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The New York City Council Sets its Sights on Non-Profit Housing Ownership

By Jodi Stein, Peter Koffler & Eva Schneider on February 28, 2023
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Universal Blog NYC

On February 23, 2023, the Committee on Housing and Buildings at the New York City Council held a hearing on four local laws and three resolutions, all of which, if passed, would have vast impacts on residential housing development in New York City. While all of these pieces of legislation are important, this blog post focuses predominantly on Intro 196, otherwise known as the Community Opportunity to Purchase Act (“COPA”).

COPA would require private owners of residential buildings containing three or more dwelling units to give HPD 180 days’ notice (i.e., approximately 6 months) that they plan to sell their property (the “Notice of Sale”), and further, mandates that the first opportunity to purchase such property must be given to a “Qualified entity,” i.e., a nonprofit with a demonstrated commitment to providing permanently affordable housing, a commitment to community representation, and a demonstrated legal and financial capacity to effectively acquire and manage real property. 

The information required to be provided by private owners in the Notice of Sale is somewhat extensive, particularly when compared to a standard term sheet or letter of intent, a mechanism often used in private transactions, and is more akin to information provided during the due diligence period. In addition to providing names and addresses for the owner of the residential building, the Notice of Sale would be required to include the total number and type of dwelling units and rent collected for the same as of the date of the Notice of Sale, the income and expense report for the 12-month period before the Notice of Sale, including capital improvements, real property taxes and other municipal charges, the amount of the outstanding mortgage as of the date of the Notice of Sale, and the two most recent inspection reports of comprehensive building-wide inspections conducted by HPD or the Department of Buildings (“DOB”), among other things.

Once such Notice of Sale is provided to HPD by the private owner, Qualified entities have 60 days to submit a notice of intent to submit an offer to purchase and further, have then an additional 60 days to submit an offer to purchase the property. The private owner would be prohibited from accepting any other offers during this 120 day period of time. On top of this, HPD has the authority to extend any of these time limits upon an application for good cause. 

COPA also requires the owner to notify HPD in writing within 15 days if it receives an offer (ostensibly from a private party) to purchase the residential building. This notice must provide the name and address of the potential purchaser, as well as the price and terms and conditions of the offer made. Further, within 15 days of completing the sale of the residential building, the owner is required to provide HPD and any Qualified entity that submitted an offer to purchase the residential building with such notice.

If a Qualified entity does not submit a notice of intent or offer within the above-stated time limits, their right of first purchase is deemed waived, and the owner does not have any further obligations under COPA. If an owner fails to comply with COPA, they would be liable for a civil penalty of $30,000, and Qualified entities are entitled to seek injunctive relief against a non-complying owner in court.

If enacted, COPA would take effect 120 days after becoming law.

At the February 23rd hearing, Kim Darga, Deputy Commissioner of Development with HPD stated a variety of concerns. First, COPA, as currently drafted, is “very broad” and risks “undermining the goal of supporting more affordable mission driven housing.” Second, the Deputy Commissioner stated that “the breath of the legislation risks significantly disrupting the housing market potentially causing the most significant harm to small property owners.” Third, the Deputy Commissioner cited concerns that this would “slow the market” for residential sales of buildings. Finally, the Deputy Commissioner stated that discussions should be had with the bill’s sponsors to “narrow the scope of the legislation.”

There are two other pieces of proposed legislation discussed at the February 23rd hearing worth noting. First. Res. 38, otherwise known as the Tenant Opportunity to Purchase Act (“TOPA”), a companion resolution to COPA, calls upon the state legislature and Governor to enact legislation mandating that any owner intending to sell a multi-unit residential building must first make a fairly appraised offer to the tenants of the building before making any sale offers to third parties. TOPA is modeled after similar legislation enacted in 1980 in Washington D.C. Second, Intro 637 essentially applies the principals of COPA to City-owned land, requiring the City to prioritize nonprofit developers and community land trusts when it disposes of land for affordable housing and public use. 

The other bills and resolutions discussed at the February 23rd hearing were as follows:

  • Intro 714: This bill would establish a land bank for New York City, which would be tasked with acquiring, warehousing and transferring real property to develop, rehabilitate and preserve affordable housing. If enacted, this bill would take effect immediately.
  • Intro 932: This bill would require HPD, the Department of City Planning and the Department of Social Services to conduct a feasibility study on the establishment of a new agency focused exclusively on the promotion and development of social housing and report on the findings of the study. If enacted, this bill would take effect immediately.
  • Res. 344: This resolution calls upon the New York State Legislature and Governor to enact A.3701B/S.2804B, in relation to establishing a housing access voucher program.
  • Res. 506: This resolution calls upon the New York State Legislature and Governor to enact A.5573/S.3082, in relation to prohibiting eviction without good cause.

The Sheppard Mullin Land Use team will continue to monitor these local laws and resolutions; please feel free to contact a member of our team with any questions.

Photo of Jodi Stein Jodi Stein

Jodi Stein is a partner in the Real Estate, Energy, Land Use & Environmental Practice Group in the firm’s New York office.

Read more about Jodi SteinEmail
Photo of Peter Koffler Peter Koffler

Peter Koffler is a partner in the firm’s New York Office and is Leader of the New York Real Estate, Energy, Land Use & Environmental Practice Group.

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Photo of Eva Schneider Eva Schneider

Eva Schneider is an associate in the Real Estate, Energy, Land Use & Environmental Practice Group in the firm’s New York office.

Read more about Eva SchneiderEmail
  • Posted in:
    Real Estate & Construction
  • Blog:
    Real Estate, Land Use & Environmental Law Blog
  • Organization:
    Sheppard, Mullin, Richter & Hampton LLP
  • Article: View Original Source

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