Geoffrey Mazel in Legal/Financial on November 7, 2019
Two bills have been introduced in the state Legislature to carve co-ops out of the Housing Stability and Tenant Protection Act. The intention of the act, which was signed into law by Gov. Andrew Cuomo on June 14, 2019, was to provide protections to the millions of tenants in rental properties in the state of New York. However, the act has had a profound – and clearly unintended – impact on the thousands of housing cooperatives in the state, because co-op boards have a landlord-tenant relationship with shareholders. (While condo boards have no such relationship with unit-owners, the act could affect condo unit-owners who attempt to sublet their apartments). In its current form, the act imposes the following provisions on all landlords, including co-op boards:
Security deposits are limited to one month’s rent or maintenance. Since many co-op boards approve marginal apartment buyers if they agree to put a year or two worth of maintenance in an escrow account, this provision will effectively reduce the number of people who will be approved to buy into co-ops.
Application fees imposed on buyers are limited to $20. Since some property managers spend up to $1,000 vetting a prospective co-op buyer, this provision will have a chilling effect on apartment sales – unless boards require apartment sellers to pay all application fees. Although the New York Department of State issued a memorandum in September excluding co-ops from this limitation, the law is still in flux, and the memorandum is not the final legal word on this issue. Only the Legislature can pass or amend laws.
Only rent or co-op maintenance may be sought in Housing Court, and no fees or other charges, including attorney’s fees, can be recovered in such proceedings. This will force co-op boards to initiate an additional legal proceeding in civil court to collect unpaid late fees, attorneys’ fees, and other charges.
Penalties for late payment of maintenance or rent cannot exceed $50 or 5 percent of the monthly maintenance or rent, whichever is less. This, like the above provision, robs co-op boards of a potent tool in collecting arrears.
Hardship. In the event a landlord or co-op board commences a summary proceeding for non-payment of rent or maintenance and obtains a judgment of possession, the tenant or shareholder can attempt to demonstrate “extreme” hardship. The court can allow such a person to continue living in the apartment for up to a year.
Notification. Finally, the act provides that if a shareholder or tenant does not pay his or her maintenance or rent within five days of when it is due, the co-op board or landlord must send a notice by certified mail. If the notice is not sent in the allotted time, the shareholder or tenant can use this fact as a defense in any eviction proceeding based on that non-payment of rent.
The pushback against this law has been fierce in the co-op community. In response, state Senator John Liu, a Queens Democrat, introduced legislation in the state Senate on October 19 (Intro S6770 of 2019); four days later, state Assemblyman Edward Braunstein, a fellow Queens Democrat, submitted mirror legislation in the state Assembly (Intro AO8718 of 2019). The Legislature goes back into session in January, 2020. Hopefully, common sense will prevail, and co-ops will soon be carved out of the Tenant Protection Act.
Geoffrey Mazel is a member of the law firm Hankin & Mazel. He also serves as an executive member and counsel to the Presidents’ Co-op and Condo Council, which advocates for more than 100,000 units of housing in New York City.
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