Pending Anti-Co-Op Legislation In The City Council And The State Legislature

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There are presently two bills pending before the New City Council: Intro 1458 of 2017, the Fair Residential Cooperative Disclosure Law, and Intro 1467 of 2017, the Cooperative Corporation: Timing of Decisions Law, both of which will have an adverse impact on all cooperative housing corporations in New York City. There is also a bill in the State Senate S 5644 called the Fairness in Cooperative Home Ownership Act. These three bills are intended to solve a problem that does not exist, but could better be called the “Bills to Keep Shareholders From Wanting to Serve on Co-Op Boards.”
 
City Council Bills

 
The bills presume that co-op boards are guilty of discrimination just because they do not want to make mistakes on admitting new shareholders. These bills are successors to Intro 188, which was not enacted in 2013, but during hearings before the City Council, the New York City Human Rights Commission testified that in the preceding five years there were virtually no complaints of discrimination by co-op boards. The simple fact is that after the court in Biondi vs. Beekman Hill Housing Corp. gave an aggrieved, rejected subtenant over $250,000 in damages and neither the corporation nor the co-op’s insurer could pay the damages for the board members, boards have avoided even the appearance of discrimination. Nevertheless, members of the City Council, for reasons of their own, have started on a crusade that will only hurt the residents of cooperatives and diminish the value of the apartments and the buildings.
 
Intro 1458 contains the following provisions:
 
1. Real Estate brokers, who would have been entitled to a commission, would have standing to sue boards for discrimination. However, nowhere in the bill are brokers required to certify that they have no information about the purchasers that differs from what is contained in the purchaser’s application, notwithstanding the fact that many boards believe that the brokers review and clean up the applications before the boards see them and delete anything that could result in a rejection.
 
2. If a purchaser is rejected, the board must provide the purchaser with a written statement of each and all of its reasons for withholding its consent within five days. This requires identifying each element in which the purchaser’s application was deficient and must provide specific information to enable the purchaser to take specific steps to remedy any deficiency. That means that already overwhelmed boards will be required to review the same application multiple times and there will be litigation against boards in which rejected purchasers will sue to get the court to overrule the board.
 
3. Boards will be required to set forth the number of applications that were received in the preceding three years and the number of those where the board rejected the purchaser or made no decision.
 
4. The foregoing statements must be certified by an officer of the co-op, sworn under the penalties of perjury that the statements are true, complete and specific, and each board member has to state that he or she had no reason for withholding consent other than those in the statement.
 
5. Any co-op corporation that fails to comply with the foregoing shall be laible for statutory damages in an amount of no less than $1,000 and no more than $25,000 in addition to the potential damages of costs, attorneys fees, equitable remedies and punitive damages. Moreover, rejected purchasers or brokers can bring an action in front of the Human Rights Commission, who can also award damages.
 
6. Neither the corporation nor the board members can introduce any evidence other than what was in the statement described in item 2, above.
 
7. The court before whom a case is brought has the authority to determine whether the statement is in compliance with item 2, above.
 
8. If the commission finds that there was no discrimination, the purchaser and the broker can still sue the board and the corporation and the commission’s determination is not binding on the court.
 
Intro 1467 contains the following provisions:
 
1. Every co-op must maintain a standard application and a list of requirements for all apartments.
 
2. Within 10 days of receiving the purchase application and every other submission by the purchaser, the co-op must provide the purchaser an acknowledgement of its receipt.
 
3. Within 45 days of the receipt of any of the information or documents on the list, the co-op must inform a prospective purchaser whether its consent is granted unconditionally, conditionally, or denied. Note that this is 45 days from the receipt of any document and not the entire purchase application and it makes no difference how many hundreds or thousands of apartments the co-op may have. The board must meet in July and August to review applications unless or until the By-Laws specifically allow the board to take the summer off in which event the board can obtain a 14 day extension of the 45 day period. If the purchaser submits a reference letter on June 30th, the board must rule on the application by August 15th – even if the application is incomplete.
 
4. The 45 day deadline is tolled until the purchaser provides the specified missing information. However, the deadline can only be tolled three times.
 
5. If the prospective purchaser claims “to be aggrieved” by the board, the purchaser can file a complaint with the Human Rights Commission without showing any indication of discrimination or that the purchaser is a “protected person” under the law.
 
6. Boards and co-ops can be fined $1,000 to $10,000 for violations and the Human Rights Commission has the authority to award compensatory damages, attorney’s fees and equitable relief.
 
State Senate Bill
 

S 5644 requires that within 10 days of receiving an application for purchase, the board must notify the applicant that the application has been received and whether the application is incomplete. The board’s failure to notify the applicant is deemed to mean that the application is complete. Within 45 days of the receipt of the application, the board must either reject or approve the application and advise the applicant of the decision. Failure of the board to act within 45 days is deemed to be approval.
 
This bill, if enacted, would require boards to review the application within 10 days in order for the board to determine whether it was complete. This legislation assumes that board members are not employed and have no other activities other than waiting for applications; it also assumes that board members can clear their schedules and meet to determine that the application is complete.
 
The 45 day period commences when the application is submitted and not when the application is completed and all of the board’s questions are answered.
 
The Senate bill assumes that all co-ops must be six apartments because it ignores the complexity of operating cooperatives with hundreds and even thousands of apartments.
 
Conclusion
 
There is no reason for either the City Council or the State Legislature to place this burden on cooperative boards and shareholders. There is no other corporation in the state that is under these rules nor are single family homeowners or condominium boards. This is an attack against every single co-op and must be stopped or it will have dire consequences on the entire industry.
 
Every shareholder should immediately contact their City Council and State Legislative representatives and tell them to not support these bills.

For more information about how partnering with a property management company can help your property thrive, contact FirstService Residential, New York’s leading condo and co-op management partner.

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