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BLOG / 12.30.21 /Kenneth R. Jacobs

Governor Signs Bill Exempting Co-Ops From Some Damaging Provisions Of Housing Stability Act

On June 10th, we notified you that a bill exempting Co-ops from some of the more objectionable provisions of the 2019 Tenant Protection and Housing Stability Act passed the legislature. See our E-Blast HERE. Due in part to the change in the executive branch, the Governor did not sign the bill until last week.

To remind Co-op Boards, the bill:

(a) Allows Co-ops to require escrow deposits from owner-occupant purchasers (or shareholders) for more than one month’s maintenance as a condition of approval of purchase applications;

(b) Allows Co-ops to collect late fees up to 8% of maintenance if authorized under the Proprietary Lease;

(c) Allows Co-ops to charge fees (and to authorize managing agents to charge fees) in connection with processing applications to become “tenants”;

(d) Allows Co-ops to charge the actual cost of conducting background checks on applicants;

(e) Allows Co-ops to collect additional rent and fees in summary proceedings against defaulting tenants, rather than having to commence a separate proceeding; and

(f) Allows Co-ops to send notices of non-payment to shareholders other than by certified mail, if another method is authorized under their Proprietary Lease.

The foregoing does not apply to cooperatives organized under the Private Housing Finance Law, such as Mitchell-Lamas, mutual redevelopment housing, etc. Also, remember that the provisions relating to collection of late fees and other charges, as well as serving notices, must be authorized under the Proprietary Lease in order to apply.

Restrictions on Landlord Legal Fees. The Governor also signed a separate bill [S2014] that severely restricted the right of landlords to collect legal fees without a court order. (So, for example, a landlord could not pass on legal fees for sending a Notice of Default.) A post-passage amendment to the bill would exempt Co-ops from that restriction. The change does not yet appear in the bill text, but the Governor’s Signing Statement makes clear that the bill will be amended to exempt cooperatives. We will keep you advised when that change makes it into law.

Other News; 2022 Updates to Follow:

Reverse Co-op Loans Allowed. After a long fight, the legislature is allowing lenders to make “reverse” loans secured by co-op shares. While this theoretically puts co-op shareholders on a par with single-family and condo unit owners, the procedure is complex and potentially expensive. Applicants should carefully review the costs and procedure, and make sure their Co-op Boards will approve such a loan.

FNMA and Freddie Mac Imposing Reserve Fund Disclosure Requirements on Existing Cooperatives and Condominiums. In response to the Surfside Condominium collapse in Florida, the agencies that bundle and resell mortgages and co-op loans on the secondary market are imposing new disclosure requirements on lenders and borrowers regarding the physical condition of the building and the steps the Association is taking to fund potential structural repairs. Eventually we expect this to filter down into a formal requirement for a Reserve Fund Study that most NY State community associations currently decline to perform. This merits a separate e-blast, which will follow.

Vaccine Mandates. Vaccine mandates for NYC employees went into effect on December 27th. The latest questions received from buildings deal with how to discipline an unvaccinated employee. The directive from the Commissioner of Health states that the building can “exclude” the employee from the workplace, but says nothing about whether the Association has to pay the employee until they comply. We expect this to get to the grievance stage in union buildings very quickly.