On October 8, 2020, the Office of the New York State Attorney General’s Charities Bureau released guidance regarding property appraisals for not-for-profit corporations and certain religious corporations seeking approval of property transactions by the Attorney General or the Court. To review the full guidance issued, see https://www.charitiesnys.com/pdfs/AppraisalGuidance.pdf.
The New York Not-for-Profit Corporation Law (“NPCL”) requires that certain transactions involving the sale or transfer of assets owned by not-for-profit corporations and certain religious corporations be reviewed and approved by the Attorney General’s Charities Bureau before closing. These entities must submit a petition to the Charities Bureau for the approval of the sale or transfer of the property, and the petition must include an appraisal of the property. The purpose of the petition and review is to ensure that the proposed transaction complies with the statutory requirements that the price and terms are fair and reasonable, and that the transaction serves the best interest of the corporation and its members.
The Charities Bureau’s guidance discusses certain issues and requirements which are considered by the Charities Bureau when reviewing appraisals submitted with a petition, including:
- When to Obtain an Appraisal: An independent appraisal should be obtained by an organization if it is considering transferring property to inform the Board of Directors of the fair market value of the property. The appraisal should be obtained prior to marketing the property and negotiating with a buyer.
- Choosing an Appraiser: In New York State, there are three types of appraisers for different types of property being transferred. An entity seeking to sell or transfer property should ensure that the appraiser it engages is qualified to appraise the type of property it owns.
- Standards for Appraisals: The appraisal must be done by a licensed or certified independent appraiser. An “independent appraiser” is one who has no relation to the buyer or seller, including their respective board members, officers, key employees or relatives, or the buyer’s or seller’s attorney.
- Age of Comparable Sales: Appraisals must be dated less than 12 months prior to the date of execution of the Purchase and Sale Agreement. The comparable sales used in the appraisal should have closed less than 12 months prior to the date of the appraisal.
- Adjustment Grid: An adjustment grid or similar type of analysis of the sales comparable to the property being appraised should be included in the appraisal. An adjustment grid is a listing of adjustments made to the comparable sales.
- Sales for Less Than Appraised Value: A complete explanation must be submitted with the appraisal should an organization desire to transfer the asset for less than the appraised value, including a description of the marketing process and offers received.
- Certification Statements: Appraisals require certain certifications as to the appraiser’s independence and lack of bias.
For more information, see additional Charities Bureau guidance: A Guide to Sales and Other Disposition of Assets by Not-for-Profit Corporations; A Guide to Sales and Other Disposition of Assets by Religious Corporations – posted at https://www.charitiesnys.com/guides_advice_new.html.
Should you have any questions regarding the above, please contact the Garfunkel Wild attorney with whom you regularly work, or contact us at [email protected].