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| Mark N. Axinn |
Contributed by Mark N. Axinn, a partner at the New York, NY law firm Phillips Nizer.
He represented Jennifer Realty Co. in the landmark Court of Appeals
case in 2002
NEW YORK, NY -- After decades of fighting
their sponsors,
New York City co-ops
and condominiums may finally be catching a break.
Almost 20 years have passed since the state’s highest court,
the Court of
Appeals, decided the landmark Jennifer Realty case, holding that co-op apartment
corporations may sue their sponsor-developers for breach of an implied promise
to sell their unsold
shares in the corporation.
Despite the ruling, most owners of unsold apartments continued to
rent rather than sell their unsold units, especially when the rental market
remained strong.
This happened not only in new
construction but in many buildings first converted to co-ops and condominiums
in the 1980s and 1990s.
While many of those buildings had seen very few transfers for
decades, they now are enjoying a resurgence in sales.
For example, since Jan. 1, 2020, my clients have closed more than
120 individual sales to new owners of previous rental apartments in several
different neighborhoods in Brooklyn and Queens.
What we are seeing now is that the
increase in sponsor sales has reduced those concerns for boards, residents
and lenders.
The shift in sponsor attitudes toward
selling resulted from several legal and market factors.
First, there were extensive changes in the New York rent laws with
the passage of the Tenant Protection Act in 2019, which included increased
protections to both rent-stabilized and free-market tenants, rendering
ownership of rental units less attractive in many cases.
Concerned that the law may be changed
soon, sponsors are selling now in order to take advantage of the existing
tax-deferral provisions, which may be curtailed either by changes to the tax
code or by Congress as part of the current infrastructure bill.
Additionally, some investors are looking
for alternative properties for portions of their holdings. Many owners who have
invested in New York City multi-family buildings for decades, including co-ops
and condominiums, are using this opportunity to diversify into other types of
properties in New York and other locations.
No matter what the reason, boards and
residents in New York co-op and condo buildings should embrace this
development. More sponsor sales means a higher percentage of owner occupancy. And
that’s better for everyone.
About Mark N. Axinn
Axinn is the chair of Phillips Nizer's cooperative and condominium practice. He represents
cooperative and condominium associations, sponsor/developers, holders of unsold
shares and individual property owners and businesses.
A graduate of Columbia College and Fordham Law School, he
performs all aspects of cooperative and condominium association practice and
also has extensive commercial litigation experience.
CONTACT:
Keith Emmer
212-920-9205
