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BLOG / 04.29.24 /Kenneth R. Jacobs

Corporate Transparency Act Compliance Update; “Good Cause Eviction Law” Signed By Governor

CTA UPDATE. On April 18th, the Treasury Department issued additional guidance affecting whether cooperatives, condominiums and homeowners’ associations will need to report their beneficial owners to FinCen, the government’s financial crimes enforcement agency. The update is framed in question-and-answer format.

Question C10 asks, “Are homeowners associations reporting companies?” In response, FinCen states that a HOA that was not created by filing with the Secretary of State or a comparable office, or an HOA that qualifies for an IRC Section 501(c)(4) exemption [social welfare organization], is not a “reporting company.” Otherwise, it “may” fall within the definition.

Question D13 asks, “Who is a beneficial owner of a homeowners association?” In response, FinCen states that a beneficial owner is any individual who, directly or indirectly, exercises “substantial control” over a reporting company, or owns or controls at least 25% of the reporting company. Thus, a Sponsor who owns more than 25% of the units in the association would have to report even if it does not control the Board. Likewise, senior officers, persons who have authority to appoint or remove certain officers or a majority of directors, “important decision-makers”, and anyone else who might be deemed to have substantial control over an HOA would qualify.

Under the Internal Revenue Code, a “homeowners association” [HOA} includes cooperatives, condominiums, and typical HOA’s. Based on these excerpts from the FinCen guidance, it looks even more likely that community associations will be required to disclose their “beneficial owners.” Further, it looks like the reporting obligation will extend to the executive officers and possibly even other Board members (since they can remove senior officers). As set forth in our March E-blast, it looks like community associations’ best hopes to avoid being swept up in the Act lies in passage of H.R.5119.

The full text of FinCen’s CTA update is available at

“EVICTION FOR GOOD CAUSE” LAW PASSES. The Governor approved the “Good Cause Eviction Law” as part of the state budget package. Fortunately, it has been modified from its original form to make it slightly more palatable to landlords, including co-ops and condos. Some key features and changes from the original version include:

  • Units owned in cooperatives or condominiums are exempted, i.e., the exemption now covers both the associations and individual shareholders or unit owners who lease their units.
  • Units in buildings for which a “red herring” offering plan has been submitted are also exempt.
  • “Small landlords” (who own 10 or fewer units, directly or indirectly) are exempted.
  • Increases in rent by more than (i) 5% plus the CPI inflation increase, or (ii) 10%, whichever is lower, are subject to a rebuttable presumption that they are unreasonable. (Previously the floor was 3% or the CPI.)
  • In deciding whether an increase is unreasonable, the court must take into account real estate taxes, and may take into account increases in operating costs and significant repairs.
  • Buildings for which a TCO has been issued in 2009 or later are exempted for 30 years after issuance.
  • The law “sunsets” in 2034 (ten years).
  • The law applies to New York City immediately. Communities outside NYC may “opt-in” and establish their own standards for unreasonable rent increases and exempting “small landlords.”

The law requires a court order in order to evict a tenant on the relevant permitted grounds in the law. Landlords must also comply with detailed notice and procedural requirements for renewing leases and going to court. A separate “Good Cause” law notice also must accompany most leases, renewals, notices of non-renewal, and petitions. All of these requirements will greatly slow down the pace of (and increase the cost of) evictions.

The final version of the law incorporates many nuances and additional notice and compliance requirements as well as some potentially significant ambiguities. A comprehensive review of the law exceeds the scope of this E-mail blast, but the law itself can be reviewed here.