Page 7 - CooperatorNews July 2021

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COOPERATORNEWS —
JUNE 2021
7
LEGAL & LEGISLATIVE...
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and violations” but that “there’s a rebuttable
presumption in this law, that the failure to pay
rent is not good cause if it results from a rent
increase of more than 3%, or one-and-a-half
times the increase in consumer price index
(CPI).”
As such, with passage of this bill co-ops
would not be able to increase their mainte-
nance charges more than 3% or one-and-a-
half times the increase in CPI in a given year.
“This effectively prohibits co-ops and condos
from enforcing maintenance or common
charge increases that are over these kept fig-
ures,” says Weinstein, “even if they have vastly
increasing operating costs or tax increases
or other obligations—such as all the carbon
emission control rules that they have to now
comply with.” The vast majority of co-ops do
not have other means of raising funds to op-
erate their properties, so without being able to
adjust carrying charges to meet rising costs,
many co-ops will be hard pressed to meet
their expenses if this bill passes.
Weinstein adds that the bill also pertains
to renewal leases and subleases, which might
have consequences for individual condo
owners who rent out their units. “You can’t
recapture individual units, except for quote-
unquote ‘good cause,’” she adds. “So let’s say
you lease your unit out. You may not be able
to take it back.”
In short, she says, “this bill could severely
restrict the board in maintaining its build-
ing, and will prevent individual unit owners
as well from renting their apartments on a
short-term basis and getting those apart-
ments back. So I think it has detrimental po-
tential on multiple levels to affect the housing
supply and the ways in which a co-op or a
condominium currently operates.”
Reason for Rejection
Another swath of legislation getting a
lot of attention in New York are Senate bills
1449, 2846, and 2874, which deal with boards
disclosing a reason for rejecting a co-op or
condo purchase applicant, and the timing for
doing so. Weinstein says that these types of
bills have reached the legislature every couple
of years for the last decade or so, “and they
usually just don’t go anywhere. … [but] this
year, there are three of these bills in the Senate
that seem to show some movement.”
With the ostensible purpose of provid-
ing transparency and eliminating the po-
tential for discrimination, the bills would
require boards of co-ops to provide a writ-
ten explanation for their rejection of a pro-
spective buyer, rather than the current lee-
way boards have to reject an applicant “for
any reason, or for no reason.”
But Philip Simpson, an attorney with
Robinson Brog, a firm also based in New
York, points out that “New York City pres-
ently has the broadest scope of protection
for groups of people against whom co-op
boards might discriminate. If a prospec-
tive purchaser in a protected class is turned
down and sues, the co-op board may well
have to articulate a reason in response to
the lawsuit.”
Aside from that apparent redundancy of
the bill, boards have the fiduciary responsi-
bility to protect the assets of their commu-
nity and the investments of their individual
shareholders. In fact, attorneys represent-
ing both co-op corporations and prospec-
tive shareholders advise that the most
common reason for denial is the financial
position of the applicant. Since cooperators
in a housing corporation share financial re-
sponsibility for the operation and upkeep
of the property, it is particularly impor-
tant for incoming shareholders to be able
to contribute proportionally now and for
the foreseeable future. Similarly, Simpson
also says that he has “seen denials, or issues
raised, when the board views the purchase
price as too low. A low purchase price will
affect values throughout the building, be-
cause it will become a comparable sale the
next time an apartment comes on the mar-
ket, or someone wants to refinance their
unit’s mortgage.”
One of these bills that Weinstein sees
as particularly problematic says that if the
board doesn’t act within a certain period
of time, the board is deemed to have con-
sented to the applicant. She points to the
effect this would have on financing, ques-
tioning whether mortgage lenders would
accept such tacit consent without seeing
it in writing. Similarly for the issuance of
a cooperative’s title insurance. “Yeah,” says
Weinstein, “I think both title policies and
lenders are going to want the affirmative
consent. And the board might refuse to is-
sue that affirmative consent. So then where
are we?”
Construction Defect Claims
Matthew Gaines, attorney with Braintree,
Massachusetts-based law firm Marcus, Erri-
co, Emmer, and Brooks, P.C. and co-chair of
the Community Associations Institute’s New
England Chapter’s (CAI-NE’s) Legislative Ac-
tion Committee, explains that January began
the legislative session for Massachusetts’ two-
year legislative cycle; all bills have been filed
and referred to their respective committee,
awaiting hearings that will take place in the
upcoming year or so.