BILL NUMBER: S7745
SPONSOR: MAYER
 
TITLE OF BILL:
An act to amend the public housing law and the real property law, in
relation to creating the cooperative and condominium ombudsperson
program; to amend the tax law, in relation to authorizing the residen-
tial unit fee; and to amend the state finance law, in relation to estab-
lishing the cooperative and condominium ombudsperson program fund
 
PURPOSE:
The bill creates the Cooperative and Condominium Ombudsperson Program
within the Division of Housing and Community Renewal, to serve as a
neutral, informative, and accessible resource available to cooperative
and condominium shareholders and unit owners, prospective shareholders
and unit owners, boards of directors and managers, and other affected
parties.
 
SUMMARY OF PROVISIONS:
Section 1 amends subdivision 1 of section 14 of the public housing law
to add a new paragraph y which empowers the Commissioner of Housing and
Community Renewal to administer the Cooperative and Condominium Ombud-
sperson Program.
Section 2 amends the real property law by adding a new article 11 estab-
lishing the Cooperative and Condominium Ombudsperson Program.
Article 11:
*Shall be known as the "cooperative and condominium ombudsperson act"
*The legislature finds that as cooperative and condominium housing
constitutes a significant portion of New York's residential housing
stock and it is the public policy of the state to encourage such forms
of home ownership, it is necessary to provide a neutral, informative,
and accessible resource available to all parties involved in residential
cooperative and condominium ownership and governance
*Defines relevant terms
*Outlines the Cooperative and Condominium Ombudsperson Program and
services to be provided under the program:
*To be established within the Division of Housing and Community Renewal
which shall be responsible for program oversight and have the power to
implement by appropriate regulation
*Division of Housing and Community Renewal to fund a not-forprofit enti-
ty, selected by competitive bidding, to act as the Cooperative and
Condominium Ombudsperson, to provide services under the program and to
oversee statewide
*Ombudsperson program staff to include at least one attorney or other
professional with extensive experience in real estate, cooperative and
condominium law, and conflict and alternative dispute resolution to
oversee program services; staff to adhere to code of ethics and avoid
conflicts of interest
*Program would educate shareholders of cooperatives and owners of condo-
miniums, their boards of directors and boards of managers, professionals
working with and for such boards, property managers, and other inter-
ested parties about their legal rights and responsibilities under feder-
al, state, and local laws and regulations
*Additional services to be provided under the program: to prepare educa-
tional and reference materials; to organize and conduct meetings, work-
shops, conferences and forums to disseminate information; to provide
mediation, arbitration, and other forms of alternative dispute resol-
ution; to refer parties to hearings held before the Division of Housing
and Community Renewal where mediation or alternative dispute resolution
fails; to offer monitors and vote counting services to assure fair
elections for board membership; to perform other functions and duties as
necessary.
*Ombudsperson to maintain registry of cooperatives and condominiums
within the state, to be updated annually
*Annual reports to be made to the Governor and the Legislature
Section 3 adds a new section 186-h to the Tax Law to create a new resi-
dential unit fee. Each cooperative corporation and condominium associ-
ation shall pay an annual fee of six dollars per year to the Department
of Taxation and Finance for each residential unit located in a building
or buildings owned or operated by such corporation or association. All
revenue from such fees paid to the Department of Taxation and Finance to
be paid to the State Comptroller to be deposited into the Cooperative
and Condominium Ombudsperson Program Fund.
Section 4 of the bill adds a new section 81-a to the State Finance Law
to establish a new fund in the custody of the State Comptroller to be
known as the "Cooperative and Condominium Ombudsperson Program Fund."
All monies in this fund shall be kept separate from other monies in the
custody of the State Comptroller. Monies from the fund shall be allo-
cated and spent by the Division of Housing and Community Renewal solely
for the staffing and administration of the Cooperative and Condominium
Ombudsperson Program.
Section 5 establishes the effective date.
 
JUSTIFICATION:
The rights of condominium owners and cooperative shareholders are
derived from a complex set of laws, regulations, and individual organ-
izational bylaws and other corporate documents. Under Article 23A of New
York's General Business Law, the Attorney General is responsible for the
regulation of public offerings of real estate securities, including the
offer of cooperative interests in realty, such as cooperatives and
condominiums, and the conversion of rental buildings to condominiums and
cooperatives. This protects potential buyers from fraud through detailed
disclosure requirements. Once cooperative and condominium offering plans
are declared effective, condominiums then fall under the New York State
Condominium Act and cooperatives fall under the state's Business Corpo-
ration Law - the statute which regulates all the state's corporations.
Unless the sponsor is still controlling the board of directors or is not
keeping the commitments which it made in the offering plan, the Attorney
General no longer has jurisdiction or oversight responsibilities.' While
the Condominium Act and the General Business Law grant condominium unit
owners and residential cooperative shareholders some rights, for the
most part, they leave many issues to t he cooperative or condominium's
governing documents - for cooperatives, the proprietary lease, house
rules, certificate of incorporation and by-laws; for condominiums, the
unit deed or declaration, house rules and by-laws of the condominium
association. Neither the Condominium Act nor the Business Corporation
Law provide a remedy short of litigation if these governing documents
are not adhered to.
The laws and regulations governing the rights of cooperative and condo-
minium residents, shareholders, unit owners, association members, and
boards of directors can be difficult to navigate and comprehend. This is
particularly true in the case of cooperative buildings since they are
governed by the Business Corporation Law which was not designed to regu-
late residential real estate. Cooperative shareholders are often
unaware that they do not own real property, and are considered tenants
of the corporation that owns the building where they live.
The boards of directors in cooperatives, and boards of managers in
condominiums, have a great deal of discretion over most issues involved
in the daily management and operation of their buildings.
While many cooperative and condominium boards act in the best interest
of their buildings, are financially prudent, and are responsive to the
needs of shareholders and unit owners, significant problems arise for
residents when this is not the case. Difficulties also arise when boards
of directors and managers are unable or unwilling to remedy disputes
between residents which may lead to the diminution of quality of life in
the building and significant tension between neighbors. Disputes regard-
ing transparency, finances, board elections, management decisions, rules
and regulations, construction, and other issues between individual resi-
dents, as well as between residents and their boards, are all too
common.
Because there is no government agency or other entity which oversees the
operation of cooperatives and condominiums, shareholders and unit owners
are left with only two options when serious problems develop: to organ-
ize other residents to change the board of directors or managers, or to
initiate legal action against the board or another shareholder or unit
owner.
Neither of these options is easy or appealing for most residents.
Changing the membership of the board of directors or managers often
takes an extended period of time, and is difficult or even impossible in
buildings where the original building sponsor or another party controls
the majority of votes. As a result, problems in cooperative and condo-
minium buildings all too often result in lengthy, expensive, and acrimo-
nious litigation which harms all parties involved. Such litigation
diverts resources which could be better utilized to provide well main-
tained buildings and grounds for the common good of the residents. Liti-
gation between neighbors frequently detracts from the quality of life in
buildings, harms the sense of community, and ultimately results in
greater expenses for everyone since boards have to pass the costs of
legal fees along to all residents. In cases where shareholders and unit
owners do not have the economic resources needed to pursue litigation,
problems may remain unresolved for years, finances may be mishandled,
and buildings deteriorate.
Florida, Nevada, and New Jersey have created ombudsperson or ombudsper-
son-type offices to address similar challenges in their states.2 These
offices provide general education to condominium owners and cooperative
shareholders, monitor board elections, and offer alternative dispute
resolution processes that provide a fair and inexpensive means for unit
owners and shareholders to resolve disputes with each other or with
their cooperative or condominium association. Other states have passed
or are considering legislation to create condominium or community asso-
ciation ombudspersons. 3
New York has one of the largest, if not the largest, number of cooper-
atives and condominiums in the nation. New York is also unique in having
both cooperative and condominium housing . In parts of the state, coop-
erative shareholders and condominium owners substantially outnumber
owners of single-and two-family homes.
Cooperative shareholders and condominium unit owners would see signif-
icant benefits from the Cooperative and Condominium Ombudsperson Program
created by this bill. The program, to be overseen by the Division of
Housing and Community Renewal, will provide a neutral, informative, and
accessible resource available to all parties involved in residential
cooperative and condominium ownership and governance, by producing and
distributing educational materials, holding public meetings and forums,
and providing a means to solve disputes without the need for costly and
time consuming litigation.
 
FISCAL IMPLICATIONS:
None. The Cooperative and Condominium Ombudsperson Program will be fully
funded by the creation of the six dollar residential unit fee.
 
LEGISLATIVE HISTORY:
New bill.
 
EFFECTIVE DATE:
This act shall take effect on the one hundred eightieth day after it
becomes law.
1 Office of the New York State Attorney General, Boards, Bylaws and
Rules: Understanding & Dealing With a Co-op Board of Directors,
https://ag.ny.gov/sites/default/files/publications/coop_board_directors.
pdf
2 See, e.g., Nev. Rev. Stat. § 116.625,et seq (creating the office of
Ombudsman for Owners in Common-Interest Communities and Condominium
Hotels); NJ Rev. Stat. § 46:8B-13.1 - 16 (directing the Commissioner of
Consumer Affairs to provide guidance to associations and vesting that
office with power to direct boards of associations "to provide a fair
and efficient procedure for the resolution of disputes," and to order
compliance with records requests); Fla. Stat. § 718.5011 et
seq.(establishing the Office of the Condominium Ombudsman and delineat-
ing its powers and duties).
3 See Joni Lucas, Ombudsman Programs Being Considered, HOA Resources,
Community Associations Institute available at
https://hoaresources.caionline.org/considering-hoa-ombudsman-program/ .

Statutes affected:
S7745: 14 public housing law, 14(1) public housing law