GATEWAY PERSPECTIVES: Persistence Pays Dividends in Albany
Richard Haggerty | July 2016
Last month I wrote in detail about HGAR’s success in preventing an increase in the transfer tax in the City of Yonkers. It was a great example of the value of teamwork and persistence. This month I want to address an issue that has long been on both HGAR’s and NYSAR’s legislative agenda, co-cop transparency legislation.
In the middle of June NYSAR issued a call to action in support of legislation in the State Senate called the “Fairness in Cooperative Home Ownership Act.” The legislation required co-ops or their managing agents to acknowledge whether an application is complete and in acceptable form within 10 days of receipt of the application. Further, the legislation required that a co-op board must take action on an application within 45 days, or the application is deemed approved.
The Senate passed this legislation late in the session and it was our hope that the Assembly would take action as well, but unfortunately that was not the case. Organizations purporting to represent the interests of co-op owners argued that this legislation was unnecessary and created undue burdens and hardships for co-ops. Quite frankly, I think if you were to poll the rank and file co-op owners in the Hudson Valley, they would overwhelming support this legislation, as they are the ones who are most impacted when a co-op board fails to take timely action on an application.
While co-op owners technically do not own their apartments, but rather own shares in a corporation, the plain fact is that co-op owners view their units as tangible assets that are marketed in the same fashion as other forms of real estate. Co-op owners are seeking the same type of security and investment opportunity as any other form of real estate.
Ultimately co-op boards have fiduciary obligations to the shareholders of the corporation, and it benefits all shareholders to have a straightforward and predictable application process. The lack of a defined process in the end harms not just the prospective purchaser, but also the seller. When all is said and done, a 10-day period in which to review an application and deem it complete and in acceptable form is eminently reasonable. Further, a 45-day time frame to act on the merits of an application, including an interview, is also reasonable. Importantly, the proposed legislation does not restrict or curb in any way the ability of a co-op board to deny applicants.
Co-op boards typically will not accept an application until the prospective purchaser has obtained a mortgage commitment. With the sale of single-family homes or condominiums, the receipt of a mortgage commitment would be the juncture when the parties schedule a closing date. With co-op sales, the receipt of a mortgage commitment starts a process that is completely open-ended with no obligation on the part of the board to act on the application in a timely manner, allowing mortgage commitments to expire and leading to frustration for both the seller and the prospective purchaser.
We may not have succeeded on this issue during this legislative session, but we can’t afford to give up. I firmly believe that the passage of this legislation will positively impact co-op values and the investment security of co-op owners. Having a strong and vibrant co-op market ultimately benefits the entire housing market in the lower Hudson Valley.