Understanding Why and When a Cooperative Corporation, as Landlord, Can Accept More Than One Month’s Rent?

As this firm previously promised, we have been carefully tracking proposals to the Housing Stability and Tenant Protection Act ("HSTPA") voiced by advocates for Cooperatives. A Bill was drafted, that went through various amendments since the beginning of 2021 which was just signed into legislation by Governor Hochel on December 22, 2021. The law amends the HSTPA by adding and clarifying language exempting homeowner - shareholder- tenants from certain provisions. This Bill corrects the unintended effects that the HSTPA had on Cooperatives.      

Deposits

Specifically, the HSTPA, only allows for the payment of up to one month of rent as security to a landlord, however the amendment signed into law provides "unless the deposit or advance is for an owner occupied cooperative apartment..."  The definition of an owner-occupied cooperative apartment is defined in the statute as: 

"A dwelling unit shall qualify as an owner-occupied cooperative apartment for the purpose of paragraph (a) of subdivision one-a of this section if it meets all of the following conditions: (a) the tenant is the dwelling unit owner, purchaser or shareholder of such a cooperative housing corporation; (b) such tenant has or will have after purchase exclusive occupancy of such dwelling unit individually and with the permitted occupants pursuant to a proprietary lease or occupancy agreement and established and delimited rights under such lease or agreement; and (c) such dwelling unit is not subject to the provisions of article two, article four, article five, or article eleven of the private housing finance law."

What this amendment means is that Purchasers of Coops or Owners of Coops can now submit offers that provide for the payment of more than one month of maintenance in advance to provide extra security for the Board in instances where a Purchaser does not otherwise meet the Board requirements including but not limited to Purchasing in an LLC or Trust, co-purchasing, or where a Purchaser’s financials do not satisfy the Boards Debt to Income Ratio  (“DTI”) requirements. Previously that right was challenged and removed by HSTPA. 

However, Brokers, Purchasers and Owners/ Shareholders should be aware that if the Owner- Shareholder rents the unit to a 3rd party, the exception does not apply. In such cases, the rules are the same as any other rental which was and continues to be limited by the HSTPA by only permitting one month security and one month’s rent in advance.

Increases

If a landlord offers a renewal lease for a residential apartment, with a rental increase of 5% or more above the current rent or if the landlord does not intend  to renew the lease, the landlord is must comply with the requirements under HSTPA, required to provide a timely 30/60 or 90 day notice. However, an exception exists for a unit owner of a Cooperative - thus freely permitting maintenance increases as permitted under the proprietary lease and bylaws of the Cooperative (other than a cooperative housing corporation subject to the Private Housing Finance Laws.)

Application fees

The law under the HSTPA provides that no landlord may charge a potential tenant for processing fees or review of applications etc except background and credit checks, of not more than $20. However, there is an exception for Cooperative Housing Corporations (other than those subject to Private Housing Finance Law as stated above). Cooperative Housing Corporations may demand payment or fees to cooperative managing agents or transfer agents for processing review applications on acceptance for a prospective tenant's application without a $20 cap.

Late Fees

Late charges are only permitted if a tenant has not paid rent within 5 days and the Owner can only charge up to $50 or 5% percent of the rent, whichever is less. But for a Cooperative (not subject to the Private Housing Finance Laws), as it relates to a shareholder tenant, the Cooperative Housing Corp. may charge a fee of up to 8% of monthly rent so long as a provision for such is in the proprietary lease.

Summary Proceedings

In a residential summary proceeding, for Cooperative shareholder tenants (other than those pursuant to the Private Housing Finance Laws) an owner/shareholder may be charged fees, penalties or assessments other than rent/maintenance whereas for a non-shareholder- Tenant  only base "rent" may be sought under the HSTPA.

Attorney Fees

Finally, with respect to attorney fees they may be awarded against, or in favor, of a dwelling unit owner who is a tenant of the Cooperative, within a suit with the Cooperative Housing Corporation (not subject to Private Housing Finance Laws) in the event of a default judgment.         

The new amendments add several provisions regarding its application to shareholder-tenants who utilize their cooperative as their residence. SDK HEIBERGER, LLP can assist you in ensuring that you are protected, in accordance with these new laws both during your transactions and/or litigation within a Cooperative setting.   

https://legislation.nysenate.gov/pdf/bills/2021/S5105C

Steven, Jamie & Eric
and the entire SDKH Team