The HSTPA was signed into law during the summer of 2019 by then Governor Andrew Cuomo. Unfortunately, as the law applied to all residential apartment leases, it painted with too broad a brush and brought cooperative proprietary leases under its domain. Almost immediately, there was an outcry from the cooperative community that cooperative apartment buildings should not be equated with rental apartment buildings. Unfortunately, it took almost 2½ years for the New York State legislature to change the legislation and for Governor Kathy Hochul to sign the legislation into law. This memo will highlight the changes in the HSTPA which inure to the benefit of cooperative apartment corporations.
Subject to the terms of a cooperative apartment corporation’s proprietary lease, a cooperative may once again:
- Condition approval of purchase applications upon the deposit of a maintenance escrow. Since 2019, cooperatives were prohibited from doing so.
- Charge application, processing and search fees in connection with the review of prospective purchasers or subtenants. Since 2019 those fees were capped at $20.
- Impose late fees in an amount up to, but not in excess of 8% of a late-paying shareholder’s monthly maintenance charges. Late fees had been limited to the lesser of 5% of maintenance or $50.
- Enable the Board of Directors to collect late fees, legal fees and other expenses related to non-payment of maintenance in any proceedings which the Apartment Corporation maintained. Since the summer of 2019, the HSTPA had prohibited cooperatives from seeking such charges in any non-payment proceedings.
- Allowing for any default notices to be served in accordance with the terms of the apartment corporation’s proprietary lease. The HSTPA had imposed a requirement that all landlords send a delinquency notice by certified mail to tenants before being able to commence non-payment summary proceedings.
- Allowing for the reimbursement of legal fees in connection with obtaining a default judgment against the shareholder-lessee in a non-payment summary proceeding. The HSTPA had prohibited cooperatives from seeking the recovery of legal fees.
The only exception is for cooperatives organized pursuant to the Private Housing Finance Law (i.e. Mitchell-Lamas) which remain subject to the provisions of the HSTPA. The apparent theory there was that those cooperative developments are regulated by either New York State or New York City and are intended to be housing for individuals with limited incomes.
The recent changes to the HSTPA as applied to cooperatives essentially places cooperatives on the same legal footing, they were on prior to the 2019 adoption of the HSTPA. However as noted above, it took 2½ years to return cooperatives to the status quo. Accordingly, it is imperative for all Boards of Directors and Managing Agents to have ongoing communications with government representatives, both state and local, highlighting the difference between cooperatives and landlords for profit, with the goal to avoid future legislative mistakes.
Should you have any questions, please contact Eric M. Goidel, Esq. at (212) 431-1300 extension 438.
