New Law: Housing Stability and Tenant Protection Act of 2019

June 27, 2019 Advisory

You may have heard that the Governor of New York signed into law the Housing Stability and Tenant Protection Act of 2019 (the “Act”). You may have also heard that the Act includes major changes in the Rent Control and Rent Stabilization laws. It does, but that is not the purpose of this Memo. The Act also includes changes that, at least as the Act is currently written, may seriously affect the governance of co-ops. Although we believe that the following were not meant to, it may be determined that these provisions apply to co-ops. If they do indeed apply, we have attempted to outline some of the ways co-ops would be affected. In light of this, when reviewing the following summary, “landlord” should be read to also mean “cooperative,” and “rent” should be read to also mean “maintenance.”

  1. The Act states that no landlord may refuse to rent or offer a lease to a potential tenant on the basis that the potential tenant was involved in a past or pending landlord-tenant action or summary proceeding. In addition, there is now a rebuttable presumption that there is a violation of this law if information is requested by a landlord from a tenant screening bureau or the landlord otherwise inspects court records. (Real Property Law 227-f) This is information that co-op boards typically require in order to make an informed decision about potential new shareholders.
  2. The Act provides that if a tenant does not pay his/her rent within five (5) days of when it is due, the landlord must send a notice, by certified mail. Failure to send the notice is an affirmative defense in any eviction proceeding based on that non-payment. (RPAPL Sec. 702) This is an entirely new notice that was not previously required. Proprietary leases typically have their own deadlines and methods of sending a notice, so this may be duplicative or add yet another layer onto the process. In any event, it is an additional and cumbersome requirement, particularly if the shareholder/lessee is in arrears for several months.
  3. Under the Act, “no landlord, lessor or sub-lessor may demand any payment, fee or charge for the processing, review of acceptance of an application … before or at the beginning of a tenancy” (with a few exceptions); provided, however that the landlord may charge a fee to reimburse costs associated with conducting a background check and a credit check, provided the cumulative fee is no more than the actual cost or twenty dollars ($20.00), whichever is less (and only if the landlord gives the prospective purchaser a copy of the reports as well as a receipt or invoice). It is unclear at this time whether this applies to a co-op’s management agent’s application fee for potential purchasers (or sub-tenants), which is typically required to compensate management for the additional work that is necessary to review and process the application. (RPL Sec. 238-a).
  4. The Act provides that no landlord may demand a payment, fee or charge for late payments of rent if it exceeds FIFTY dollars ($50.00) or five percent (5%) of the monthly rent, whichever is less. Many proprietary leases already include late fee and interest, and the new law may void those provisions. (RPL Sec. 238-a).
  5. The Act adds a definition of the term “rent” that excludes fees, charges and penalties (such as late charges, legal fees, and metered utility charges). Since only “rent” may be the basis of a summary eviction proceeding for non-payment, it may be impossible to evict a shareholder who pays only the basic rent but not any of the other charges. (RPAPL Sec. 702).
  6. The Act precludes a landlord from recovering attorneys’ fees upon obtaining a default judgment. (RPL 234).
  7. The Act limits security deposits to one month’s rent. This may prevent co-ops from requiring greater escrows from financially marginal applicants as a condition of approval of their purchase applications. (GOL Sec. 7-108 1-a) If the Act is construed to apply to such conditional approvals, it will likely have the effect of leading boards to reject more prospective purchasers.
  8. In the event a landlord commences a summary proceeding for non-payment of rent and obtains a judgment of possession, and the tenant can demonstrate extreme hardship, the court can allow the tenant to remain in occupancy for up to a year. A child’s enrollment in school is listed as one of the circumstances a court may consider. (RPAPL 753) This will undoubtedly adversely affect the governance of co-ops.

It seems clear that the Act was written to remedy some issues involving rental buildings, and certain abuses found in some of those buildings. However, because the Act uses very broad language, it appears that its provisions may apply to cooperative housing corporations, even if that was not the intent of the legislature.

We believe these provisions will cause unnecessary hardships to cooperative housing companies, their managing agents and boards, and even prospective purchasers. Interestingly, none of the foregoing seems to apply to condominiums, since the unit owner has no lease with the condominium board, and therefore there is no landlord/tenant relationship. These provisions may apply, however, if the condominium unit owner rents out their unit, thus creating a landlord/tenant relationship.

The foregoing is a simple outline of some of the provisions of the new law. We suggest that you review the entire law, which is available on the web. We also suggest that if you object to all or some of the provisions of the Act, you write to your State Senator and Assembly member. We are hopeful that if enough people write to their legislators, we may see a bill that corrects the Act to clearly exclude cooperatives.

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