Herman J. Geiser, as Executor of Nathaniel Ratner, Deceased, Respondent,
Andrew Maran, Appellant.
Andrew Maran, appellant pro se.
Howard M. File, P. C., Staten Island, for respondent.
Order unanimously affirmed without costs.
In moving to vacate the default final judgment, tenant alleged, as a meritorious defense, that he is protected from eviction by the Martin Act (General Business Law § 352-eeee). He predicates his claim on the decisions in Paikoff v Harris (178 Misc.2d 366, mod 185 Misc.2d 372), which held that a tenant who rents an apartment from a sponsor after the transfer of title to the cooperative corporation is protected as a nonpurchasing tenant (but see, Park W. Vil. v Nishioka, NYLJ, May 26, 1999, at 25, col 2 [Civ Ct, N.Y. County], affd 187 Misc.2d 243; Pembroke Sq. Assocs. v Coppola, NYLJ, May 5, 1999, at 25, col 2 [Civ Ct, Queens County]).
In the Park W. and Pembroke Sq. cases, the courts held that a tenant who rents from a sponsor subsequent to the transfer of title to the cooperative corporation falls within an exception to protection for those who sublet from a " purchaser under the plan," which term is defined to mean the " person who owns the shares allocated to a dwelling unit" (General Business Law § 352-eeee  [d]). We do not agree with their determination that a sponsor is a " purchaser under the plan."
The Martin Act must be understood in the light of the practice that it was designed to regulate. In that practice, a sponsor is a seller not a purchaser. A sponsor is the person or entity that makes " a public offering or sale ... of securities consisting primarily of shares ... in real estate" (13 NYCRR 18.1 [c] ). Both before and after the transfer of title to the cooperative corporation, the sponsor offers to sell the shares under his control pursuant to the offering plan, which plan he must continue to update after the closing of title (13 NYCRR 18.3 [w] ). Thus, after the closing of title, the sponsor remains the seller under the plan, not the " purchaser under the plan." Had the Legislature intended to depart from this conventional understanding, it would have had to expressly state that the term " purchaser under the plan" would include a sponsor.
Moreover, under long-standing practice, the shares held by the sponsor after the closing of title are considered " unsold
shares" (see, e.g., People v Lexington Sixty-First Assocs., 38 N.Y.2d 588, 598-599 ). Indeed, paragraph 38 (a) of the standard proprietary lease has long provided that " unsold shares" retain their character as unsold shares until they become the property of a purchaser for occupancy (see, e.g., Sims v Darwood Mgt., 147 A.D.2d 373, 374; 5 New York Practice Guide: Real Estate § 39.08  [Matthew Bender & Co.]). In addition, under the Attorney General's regulations, every offering plan must state:
" [U]nsold shares shall be any shares not subscribed to and fully paid for prior to closing. At or prior to closing, unsold shares must be acquired by the sponsor or financially responsible individuals produced by the sponsor. A holder of unsold shares is the sponsor or any individual designated to hold unsold shares by the sponsor. Such shares shall cease to be unsold shares when purchased by a purchaser for occupancy" (13 NYCRR 18.3 [w] ).
Again, had it been the Legislature's intention to depart from this long-established understanding that the shares held by a sponsor are unsold, it was incumbent upon the Legislature to ...