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Co-ops Get Relief Under New State Laws

Dec 27, 2021

CO-OPS GET RELIEF UNDER NEW STATE LAWS

By Aaron Shmulewitz

On December 22, 2021, Governor Hochul finally signed into law the bill that was passed by the State Legislature last June to exempt co-ops from some of the provisions of the 2019 Housing Stability and Tenant Protection Act (“HSTPA”). The new law can be accessed here.

The 2019 HSTPA barred landlords from taking various actions, and imposing various fees, on tenants. Co-ops were (presumably inadvertently) included by implied reference in such prohibitions, and many co-ops found themselves subject to significant operational limitations over the past two and a half years.

Now, as a result of the new amendments, co-ops (other than HDFC co-ops) have much greater operational freedom:

-co-ops can once again require maintenance escrows and prepayments of maintenance as conditions for purchase consent;

-co-ops need no longer give prior notice to shareholders if maintenance is to increase by more than 5% in order for any such increase to be enforceable;

-co-ops and managing agents can again charge administrative and application fees with regard to prospective sales and sublets;

-the former $20 limit on background and credit check fees no longer applies to co-ops and managing agents;

-co-ops can now charge a late fee of up to 8% of unpaid maintenance payments if the proprietary lease provides for a late fee;

-co-ops can once again seek to recover amounts other than unpaid maintenance in non-payment proceedings; and

-co-ops can now recover attorney’s fees from a shareholder who defaults in an action or proceeding.

As can be seen, the new law gives co-ops much-needed breathing room to be able to operate as they had prior to the 2019 HSTPA.

Having said that, please note that on December 21, Governor Hochul also signed into law a bill that would restrict significantly the ability of landlords to impose legal and legal-oriented fees on tenants absent a Court order. The new law can be accessed here.

Once again, the law is written broadly enough to include co-ops by implicit reference. As such, co-ops are currently technically barred from collecting legal fees from shareholders, including, theoretically, legal fees for routine things like review and preparation of transfer documents, special consent forms, and the like. The law provides that any agreement to the contrary (such as with a shareholder to voluntarily pay any such fees) is void as against public policy.

However, amendments are apparently currently in the works to clearly exempt co-ops from the broad reach of this new law as well.

Please contact BBG with any questions.

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