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BLOG / 02.03.21 /Eric P. Blaha,Jeffrey D. Buss,Kenneth R. Jacobs,Emanuela Lupu,Thomas W. SmithandDomenick J. Tammaro

Covid-19: DHCR Allows Co-ops to Impose Mask Mandates; Employers May Require Vaccinations from Employees; Condo Lien Foreclosures Not Barred by Latest Moratorium

DHCR Grants Powers to Co-ops to Enforce COVID Rules. DHCR has issued regulations allowing “Limited Profit and Limited Dividend” housing projects (such as Mitchell-Lama co-ops and many HDFC’s) to pass rules requiring residents to wear masks in public areas if they cannot maintain social distancing. Building owners are authorized to [“shall”] deny admittance to any person who fails to comply.

Moreover, DHCR is authorizing these co-ops to charge “administrative fees” (which they also call “fines,” unfortunately) to cover “unusual administrative costs caused by repeated negligence or willful actions of tenants or cooperators.” However, the fees must have a rational basis and be appropriately sized, and the proprietary lease and by-laws must authorize the levy of “administrative fees.”

Legally, DHCR has simply put limited equity co-ops on the same footing as private co-ops, albeit about nine months late. But it has also publicized a major sore point for all cooperatives. Most co-op Proprietary Leases and By-laws do not expressly authorize the Cooperative to impose “administrative fees” or fines except in certain circumstances, such as transfers. (In fact, unlike Condo by-laws, most Co-op governing documents hardly discuss the powers of Boards at all.) Courts have frequently ruled that without such authorization, fines imposed by Board resolution are unenforceable, since they impose an additional monetary obligation on a shareholder in a manner different from a “per-share” charge. Boards may have more leeway to impose “administrative fees” by treating such fees as compensation to the Corporation for the reasonable additional costs in management and Board time, such as for monitoring violators of its mask mandates. By equating administrative fees with fines, though, DHCR has blocked that avenue.

To optimize their default remedies, we recommend that Boards amend their Proprietary Leases to allow the imposition of “administrative fees” and “fines.” Ideally the Board can present this as a housekeeping measure that simply formalizes what many Boards do anyway. (Make sure you include some other housekeeping measures with that amendment; but the fine art of presenting and passing amendments is a topic for another blast.)

Can Employers Require Employees to be Vaccinated in order to Work? The short answer, according to the EEOC, is “yes,” with numerous qualifications. Although an employer can ask an employee whether he or she has been vaccinated, if they say they have not, the employer cannot ask them “why”; that comes close to requiring them to disclose a disability, which is largely prohibited unless knowledge of the disability is job-related and consistent with business necessity. Moreover, if requiring a vaccination has the effect of screening out employees with disabilities, the employer must show that the unvaccinated employee would pose a direct threat due to a “significant risk of substantial harm to the health or safety of the individual or others that cannot be eliminated or reduced by reasonable accommodation.” The EEOC also warns that employers may want to get buy-in from unions first. For further details, visit EEOC’s website HERE.

Are Condo Lien Foreclosures Still Enforceable Notwithstanding the Moratorium on Mortgage Foreclosures? The “Emergency Eviction and Foreclosure Act” passed in late December prohibits foreclosures of mortgages and tax liens until May 1st if the borrower files a “Hardship Declaration. The Act provides in part that “For purposes of this Act, real property shall include shares in a residential cooperative….”

Courts have been ruling that a condo lien was not a “mortgage” and thus would not be subject to the notice requirements and other restrictions imposed on lenders foreclosing mortgages. Presumably that includes the latest Act. However, some practitioners have asked whether the inclusion of “tax lien foreclosures” in the moratorium brings condo lien foreclosures into the forbidden circle, since tax liens are not “mortgages” either.

We do not think so. Unlike condo liens, tax liens are sold to third parties and foreclosed for profit; therefore they resemble mortgages in purpose and effect. In addition, if condo liens were meant to be included, the legislature could have done so.

We will continue to keep you updated on COVID-19 developments and other current issues. If you need assistance on any of our topics, please contact one of our partners on our Co-op/Condo team.