The year 2015 brought a number of incremental developments in the laws affecting New York’s commercial real estate industry, including the following:
Books and Records: Normally only appellate court decisions have made my year-end review for the New York Real Estate Journal but this December’s ruling by judge Kornreich in Barry v. Clermont York Associates LLC was a rare and well written analysis of New York’s rules governing the right of an LLC member to review the LLC’s books and records. Apparently only one of many intrafamily litigations, the managing member in this case told the plaintiff that detailed financial information would be given only twice per annum. Kornriech upheld the policy as reasonable citing both Section 1102(b) of the statute and the defendant’s rights as managing member to use his business judgment to limit access.
Crowdfunding: After a significant delay, the Securities and Exchange Commission issued new regulations governing the new crowdfunding permitted by Title III of the 2012 JOBS Act. That part of the act permits non-accredited investors to invest up to the greater of $2,000 or 5% of their annual income if the investor’s annual income and net worth are both less than $100,000, or 10% of their annual income or net worth if their income or net worth is $100,000 or more. While these restrictions will make Title III crowdfunding unlikely to help large or even middle market real estate deals in New York, expect to see promoters become active in this area.
Attorney General Rulemaking: The AG’s Real Estate Financing Bureau issued a flurry of new rulemaking in 2015. Some have commented that the new rules were adopted without compliance with state rulemaking procedures. Sponsors and their attorney should review the “Hot Topics” section of the bureau’s website. The areas covered include required electronic submissions starting February 2016, a position memo on disclaimers of liability in offering plans and advertising guidelines for out of state offerings.
RPT Returns: New York City’s Department of Finance revised the city’s Real Property Tax (RPT) Return to include the identity and social security numbers (or federal tax ID numbers) for every member of an entity (typically a limited liability company) that is a seller or purchaser of real property located in the city. Previously, not every member of the LLC needed to be disclosed in the RPT Return. The new requirement has added significant administrative headaches to the commercial closing process without adding much to the information collected by the DOF since that information was always disclosed on later filed income tax returns.
Holding the Note Gives Standing: New York’s court decisions on mortgage standing are rightly criticized for being chaotic. New York’s highest court in Aurora Loan Services v. Taylor quieted one controversy by unequivocally holding that a foreclosing lender in physical possession of the mortgage note has standing to sue even if the assignment of the mortgage to the foreclosing lender was defective.
In addition to the New York Real Estate Journal, here are a few resources to keep up on the constantly evolving legal environment affecting New York’s commercial real estate industry: Mike Berry’s Current Developments newsletter for First American Title; Peter Mahler’s NYBusinessDivorce.com; JoshuaStein.com’s email list; the Attorney General’s email list; @REBNY and yours truly’s @TDKearns on Twitter. Happy New Year!
Tom Kearns is a partner at Olshan Frome Wolosky, New York, N.Y.
PartnerTom represents owners, operators and developers in the acquisition, financing, development, ground leasing, and sale of significant properties. His experience includes office towers, commercial condominiums, industrial ...