As the 2021 New York legislative session wound down, a law of great significance to the cooperative community was passed and now, after many months, has been signed into law by Gov. Kathy Hochul. This is extremely important and should immediately be reviewed by all cooperative boards, shareholders, managers and attorneys.

In 2019, legislation was passed known as the Housing Stability and Tenant Protection Act (HSTPA), which affected all aspects of leasing. It affected cooperatives as well, although to some the intent was clearly to affect residential rental landlord-tenant relationships and not tenant-shareholders in cooperatives.

The new law, which became effective on Dec. 22, 2021, modifies the HSTPA by excluding cooperatives from certain provisions. The following provisions of the HSTPA no longer apply to cooperatives: 

  1. The provision limiting security deposits and advances to one month's rent. This has been a serious impediment, as before HSTPA, cooperative boards often conditioned consent for a purchaser with insufficient or marginal finances upon the posting of a significant maintenance escrow. Cooperative boards may now use maintenance escrows again, without a limitation on the amount held in escrow. See GOL 7-108.
  2. The requirement for the landlord to give notice if a lease renewal is not offered to a tenant, or if a renewal is offered at an increase of rent equal to or greater than 5%. Cooperatives must comply with the provisions of their governing documents or any other laws on this point. See RPL 226-c.
  3. The prohibition of fees at the beginning of a tenancy, except for a credit or background check reimbursement of no more than $20. A cooperative's transfer agent or management company may now charge fees for processing an application, and they are now entitled to full reimbursement of the cost of a credit check, regardless of the amount. A comment in the Governor's signing memo makes reference to the fees being reasonable and “approved by a supervising agency.” These comments are not yet part of the law, and we are not certain how that second requirement will be considered going forward. See RPL 238-a.
  4. The limitation of payments, fees or charges for the late payment of rent to $50 or 5%, whichever is less. The proprietary lease or occupancy agreement often provides for interest and/or late fees, and these may now be collected once again, though the total amount of “any payment, fee or charge for the late payment of rent” is limited to EIGHT (8%) PERCENT of the monthly maintenance if the proprietary lease or occupancy agreement permits. See RPL 238-a.
  5. The provision that only rent (as narrowly defined by HSTPA) may be sought in a summary proceeding. A cooperative may now again seek eviction of a tenant shareholder for nonpayment of both “rent” and any fees, charges, penalties or assessments due under the proprietary lease or occupancy agreement in a summary proceeding. See RPAPL 702.
  6. The requirement that an additional five-day notice be sent by certified mail if maintenance is not timely received. This provision does not relieve a cooperative of the additional five-day notice that HSTPA mandates, but does allow the notice to be given in the manner required by the proprietary lease or occupancy agreement rather than by certified mail. Since most proprietary leases require notices to be given by certified or registered mail, this change may be of little impact. See RPL 235-e.
  7. The provision prohibiting the collection of attorneys' fees when there is a default judgment in a summary eviction proceeding. If there is a provision in the proprietary lease or occupancy agreement that permits the recovery of attorneys' fees, it is now possible to recover the fees even if the tenant shareholder defaults. See RPL 234.

Note: While these rollbacks of the HSTPA benefit cooperatives generally, they specifically do not apply to Mitchell Lamas, Housing Development Fund Corporations and cooperatives subject to Articles 4 and 5 of the Private Housing Finance Law with limited exceptions. For these cooperatives, all the provisions of the HSTPA remain applicable.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.