What's New for Co-ops and Condos Legislative Update for 2011

 As managers, residents, and board members of the city's residential buildings  gear up for 2011, sweeping up the tinsel and cookie crumbs leftover from holiday parties isn't the  only job at hand. From bedbug disclosure rules to a proposed federal ban on  flip taxes, there is also an array of new legislation that promises to have an  impact on managers, boards, and the co-op and condo communities they represent  and serve.  

 Flip Taxes Banned?

 One of the hottest topics being debated among co-op and condo owners is the  Federal Housing Finance Agency (FHFA)’s Proposed Guidance on Private Transfer Fee Covenants, which was published in  August 2010. The rule would restrict Fannie Mae, Freddie Mac, and the Federal  Home Loan Banks from investing in mortgages in buildings with private transfer  fees —better known as flip taxes. Many are objecting strenuously to the proposal,  feeling that as it is currently drafted, the rule would effectively eliminate  flip tax fees—a revenue stream upon which many buildings rely.  

 Critics of this proposed rule say that the FHFA’s ban was developed with the intention of eliminating current provisions that  allow developers to receive revenue long after they have sold all their  ownership interests in a development. In its Proposed Guidance, the FHFA  states: “The typical one percent fee at the time of resale is neither a minimal nor a  reasonable amount; further, such fees may be in excess of one percent. Such  fees increase by a meaningful amount the seller’s and potentially the buyer’s burden at the time of a property sale. Expanded use of private transfer fee  covenants poses serious risks to the stability and liquidity of the housing  finance markets.” Co-ops, critics say, present a unique situation that was not contemplated by the  FHFA, and are not subject to the same abuse.  

 "The [flip tax] fee is not onerous when it directly benefits the community and  individual homeowners by funding reserves, capital improvement projects, and  ongoing co-op association obligations," says New York Congressman Eliot L.  Engel, (D-17) of the U.S. House of Representatives, serving the Bronx,  Rockland, and Westchester counties. "This enables monthly maintenance fees for  co-op dwellers to remain affordable. In its absence, co-op boards would need to  substantially increase rates to afford improvements and daily upkeep. It is  unfair that the vast majority of developers, investors and the hard-working  families who live in co-ops suffer due to the shady methods by some to ‘game the system.’ As our housing market struggles to recover from the devastating effects of the  past three years, we must not add to the problems and hinder both resale prices  and current living expenses. FHFA needs to understand the critical and  necessary role transfer fees play for millions of Americans who benefit from it  daily.”  

 Upon FHFA’s publication of the proposed rule, the federal agency invited public comment.  Many co-op shareholders, in New York especially, responded by sending emails  and letters, and by responding through the Federal eRulemaking Portal located  at www.regul ations.gov. These letters are available to the public on the FHFA’s website. One letter on behalf of a New York cooperative corporation, states, "Without  transfer fees, our board would have to substantially increase monthly carrying  charges in order to maintain our building. This will inflict financial hardship  on our shareholders/unit owners and could result in defaults, displacement for  individuals and, poorer quality of lives. We urge FHFA to protect the right of  housing cooperatives and condominiums to preserve affordability by continuing  to collect transfer fees.”  

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5 Comments

  • I'm a strong supporter of the Bill set forth by Senator Liz Krueger. Most people cant afford the legal fees and shouldn't have to. As a single mother purchasing a co op in Suffolk County, I had no idea of how much control a Board has over one's life. I have a Board run a muck, shareholder's talk of unethical conduct, been harassed and fear this board. Hard working people with limited resources to protect themselves, where do they go, who do they turn to? Perhaps the Cooperator might considering publishing some stories to get the awareness that is needed, no one should be violated and have to accept it because they dont have money for legal fees. Perhaps publish who ever endorses the last statement in that article, "Opponents of the bill say that there is no need for this office because appropriate mechanisms are already in place to handle building issues, and others object to the annual fee". Where are these resources, awareness is key!
  • I totally support the Bills set forth by Senator Liz Krugeger and Assemblyman Jeffrey Dinowitz. Co-Op shareholders are often hard working class with little financial or legal resources to fight the dictatorship of the corrupted/unethical board. Our board is corrupted and unethical without apprehension over the consequences because we don't have the resources for investigation and lawsuit. Our board illegally monopolizes the board memberships for as long as 20 years; and it gets kick back from the Management Company and contractors through expansive but unnecessary projects yearly. This results in heavy burden on shareholders via unreasonably high maintenance and flip tax. We understand our rights but it is very difficult to protect our rights without fair legislations and legal enforcement. We have been paying our real estate tax dutifully. We hope for government’s intervention to stop the board taking advantage of the shareholders.
  • Suffering coop owner on Sunday, June 05, 2011 9:28 AM
    I too support Liz Krueger's Ombudsmans Bill. I have had no success dealing with my Board, its lawyer, the management, govt agencies as my upstairs neighbor harasses me with no action taken by coop. Lawyers are expensive and this law would help the regular guy. All the agencies and regulations have not helped me so far. This law is essential to coop and condo owners.
  • Business Corporation Law, Leases, House Rules and Bi Laws are great rules but no one to enforce them!!! Board membership and management is a great position, this a free ticket to steal, violate, harass and supersede all laws that others would be punished for. I live in a small cooperative community, I had no clue until I attempted to address an issue of concern, this board is not a board of professionals, they are a "gang". They literally came passed my home, stalked, harassed and I learned sooo much after speaking to people that have been violated, they cant afford lawyers, so they are sitting pigeons of these actions. Am I living in New York, USA? This is unbelievable!!! They make their own rules, do what they want, omg, I support this bill and I support the Alliance for Co op and Condo Owners! A six dollar fee for this office is nothing, the big issue is they want to protect their rights to continue to do what they want, by all means, if that were me, yeah, hey, I dont want this, Im lining my pockets from all the kickbacks, legally!!!!!
  • WHAT NYS AGENCY IS RESPONSABLE FOR COMPLAINTS REGARDING CO-OPS