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State Legislature Restores Rights of Private Cooperatives That Were Formally Prohibited Under the House Stability and Tenant Protection Act of 2019

On June 14, 2019, the Governor signed into law the most sweeping changes to landlord tenant laws of a generation. While tenant advocates saw this law as a major victory, landlords decried it as heavily destructive of the profitability of private land ownership. Particularly hard hit were landlords outside of New York City who had no idea that their generations long ways of dealing with tenants were now not only illegal, but subject to severe penalties, but the hardest hit of all were private cooperatives who have nearly no source of income except from their own shareholders.

Law firms representing cooperatives, including Adam Leitman Bailey, P.C. were quick to point out how destructive these laws were of the financial stability of private cooperatives. Yet, the law remained unchanged for nearly two years.

However, recently the Legislature promulgated amendments signed by the Governor into law that exempt privately held cooperatives from nearly all of the worst provisions of the 2019 law. By privately held cooperatives, we refer to those which exist without specific governmental subsidies or governmental supervision, like Mitchell-Lama developments.

Under this new 2021 law, a privately held cooperative may go back to negotiating with a proposed shareholder how much additional security the would-be purchaser must deposit with the cooperative in order to be approved as a shareholder. There is no limit on the amount except what the parties decide to limit it to.

Also under the new law, a privately held cooperative is not obliged to give special notice to the shareholder if the maintenance is going to go up by 5% or more. The cooperative may do it on whatever notice it deems best for its own shareholders, including no notice at all.

Privately held cooperatives under the new law may go back to charging any application fee they deem appropriate. As to background check and credit check fees, under the new law, they are limited to the actual expense the cooperative has in effecting such checks.

While the 2019 law limited late fees to the lesser of $50 or five percent of the monthly rent, the new law raises those limits for privately held cooperatives to 8%, if there is an empowering clause in the proprietary lease permitting it.

The 2019 law had eliminated attorneys’ fees from dispossess proceedings and holdovers in civil court for all classes of landlords. Private cooperatives may go back to collecting those fees in the course of such lawsuits.

The 2019 law created a new predemand to send to tenants in arrears for five days or more, requiring that it be sent by certified mail. The 2021 law changes this to ordinary mail if the proprietary lease allows for it. However, it will likely be a very long time before any significant number of proprietary leases make this change and there is relatively little reason to go to the expense of amending proprietary leases for this reason alone.

For the most part, these changes restore privately held cooperatives to the position they held prior to June of 2019. Other kinds of landlords have no such relief on the horizon.

Dov Treiman chairs the Landlord-Tenant Civil Litigation Practice. As one of the leading authorities in the landlord-tenant bar, Mr. Treiman’s drafting of appellate briefs, legal documents and motions has increased Adam Leitman Bailey, P.C.’s ability to garner better results for its clients.

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