New Executive Order Affects Offering Plan Requirements
On August 5, 2020, Governor Cuomo issued Executive Order 202.55, which recognizes that the coronavirus emergency has not concluded, and so extends many provisions of existing Executive Orders for another 30 days, until September 4, 2020. The Executive Order extends, among many other things, the prohibition against executing warrants of eviction that were issued before the pandemic began, the authorization for remote notarization of documents, and the tolling of most civil statutes of limitations.
In addition, the Executive Order affects certain provisions of the General Business Law, Real Property Law, and the Attorney General’s Regulations dealing with offering plans, including:
• Ordinarily, a Sponsor must offer rescission to purchasers if the first closing of a unit does not occur within twelve months of the commencement date of the projected first year of condominium operation as set forth in the offering plan. Apparently, this period is extended for the duration of the Executive Order plus an additional 120 days, and such extensions shall not be deemed a material or adverse change under the terms of the offering plan.
• The requirements to update the projected budget for the first year of operations are also tolled for the duration of the Executive Order plus an additional 120 days. The Sponsor will not be required to offer rescission based on an increase in the first-year budget as long as it is less than 25%.
• Sponsors will be required to file an amendment to their offering plan updating the applicable deadlines and first-year budget within 45 days after the Executive Order expires.
• The two-year periods during which certain credits are available against mortgage recording taxes under RPL Section 339-ee for condominiums have also been extended.
• Ordinarily, an offering statement or prospectus for the conversion of a property in New York City from a rental property to a condominium or cooperative ownership must be declared effective within 15 months after the Department of Law has accepted it for filing. Although conversions are not common, for those that are pending, this 15-month period has been extended for the duration of the Executive Order plus, apparently on a current reading, an additional 120 days. The Sponsor will have to file an amendment to the offering plan, updating the date by which the offering plan must be declared effective, within 45 days after the Executive Order expires.
The above is just a partial summary of the Executive Order, whose complete text can be found at https://www.governor.ny.gov/news/no-20255-continuing-temporary-suspension-and-modification-laws-relating-disaster-emergency. We also note that it is possible that in a given instance there may be arguments that the order is inapplicable, or there may be separate matters of contract that arguably might affect the operation of the in a particular instance. Sponsors, purchasers, and others who may be impacted by the changes should consult with their legal counsel for a full analysis of how the Executive Order may affect them.