New Executive Order from Gov. Cuomo Extends and Expands COVID-19 Relief on Offering Plan, Condo Conversion and Mortgage Recording Tax Credit Deadlines

Gov. Andrew Cuomo previously issued Executive Order 202.18 on April 16, which, among other things, postponed certain deadlines relating to condominium and other public offerings, namely: (a) the 15-month deadline following an occupied (rental to condo/co-op) conversion offering plan being accepted for filing, by which such offering plan must be declared effective or otherwise abandoned; and (b) the 12-month deadline (following the projected first closing date) for the sponsor to conduct such first closing before rescission must be offered to all purchasers. Details on Executive Order 202.18 can be found in the Kramer Levin Condominium Team alert dated April 16.

The declared state of emergency in New York State (the State of Emergency) underlying Executive Order 202.18 and the tolling and extension of the foregoing deadlines (and other requirements) thereunder remain in effect as of this date. However, even with New York proceeding gradually with its phased reopening, both development and sales activity remain significantly impacted by a confluence of factors beyond sponsors’ control, including continuing government-mandated occupancy restrictions and social distancing requirements, supply chain disruption, and workforce limitations, as well as a negative transformation of the marketplace caused by public anxiety over the ongoing health crisis. Such impacts and disruptions are certain to continue even after the formal State of Emergency is ended, leaving sponsors in need of additional time to get the construction, development and/or sales activity of their projects back on track.

Recognizing this, on Aug. 5, Gov. Cuomo issued Executive Order 202.55 (the Order). As described below, the Order continues to extend the offering plan deadlines and to toll various filing requirements, but under the new Order, the amount of time by which the deadlines are extended has been increased by at least 120 days. The Order also includes a new, similar tolling and extension with respect to available mortgage recording tax credits. What does this actually mean?

The most significant aspects of the current Order are as follows:

• Deadline to Conduct a First Closing Is Extended. Sponsors have an obligation to conduct the first closing for a development within 12 months after the projected first closing date set forth in the offering plan; if sponsors fail to satisfy this obligation, purchasers are entitled to an automatic rescission right. As modified by the Order, that 12-month first closing deadline is extended for a period equal to the number of days from April 16 through and including Sept. 4, plus an additional 120 days.

Other features of the Order include a continuation of the suspension of the typical requirement for sponsors to update the projected budget in the offering plan if the anticipated or actual date of commencement of operations will be delayed by more than six months. Sponsors are required to update the first year of operation and projected budget, as necessary, within 45 days from the expiration of the Order (unless a longer time period is implemented by the Department of Law).

• Deadline to Declare a Conversion Offering Plan Is Extended. Failure to timely declare a conversion offering plan “effective” (within 15 months after acceptance of the plan) has catastrophic consequences for the project, requiring sponsors to abandon the offering plan, rescind all contracts and refund all purchaser deposits. To declare a plan “effective,” sponsors must satisfy certain conditions and project milestones, including entering into contracts with bona fide purchasers for a specified minimum number of the condominium units or the co-op shares offered under the plan. As modified by the Order, that 15-month deadline to declare the plan effective is extended for a period equal to the number of days from April 16 through and including Sept. 4, plus an additional 120 days. Sponsors are required to amend the offering plan to disclose the date by which it must be declared “effective,” as necessary, within 45 days from the expiration of the Order (unless a longer time period is implemented by the Department of Law). Sponsors should also note that the Order provides new protections for certain non-purchasing tenants (which were not covered by Executive Order 202.18), including that the 90-day “exclusive purchase period” of a tenant in occupancy to purchase its unit or apartment shall be tolled for the duration of the Order plus an additional 120 days.
  
  
• Deadline for Qualifying for Mortgage Recording Tax Credit Is Extended. Where mortgage tax was previously paid on a construction loan in connection with the development of a condominium or a loan to purchase land or buildings for the condominium, a credit is available under Real Property Law 339-ee(2) at each individual unit closing against a portion of the tax otherwise payable on the condominium unit buyer’s purchase money mortgage, provided certain two-year deadlines are met for the recordation of the condominium declaration and the closing of the first unit. This mechanism provides sponsors with a means to offset a material development cost. The Order extends the milestone deadlines for qualifying for the credit by a period of time equal to the number of days from Aug. 5 through and including Sept. 4, plus an additional 120 days. The extension with respect to the mortgage tax credit was not addressed in Executive Order 202.18 and affords new relief to sponsors.

The issuance of the Order follows instrumental lobbying efforts spearheaded by the Real Estate Board of New York, with assistance from the Kramer Levin Condominium team. Kramer Levin’s Condominium practice group attorneys are available to strategize with and help guide sponsors through these challenging times. Clients and contacts are encouraged to reach out to the authors of this alert for further details and insights regarding this Order. The foregoing is a summary of key provisions and impacts of the Order. The complete Order can be found here.