N.Y. Comp. Codes R. & Regs. tit. 13 § 21.1

Current through Register Vol. 46, No. 43, October 23, 2024

Section 21.1 - General

(a)Applicability.

The offering statement or "offering plan" required by section 352-e of the General Business Law for a cooperative that meets the requirements set forth in this section is subject to this Part. Except as provided in paragraph (4) of this subdivision, offering plans submitted pursuant to this Part are not subject to the provisions of any other Part.

(1) The building is completely vacant of individuals residing in the building on the date of submission of the offering plan to the Department of Law or the building is to be newly constructed.

(2) The cooperative is not organized as a time-sharing arrangement.

(3) One or more of the cooperative units being offered are used for residential purposes or for combined residential/home occupation purposes.

(4) The conversion of a vacant or newly constructed building to two or more condominium units and the conversion of one or more of the condominium units to an apartment corporation is primarily subject to this Part. In addition, the offering plan must comply with the requirements of Part 20 to the extent necessary to comply with subdivision (b) of this section.

(b)Standard of compliance.

An offering plan must, at a minimum:

(1) contain in detail the terms of the transaction and be complete, current and accurate;

(2) afford potential investors, purchasers and participants an adequate basis upon which to found their judgment;

(3) not omit any material fact;

(4) not contain any untrue statement of a material fact;

(5) not contain any fraud, deception, concealment, suppression, false pretense or fictitious or pretended purchase or sale;

(6) not contain any promise or representation as to the future which is beyond reasonable expectation or unwarranted by existing circumstances; and

(7) not contain any representation or statement which is false, where the sponsor or the person who made such representation or statement:

(i) knew the truth;

(ii) with reasonable effort could have known the truth;

(iii) made no reasonable effort to ascertain the truth; or

(iv) did not have knowledge concerning the representation or statement made.

(c)Sponsor(s).

As used in this Part, the word sponsor(s) means any person, partnership, joint venture, corporation, company, trust, association or other entity or agent thereof who makes or takes part in a public offering or sale in or from the State of New York of securities consisting primarily of shares or participation interests or investments in real estate, including cooperative interests in realty.

(d)

(1) Principal(s).

As used in this Part, the word principal(s) means all individual sponsors; all general partners of sponsors that are partnerships; all officers, directors and shareholders of a corporate sponsor that are actively involved in the planning and consummation of the offering; and all other individuals who:

(i) own an interest in or control sponsor; and

(ii) actively participate in the planning and consummation of the offering, regardless of the form of organization of sponsor.

(2)Consummation of the plan means transfer of title to the apartment corporation and the issuance of shares and a proprietary lease to at least one subscriber under the plan following a declaration of effectiveness by the sponsor and acceptance of the amendment by the Department of Law confirming or declaring the plan effective.

(3)Filing means the issuance of a letter from the Attorney General stating that an offering plan or amendment has been accepted for filing.

(e)Service.

Unless otherwise provided by statute or regulation, any documents required to be served by this Part shall be served on subscribers or purchasers who have executed and delivered subscription agreements or purchase agreements to the sponsor and who are not in default, shareholders and any other person entitled to service pursuant to local law or regulation (collectively "offerees"), in the following manner:

(1) personal delivery; and

(2) mailing by regular or registered or certified mail, with or without return receipt requested, addressed to the offeree at the last residence of such offeree. If sponsor has no information of the last residence address but has written information of the place of business or employment of such offeree, the mailing shall be addressed to such last business or employment address.

Service shall be complete upon completion of personal delivery on all offerees or three days after mailing to all offerees not personally served. An affidavit of service identifying the offerees served, stating the manner of service, and the date of service shall be part of the documents required to be retained in subdivision (z) of section 21.3 of this Part.

(f)Time of review.

Not later than 30 days after the date of submission of the offering plan for filing, the Department of Law shall issue a letter to the sponsor or sponsor's attorney stating that the plan is filed, or indicating deficiencies. The Department of Law may issue a deficiency letter whenever it appears that the Department of Law cannot make any finding mandated by law or that the offering plan is deficient in one or more respects.

(g)Statutory compliance.

Unless expressly provided herein, nothing contained in this Part shall be construed as limiting the requirements set forth in article 23-a of the General Business Law.

(h)Out-of-state.

A sponsor of a cooperative located outside of New York who makes or takes part in a public offering or sale in or from the State of New York of cooperative units must file an offering plan with the Department of Law that provides the full and fair disclosure required by this Part. The Department of Law, in its discretion, may allow the sponsor to comply with any requirement of this Part which would require a departure from the offering plan approved by or filed with the state where the cooperative is located by employing an addendum at the end of the offering plan containing the information required and, where necessary, by deleting from the offering plan any representations or statements that are inconsistent with or not permitted by this Part or the General Business Law.

(i)Exemptions.

Upon written application of the sponsor, or sponsor's attorney, the Department of Law, in its discretion, may by ruling exempt a plan from the application of any provision of this Part where it is found that enforcement of the provision is not necessary to effectuate the purposes of the General Business Law or to protect the investing public. The application shall:

(1) be annexed to and be submitted with the attorney's transmittal letter;

(2) set forth the provisions for which the exemption is sought and the grounds for the exemption; and

(3) be signed by sponsor or the sponsor's attorney.

The certifications required by section 21.4 of this Part shall be in the form required by this Part, without modification, and shall be based on the presumption that any exemption sought pursuant to this section has been granted. In the event the application for exemption is denied, the Department of Law shall issue a deficiency letter as provided in subdivision (f) of this section.

(j)Transition.

With respect to any offering plan which:

(1) was submitted to the Department of Law pursuant to the prefiling procedure set forth in section 17.3 of this Subchapter before the effective date of this Part;

(2) had not been filed with the Department of Law on the effective date of this Part; and

(3) meets the requirements of subdivision (a) of this section.

The Department of Law, in its discretion, may issue a letter to the sponsor or sponsor's attorney stating that an offering plan is filed if the sponsor's attorney affirms that the offering plan substantially complies with this Part and executes a transmittal letter to that effect. For purposes of this section, substantial compliance shall mean that the offering plan contains all information required to be disclosed by this Part either in the bound offering plan or in a supplemental submission annexed to the plan.

(k)Digital copy.

As used in this Part, digital copy means a copy that is identical in content to a paper copy except that it is recorded electronically in read-only .pdf format or other electronic format that the Department of Law determines to be acceptable. Digital copies of the plan shall include all the supporting documents included in part II of the plan. Digital copies of the exhibits to the plan shall include all documents referenced in section 21.2(c)(3) of this Part, as applicable. Digital copies of the amendment shall include all exhibits, back-up documents, and other supplemental documents annexed to the amendment, as applicable. The Department of Law shall periodically issue a Guidance Document as defined by State Administrative Procedure Act section 102(14), setting forth particular guidelines and procedures for the submission of digital copies. Such Guidance Document will be available on the Department of Law's website, as required by State Administrative Procedure Act section 202(e).

N.Y. Comp. Codes R. & Regs. Tit. 13 § 21.1

Amended New York State Register December 30, 2015/Volume XXXVII, Issue 52, eff. 2/1/2016

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