N.Y. Comp. Codes R. & Regs. tit. 13 § 22.8

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

Section 22.8 - Applications for no-action letters

(a)Applicability.

Upon application made in accordance with the requirements of this section, the Department of Law may, in its discretion, issue a "no-action letter" stating that it will not take any enforcement action because the transaction described in the application does not require the filing of an offering plan in compliance with section 352-e of the General Business Law. A no-action letter may be issued where the Department of Law determines that the filing of an offering plan pursuant to General Business Law section 352-e is not necessary to effectuate the purposes of General Business Law article 23-A or to protect the public interest.

(b)Application procedure.

(1) An application for a no-action letter shall be submitted to the New York State Department of Law, Real Estate Finance Bureau.

(2) Such application shall include the following:

(i) An affidavit signed and sworn to by the offeror(s) which states:

(a) The name, residence and business address and legal status (corporation, partnership, individual, etc.) of each offeror and its principals, and the relationship of the offeror(s) to the property which is the subject of the offering.

(b) A description of the property which is to be cooperatively owned or maintained by the HOA.

(c) A description of the proposed transaction, including the number of homes or lots being offered in conjunction with membership in the HOA.

(d) That the offeror(s) will comply with the escrow and trust fund provisions of General Business Law section 352-e (2-b) and section 352-h and the regulations adopted by the Attorney General pursuant thereto, and hold down payments for the purchase of the property in trust for the benefit of the purchasers and that such funds will not be commingled with the moneys of the offeror(s) until actually employed in connection with the consummation of the transaction.

(e) That the offeror(s) will provide to each offeree the following information:

(1) a statement that the purchase price of the home(s) or lot(s) includes the cost of membership in the HOA;

(2) a copy of any mortgage or ground lease that will remain on HOA property after transfer to the association;

(3) a copy of any contract between the sponsor and the HOA;

(4) a copy of the proposed deed of HOA property from sponsor to the HOA;

(5) a copy of the recorded deed to the HOA property by which sponsor derived title or a copy of the contract of sale between the owner and sponsor if sponsor is the contract vendee;

(6) a copy of the most recent financial statement of income and expenses for the operation of the property, if applicable;

(7) information known to the offeror(s) which may result in extraordinary expenses for members or for the HOA including but not limited to, assessments, liabilities, dangerous or hazardous conditions, pending litigation and administrative proceedings;

(8) evidence of compliance with local zoning laws and regulations, e.g., construction permits, zoning resolutions, use permits, a certificate of occupancy if HOA property includes any buildings;

(9) disclosure of escrow account as required by section 22.3(k)(2) of this Part including the form for dispute resolution by the Attorney General; and

(10) such other information as the Department of Law may require to be presented to each offeree.

(f) That the offeror(s) agrees to furnish a complete copy of the application for a no-action letter and a copy of the no-action letter to each offeree prior to accepting any down payment.

(g) That the offeror(s) agrees to furnish, within five days after a request by the Department of Law, copies of executed offeree affidavits required pursuant to clause (j) of this subparagraph.

(h) That the use for which the unit(s) and property are being offered will comply with the property's certificate of occupancy, zoning, building and housing laws, rules and regulations. If the proposed use will not comply with the legally permissible use, a discussion of what steps must be taken to comply with or to change the legally permissible use and identification of which party will assume responsibility for taking such steps.

(i) Whether the offeror(s) or its principals, have, within the preceding five years, participated in any other applications for a no-action letter or have made any other offerings which were not pursuant to an offering plan filed with the Department of Law. If so, the address of any property which was the subject of such application or offering.

(j) That an affidavit will be obtained from each proposed offeree prior to the closing on a unit that is subject to this application which will contain the following representations;

(1) the offeree's name, residence and business address and legal status (corporation, partnership, individual, etc.);

(2) that the offeree has read the affidavit of the offeror(s) submitted as part of the application for a no-action letter;

(3) that the offeree understands that no offering literature other than as required by the no-action letter will be provided;

(4) that the offeree has inspected the subject property.

(ii) A site plan indicating the property which is to be commonly owned or maintained by the HOA.

(iii) Declaration of covenants, restrictions, easements and liens or a road maintenance agreement.

(iv) The estimated monthly or annual assessment and the current or proposed budget.

(v) Certification by an expert as to the adequacy of projected income and expenses for the first year of operation or back-up documentation substantiating each line item of the budget.

(vi) Transmittal letter. A transmittal letter addressed to the Department of Law that is signed and affirmed under penalty of perjury by the individual attorney who prepared the no-action application, and containing the following unqualified statements must be submitted with the application at the time the application is submitted:

"I am the attorney who prepared the no-action application for the captioned property. I affirm as follows:

Enclosed for filing pursuant to Section 22.8 of 13 NYCRR Part 22 is an application for a no-action letter for the captioned property.

I am fully familiar with the provisions of Article 23-A of the General Business Law and the regulations promulgated by the Attorney General in Part 22.

I prepared (or reviewed) all legal documents necessary to form an HOA and, in my opinion, the HOA is duly organized, validly existing and in good standing. [If the HOA is not in existence at the time the application is submitted, state that counsel will cause the HOA to be formed in conformity with applicable law.] I have prepared the application based on information from the sponsor. I expressly disclaim any responsibility to have made an independent inspection of the property or investigation of the information furnished to me by sponsor.

I have no actual knowledge of any violation of Article 23-A of the General Business Law or Part 22 of the regulations promulgated by the Department of Law, nor do I have actual knowledge of any material fact omitted or any untrue statement of a material fact included in the application."

(vii) A check in the amount required by General Business Law section 352-e(7)(a) made payable to the Department of Law.

(viii) A Broker-Dealer Statement (Form M-10) for the offerors accompanied by a check in the amount required by General Business Law section 359-e(5).

(ix) A statistical record card available from the Department of Law.

(x) Where the roads are subject to an offer of dedication to the locality, a copy of the dedication agreement and documentation establishing that the sponsor has substantially complied with conditions for dedication.

(xi) Such other documents and information as the Department of Law may specify.

(c)Criteria for the granting of a no-action letter.

(1) The granting of a no-action letter will be on such terms and conditions as the Department of Law may impose in order to protect the public interest. A no-action letter shall not be granted if the Department of Law determines that such act may contravene the rights of any purchaser under General Business Law article 23-A.

(2) An HOA may qualify for a no-action letter if the total annual charge assessed for membership can be demonstrated by documentation satisfactory to the Department of Law to be minimal. However, if the HOA property includes private roads the Department of Law will not issue a no-action letter regardless of the annual charge assessed for membership unless the number of homes or lots which use such private roads is four or fewer.

(3) The issuance of a no-action letter is based solely on the information provided in the application. Any material misstatement or omission of material fact required by this Part may render the no-action letter void ab initio.

(4) The issuance of a no-action letter shall not be construed to be a waiver of or limitation on the Attorney General's authority to take enforcement action pursuant to article 23-A of the General Business Law and other applicable provisions of law except as expressly stated in such letter.

(5) The issuance of a no-action letter by the Department of Law shall have no value as precedent and may not be relied upon in the submission of any other application for such letter.

N.Y. Comp. Codes R. & Regs. Tit. 13 § 22.8

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