Does a New York land bank have to give buyers of residential property a Real Property Disclosure Statement, or is it exempt as a 'governmental entity'?

Plain-English summary

The Greater Syracuse Property Development Corporation, a land bank, asked whether it had to provide buyers of residential property with a Real Property Disclosure Statement (RPDS) under Real Property Law § 462, or whether it was exempt as a "governmental entity" under § 463(13). The AG concluded the land bank was exempt.

The reasoning rested on three things. First, the rationale for the exemption: non-occupant sellers (foreclosed-property sellers, sheriffs, mortgagees, governmental entities) are exempted because they typically lack the property knowledge needed to complete a meaningful disclosure form. Land banks fit that pattern; they acquire tax-foreclosed and abandoned property and have no occupant-level knowledge of conditions.

Second, the statutory architecture of land banks treats them as governmental in numerous respects. They must be created by one or more local governments (NFPCL §§ 1603(a), (b)), they qualify as a "local authority" under the Public Authorities Law (§ 2(2)(e)), they are subject to oversight by the Authorities Budget Office, audit by the State Comptroller (NFPCL § 1603(h)), the Open Meetings Law and FOIL (NFPCL § 1612(a)), and conflict-of-interest rules in Public Officers Law §§ 73 and 74 (NFPCL § 1605(l)). For state contracting purposes, a land bank is treated as a "state agency."

Third, the legislative history confirmed that land banks were intended to operate as the equivalent of local public authorities. The Legislature used the not-for-profit corporation form because local governments lack constitutional power to create public authorities directly, but explicitly classified land banks as "local authorities" for Public Authorities Law purposes.

Currency note

This opinion was issued in 2014. Subsequent statutory amendments, court decisions, or later AG opinions may have changed the analysis. Treat this page as historical context, not current legal advice. Verify current law before relying on any specific rule, deadline, or remedy mentioned here.

Common questions

What is a land bank?

A land bank is a local entity created under Article 16 of the New York Not-for-Profit Corporation Law to acquire tax-delinquent, tax-foreclosed, vacant, or abandoned real property and return it to productive use. NFPCL §§ 1601, 1603, 1607.

What is the Real Property Disclosure Statement?

Real Property Law § 462 requires sellers of residential real property to deliver a Property Condition Disclosure Statement to buyers before they sign a binding sale contract. The statement covers environmental conditions, structural integrity, mechanical systems, and similar matters. A seller who fails to provide the form must give the buyer a $500 credit at closing under § 465(1).

Why is this disclosure obligation problematic for land banks?

Land banks acquire properties they have not occupied, often after tax foreclosure or from owners who let the property fall into disrepair. They do not have the personal knowledge of conditions that the disclosure form is designed to capture. The statute already exempts foreclosure sales, sheriff sales, deed-in-lieu-of-foreclosure transfers, and governmental entity transfers under § 463(4), (6), (11), (13) for similar reasons.

What other governmental-style obligations apply to land banks?

A lot. They are subject to the Open Meetings Law and FOIL (NFPCL § 1612(a)), audit by the State Comptroller (NFPCL § 1603(h)), Authorities Budget Office oversight (Public Authorities Law §§ 2(2)(e), 6(1)(a)), conflict-of-interest rules in Public Officers Law §§ 73 and 74 (NFPCL § 1605(l)), and minority- and women-owned business contracting rules as a "state agency" (NFPCL § 1617(b)).

How does the AG opinion compare to other state's treatment of land banks?

Many states have similar land-bank statutes that classify these entities as governmental for various purposes. New York's classification is on the broader end, treating them effectively as local public authorities through the not-for-profit corporation form.

Background and statutory framework

New York's Property Condition Disclosure Act (Real Property Law Article 14, §§ 462-467) requires residential sellers to disclose property conditions through a standardized form. Section 463 enumerates exempt transactions, and the "governmental entity" exemption in § 463(13) covers transfers "to or from the state, a political subdivision of the state, or another governmental entity." The legislative history (Bill Jacket for ch. 456 (2001)) shows the exemptions were aimed at non-occupant sellers who lack knowledge of property conditions.

Article 16 of the Not-for-Profit Corporation Law authorizes one or more local governments to create a land bank as a not-for-profit corporation. NFPCL §§ 1601-1617. The architecture treats land banks as governmental in many practical respects. The legislative history (Assembly Memorandum in Support of Legislation, Bill Jacket for ch. 257 (2011)) makes the design intent explicit: land banks were intended to operate as local public authorities, but the not-for-profit form was used because local governments cannot constitutionally create public authorities directly. See N.Y. Const., Art. 10, § 5.

Citations

The disclosure statute is Real Property Law § 462, with the exemption framework at § 463 (governmental-entity exemption at subsection (13)) and the remedial credit at § 465(1). The land bank framework is in Not-for-Profit Corporation Law Article 16, with key sections at § 1601 (purpose), § 1603 (creation), § 1605(l) (conflict-of-interest application), § 1607 (powers), § 1612(a) (Open Meetings/FOIL), § 1617(b) (state-agency status for MWBE). Public Authorities Law § 2(2)(e) defines land banks as local authorities. Public Officers Law §§ 73 and 74 govern conflicts of interest.

Source

• Landing page: https://ag.ny.gov/libraries-documents/opinions/opinions-year
• Original PDF: https://ag.ny.gov/sites/default/files/opinions/2014-5_pw.pdf

Original opinion text

Real Property Law §§ 462, 462(1), 463, 463(4), 463(6), 463(11), 463(13), 465(1); Not-For-Profit Corporation Law §§ Art 16, 1601, 1603, 1603(a), 1603(b), 1603(h), 1605(l), 1607, 1607(a)(12), 1607(a)(13), 1607(a)(15), 1612(a), 1617(b); Public Authorities Law §§ 2(2)(e), 6(1)(a); Public Officers Law §§ 73, 74

The Greater Syracuse Property Development Corporation, a land bank, is a "governmental entity" for the purpose of Article 14 of the Real Property Law and, as such, it need not provide a disclosure statement when it sells residential real property.

September 3, 2014
John P. Sidd
Menter, Rudin & Trivelpiece, P.C.
Counsel, Greater Syracuse Property Development Corp.
308 Maltbie Street, Suite 200
Syracuse, NY 13204-1439

Informal Opinion
No. 2014-5

Thomas R. Babilon
Assistant Corporation Counsel
City of Syracuse
233 E. Washington Street
300 City Hall
Syracuse, NY 13202

Dear Messrs. Sidd and Babilon:

You have requested an opinion as to whether the Greater Syracuse Property Development Corporation ("Land Bank") is exempt from providing to purchasers of real property a Real Property Disclosure Statement as required by Real Property Law § 462(1). As explained below, we are of the opinion that the Land Bank is exempt from the disclosure requirement because of its status as a governmental entity.

A. Real Property Disclosure Statement

A seller of residential real property must complete and sign a Real Property Disclosure Statement ("disclosure statement") and deliver it to a buyer before the buyer signs a binding contract of sale. Real Property Law § 462. The purpose of the disclosure statement is to inform the buyer of certain environmental, structural, mechanical system, and similar conditions associated with the real property. Id. A seller who fails to provide a disclosure statement to a buyer must give the buyer a $500 credit against the agreed-upon purchase price when title is transferred. Real Property Law § 465(1).

A disclosure statement is not required for every type of transfer of residential real property. Certain types of transfers are statutorily exempted including, for example, a transfer pursuant to a foreclosure sale that follows a default in the satisfaction of an obligation that is secured by a mortgage, a transfer by a mortgagee who has acquired the residential real property by a deed in lieu of foreclosure, a transfer by a sheriff (who executes judgments taken on real property to satisfy debts), and, most relevant here, a "transfer to or from the state, a political subdivision of the state, or another governmental entity." Real Property Law § 463(4),(6),(11),(13). Unlike a seller who occupies or occupied the real property subject to transfer, the sellers in these exempted types of transfers are unlikely to have sufficient information about the property to meaningfully complete the disclosure statement. This appears to be the reason for exempting these transfers. See Letter from Ronald B. Steed, president, New York State Ass'n of Realtors, to James M. McGuire, counsel to the Governor (Nov. 5, 2001), reprinted in Bill Jacket for ch. 456 (2001), at 12; Karl B. Holtzschue, Practice Insights: Exemptions under Property Condition Disclosure Act, 28A N.Y. Real Property Law § 463 at 241 (Consol. Supp. 2002).

B. The Governmental Nature of a Land Bank

The Land Bank is established pursuant to Article 16 of the Not-for-Profit Corporation Law (NFPCL), which provides for the creation of a land bank as a not-for-profit corporation by one or more local governments. NFPCL §§ 1603, 1607. The primary function of a land bank is to acquire real property that is tax delinquent, tax foreclosed, vacant, or abandoned and return such property to productive use. NFPCL § 1601. To achieve this function, a land bank is empowered to construct, rehabilitate, renovate, and otherwise improve real property it acquires and then rent, lease, or sell it. NFPCL § 1607(a)(12),(13),(15).

The statutory provisions governing the creation and operation of a land bank demonstrate that the Legislature regarded it as a governmental entity in numerous respects. A land bank created pursuant to Article 16 must be created by one or more local governments. NFPCL § 1603(a),(b). It constitutes a "local authority" as used in the Public Authorities Law and, as such, it is subject to oversight by the Authorities Budget Office. Public Authorities Law §§ 2(2)(e), 6(1)(a). It is subject to audit by the Office of the State Comptroller. NFPCL § 1603(h). A land bank is subject to the Open Meetings Law and the Freedom of Information Law, which generally govern governmental entities. NFPCL. § 1612(a). For certain purposes it is treated as a state agency. For example, its directors, officers, and employees are deemed state officers or employees for the purposes of sections 73 and 74 of the Public Officers Law, which prohibit specific acts by state officers and employees to avoid conflicts of interest. NFPCL § 1605(l). And a land bank is deemed a "state agency" subject to state law governing access to state contracting opportunities by minority- and women-owned businesses. NFPCL § 1617(b).

Indeed, the legislative history demonstrates that the Legislature intended for land banks to operate as the equivalent of local public authorities, to be created by local governments. Because local governments do not have the constitutional power to create public authorities, the Legislature selected the not-for-profit corporation form instead, and then deemed a land bank a "local authority" for purposes of the Public Authorities Law, see Public Authorities Law § 2(2)(e). Assembly Mem. in Support of Legislation (2011), reprinted in Bill Jacket for ch. 257 (2011), at 14; see also N.Y. Const., Art. 10, § 5.

Moreover, the conclusion that a land bank is a "governmental entity" exempt from the disclosure statement requirement is supported by the apparent rationale for the exemption: non-occupying sellers are exempted from the disclosure requirement because they typically do not have the knowledge needed to complete a meaningful disclosure statement, and that rationale is fully applicable to the land bank.

We therefore are of the opinion that the Land Bank is a "governmental entity" for the purpose of Article 14 of the Real Property Law and, as such, it need not provide a disclosure statement when it sells residential real property.

The Attorney General issues formal opinions only to officers and departments of state government. Thus, this is an informal opinion rendered to assist you in advising the municipality you represent.

Very truly yours,

KATHRYN SHEINGOLD
Assistant Solicitor General
in Charge of Opinions