Our recent real estate alert discussed new requirements imposed on condominium and cooperative corporations formed pursuant to the BCL or the NPCL, which must provide at least once a year (i) a copy of the conflicts of interest law to each of its directors and (ii) an annual report to its shareholders regarding related party transactions. Until this past week, the conflicts of interest legislation did not appear to apply to most condominiums since condominiums generally are unincorporated associations. However, on April 18, 2018, amendments were signed into law clarifying the types of condominiums and cooperative housing corporations that are required to submit annual reports.
The new amendment is a technical correction to address the ambiguity as to which housing corporations must abide by the conflicts of interest law.
The technical correction clarifies that all condominiums must properly disclose its conflicts of interest. Even condominiums that are unincorporated associations formed pursuant to Article 9-B of the New York Real Property Law, known as the Condominium Act, are affected by the conflicts of interest law.
All condominiums—and any affected cooperative corporations that have not yet done so—should consider amending their governing documents to ensure they are compliant with the statutes. Best practice for housing corporation boards would be to establish a procedure to provide each director a copy of the applicable statute and track when the annual reports will be circulated.
Although the amendment now spells out which corporations the rules apply to, the law is still completely silent on enforcement and oversight, so shareholders and members will likely only be able to address violations of the conflicts law through litigation. Or they can always wait until the next technical correction for this law to be refined further.
Many of our condominium and cooperative clients have requested that we assist them with these fluctuating annual reporting requirements. Nixon Peabody’s team of cooperative and condominium attorneys would be happy to help develop carefully worded policies in compliance with this law.
The foregoing has been prepared for the general information of clients and friends of the firm. It is not meant to provide legal advice with respect to any specific matter and should not be acted upon without professional counsel. If you have any questions or require any further information regarding these or other related matters, please contact your regular Nixon Peabody LLP representative. This material may be considered advertising under certain rules of professional conduct.
Cooperative and Condominium Alert | 07.24.18