While we look ahead to all that 2022 has to offer, we want to make sure you are aware of some significant developments impacting co-ops that took place at the end of 2021. On December 22, 2021, Governor Hochul signed a law that amended sections of the General Obligations Law, the Real Property Law, and the Real Property Actions and Proceedings Law to exclude tenant-shareholders in co-ops from certain provisions of the Housing Stability and Tenant Protection Act of 2019 (the “HSTPA”).
Co-ops may now take the following actions:
- Co-ops may collect a security deposit from shareholders without restrictions relating to the amount. For example, a co-op board may require as a condition to consent to a purchase that a purchaser deposit as security an amount such as twelve months' maintenance. The one month's rent limit for security deposits under the HSTPA no longer applies to co-ops. (General Obligations Law § 7-108)
- Co-ops are permitted to (1) collect fees payable to managing agents and/or transfer agents for processing and reviewing applications from prospective tenants, and (2) collect the actual cost of any background checks or credit checks for prospective tenants. The $20 charge-back limit for background and credit checks under the HSTPA does not apply to co-ops. (Real Property Law § 238-a)
- Co-ops may charge a late fee of up to 8%, with no dollar limit, if authorized by the proprietary lease or occupancy agreement. Co-ops are exempted from the HSTPA's late fee limit of $50 or 5% of the monthly maintenance. (Real Property Law § 238-a)
- Co-ops may recover fees, charges, penalties, and assessments in addition to rent in a summary proceeding, if authorized by the proprietary lease or occupancy agreement. The HSTPA prohibition against collecting fees, charges and penalties in a summary proceeding no longer applies to co-ops. (Real Property Actions and Proceedings Law § 702)
- Co-ops are permitted to obtain attorneys' fees in the event of a default judgment against a shareholder, if authorized by the proprietary lease or occupancy agreement. The HSTPA restriction preventing a landlord from recovering attorneys' fees upon a default judgment does not apply to co-ops. (Real Property Law § 234)1
- Co-ops may send notice of rent defaults by methods other than certified mail, if such methods are authorized by the proprietary lease or occupancy agreement. Co-ops are excluded from the HSTPA requirement that rent default notices be sent by certified mail, and should strictly follow the notice requirements in their governing documents. (Real Property Law § 235-e)
Footnote
1. Please note that Governor Hochul also signed into law Section 234-A of the Real Property Law, which prohibits lessors from assessing legal fees in connection with the operation of a rental unit unless authorized by a court order. We do not believe that this law is intended to apply to co-ops, and we anticipate that a clarifying amendment will be enacted in the near future. In the meantime, we believe that co-ops can continue to collect legal fees where authorized by proprietary leases.
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