Co-ops Now Exempt from Housing Stability and Tenant Protection Act

While we look ahead to all that 2022 has to offer, we want to make sure you are aware of some significant developments impacting co-ops that took place at the end of 2021. On December 22, 2021, Governor Hochul signed a law that amended sections of the General Obligations Law, the Real Property Law, and the Real Property Actions and Proceedings Law to exclude tenant-shareholders in co-ops from certain provisions of the Housing Stability and Tenant Protection Act of 2019 (the “HSTPA”).

Co-ops may now take the following actions:

• Co-ops may collect a security deposit from shareholders without restrictions relating to the amount. For example, a co-op board may require as a condition to consent to a purchase that a purchaser deposit as security an amount such as twelve months’ maintenance. The one month’s rent limit for security deposits under the HSTPA no longer applies to co-ops. (General Obligations Law § 7-108)
• Co-ops are permitted to (1) collect fees payable to managing agents and/or transfer agents for processing and reviewing applications from prospective tenants, and (2) collect the actual cost of any background checks or credit checks for prospective tenants. The $20 charge-back limit for background and credit checks under the HSTPA does not apply to co-ops. (Real Property Law § 238-a)
• Co-ops may charge a late fee of up to 8%, with no dollar limit, if authorized by the proprietary lease or occupancy agreement. Co-ops are exempted from the HSTPA’s late fee limit of $50 or 5% of the monthly maintenance. (Real Property Law § 238-a)
• Co-ops may recover fees, charges, penalties, and assessments in addition to rent in a summary proceeding, if authorized by the proprietary lease or occupancy agreement. The HSTPA prohibition against collecting fees, charges and penalties in a summary proceeding no longer applies to co-ops. (Real Property Actions and Proceedings Law § 702)
• Co-ops are permitted to obtain attorneys’ fees in the event of a default judgment against a shareholder, if authorized by the proprietary lease or occupancy agreement. The HSTPA restriction preventing a landlord from recovering attorneys’ fees upon a default judgment does not apply to co-ops. (Real Property Law § 234)^[1]
• Co-ops may send notice of rent defaults by methods other than certified mail, if such methods are authorized by the proprietary lease or occupancy agreement. Co-ops are excluded from the HSTPA requirement that rent default notices be sent by certified mail, and should strictly follow the notice requirements in their governing documents. (Real Property Law § 235-e) 

^{[1] Please note that Governor Hochul also signed into law Section 234-A of the Real Property Law, which prohibits lessors from assessing legal fees in connection with the operation of a rental unit unless authorized by a court order. We do not believe that this law is intended to apply to co-ops, and we anticipate that a clarifying amendment will be enacted in the near future. In the meantime, we believe that co-ops can continue to collect legal fees where authorized by proprietary leases.}