N.Y. Private Housing Finance Law § 32: Supervision and regulation

§ 32. Supervision and regulation. The commissioner or the supervising

agency as the case may be, may:

1. Examine a company and keep informed as to its general condition,

its capitalization and the manner in which its property is constructed,

acquired, rehabilitated, leased, operated or managed, and to its

compliance with all provisions of law and orders of the commissioner or

the supervising agency.

2. Require every company to file with him or it an annual report

setting forth such information as the commissioner or the supervising

agency may require, verified by the oath of any officer, general manager

or other person in control of the company. Such report shall be in a

form, cover a period, and be filed at a time as prescribed by the

commissioner or the supervising agency.

3. From time to time make, amend and repeal supplementary rules and

regulations for carrying into effect the provisions of this article

provided, however, that such supplementary rules and regulations shall

be strictly limited in their application to the means and methods of

compliance with the provisions of this article to which such power

relates.

4. Make such agreements with bondholders, mortgagees or creditors of a

company to do or refrain from doing any act, not inconsistent with law,

to protect the investment rights of the state of New York, the New York

state housing finance agency, the New York city housing development

corporation or of the municipality.

5 (a) Administer oaths, take affidavits, hear testimony and take proof

under oath at public or private hearings; (b) subpoena and require the

attendance of witnesses and the production of books and papers

pertaining to any investigations and inquiries authorized by this

article and examine them in relation to any matter concerning which the

power to investigate is granted; (c) issue commissions for the

examination of witnesses who are out of the state or unable to attend or

are excused from attendance; (d) investigate into the affairs of a

company and into the dealings, transactions or relationships of such

company with third persons and into the affairs of any person, firm,

corporation or other entity having a financial interest, whether direct

or indirect, in the design, construction, acquisition, reconstruction,

rehabilitation, improvement, financing or operation of any project

undertaken by a company; (e) intervene, as a matter of right, in any

action or proceeding of which notice shall be given affecting the

project of a company; (f) take such steps in such action or proceeding

as may be necessary to protect the public interest.

With regard to duties and liabilities arising out of this article the

state, the commissioner or the supervising agency may be sued in the

same manner as a private person. No costs shall be awarded against the

commissioner, the state, or the supervising agency, as the case may be,

in any such litigation.

6. In the event of a violation by a company of a provision of the

certificate of incorporation or of law or of the loan or mortgage

contract or of any rules and regulations duly promulgated pursuant to

the provisions of this article, the commissioner or the supervising

agency, as the case may be, may remove any or all of the existing

directors of the company and appoint such person or persons who the

commissioner or the supervising agency, as the case may be, in his or

its sole discretion deems advisable, including officers or employees of

the division of housing and community renewal or the supervising agency,

as new directors to serve in the places of those removed. Directors so

appointed need not be shareholders or meet other qualifications which

may be prescribed by the certificate of incorporation or by-laws. In the

absence of fraud or bad faith, directors so appointed shall not be

personally liable for debts, obligations or liabilities of the

corporation. Directors so appointed shall serve only for a period

coexistent with the duration of such violation or until the commissioner

or the supervising agency, as the case may be, is assured in a manner

satisfactory to him or it against violations of a similar nature.

Officers or employees of the division of housing and community renewal

or of the supervising agency who are so appointed as directors shall

serve in such capacity without compensation. No such removal may take

place without written notice and an opportunity for the affected

directors to appear and be heard before the agency or commissioner with

respect to any alleged violation and the respective parties may be

represented by counsel. Notwithstanding any inconsistent provision of

any general, special or local law or any limitation contained in the

provisions of any city charter, the state or a municipality acting by

and through the commissioner or the supervising agency, as the case may

be, shall save harmless and indemnify any officer or employee of the

division of housing and community renewal or the supervising agency so

appointed as a director, from financial loss arising out of any claim,

demand, suit or judgment by reason of alleged negligence or other act by

such director, provided that such director was acting in the discharge

of his duties and within the scope of his employment and that such loss

did not result from the willful and wrongful act or gross negligence of

such director and provided further that this save harmless and

indemnification provision shall not in any way impair, limit or modify

the rights and obligations of any insurer under any policy of insurance

and shall inure only to directors so appointed and shall not enlarge or

diminish the rights of any other party. No action or special proceeding

based on or arising out of alleged negligence or other act by such

director may be commenced against such director, municipality or the

state unless a notice of claim shall have first been served in a manner

consistent with service upon a municipality or the state, as the case

may be.

7. Whenever the commissioner, in the case of a company undertaking or

otherwise operating a state-aided project, or the supervising agency, in

the case of a company undertaking or otherwise operating a

municipally-aided project, shall be of the opinion that such company is

failing or omitting, or is about to fail or omit to do anything required

of it by law or by order of the commissioner or is doing or is about to

do anything, or permitting anything, or is about to permit anything to

be done, contrary to and in violation of law or of any order, regulation

or directive of the commissioner or the supervising agency, as the case

may be, or which is improvident or prejudicial to the interest of the

public, the lienholders, the stockholders, or the tenants, the

commissioner or the supervising agency, as the case may be, may, in

addition to such other remedies as may be available, commence an action

or proceeding in the supreme court of the state of New York in the name

of the commissioner or the supervising agency, as the case may be, for

the purpose of having such violations or threatened violations stopped

and prevented, and in such action or proceeding the court may appoint a

temporary or permanent receiver or both. Such action or proceeding shall

be commenced by a petition to the supreme court, alleging the violation

complained of and praying for appropriate relief. It shall thereupon be

the duty of the court to specify the time, not exceeding twenty days

after service of a copy of the petition, within which the company

complained of must answer the petition. In case of any default or after

answer the court shall immediately inquire into the facts and

circumstances in such manner as the court shall direct without other or

formal pleadings, and without respect to any technical requirements.

Such other persons or corporations as it shall seem to the court

necessary or proper to join as parties in order to make its order or

judgment effective, may be joined as parties. The final judgment in any

such action or proceeding shall either dismiss the action or proceeding

or direct that an order or an injunction, or both, issue, or provide for

the appointment of a receiver as prayed for in the petition, and grant

such other relief as the court may deem appropriate.

8. The commissioner or supervising agency may modify supervision of a

company upon finding that duplicative supervisory functions may impose

an undue regulatory burden or unnecessary expenditure of agency

resources, by taking such actions as are deemed appropriate, including

consolidating supervisory functions associated with different programs,

and entering into memoranda of understanding with other agencies for the

allocation of supervisory functions.