The AG's
Jurisdiction Ends
at Closing.
The NY Attorney General Real Estate Finance Bureau enforces the Martin Act against sponsors and offering plans. Once the sponsor sells out, the Martin Act's grip loosens and no other agency takes over. The post-closing governance vacuum is not an oversight. It is the structure.
THE BOUNDARY
The Martin Act is a securities statute, not a governance statute.
General Business Law §352-e gives the Attorney General authority to review offering plans for new condominium and cooperative conversions. The Martin Act framework (GBL Article 23-A) treats unsold condo and co-op shares as securities, giving the AG broad investigative and remedial powers over the sponsor and the offering documents.
That authority effectively ends at sellout. Once the sponsor has sold the units and turned over the board to elected owners, the Martin Act no longer covers the building's operations. Governance failures by the post-turnover board, conflicts of interest involving managing agents, financial mismanagement, election irregularities -- these are post-closing operating issues, not securities issues, and the AG generally does not pursue them.
REFB will accept post-closing complaints. REFB will read them. REFB will typically send a form acknowledgment and suggest the complainant retain private counsel. The five attorneys staffing REFB cannot investigate 800 annual complaints regardless of how strong any individual matter looks; the math does not work, and the Martin Act authority for most post-closing matters is weak in any case.
WHAT FALLS THROUGH
Everything the building does after sellout.
- Self-dealing contracts between board members and vendors
- Managing-agent fee structures, markups, and undisclosed kickbacks
- Special assessments imposed without proper vote
- Reserve fund underfunding or misappropriation
- Board election irregularities (proxy abuse, ineligible voters, captive nomination committees)
- Records-inspection refusals
- Retaliation against complaining owners
- Inadequate or fraudulent insurance procurement
- Local Law 11 cost overruns and engineer kickbacks
- Capital project mismanagement and deferred maintenance
None of these are within REFB's effective jurisdiction. None of them are within HPD's jurisdiction (which covers housing code compliance, not governance). None of them are within DOB's jurisdiction (construction safety). None of them are within OATH's jurisdiction (administrative violations of city codes). None of them are within DOS's jurisdiction (DOS licenses brokers and real estate agents but not property managers).
The complaint goes nowhere because there is no body whose statutory mandate includes it.
THE CLEAN BOUNDARY
AG keeps the sponsor period. A new authority gets everything after.
The cleanest reform leaves REFB alone and creates a successor body for post-closing governance. The boundary is the sponsor turnover date documented in the offering plan and the Certificate of Occupancy filings. Before turnover, REFB owns the file. After turnover, a state Governance Oversight Authority owns the file.
Shared jurisdiction is defined narrowly: (1) sponsor failure to turn over on schedule, (2) sponsor-controlled board decisions binding post-turnover owners, (3) sponsor breach of offering plan commitments that surface after closing. These crossover matters require statutory referrals between the two agencies, with joint investigations permitted where a single fact pattern straddles the period.
The benefit to REFB: it can concentrate scarce resources on sponsor-period enforcement, where its Martin Act authority is strongest and where the largest per-case stakes typically sit. The benefit to owners: there is finally a state agency whose mandate includes their day-to-day governance reality.
WHAT OTHER STATES DO
Florida divided the work. New York has not.
Florida assigns offering-period oversight to its Division of Florida Land Sales, Condominiums and Mobile Homes (in DBPR) and post-closing governance oversight to the same Division. The same agency holds both portfolios, but the statutory authority for each phase is distinct. Florida HB 913 (2025) substantially strengthened both.
Virginia places offering disclosure authority in the Real Estate Board and governance oversight in the Common Interest Community Board. The split forces clear referrals between the two.
Nevada places both functions inside the Real Estate Division but assigns the Ombudsman for Owners in Common-Interest Communities as the post-closing complaint intake.
New York is the only major state with a meaningful sponsor-conversion regime and no successor body for the post-closing phase. The Martin Act framework was built in 1921 for stock manipulation. It was extended to condo and co-op sales in 1960 because no other vehicle was available. It was never designed to govern building operations, and it does not.
PROPOSED FIX
A Governance Oversight Authority with clear handoff from REFB.
- Statutory boundary. The Martin Act covers offering and sponsor conduct. The new authority covers everything after turnover.
- Mandatory referral on crossover matters. Joint investigations where fraud spans both periods.
- Resource right-sizing. Filing fees and licensure fees fund the new authority; the AG keeps its existing appropriation for Martin Act enforcement.
- Memorandum of Understanding between AG REFB and the new authority, recorded in regulation, so each agency knows where its jurisdiction ends and the other begins.
- Owner-facing intake. One online portal routes complaints to the right agency based on the building's turnover status.