponsor's certification that its net worth is sufficient to meet sponsor's unsecured obligations under the plan, including sponsor's obligations for unsold units (orig.);

(vi)

(D-6) -affidavit from sponsor and principals of sponsor, stating whether sponsor and principals of sponsor have taken part in public offerings of cooperative interests in realty, including condominiums in or from New York which were initially offered during the preceding five years. State the address of the realty and approximate date of the first closing; and

(vii)

(D-7) -completed statistical information cards available from the Department of Law.

N.Y. Comp. Codes R. & Regs. Tit. 13 § 19.2

Amended New York State Register July 3, 2018/Volume XL, Issue 27, eff. 7/3/2018