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Proposed State and City Legislation Threatens Cooperatives’ Ability to Screen Tenant-Shareholders

Proposed legislation pending in both the New York City Council and the New York State Legislature poses a threat to Cooperatives’ approval rights and processes in connection with the screening of purchase applications. For example, Int. 1467-2017 pending before a City Council committee would, among other things, require that a Board acknowledge receipt of application materials within 10 days and decide whether to approve a sale within 45 days after receipt of any portion of the application.  If this timetable is not met, the Cooperative could be fined or subjected to other sanctions imposed either by the New York City Commission on Human Rights or by a court, and could be required to pay the applicant’s attorneys’ fees.

Int. 1458-2017, captioned the “Fair Residential Cooperative Disclosure Law,” would require that “[i]f a prospective purchaser is disapproved, the cooperative corporation shall provide the prospective purchaser with a written statement of each and all of its reasons for withholding consent no later than five business days after it has made its decision to withhold consent.” Moreover, such statement would have to set forth “each element of the prospective purchaser’s application which was found by the cooperative corporation to be deficient, any specific ways that the application failed to meet any specific policies, standards, or requirements of the cooperative corporation, and the source of any negative information relied upon by the cooperative corporation in connection with any of its reasons for withholding consent to the proposed purchase.”  This statement would also have to include the number of applications approved and disapproved by the Cooperative within the past three years, and a certification by an officer of the Cooperative, under penalty of perjury, attesting that the statement contains all the reasons that consent was denied and “that each person who participated in the decision to withhold consent has stated to the certifying officer that he or she had no reasons for withholding consent other than those set forth in the statement.”  In any legal proceeding arising from the denial of consent to the application, the Cooperative could not offer evidence other than as set forth in the statement.  In addition, failure to comply with the statement requirements could also lead to fines and attorneys’ fees imposed by the Commission on Human Rights or a court.

At the State level, S. 2540, the proposed “Fairness in Cooperative Home Ownership Act,” would require that a Cooperative notify applicants within 10 days whether their application is complete; if the Cooperative failed to do so, the application would be deemed to be complete. The Cooperative would also be required to notify the applicant of its decision within 45 days after receipt of the completed application; failure of the Cooperative to act within 45 days would be deemed to constitute approval of the application.  Any provisions of existing agreements (including proprietary leases) or other document according a Cooperative greater flexibility in considering applications would be declared “void and unenforceable” as contrary to “public policy.”  The bill is pending before the State Senate Committee on the Judiciary.

Legislation of this sort has been proposed several times before and has not been enacted – but that is no assurance that one or more of the bills will not gain traction and pass this year.  Many Cooperative Board members, managing agents, and others affiliated with Cooperatives are opposing the proposed legislation.  To do so, interested parties should contact their State Senators and Members of Assembly and their City Council Members to express their concerns that timing of Cooperative Boards’ consideration of applications and their ability to make independent decisions would be detrimentally impacted if such legislation is passed.