Martin Act Amendments: Threshold for Effective Offering Plan
In her Ask the Former Regulator column, Erica F. Buckley discusses recent amendments to the Martin Act, of which one of the most-controversial changes was the threshold for declaring an offering plan effective. She discusses the changes and provides an example of what declaring an offering plan effective would look like under a strict interpretation of the new law.
September 27, 2019 at 12:30 PM
10 minute read
Question: I understand the Martin Act was amended, and now you need 51 percent to declare an offering plan effective in a rental-to-cooperative or -condominium conversion. Can you explain how to reach the 51 percent? Also, doesn't this effectively end conversions?
Answer: Yes, it is true that the Housing Stability and Tenant Protection Act (the Act) included amendments to the Martin Act, with one of the most-controversial changes being the threshold for declaring an offering plan effective. 2019 N.Y. Laws, Ch. 36, Part N. Unfortunately, I am not able to answer this question with any level of certainty because the Department of Law has not yet promulgated regulations on the 51 percent requirement. However, I can discuss the changes and provide an example of what declaring an offering plan effective would look like under a strict interpretation of the new law, with the caveat that it is purely hypothetical without regulations in place.
Overview of Changes to the Martin Act on Effectiveness
To start, let's go over the change in the language. First and foremost, the changes have done away with eviction plans. Therefore, the only way you can convert a rental property to cooperative or condominium status is through a non-eviction plan. Second, to declare a non-eviction plan effective, you now need tenants to enter into purchase agreements for at least 51 percent of all dwelling units in a building, with potentially no offset for vacant units or units occupied by senior citizens and disabled persons who have elected non-purchasing tenant status, unless permitted by Attorney General regulations. Third, the legislature struck language providing that non-tenant purchasers may count toward the non-eviction plan effectiveness threshold.
Therefore, on its face, it appears as though only tenants in occupancy on the date the offering plan is accepted for filing count toward the threshold. However, the Act does empower the Attorney General to promulgate implementing regulations and to issue waivers as long as such waivers comply with the intent of the Martin Act. Here is an excerpt of the current statute:
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