For New York Cooperatives, A ‘Significant Victory…’

The following information was provided by attorneys with the New York City law firm Schwartz Sladkus Reich Greenberg Atlas LLP.

For New York cooperative boards that were handcuffed by many of the provisions in the Housing Stability and Tenant Protection Act, the June 10, 2021 legislation passed in Albany and described below, offers some relief.

SIGNIFICANT VICTORY FOR COOPERATIVES
NY LEGISLATURE EXEMPTS COOPERATIVES
FROM KEY TENANT PROTECTION ACT PROVISIONS

New York’s legislature passed legislation on June 10 exempting cooperatives from some of the most onerous provisions of the state’s Housing Stability and Tenant Protection Act, a victory for thousands of cooperative boards. The new legislation now awaits the governor’s signature.

Signed into law in 2019, the act was meant to provide safeguards for tenants, but it created a number of unintended effects for cooperative boards, which are not traditional landlords. The 2019 law does not affect condominium boards.

Unlike rental landlords, cooperative boards will no longer be restricted to requiring just one month’s maintenance for security deposits. That Tenant Protection Act provision had potentially reduced the number of qualified cooperative buyers because cooperative boards formerly approved borderline buyers if they could establish a maintenance escrow to secure their going-forward obligations. That practice will again be available if the governor signs the new legislation.

Under the new legislation, cooperative application fees will no longer be capped at $20, a Tenant Protection Act provision that adversely affected some property managers who spent up to $1,000 vetting prospective buyers.

Cooperatives can now recover attorneys’ fees and other fees and costs in Housing Court. The Tenant Protection Act constrained cooperatives to seeking rent and maintenance payments, forcing cooperative boards to use civil court proceedings to recoup unpaid late fees, attorneys’ fees and other charges.

The Tenant Protection Act caps penalties for late rent or maintenance payments at $50 or 5% of the monthly maintenance or rent (whichever is less). But, under the newly passed legislation, the cap will be raised to 8%, with no dollar limit.

Some Tenant Protection Act provisions, however, were preserved, including an “extreme” hardship eviction exemption. If a cooperative board obtains a judgment of possession in a summary proceeding for failure to make rent or maintenance payments, a tenant or shareholder will still be able to demonstrate extreme hardship. Under those hardship circumstances, courts may allow the individual to continue living in the apartment for up to a year.

The passage of the legislation is good news for cooperatives and we hope to soon confirm that the governor has signed the bill into law.


Jeffrey M. Schwartz
jschwartz@ssrga.com
212-743-7018

Steven D. Sladkus
ssladkus@ssrga.com
212-743-7008

Jeffrey S. Reich
jreich@ssrga.com
212-743-7020

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