During the last year, there has been an explosion of condominiums being formed in New York ranging from commercial buildings being divided into two or three pieces to facilitate the sale or financing of parts of the building to dozens or hundreds of individual residential units. Meanwhile and perhaps as a result of it, the prices for the units have escalated exponentially. Suddenly, every attorney is being asked questions about condominium formation which, in New York, is neither fast nor simple.
In New York state, condominiums are formed by the filing of a Declaration (with By Laws and Tax Maps attached) with the City Register of the borough in which the property is located in New York City, or the County Clerk of the county in which the property is located, outside of New York City. However, regardless of the area in which the condominium is located, the process cannot occur without the involvement of the New York state attorney general (the AG) because the recording offices cannot record the Declaration with it being accompanied by either an acceptance letter from the AG of an Effectiveness Amendment for an Offering Plan or a No Action Letter indicating that an Offering Plan was not required. In essence, just like all roads leading to Rome, no condominium can be formed without the involvement of the AG. The conversion of existing buildings into condominiums and the sale of condominium units are subject to both the Condominium Act (Real Property Law Article 6B) and the Martin Act (General Business Law §352 et. seq.). The Condominium Act deals with the formation and operation of condominiums while the Martin Act provides the AG with the authority to control the sale of condominiums units since condominium and cooperative interests are considered securities.
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