The Laws of the Land Proposed Legislation for Co-ops and Condos

The Laws of the Land

Each year, our representatives in the New York State Legislature propose, debate, and ultimately pass or reject scores of laws and pieces of legislation.

This issue of The Cooperator is devoted to the legal and legislative issues affecting the city’s co-op and condo-dwelling population and the boards and managers who serve them. Let’s take a look at some of the bills making their way through the assembly this term.

Written Rejection

One of the most confounding aspects of the co-op purchasing process for many buyers is the fact that building boards are not obligated to give rejected buyers any reason whatsoever for their rejection.

Now however, a group of proposed bills aimed at streamlining and equalizing the application/rejection process are making their way through both houses of the Legislature. Assembly bills A10733 and A00259 tackle the issue of rejections, and propose that “cooperative housing corporations provide a prospective purchaser with a written statement of reasons when withholding consent to purchase.”

The other bills cover everything from requiring boards to give their reasons for rejection within five business days of the decision to “sanctions, fines, and other punitive damages” for co-ops that willfully withhold their reasons for rejection from prospective buyers. The bills also propose a standardized co-op purchasing application that would be universal among all co-op buildings in the state, and obligates condo boards to respond to applications within 60 days of receipt. If a board drags its feet and doesn’t give the buyer an answer one way or another, the buyer is automatically approved.

According to the sponsors of the various bills, “residential cooperative purchasers are subject to processes and conditions that do not also apply to purchasers of other single-family residences,” and can give the appearance of unintentionally discriminating against a buyer. This act is intended to improve the transparency of the cooperative purchase process.

Not everyone thinks so, however. According to Greg Carlson, owner of Carlson Realty Management in Queens and executive director of the Federation of New York Housing Cooperatives and Condominiums (FNYHC), his group doesn’t favor the so-called “written rejection” proposals.

“This bill is a duplication of rights that already exist,” says Carlson. “If a person feels that they have been discriminated in one the 14 protected classes in New York City, they can make a complaint to the Human Rights Commission, and if it’s warranted, the agency can make the cooperative give a reason for the rejection. A similar bill has been in Albany for years, and has never seen the light of day. This bill was brought on by independent, non-REBNY brokers—REBNY testified against the bill.”

And to clarify their position on the proposed bills that have been introduced both state and citywide, the Real Estate Board of New York (REBNY) issued its own Co-op Board Admissions Guide, which outlines the anti-discrimination requirements that all boards must follow in their approval process.

“Most cooperative corporations require a prospective purchaser to submit an application and various supporting documents containing personal and confidential information concerning an applicant’s history and finances. The Board of Directors may also require one or more personal interviews with the prospective purchaser. The handling of this application and interview process may be subject to scrutiny and claims of unlawful discrimination. An applicant who is a member of a protected class may perceive that he/she is being held to a different standard than other applicants,” the guide explains. Among the protected classes are age, alien status, children or no children, country of national origin, creed, disability, gender, lawful occupation, marital status, military status, partnership status, race, religion and sexual orientation.

To protect itself from unfounded claims of discrimination, REBNY advises that it is important that all boards develop a “carefully conceived policy and have clearly stated procedures in the handling of applications.” Historically, the right of a cooperative’s board to allow or withhold consent from a sale, for any reason or for no reason, has been recognized and protected by the courts. Members of a cooperative corporation have the right to decide for themselves with whom they would like to share their community, says REBNY’s policy. Other recommendations are to establish a standard admissions package; set a goal of six weeks from receipt of a complete package for a response by the board; appoint a subcommittee or admission chair to oversee application process; conduct a timely review process; be proactive; maintain confidentiality; after a decision is rendered, ensure that personal and financial information is protected and shredded when no longer needed; and allow managing agent or agent attorney to inform applicant of acceptance or rejection.

Some in the industry—including Carlson and the FNYHC—also feel that a written rejection bill would make more work for cooperative attorneys, and would dissuade people from running for their boards because of the liability issues it might raise.

Indecent Disclosure

And speaking of transparency, another interesting—and perhaps long-awaited—development for prospective buyers comes with the introduction of Bill A06361, which “extends the requirements for property condition disclosure statements to sales of condominiums and cooperative apartments.”

Currently, apartment sellers are not legally obligated to disclose information about an apartment’s physical condition to prospective buyers. Physical defects can’t be deliberately hidden in order to make a sale, but sellers aren’t required to disclose a history of leak problems, for example. Assembly bill A06361 would hold apartment sellers in both co-ops and condos to the same standards that apply to sellers of single-family homes—which, combined with the proposed changes to the application process in co-op buildings, may turn out to be good news for apartment seekers.

If there’s a downside to the bill, says Carlson, “It’s [in the form of] potential liability. Shareholders may not have the same knowledge [about their unit] as a single-family homeowner would about their home. Remember—these are multi-family building structures and not a single home. More liability exposure means more potential for having the appearance of non-disclosure.”

Shareholder Rights

And for those shareholders and unit owners who have questions about their legal rights and their boards’ obligations, there’s potential good news in the form of Assembly bill A05297. This proposed piece of legislation enacts a bill of rights—including “fair and equitable treatment” for all owners of residential cooperative or condominium units and spells out the obligations boards and associations have to their shareholders or condo association members.

The bill also “directs the attorney general to promulgate a handbook summary of the rights of shareholders and unit owners vis-à-vis cooperative corporations and condominium associations and the procedures and processes available to shareholders and unit owners to enforce such rights.”

Among the specific items in A05297 there is language requiring boards to:

Process requests for action in an expeditious, non-discriminatory fashion, according to uniform written procedures.

Provide financial statements to all owners for inspection.

Post notice of meetings at least 10 days prior to the meeting.

Notify, and in some cases seek approval from, owners before imposing special assessments or entering into contracts for extraordinary expenses.

According to the proponents of the bill, “Boards of directors of cooperative corporations and boards of managers of condominium associations exercise broad authority over the rights and financial interests of individual property owners. Under present law, there is little which regulates the discretionary authority these boards and associations possess. This bill would establish a number of important due process rights for individual property owners in dealing with their board or association. It would also create general standards for the conduct of business by these boards or associations.”

Other proposed bills have been submitted with shareholders and owners in mind as well—some specifically aimed at giving condo owners (who historically have more limited legal recourse than co-op shareholders) options for redress when problems arise in their units or in their buildings.

Bill A06898 for example, “would authorize a condominium unit owner to withhold common charges until the board of managers makes necessary repairs” to their unit. The legislation would provide recourse to condominium owners who, despite following proper procedures, have been unable to get their board of managers to address a problem in their units, when the problem falls under the responsibility of the board. The bill would allow unit owners to use the withheld common charges to make the needed repair if the board doesn’t do it within 30 days of notification, and would prevent condo boards from placing liens against the unit owner’s apartment.

While most people view anything labeled a “Bill of Rights” as an inherently good thing, there’s more than one side to every piece of proposed legislation. According to Carlson, “This bill has kicked around Albany for almost a decade,” and wouldn’t necessarily be a purely positive development for boards and managers.

“This bill could be used by unhappy shareholders to harass a board and/or its managing agent,” he says. “We have always stood with the Council of New York Cooperatives and Condominiums (CNYC) as opposed to the bill. Again, the problem [with this proposal] is the liability exposure to the board, the potential for rumors and using partial information to discredit people, and the enormous amount of time that may be taken up by it.”

The Question of Eviction

Whenever a rental building in the city announces that it’s going co-op or condo, the first question on the minds of many is, “What will happen to the tenants?” New York City has a long history of protecting rental tenants who may not be willing—or financially able—to buy their apartments, should their building convert. Exceptions do happen however, and with the average price of a one-bedroom apartment in Manhattan topping $1 million, rental conversions are no joke for the vast majority of renters faced with losing their homes.

Currently, a landlord wishing to convert a rental property to co-op or condo can opt to do so under an “eviction plan,” or a “non-eviction” plan. Two proposed bills in the State Assembly seek to lock in security and peace-of-mind for rental tenants in quickly-gentrifying neighborhoods by doing away with eviction-plan conversions altogether, and imposing stricter parameters on the conversion process in general.

The first, Assembly bill A05024, “prohibits landlords of residential condominium and cooperative residential conversions from evicting tenants [who] refuse to purchase such cooperatives or condominiums.”

The bill goes on to say that “permitting evictions is bad housing policy. We should not allow landlords to force tenants to buy apartments, which they cannot afford or be forced to find a rental apartment in the tight New York City market. Many of these people have lived in the same neighborhood for many years. Forcing these people to move out make for community instability and is unfair to the middle-class tenant. Eviction co-opting should therefore not be permitted.”

A second, somewhat related bill—A01461—doesn’t deal with eviction-versus-non-eviction conversion plans, but does address the often problematic relationship between developer/sponsors and newly-formed co-op and condo boards, either after a conversion, or in the case of new construction.

Assembly bill A01461 “provides that the sponsor of a cooperative apartment building or condominium units may not continue to sit on the board or to vote after the transfer to the cooperative corporation or condominium ownership.”

This bill has been introduced to “eliminate the possibility of landlords holding a seat on the board of directors or being allowed to vote any shares after conversion to cooperative ownership.” There are currently no laws that state this explicitly—only legal precedents set in landmark court cases, such as the well-known “Jennifer Realty” case of 2001, which compelled the sponsor in the case to sell its majority shares in a rental-to-co-op conversion. In short, Assembly bill A01461 “would prohibit landlords from holding a seat on a board of directors and voting on matters which rightfully are no longer under the landlord’s jurisdiction.”

Board and Owner Liability

In an increasingly litigious society, boards and board members—not to mention managing agents and shareholder/owners themselves—often operate in an atmosphere of anxiety about their own liability and exposure to legal claims. A number of bills introduced to the state Assembly address that liability, some in favor of boards/managers/et al, some less so.

In a related Assembly bill, A04325, individual unit owners and board members’ liability for tort claims arising from their buildings’ common elements is addressed. Torts are wrongful acts or negligence. If a pedestrian slips and falls because of an improperly maintained sidewalk in front of your building, for example, or has an accident or injury because of some condition within your building that your board, management, and staff should have remedied, they can file a tort claim against the building. Currently—and perhaps alarmingly—tort claimants can go after not just the co-op corporation or condo association for damages, but each individual shareholder or owner in the building.

Bill A04325 aims to change that. According to the bill, “Individual condominium owners may not be held jointly and severally liable for such torts, nor may board members be held personally liable in such cases.”

The bill’s sponsors feel that the bill “will prohibit people who are hurt within the common grounds of a condo from suing any individual unit owners. Without these provisions in place, there would be no end to the amount of money a person could claim to be ‘adequately compensated,’ [and would] cause trial lawyers to go after the unit owner with the ‘deepest pockets,’ which is not right.”

The bill goes on to say that while it may be a drastic scenario, it’s entirely possible that without a measure like A04325, anyone injured in a condo’s common areas could conceivably sue every individual owner in the building for unlimited damages. “Every unit owner within the condo would have to go out and hire a lawyer,” say the sponsors, “to make sure they’re covered if they’re sued.” Not only would such lawsuits be potentially devastating to unit owners, but their volume could overrun the state’s already crowded courts with endless lawsuits.

On a completely different note—though still within the realm of liability and legal obligation—is the issue of responsible dog ownership, which is addressed in Assembly bill A04187. This proposed bill “makes the owner of any dog liable for damages suffered by any person who is bitten by the dog while in a public place or lawfully in a private place—including the property of the owner of such dog.”

What makes this piece of legislation different—and of particular concern to both dog owners and the neighbors of dog owners in the city—is that it puts liability on the dog owner “…Regardless of the former dangerousness or viciousness of the dog or the owner’s knowledge thereof.”

Basically, that means that would no longer be such a thing as “one free bite.” According to the bill, “At present, the courts in New York State apply a common law standard knows as the ‘one free bite’ rule. Under this standard, the owner of a dog is not liable for any damages—no matter how savage the attack—unless it can be proved that the dog has a prior history of viciousness and that the owner was aware of this history.”

As written, A04187 would alter that standard and put dog bites on a par with other legal actions. “It would encourage dog owners to act responsibly in taking their dogs out in public, and will reduce the number of serious injuries resulting from dog attacks.” The bill isn’t a zero-tolerance policy, however—it provides a defense for dogs that bite “while the dog is defending itself from an annoying, harassing or provoking act.” That said, if the bill is signed into law, what constitutes “annoying, harassing, or provoking” may become a point for debate.

Tax Rebates

New York’s Byzantine tax-and-rebate system can often seem impenetrable to all but the most knowledgeable CPA or certiorari attorney. It’s sometimes difficult for a board made up of laypersons to figure out their building’s tax landscape, and to make sure that their shareholders and owners get the rebates due them in an appropriate and timely manner. A newly proposed piece of legislation aims to clarify for boards and managers exactly how certain tax rebates and refunds are to be disbursed among shareholders and unit owners.

The bill is A05162, and it deals with STAR abatements, which are property tax rebates given to New York State residents 65 and older whose annual household incomes are below the state average.

This proposal will provide for the imposition of a fine for the failure of a cooperative apartment corporation to credit the STAR exemption to a tenant-shareholder. The bill guarantees that those residents in cooperative apartments receive their STAR benefit exemptions as provided by law.

According to the sponsors’ justification for the proposed bill, “Tenants in apartment cooperatives are entitled to STAR benefits like many other citizens. In these cases, the cooperative corporation disburses the STAR benefit to the tenant. However, there have been many cases where the corporation has not fully complied with the law, and has not distributed the benefit in a timely manner as prescribed by law, or in many cases, has not distributed it at all. When this does happen, currently tenants have no remedy. This bill would provide a remedy to those tenants.”

Manager Licensing—Again

Finally, the issue of licensing property managers has been brought up in the Assembly—again. The matter has become an almost perennial fixture in the state legislature, backed with equal vigor on both sides of the debate over whether the people handling the city’s multi-family dwellings should be legally obligated to adhere to a set of professional and ethical standards.

Currently, property managers in New York are not required to have any sort of professional license—though many have certifications granted by their various professional trade organizations. While some argue that a government-mandated set of guidelines could only help the management profession, others feel that there’s enough oversight already, and that management companies are perfectly capable of governing themselves.

The newly re-proposed bill A09490 would “require licensing building managers, require managers to take building management courses and provides for determining competency to receive a license.

“I have member buildings that call up asking about an agent, or a management company,” says Carlson. “Right now, you can do a criminal check on the agent and check the management company’s broker license for any complaints. If there was management licensing, there would be a central agency to make and/or inquire about an agent’s license.”

“In the case of co-ops and condos, I feel that there is a higher fiduciary responsibility to the board, because in a majority of cases those boards have no real estate experience.”

On the other side of the debate are groups like REBNY, who feel that in order to be functional on the job, property managers already have to have certain baseline competencies, and that further licensing requirements would be redundant. Marolyn Davenport, a senior vice president of REBNY, says her group feels that the current system works fine the way it is—the licensing requirements for real estate brokers already cover property management, and creating licensing protocol would entail more difficulty than the end result would be worth.

“I don’t know why it would be passed,” says Davenport. “There is no hue and cry for it. I’ve worked for REBNY for more than 20 years, and there’s never been a bill that worked for everyone in the industry. We really think it’s terrific if people want to take courses in the various accreditation programs that enhance their skills and knowledge, but we don’t think there should be a requirement.”

In addition, opponents are concerned—and even some advocates have expressed concern on this issue too—that licensing may lead to a demand for salary increases among licensed property managers—a demand that some buildings may not be able to afford.

Law or No Law?

While all of these measures have been proposed, there’s no guarantee that they’ll make it to a vote and be ratified. Assembly spokesman Jonathan Harkavy, who is an aide to Assemblyman Vito Lopez, the housing committee chairman, agrees. In order to be approved, the bills have to be ratified by both chambers of the state Legislature, a practice that doesn’t often happen with co-op or condo-specific legislation.

The best way, however, to track the progress of a particularly important piece of legislation is to visit the New York State Assembly’s website at www.assembly.state.ny.us and read up on where the law is in the process. If you feel particularly strongly about a proposed bill, you can contact the bill’s sponsors—they’re listed on each individual bill’s page—and let them know how you feel. Similarly, if you’re against a bill, you can make your feelings known as well.

Debra A. Estock is managing editor and Hannah Fons, associate editor of The Cooperator.

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3 Comments

  • Currently, Assembly Bills A10733 and A00259 in www.assembly.state.ny.us do not refer to "Written Rejection". Have this been modifed? Thanks
  • After 5 years of trying to sell my coop off and on I found a buyer for my coop in Westchester, NY. My buyer put the deal on hold shortly after I accepted his offer because his mother became ill. A month or so later the deal was back on. After several months of back and forth with submitting and securing documents the buyer finally had a mortgage and a completed application package to submit to the coop board. Yesterday my agent called me to tell me that the board refused to interview the poor man. Needless to say I am heartbroken. I feel like a runaway slave who will never get her freedom. The reason he was rejected could not have been for financial reasons because this gentlemen has a substantial amount of money in the bank a good job and a good credit rating. It is unfair that these rogue boards have no checks and balances. How is it possible for a board to have so much power that they can literally ruin your entire life by not allowing you to move on with your life. My attorney informed me that I can't even return my property to the bank without the board's approval. Are we not in America!!!! This is so unfair these draconian laws must be changed.
  • After 5 years of trying to sell my coop off and on I found a buyer for my coop in Westchester, NY. My buyer put the deal on hold shortly after I accepted his offer because his mother became ill. A month or so later the deal was back on. After several months of back and forth with submitting and securing documents the buyer finally had a mortgage and a completed application package to submit to the coop board. Yesterday my agent called me to tell me that the board refused to interview the poor man. Needless to say I am heartbroken. I feel like a runaway slave who will never get her freedom. The reason he was rejected could not have been for financial reasons because this gentlemen has a substantial amount of money in the bank a good job and a good credit rating. It is unfair that these rogue boards have no checks and balances. How is it possible for a board to have so much power that they can literally ruin your entire life by not allowing you to move on with your life. My attorney informed me that I can't even return my property to the bank without the board's approval. Are we not in America!!!! This is so unfair these draconian laws must be changed.