Gov. Andrew Cuomo has signed an executive order that extends the deadlines for condo offering plans, giving developers a lifeline as projects fall behind schedule and transactions stall.
The order pauses the 15-month period in which offering plans for rental conversions to co-op or condo status must become “effective” — meaning at least 15 percent of units have gone into contract.
That timeline is now on hold until the order expires on May 16. Based on the governor’s actions to date, that order could also be extended beyond that, depending on the coronavirus situation.
“When you get right down to it, because the Department of Finance is pretty much closed, the Department of Buildings isn’t inspecting buildings — except in emergency situations — and there are all these timelines that are baked into our offering plans, this extension was essential,” said Stuart Saft, an attorney with Holland & Knight. (A Department of Buildings spokesperson said the agency is conducting routine inspections and, in fact, performing all of its usual services and oversight.)
The order also pauses the automatic right of new-development buyers to rescind their contracts if the first closings don’t take place within a year of the projected date in the building’s offering plan. The change will pause that 12-month deadline until the order expires, giving sponsors more time to conduct their first closings. Sponsors must update their first year of operation within 30 days of the order ending.
“We looked at the relevant regulations and saw that there were time periods that didn’t make sense given the shutdown,” said attorney Jay Neveloff of Kramer Levin, who worked with partner Jonathan Canter and the Real Estate Board of New York to draft the measures and answer questions from the state.
The third change outlined in the order relates to the requirement that sponsors update their projected budget for the first year of operation if a project is delayed by more than six months. That requirement is now temporarily suspended.
While the sponsor must update the budget within 30 days of the order expiring, it “shall not be required to offer rescission, to the extent that such budget does not increase by 25 percent or more,” the order says.
The announcement is welcome news for the city’s residential developers, who were forced to halt in-person showings and most construction work under the governor’s earlier proclamations. As the market falls, they now have a valuable opportunity to stop the clock — even if only in a narrow sense — as they attempt to salvage sales and placate lenders.
It will also mean that developers won’t need to go to court to seek injunctions to stop the deadlines from being enforced, a move Saft said some developers had been considering.
“There were not a lot of options available, because at this point the developers have no control whatsoever over the events,” he said.
Write to Sylvia Varnham O’Regan at [email protected]