The Housing Stability Tenant Protection Act (HSTPA), enacted by New York State in 2019, was never met with much favor among landlords, including by the boards and management of buildings which are operated as cooperatives. The law was intended primarily to govern traditional rental arrangements between a landlord and tenant.
Critics of the act claimed that it was unduly restrictive and ill-suited for a housing cooperative where the shareholder tenants of the building all share in the expense of maintaining and operating the building.
Rollbacks of certain HSTPA provisions for co-ops
Good news for cooperative owners came in the form of legislative amendment to the HSTPA.
According to The Builders Institute The Building & Realty Institute, On December 22, 2021, New York Governor Kathy Hochul signed into law numerous rollbacks of certain provisions of the HSTPA to the extent they applied to tenant-shareholders in cooperative housing.
Some of the critical changes
The changes made by this new law involve:
- Collection of security deposits: The old law placed a significant restriction on the amount that a landlord could collect for security deposits to only one month’s rent. Many questioned whether this prohibited the collection of a maintenance escrow by a cooperative in those instances where the cooperative was concerned about the finances of potential shareholder and would otherwise reject their purchase application. The new law makes it clear that the one-month restriction does not apply to shareholders who occupy their apartment so cooperatives can once again approve potential shareholders on condition that a reasonable escrow be established to guaranty payment of maintenance.
- Charges for application fees and background checks: The HSTPA places a charge-back limit of $20 for background checks, with landlords absorbing any additional costs to third-party vendors for application fees, background checks and the like. The new law removes that limit from co-op purchase applications.
- Late fees: The new law also eliminates the limit on late fees to $50, or 5 percent of the monthly maintenance. As long as the lease agreement includes a provision authorizing the collection of late fees, a co-op can charge a late fee as high as 8 percent of the monthly maintenance charge, with no dollar limit.
- Collecting fees, charges, attorney fees etc.: New York’s new law also removes the restriction against cooperatives from collecting attorney fees in summary proceedings where default judgments are sought or collecting other fees and charges in summary non-payment proceedings. As long as the lease allows for collection of these fees and charges as additional maintenance, they may be sought in nonpayment summary proceedings commenced by a cooperative.
In general, these new laws are a welcome change for cooperatives. They begin to show legislative recognition that there is a difference between regulating the conduct of free market landlords and a cooperative where additional expenses and budgetary shortfalls caused by a shareholder’s default must be made up by the other shareholders in the building.