BILL NUMBER: S3566B
SPONSOR: CLEARE
 
TITLE OF BILL:
An act to amend the general business law and the real property law, in
relation to providing expanded homeownership opportunities from the
conversion of certain residential rental buildings to condominium status
by property owners that commit to the stewardship of permanently afford-
able units and the preservation of expiring affordable housing inventory
in the city of New York; and providing for the repeal of such provisions
upon expiration thereof
 
PURPOSE:
This legislation aims to provide expanded homeownership opportunities
and affordable housing preservation for a small subset of mixed-income
rental buildings that have either expiring affordable units or existing
permanently affordable units that could be increased in number. The
scope of the legislation is limited to New York City.
Certain mixed-income rental buildings constructed in the 1990s relied on
incentives such as low-income housing tax credits, bonds, and tax abate-
ments to get built. The affordability restrictions required by these
incentives are nearing expiration. As a result, many building owners
will be able to command market rate rents on formerly affordable apart-
ments, and the low-income families within those apartments could face an
uncertain future. In other cases, developers have availed themselves to
zoning bonuses under inclusionary housing laws and have agreed to set
aside affordable units as permanently affordable. However, many of these
units lack a steady stream of income, and therefore units could be at
risk of falling into distress without an infusion of capital to meet
future capital needs. This bill would allow market-rate owners of a
limited class of mixed-income rental buildings to convert the existing
market-rate units to condominium status in exchange for agreeing to
either preserve expiring units, or in the case of permanently affordable
units, to expand the number of such units within the existing building.
The primary incentive provided to such building owners is a reduction of
the threshold required to declare the offering plan effective, which
would be reduced from the current standard of 51% of tenants in occupan-
cy to 15% of bona fide purchasers.
SHORT SUMMARY:
Relates to the conversion to condominium ownership for the preservation
and stewardship of expiring or permanently affordable housing in the
city of New York; provides expanded homeownership opportunities from the
conversion of market-rate rental housing to condominium status by prop-
erty owners that commit to the stewardship and preservation of the
inventory of expiring or permanently affordable housing in the city of
New York; requires the establishment of a reserve fund for building-wide
improvements and a dedicated capital fund for the upkeep, maintenance
and repair of affordable units; increases filing fees on certain filings
to the Real Estate Finance Bureau to cover additional costs for the
office of the Attorney General.
 
SUMMARY OF PROVISIONS:
Section 1 of the bill would add a new section to the general business
law, section 352-eeeee. This new section of the general business law
permits a limited class of condominium conversions of mixed-income
rental buildings in the City of New York without all the residential
units being offered for sale as currently required by law. A small class
of rental buildings that were built after 1996 with existing affordable
units that are either at risk of loss or at risk of falling into disre-
pair are eligible to convert under this legislation. No building that
was built prior to 1996 nor any building owned as a Mitchell-Lama, Rede-
velopment Company, or Limited Profit Company would be eligible to
convert to condominium status under this new section of the Martin Act.
Moreover, this new section of the general business law also addresses
some of the common criticisms of conversions, namely, that sponsors game
the process of declaring an offering plan effective by using interested
parties as purchasers and that sponsors do not create viable condomin-
iums by selling all units to bona fide purchasers within a reasonable
period. Provisions in the new law make it explicit that a sponsor must
exercise good faith efforts to sell its entire inventory of residential
units. A sponsor must sell at least 51% of its inventory of residential
units within the condominium's first five years of existence. This
requirement also addresses the issue of condominium viability. A sponsor
of a conversion under this section will not be able to continue to own a
large number of units within a homeownership project. Finally, this bill
makes clear that non-purchasing tenant rights apply to any tenant that
rents an apartment that has not been sold to a bona fide purchaser,
regardless of whether such tenant commenced occupancy prior to or after
the effective date of the offering plan, thereby ensuring good cause
eviction rights apply to all sponsor-owned apartments in the condomin-
ium, regardless of the date of when the occupancy of the tenant
commenced.
This bill also seeks to benefit non-profits by requiring the sponsor to
convey the permanently affordable units to a qualified owner, namely a
non-profit or community land trust. Only if a building owner accepts
this trade-off and commits to the stewardship and preservation of low-
income rental units as permanently affordable rental housing (or with
approval of the relevant housing finance agency, as low-income ownership
units) can the owner convert to condominium.
Section 1 also clarifies that the income-restricted rental units shall
remain subject to the rent stabilization code for current and future
tenants, even after the building's conversion to condominium ownership,
and ensures that low-income tenants will have equal access to all build-
ing-wide amenities for a nominal cost, which cannot be treated as rent.
Section 2 amends section 339-e of the real property law to include new
defined terms.
Section 3 of the bill would create a new section 339-mm of the real
property law that requires the offeror of a preservation plans submitted
under the new section 352-eeeee of the general business law to fund a
dedicated capital fund for the income-restricted rental units and a
reserve fund for the capital replacements that are necessary to provide
for the health, welfare and safety of the condominium's residents,
including building-wide structural replacements and investments in envi-
ronmental and sustainability upgrades. The offeror's obligation to fund
a reserve closely parallels the existing reserve fund obligations as
codified at section 26-203 the administrative code of the city of New
York.
Section 4 of the bill would modify three subdivisions of section 352-e
of the general business law to effectuate the following:
First, in subdivision (2), the prohibition on the attorney general from
accepting an offering plan that converts existing residential rental
buildings for at least four months from its submission date, is elimi-
nated for preservation plans submitted under the new section 352- eeeee.
This is to facilitate the preservation of at-risk income-restricted
rental units on an expedited basis; the four-month prohibition on the
attorney general's acceptance of all other offering plans converting
residential rental property is maintained.
Second, the definition of "plan" is amended in subdivision (2-b) to
permit the attorney general to review and accept a condominium offering
plan that preserves affordable housing under the new section 352-eeeee.
The other revisions are found in subdivision (7), which address filing
fees. These revisions: (i) create a new filing fee scheme for preserva-
tion plans submitted to the attorney general under the new section
352eeeee; (ii) eliminate the filing fees payable by a non-profit devel-
oper incorporated under article 11 of the private finance housing law to
the department of law; and (iii) increase the filing fees payable to the
real estate finance bureau fund. These revisions are intended to defray
the costs the attorney general will incur to implement and give effect
to the law's purpose while rebalancing the fee structure of the depart-
ment of law to favor the development of affordable housing units by
nonprofit developers.
Section 5 of the bill would amend section 352-eeee of the general busi-
ness law so that it conforms with the revised terms of section 352-e of
the general business law.
Section 6 of the bill would set an effective date and a sunset of four
years from the effective date.
 
JUSTIFICATION:
This bill promotes homeownership opportunities in New York City while
providing for the stewardship and preservation of an inventory of
affordable housing otherwise at risk of loss or deterioration in the
open market. This legislation will provide permanent stewardship and
financial support to participating non-profits while extending or
expanding affordable housing so that generations of today's tenants as
well as future tenants of these units - may experience a measure of
financial security in their homes.
 
FISCAL IMPLICATIONS:
There are no fiscal implications created by this bill other than being
revenue accretive to the City and State, when one accounts for new
transfer taxes, mortgage recording taxes, mansion taxes, and additional
revenue to assist the operations of the real estate finance bureau of
the Attorney General's office.
 
LEGISLATIVE HISTORY:
2024: B-Print Of Senate Bill does the following:
Requires that buildings must have at least 100 dwelling units
Requires that all income-restricted rental units must be subject to rent
stabilization
 
EFFECTIVE DATE:
This act shall take effect on the one hundred eightieth day after it
shall have become a law.

Statutes affected:
S3566: 339-e real property law, 352-eeee general business law, 352-eeee(1) general business law
S3566A: 339-e real property law, 352-eeee general business law, 352-eeee(1) general business law
S3566B: 339-e real property law, 352-eeee general business law, 352-eeee(1) general business law