Bills Pending in the New York City Council to Enact Laws Regulating the Purchaser Approval Processes of Cooperatives

Cooperative boards should be aware that there are three bills pending before the New York City Council that, if passed, will impose substantial requirements on the purchaser application process in all cooperatives in New York City with 10 or more apartments. Boards should consider whether to reach out to their council members, the members of the Committee on Housing and Buildings listed below, or the Mayor to express their views on the wisdom of the proposals. The bills are Intro. 0914-2023, Intro. 0915-2023 and Intro. 0917-2023.

Under current law, Boards must abide by all federal, state and city anti-discrimination laws, but they are otherwise free to develop and apply, without governmental interference, those application procedures and standards that they feel are appropriate for their buildings. The bills, if passed, would change that.  Among other things, they would (i) impose strict time limits for approval or disapproval of applications, (ii) require formal disclosure of the co-op’s finances to potential purchasers (extending far beyond the co-op’s financial statement), and (iii) require a detailed, sworn statement by an officer of the co-op of the basis for or any decision to reject an application, including the source of information relied upon. Cooperatives would be subject to financial penalties and legal fees for violation of the statutory requirements. The legislative language is, in many respects, vague and impractical and will likely foster disputes with boards.   The prevalence of disputes may lead to difficulty or significant additional expense in obtaining directors and officers insurance for board members and discourage board service. As a practical matter, some boards may simply decide to curtail the review of applications.

The likelihood of the success of the current legislative proposals is difficult to predict. Similar, though less onerous, legislation was successfully enacted in Westchester County in 2021.   Similar legislation has been introduced, but not enacted, in the New York City Council repeatedly in recent years.

The principal sponsor of the proposed legislation is Public Advocate Jumaane Williams. The legislation is assigned to the Council Committee on Housing and Buildings. If approved, the legislation would be signed or vetoed by Mayor Eric Adams.

The following Council Members serve on the Committee on Housing and Buildings:

As indicated above, cooperative shareholders, board members and managers may wish to express their views on the bills to the Committee, Jumaane Williams, their local Council Member or the Office of the Mayor.

If you have any questions regarding this client alert, please contact the Cooperative and Condominium Group at Smith, Gambrell & Russell, LLP.

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