Support for the Carve-Out Bill

SUMMARY

The Cooperative and Condominium Law Committee issued a report in support of  A.1701/S.1745 (the “Carve-Out Bill”), which would uniformly exclude cooperative entities and their shareholders from any reference to a “Landlord” or “Tenant” in any future legislation unless the legislation explicitly includes cooperative entities and their shareholders, tenants, or subtenants. The Carve-Out Bill clarifies the legal status of cooperative entities and their shareholders in relation to landlord-tenant legislation, by clearly distinguishing cooperative housing entities from traditional landlord-tenant relationships, thereby protecting them from the inadvertent consequences of regulations and obligations intending to apply only to landlords and tenants.

BILL INFORMATION

A.1701 (AM Braunstein) / S.1745 (Sen. Stavisky) – amends the real property law, in relation to the treatment of cooperative housing entities (NYS 2025-26).

REPORT

REPORT ON LEGISLATION BY THE COOPERATIVE AND CONDOMINIUM LAW COMMITTEE

A.1701 (AM Braunstein)
S.1745 (Sen. Stavisky)

AN ACT to amend the real property law, in relation to the treatment of cooperative housing entities

THIS LEGISLATION IS SUPPORTED

I. BACKGROUND

The Cooperative and Condominium Law Committee of the New York City Bar Association[1] (the “Committee”) strongly supports the passage of A.1701/S.1745 (the “Carve-Out Bill”) which would uniformly exclude cooperative entities and their shareholders from any reference to a “Landlord” or “Tenant” in any future legislation unless the legislation explicitly includes cooperative entities and their shareholders, tenants, or subtenants. The Carve-Out Bill clarifies the legal status of cooperative entities and their shareholders in relation to landlord-tenant legislation, by clearly distinguishing cooperative housing entities from traditional landlord-tenant relationships, thereby protecting them from the inadvertent consequences of regulations and obligations intending to apply only to landlords and tenants.

Driven by the need to prevent exploitive housing practices and ensure safe living conditions, New York State has a long commendable history of enacting tenant protection laws to balance the power between landlords and tenants. These laws are intended to ensure that renters have access to safe, affordable housing and legal recourse in the face of landlord misconduct. Simultaneously, cooperatives arose based on the need for affordable housing, stable living conditions and mutual support through collective homeownership. Cooperatives sought to distinguish themselves from the traditional landlord-tenant dynamic by establishing principles of shared ownership and democratic governance.

While landlord-tenant legislation is well-intentioned, it often unwittingly encompasses shareholders (owners as lessees of individual apartments within a cooperative) under the broad definition of “tenants.” This misclassification arises from the unique structure of cooperatives, where individuals (shareholders or “lessees”) purchase shares to an apartment (in lieu of a deed to an apartment) and receive a proprietary lease allowing them to occupy the apartment in which they own the shares. Landlord-tenant legislation so often conflates cooperatives with landlords, and shareholders with tenants. However, unlike tenants, shareholders are owners of the cooperative and may participate in the governance and operations of their cooperative, negating the necessity for the same level of statutory protections designed for traditional landlord-tenant relationships.

Furthermore, the relationship between a cooperative and its shareholders is inherently different from the traditional landlord-tenant dynamic. In a cooperative, the entity acting as the landlord is collectively owned by the shareholders, who are also the tenants. This dual role of shareholder and tenant creates a fair and equitable relationship, unlike traditional landlord-tenant dynamics where landlords, as for-profit entities, hold unilateral authority with no ownership ties to their tenants.

Therefore, applying tenant protection laws to cooperative shareholders is both inappropriate and unnecessary. The unique ownership structure and governance model of cooperatives provide inherent protections and a level of control that obviates the need for external regulatory intervention designed for rental housing. It is crucial to recognize and respect the distinct nature of cooperatives to ensure that legislative measures do not inadvertently disrupt their effective and self-sustaining operational frameworks. For example, the Housing Stability and Tenant Protection Act of 2019 initially imposed significant restrictions on cooperatives, limiting their ability to collect security deposits, enforce late fees, and conduct background checks. These constraints were only lifted after subsequent exemptions were granted. This pattern of oversight is not uncommon: for instance, the initial draft of the Good Cause Eviction Law failed to exempt cooperatives. This oversight would have restricted shareholder-approved maintenance increases and mandated that individual co-op and condo owners who sublet or lease their units offer renewal leases at “reasonable” rates. Such provisions could have prevented owners from reclaiming their own apartments, highlighting the need for careful legislative consideration to avoid unintended consequences for cooperative housing.

II. SUMMARY OF REASONS TO SUPPORT THE CARVE-OUT BILL

1. The legislature has recognized that cooperative entities are fundamentally different than traditional landlord-tenant relationships. At a Senate Joint Hearing on January 7, 2022 on the Good Cause Eviction bill, Senator Salazar stated:

“It is my understanding, and that of our legal counsel, that final exemption applies to housing coops, which are fundamentally different from other housing accommodations where this bill would apply. The intent of this bill is not to regulate housing cooperatives.”[2]

2. Inadvertently including cooperatives in landlord-tenant legislation may harm cooperative owners by interfering with their ability to finance, operate, maintain, and occupy their homes, and opt-in language will help prevent or reduce these harms in the future.

 III. CONCLUSION

The Carve-Out Bill aims to prevent future legislative oversights by requiring that any new law explicitly states its applicability to cooperatives. This mandate ensures that lawmakers clearly specify when a new section of law is intended to apply to cooperatives, thereby ensuring that laws only affect cooperatives if there is a deliberate intent to do so. Specifically, any reference to a “Landlord” or “Tenant” would not apply to cooperatives unless the legislation explicitly includes cooperative entities and their shareholders, tenants, or subtenants. This approach effectively requires an opt-in rather than an opt-out, relieving legislators from the burden of remembering to consider cooperatives in every new law. It ensures that cooperatives are only included when there is a clear and intentional decision to do so. This approach would protect the unique nature of cooperatives and ensure that they are not unintentionally harmed by laws designed for traditional rental housing.

The Committee urges the New York State Legislature to pass A.1701/S.1745 which provides a comprehensive solution by explicitly excluding cooperatives from provisions and laws that are not otherwise intended to apply to them.

Cooperative and Condominium Law Committee
Christopher M. Tumulty, Chair

Legislation Subcommittee for the Cooperative and Condominium Law Committee
Eric P. Blaha, Esq., Chair

May 2025