Whalen v. Lefkowitz, 36 N.Y.2d 75 (1975)

The Attorney General’s role in reviewing condominium conversion filings is primarily informational, focused on ensuring completeness of disclosure rather than guaranteeing the truthfulness or accuracy of the representations made by the sponsor.

Summary

A tenant in a rent-controlled apartment sought to annul the Attorney General’s acceptance of a condominium conversion plan for the Parkchester complex. The tenant argued that the conversion would dilute the negotiating power of rent-controlled tenants. The Court of Appeals held that the Attorney General’s duty under General Business Law § 352-e is limited to ensuring that offering plans provide potential investors with an adequate basis for judgment by disclosing all material facts. The Attorney General is not required to conduct a detailed investigation into the truthfulness of the representations made in the plan.

Facts

Petitioner, a tenant in a rent-controlled apartment in the Parkchester complex, challenged the Attorney General’s acceptance for filing of a condominium conversion plan. The north quadrant of Parkchester contained 3,985 residential apartments, with 3,623 being rent controlled, including the petitioner’s. The sponsor chose not to utilize the Rent, Eviction and Rehabilitation Regulations, meaning tenants could not be evicted except for lease violations. The petitioner argued the conversion would negatively impact rent-controlled tenants by reducing their collective negotiating power.

Procedural History

The petitioner initiated a proceeding to review and annul the Attorney General’s acceptance of the offering plan. The Attorney General moved to dismiss the proceeding. Special Term’s conclusion, that the Attorney General needed a hearing concerning potential misrepresentations, was appealed.

Issue(s)

Whether the Attorney General, under General Business Law § 352-e, has a duty to investigate the truthfulness and accuracy of representations made in a condominium conversion offering plan, or if the duty is limited to ensuring the completeness of the information provided.

Holding

No, because the Attorney General’s duty under General Business Law § 352-e is primarily informational, focused on ensuring that the offering plan provides potential investors with an adequate basis for judgment by disclosing all material facts, rather than guaranteeing the truthfulness or accuracy of the representations made by the sponsor.

Court’s Reasoning

The court reasoned that the filing requirement under General Business Law § 352-e aims to give potential investors enough information to make informed decisions. Citing Matter of Greenthal & Co. v. Lefkowitz, 32 N.Y.2d 457, 462, the court emphasized that the Attorney General is not obliged to conduct a detailed investigation into the truthfulness of all representations in the statement. The statute itself requires a disclaimer in sales literature stating that filing does not constitute approval by the Department of Law or the Attorney General. The court clarified that the term “deficiencies” in § 352-e(2) refers to lacking information required in paragraph (b) of subdivision 1, rather than false or inaccurate items. While the Attorney General has discretion to inquire into the application, there was no need for a hearing regarding misrepresentation of tax assessments, the engineer’s report, or necessary repairs. The court also noted that the proceeding presented a question of common interest, making class action treatment appropriate. The court affirmed the order without costs.