Learn more about the Real Estate Group at Schiff Hardin. Attorneys In This Practice James R. Balich Robert I. Berger Jean L. Bertrand Matthew Brett Nathan A. Engel Todd R. Eskelsen Christine C. Goldstein Brett H. Greenberg David A. Grossberg Russel T. Hamilton Graham R. Hone Jean H. Hurricane Janet M. Johnson James M. Kane Brian D. Kluever Donald J. Kreger Richard M. Liebman Paul G. Mackey Sean T. Maloney David A. Mandel Christine A. McGuinness Ivan W. Moskowitz K. William Neuman Randolph M. Perkins Guenther M. Philipp Marina Rabinovich Felice Bressler Rose Suma Sanakkayala David S. Sattelberger Natalie Servidio William A. Snedeker Peter C. Spier Alexander W. Suto Patricia S. Ullman Schiff Hardin Offices One Atlantic Center, Suite 2300 1201 West Peachtree Atlanta, GA 30309 225 Franklin Street, Suite 2600 Boston, MA 02110 6600 Sears Tower 233 S Wacker Drive Chicago, IL 60606 One Westminster Place Suite 200 Lake Forest, IL 60045 900 Third Avenue New York, NY 10022 One Market, Spear Tower 32nd Floor San Francisco, CA 94105 1666 K Street, NW Suite 300 Washington, DC 20006 - - - - - - - - - Join our mailing list. Forward this alert to a friend or colleague. - - - - - - - - -

New York Broadens Financing Possibilities

By Natalie Servidio

Considering the current lending climate, many clients are looking for creative ways to finance the acquisition of real estate. A recent development in the New York market has opened an avenue previously closed to purchasers of occupied multi-use buildings for some time now: the ability to divide such a building into one or more condominium units (separating the commercial and residential elements) solely for the purposes of financing.

Until very recently, the New York State Department of Law, Real Estate Finance Bureau (the "Bureau") has not typically permitted such condominium division. However, given the current economic climate, the Bureau is now expanding its policy to permit an occupied multi-use building to become a condominium with two or more units, as long as the owner has no present intention of selling the individual apartments contained within the residential condominium unit. The Bureau will now consider an application for a no-action letter where the owner of such a multi-use building wishes to divide the space into two or more condominium units, but will retain ownership of all units, with the intention of dividing the building into separate tax lots for financing purposes. The application procedure for such a no-action letter is described below.

The application package for a no-action letter submitted to the Bureau must contain the following:

• (i) a transmittal letter signed by the attorney who prepared the application, stating why the transaction meets the requirements for a no-action letter and making certain representations as to the content of the application;
• (ii) an owner's affidavit stating that, (A) owner has no present intention to offer the residential unit for sale, and, in the event the residential unit will be offered for sale to the residential tenants, an offering plan drafted in compliance with either Part 18 or Part 23 shall be submitted to the Bureau for filing or another application for a no-action letter shall be made, and (B) owner has no present intention to offer the commercial unit for sale, and, in the event the commercial unit will be offered for sale, an offering plan drafted in compliance with Part 20 shall be submitted to the Bureau for filing or another application for a no-action letter shall be made;
• (iii) an explanation of how building operation expenses are to be allocated between commercial and residential entities, such that the residential unit is not subsidizing the commercial unit in paying for the operation of the building;
• (iv) a certification from an expert as to the reasonableness of the allocation of percentages of common interest between the residential and commercial units; and
• (v) an affidavit of transferee setting forth its understanding that no offering literature other than as required by the no-action letter will be provided and its acknowledgement that transferee has been informed that, if the transaction constituted a public offering within the meaning of NY GBL Article 23-A, transferee would be entitled to certain rights and protections pursuant to such Article. A check made payable to the New York State Department of Law in the amount of $225 must accompany the application.

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ABOUT SCHIFF HARDIN LLP

Schiff Hardin's real estate practice covers all aspects of real estate. Our attorneys' experience includes a particular emphasis on real estate development, especially multi-use projects — combining residential, retail, parking and public-use areas. We have handled more multi-use projects than most firms in the United States and understand the variety of things that need to come together to complete a project — things that don't always come together easily in a large project. Our depth of experience enables us to advise our clients though the process of developing these projects in an efficient and cost-effective manner.

For more information, please feel free to contact us.