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In a flurry of bill-signing this week, Governor Paterson enacted several disclosure laws related to real estate: Landlords now have to tell potential renters about bed bug infestations, real estate agents have to confess divided loyalties to their clients in writing—and now co-op and condo sponsors have to alert residents about their right to cancel “sweetheart contracts” within two years after the sponsor loses control of the board.
“[O]ften the time to void the contracts expires before members of a condo or co-op board know they have this right,” says a press release issued by one of the bill’s sponsors, New York State Assemblymember Brian Kavanagh.
The new law, effective in 30 days, forces sponsors to issue written reminders of cancellation rights at the beginning and end of the two-year cancellation period.
“Let’s say there’s a garage primarily serving residents only and the sponsor gives itself a 50 year lease for $1,000 a month and then operates the garage himself,” says Manhattan real estate lawyer Steven Wagner of Wagner Berkow. “The act of signing the lease on behalf of the co-op or condo and on behalf of himself for below-market rent is self-dealing and can be terminated.”