New Law Raises Bar for Opting Out of Mitchell-Lama Program

January 7, 2022 – Media Mention
Habitat Magazine

Herrick litigation partner Scott E. Mollen spoke to Habitat Magazine about Governor Hochul's new law for Mitchell-Lama co-ops that adds requirements for converting affordable housing units to market rate. The article explained, "The new law requires that 80% of residents — up from 67% — must choose to opt out of the program. It also requires Mitchell-Lama co-op boards to hold six shareholder meetings a year, and if a vote to opt out fails, it places a five-year moratorium on a new vote."

Scott noted, "Some people believe this is a mechanism to prevent all buyouts because the requirements are so high," adding, "This law makes it very difficult — not impossible, but very difficult to opt out. Now, 20.1% of the shareholders know they can block the whole process. This law empowers the minority to control the majority — even a big majority. The positive side is that this will lead to greater communication between boards and shareholders because of the mandated six meetings a year."

The article highlighted Scott's experience in converting the large Ruppert Yorkville Towers from a Mitchell-Lama to a market-rate condominium in 2003. Scott said that the complex deal included protections for eldlerly and disabled residents, and rent protections for shareholders who chose not to purchase their apartments. He elaborated, "The original Mitchell-Lama agreements never contemplated that the buildings would have permanent status as Mitchell-Lamas... The opportunity for sponsors and shareholders to convert to market rate was part of the original concept."

When he was asked to speculate about Governor Hochul’s motivation for signing a law, Scott said, "I think the governor wants to send a message that maintaining affordable housing is extremely important."

Read the full piece in Habitat Magazine. Access may require subscription.