Housing Stability and Tenant Protection Legislation: Co-Op and Condo Recommendations

LETTER TO GOVERNOR HOCHUL URGING ENACTMENT – September 30, 2021

SUMMARY

The Cooperative and Condominium Law Committee and the Housing and Urban Development Committee support the underlying aims of pending legislation and offer a few modifications to better achieve those aims. In sum, the Bill provides corrections to the HSTPA in order to preserve the traditional relationships between cooperative housing corporations and their tenant shareholders. The Committees support the Bill (in its near entirety) because it has been carefully crafted to maintain the HSTPA’s protections for rent stabilized and controlled tenants, tenants of sponsor held units, tenants who sublease cooperative units from individual owners, and tenants who rent condominium units. Citing the lack of any legislative intent for the HSTPA to affect coops and condos outside of two contexts — limiting conversions of rental buildings to coops and condos, and in the context of mobile homes — the Committees urge passage of the Bill with certain suggested clarifying modifications. The report takes no position on whether the definition of “rent” for the purposes of summary proceedings should be amended to include non-possessory fees, charges or penalties incurred by a tenant who is a shareholder of a cooperative housing corporation, and contains a descriptive note about the special considerations regarding Housing Development Fund Corporations.

BILL INFORMATION

A.350-C (AM Braunstein) / S.5105-C (Sen. Liu) – Excludes tenant-shareholders in cooperative housing corporations from certain housing provisions (NYS 2021); A.8718 / S.6770 (NYS 2020)

OUTCOME

Signed by the Governor, Chp. 789, Approval Memo 142 – December 22, 2021

REPORT

REPORT ON LEGISLATION BY THE
COOPERATIVE AND CONDOMINIUM LAW COMMITTEE
AND THE HOUSING AND URBAN DEVELOPMENT COMMITTEE

A.8718 M. of A. Braunstein
S.6770 Sen. Liu

THIS BILL IS APPROVED WITH MODIFICATIONS

I. BACKGROUND

The Cooperative and Condominium Law and the Housing and Urban Development Committees of the New York City Bar Association (the “Committees”) support the underlying aims of A.8718/S.6770 (the “Bill”) and offer a few modifications to better achieve those aims.[1]  The Bill provides necessary corrections to the Housing Stability and Tenant Protection Act of 2019 (HSTPA) in order to preserve the traditional relationships between cooperative housing corporations and their tenant shareholders. We support the Bill because it has been carefully crafted to maintain the HSTPA’s protections for rent stabilized and controlled tenants, tenants of sponsor held units, tenants who sublease cooperative units from individual owners, and tenants who rent condominium units.[2]

There is no indication of legislative intent for the HSTPA to affect coops and condos outside of two contexts: limiting conversions of rental buildings to coops and condos,[3] and in the context of mobile homes.[4] However, by applying its rental protection requirements to all “landlords” and “lessors”, the HSTPA – perhaps inadvertently – intervenes in the relationship between non-profit cooperative housing corporations and their proprietary lease shareholders and unduly burdens coops with provisions intended to address a conventional landlord/tenant relationship.[5] Additionally, because these HSTPA provisions apply to coops dealing with shareholders, but not to condos dealing with unit owners, if not corrected, they may enhance the economic and market advantage of condominiums over cooperatives, and reverse a legislative and judicial trend to treat both forms of multifamily homeownership equally, in terms of governance and individual owner/shareholder rights.[6]

Passage of the Bill would distinguish tenant-shareholders from rental tenants in six main ways, while maintaining full protections for all fair market and rent stabilized and controlled tenants in cooperative buildings, including tenants of sponsors or holders of unsold shares.  The Bill makes changes to certain provisions of Part M of the HSTPA, which currently prevent coops, vis-à-vis their shareholders, from:

• receiving a deposit or advance exceeding one month’s rent;

• using an applicant’s past or pending landlord-tenant actions;

• charging applicants fees for the processing, review, or acceptance of an application except for background and credit checks;

• charging applicants more than $20 for background and credit checks;

• charging in excess of $50 for late payment of rent; and

• collecting fees, charges, or penalties other than rent in a summary proceeding.[7]

The Bill’s exemptions are narrowly drawn and would enable tenant-shareholders to continue to run their buildings in a fair and effective manner. The restriction on deposits, for example, prevents cooperatives from accepting marginal tenants and obtaining security from shareholders who perform extensive alterations. The limitations on use of background information, late fees, and application fees put the other shareholders at risk from prospective shareholders who may default on their obligations and place additional burdens for taxes and operating costs on the remaining shareholders.

This is not the first time that legislation intended to protect tenants has unintentionally included coops. In the New York City Council, after realizing Local Law 64 conflated Housing Development Fund Corporation (HDFC) cooperatives with rent-regulated apartments, the legislative body is moving swiftly to rectify a law the went beyond its intended purpose.[8]

II. NOTE CONCERNING HDFC’S

The Committees believe that the Bill correctly does not distinguish HDFC cooperatives from the larger universe of cooperatives operating in New York State.  They believe that the Bill’s exemption of cooperatives from certain provisions of the HSTPA should apply equally to HDFC’s because the reasons for doing so are the same. Indeed, some argue that the burdens that fall on non-delinquent shareholders when a shareholder cannot meet his or her obligations are exacerbated in HDFC’s (which often do not have the resources and reserves of non-HDFC cooperatives).  The Housing Court Committee disagrees, with a majority of members expressing the view that the HSTPA is meant to protect low-income individuals, including those owning shares in HDFC’s.[9]  They argue that HDFC’s, in particular, should not return to the status quo that existed prior to passage of the HSTPA.  It seems undeniable that the Legislature will hear many conflicting views on the topic of HDFC’s as they relate to both the aims of the Bill and perhaps other policy aims and legislation.  As such, the City Bar takes no position on the matter of HDFC’s vis-à-vis the Bill and leaves this issue to the larger legislative debate.

III. CONCLUSION

Although not without some controversy within the City Bar’s committees, we believe that the Bill, with certain technical clarifications that are suggested on the following pages, will preserve the legislative intent of the HSTPA.  Passage of the bill will protect rental tenants without damaging the ability of cooperative house corporations throughout the state to operate in an efficient manner, and further New York’s goal of promoting affordable home ownership.

Thank you for your consideration.

Cooperative and Condominium Law Committee
Margery N. Weinstein, Chair

Housing and Urban Development Committee
Daniel M. Bernstein, Co-Chair

February 2020

*Appendix A can be accessed through the PDF link.