July 24, 2018
Cooperative and Condominium Alert
Cooperative and Condominium Alert
Author(s): Erica F. Buckley
This alert discusses what developers of cooperative and condominium projects outside of New York State need to know in order to take advantage of CPS-12 in marketing out-of-state homeownership opportunities to New York residents.
In 2016, the New York Attorney General’s office (the “NYAG”) issued Cooperative Policy Statement 12 (“CPS-12”)—“Application for Exemption from Regulatory Filings for Offerings of Cooperative Interests in Realty where the Realty is Situated Outside the State of New York.”
CPS-12, which was effective May 5, 2016, provides an exemption from the Martin Act filing requirements to:
certain offerings of cooperative interests in realty that: (i) involve realty situated exclusively outside the [s]tate of New York and (ii) are situated within a jurisdiction that has enacted laws to protect realty purchasers through legal protections that are comparable to those of New York, such as full disclosure of the terms of sale . . . .
CPS-12 sets the framework within which developers of such out-of-state projects can offer and sell “cooperative interests in realty” to New York residents without filing an offering plan pursuant to the Martin Act. Instead, under CPS-12, developers of qualifying projects can file the short-form offering. For purposes of CPS-12, “cooperative interests in realty” includes cooperatives, condominiums, homeowners’ associations, timeshares and senior communities.
While this was welcome news in 2016, it may now prove to be an essential marketing tool for developers in low tax states such as Florida and Texas—states that New Yorkers are now flocking to as a result of the Tax Cuts and Jobs Act. Now, more than ever, developers should take advantage of CPS-12 in marketing out-of-state homeownership opportunities to New York residents who are seeking to relocate to more favorable tax jurisdictions.
The key requirement of CPS-12 is that the situs state or country have enacted laws that protect consumers in a way similar to the Martin Act. If this requirement is satisfied, then the CPS-12 filing will be available for all types of cooperative interests in realty, subject to the following:
Although this information is not publically posted, and therefore is subject to change, a representative from the NYAG confirmed that CPS-12 exemptions are available for projects in the following states:
This provides tremendous opportunities to developers of both luxury and middle-market projects throughout the country, and subject to jurisdictional rules, perhaps even for affordable homeownership opportunities.
It is important to remember that even if the out-of-state project meets all the requirements for CPS-12, issuance of the exemption is at the discretion of the NYAG. Accordingly, the CPS-12 Application must be thorough and accurate. Issuance of a CPS-12 exemption by the NYAG holds no precedential value nor does it prevent the attorney general from commencing an investigation in the future. Therefore, out-of-state developers are strongly encouraged to seek the guidance of counsel familiar with the Martin Act—New York’s blue sky law that regulates the offer and sale of cooperative interests in realty.
Now more than ever is a perfect time for developers of luxury and middle-market projects outside of New York State to consider its residents as potential homebuyers. Although New York City remains one of the most robust and popular real estate markets in the world, some of its residents may still wish to move to states with better tax laws. Therefore, developers should seriously consider taking advantage of this simplified filing process to expand their base of ready, willing and able buyers.
Nixon Peabody LLP is an AMLaw 100 international law firm with a full-service cooperative and condominium practice team.
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.
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