Legal Memorandum

SUBDIVIDED LANDS

A subdivider must make a filing with the New York State Department of State before offering to sell or lease subdivided vacant lands to New York State residents on an installment plan. This filing is required by Article 9-A of the New York State Real Property Law regardless of where the subdivided lands are located and where the offer is made. This requirement has often been a source of confusion for subdividers. This article attempts to reduce confusion by focusing on two issues: who must file under Article 9-A, and what must be contained in a filing which is required to be made by Article 9-A.

WHO MUST FILE UNDER ARTICLE 9-A OF THE REAL PROPERTY LAW?

Every “subdivider” as that term is defined in Section 337(2) of Article 9-A must file with the Department of State. The term “subdivider” means every person, partnership, corporation, company or association which sells or leases vacant lands on an installment plan, or offers to sell or lease these lands on such plan.

Several important points are to be noted. First, Article 9-A applies only if the land which is offered is vacant. If the offering consists of lots on which homes have been built, no filing with the Department of State is required. However, lots on which homes have been built may be required to be registered with the Real Estate Finance Bureau of the New York State Attorney General’s Office. The Bureau's address is Office of the Attorney General, Real Estate Finance Bureau, 120 Broadway, New York, New York 10271, the telephone number is (212) 416-8100.

A second point to note is that Article 9-A applies only if vacant land is offered for sale or lease on an installment plan. Real Property Law Section 337(1) indicates that Article 9-A applies both to vacant lands situated in New York State sold on an installment plan and to vacant lands situated outside of New York State which are sold on an installment plan or any other plans, terms, and conditions of sale. However, the provision requiring registration of other than installment plans for vacant lands located outside of New York State was found by the United States District Court for the Northern District of New York to discriminate against interstate commerce in Cranberry Hill Corporation v. Shaffer, 629 F.Supp. 628 (1986). The Court in Cranberry Hill enjoined the Department of State from requiring filings from subdividers who intend to sell subdivided lands located outside on New York State on other than an installment plan.

“Installment plan” means an agreement to make periodic payments before title is transferred. An installment plan exists if a purchaser or lessee must make at least two installment payments before receiving a deed or lease. “Deed and mortgage” transactions which require a down payment or multiple down payments are not included in this definition. (“Deed and mortgage”transactions are transactions in which a deed is given at the same time that a mortgage is executed at a closing. This usually occurs after a contract which requires a single down payment is signed.) “Deed and mortgage” transactions are the most common method of real estate transfers at the present time.

For the two reasons noted above, most real estate offerings are not required to be filed with the Department of State.

WHAT IS CONTAINED IN A FILING UNDER ARTICLE 9-A OF THE REAL PROPERTY LAW?

If a filing is required under Article 9-A, it consists of a Filing Statement, an Offering Statement, and payment of the statutory fee.

All subdividers are required by Section 337-a(c) of the Real Property Law to file a Filing Statement with the Department of State. Copies of the Filing Statement are available electronically, by calling the Subdivided Lands Section at (518) 474-6740, sending a fax to the subdivided Lands Section at (518) 473-9211, or writing to the Department of State, Subdivided Lands Section, One Commerce Plaza, 99 Washington Avenue, Albany, New York 12231.

The requirements for Offering Statements were simplified in February 1996. Most Offering Statements now consist of less than two typewritten pages. The requirements for Offering Statements are found in Section 135.2 of Part 135 of Title 19 of the New York Code of Rules and Regulations.

The fee for subdivided lands filings is $750 plus an additional $10 for each lot offered in excess of 75 lots.

1997 CHANGES TO ARTICLE 9-A OF THE REAL PROPERTY LAW

On September 24, 1997, the Governor signed Chapter 658 of the Laws of 1997. Chapter 658 made three significant changes to Article 9-A of the Real Property Law. A summary of these changes follows:

Advertisements

The requirement that advertisements for the sale or lease of subdivided lands be filed with the Department of State and a fee paid therefore was repealed by Chapter 658 of the Laws of 1997. Advertisements must now state only that an Offering Statement has been filed with the New York State Department of State, that a copy of such statement is available upon request from the subdivider, and that the filing of a Filing Statement and an Offering Statement with the Department of State does not constitute approval of the sale or lease or offer for sale or lease of subdivided lands by the Department of State or any officer thereof, or that the Department of State has in any way passed upon the merits of such filing. The Department of State has developed a model statement for inclusion in advertisements.

Additional Statement

Chapter 658 of the Laws of 1997 requires that all Offering Statements include a statement which had not previously been required. This statement indicates that additional information on the land offering is filed with the Department of State. This information includes maps of the properties being offered, a statement of liens on the land, and statements of any prior criminal convictions of the principals making the offering which involve subdivided lands. The statement further indicates that this information is available from the Department of State pursuant to the Freedom of Information Law.

Right to Cancel

Finally, Chapter 658 of the Laws of 1997 requires that every contract or agreement for the sale or lease of subdivided lands expressly grant to the purchaser or lessee the absolute right to cancel the contract or agreement within seven days following its signing. This right is exercised when the purchaser or lessee gives the subdivider notice of cancellation by registered or certified mail, return receipt requested, at the address listed in the offering statement by the subdivider. The subdivider has 10 days from the receipt of a notice of cancellation to return all payments which the purchaser has made on the contract or lease. The Department of State has developed a model statement concerning the right to cancel.

If you need further information on any of the topics covered above, please call the Subdivided Lands Section at (518) 474-6740, send a fax to (518) 473-9211, or write to the Department of State, Subdivided Lands Section, One Commerce Plaza, 99 Washington Avenue, Albany, New York 12231.