January 24, 2015
Buying Property from Nonprofits
In today’s competitive New York real estate market, buyers are looking for any possible edge. Developers and investors are speaking with nearly every owner of underutilized property, including nonprofits and religious organizations. But completing a transaction with a nonprofit or religious organization is difficult, and often requires approval from both the New York State Supreme Court and the Charities Bureau of the New York Attorney General.
According to the Charities Bureau, the sale, lease, exchange or other disposition of all or substantially all of the assets of a charitable corporation requires approval of the Attorney General or the court. This applies to any sale by a nonprofit. For religious organizations, the test is even stricter: “the sale or mortgage of any real property of a religious corporation requires approval of the Court on notice to the Attorney General.” In other words, a religious organization can’t even obtain a mortgage without approval of both the Attorney General and a judge.
In order for a sale to approved, the board of the nonprofit or religious corporation must approve the transaction, and if the corporation has voting members, they must vote as well. An independent appraiser must conduct an appraisal. A lengthy verified petition must be drafted by an attorney and submitted to the Attorney General or court, documenting the financial condition of the organization, the proposed transaction and other details. The court or Attorney General must then review and approve the transaction before it can proceed.
The process can be lengthy and complex, but may still be beneficial to the sellers and purchasers. More information about the process can be found here.