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Bill Would Require “Good Cause” for Co-op and Condo Evictions

New York State

"Good cause" eviction, co-op and condo boards, Business Judgment Rule.
March 4, 2020

Last year it was left for dead. Now it’s alive and well. It is a bill before the New York State Senate, S.2892-B, that would prevent building owners, including co-op and condo boards, from evicting tenants, subtenants or someone without a lease unless the owner can prove “good cause.” The bill, which was recently referred to the senate’s Judiciary Committee, has the backing of some two dozen co-sponsors. 

If it becomes law, the bill would curtail one of the coveted powers of co-op boards – the power to make decisions “for any reason or no reason,” provided they are made in good faith and for the betterment of the cooperative. The Business Judgment Rule has protected co-op boards from judicial second-guessing of such decisions. That may be changing, and many co-op and condo advocates (along with owners or hotels and rental properties) are not pleased.

“The bill, if enacted, would fundamentally change how someone owning real estate could treat an occupant of space regardless of whether the occupant had a legal right to occupy the space,” writes attorney Stuart Saft in a recent client alert by his firm, Holland & Knight. Such a law, he adds, “would seriously damage the economic viability of residential real estate such as cooperatives, condominiums and hotels.” 

The bill indicates that “good cause” includes failure to pay rent – unless the tenant received a rent increase that was unreasonable. (The bill sets a “reasonable” rent increase at 1.5 times the Consumer Price Index, which works out to about 3 percent annually.) “Good cause” would also be the occupant's refusal to allow the owner access to the space for the purpose of making "necessary" repairs or improvements. It would be up to a court to determine what constitutes a "necessary" repair or improvement. 

The “good cause” bill was originally proposed last year by Sen. Julia Salazar, a Brooklyn Democrat, as part of the sweeping Housing Stability and Tenant Protection Act, but lobbying by real estate interests killed it. Now it has come back to life.

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