Summary of the proposed Regulatory Agreement that HPD presented to a Brooklyn HDFC Co-Op in 2023, which The HDFC refused to sign

Key Restrictions for HDFC Co-ops

1. Income and Asset Limits

Apartments can only be sold to “Eligible Households”, meaning those with:

  • Annual income below 120% of Area Median Income (AMI).
  • Assets below 175% of AMI for a family of four.
  • No ownership or lease of other residential property within 100 miles of NYC.

2. Sales Restrictions

All sales must:

  • Comply with HPD’s Marketing Handbook.
  • Be listed through NYC Housing Connect or HPD-approved platform.
  • Be approved by both the HDFC board and an independent Monitor.
  • Have a sale price no higher than the Maximum Sale Price set by formula.
  • Pay a Flip Tax:
    • Normally 10% of sale profit,
    • But 100% if resold within 3 years (unless by inheritance or foreclosure).

3. Owner-Occupancy Requirements

Shareholders must:

  • Use the apartment as their primary residence at least 270 days/year.
  • Not rent, lease, or sublet the apartment (with strict exceptions).
  • Annually submit an Owner Occupancy Certification to the Monitor.
  • Not own or rent another home nearby (within 100 miles).

4. Leasing and Subletting

Leases and Subleases:

  • Must be approved by both the Board and the Monitor.
  • Subleases are capped at 15 months within any 5-year period.
  • Rent must not exceed “Carrying Cost” (maintenance + other charges).

5. Loan Restrictions

Cooperative Loans (for purchasing shares) require:

  • Approval by the Board and the Monitor.
  • Must not exceed 90% of the Maximum Sale Price.
  • Violations are treated as Prohibited Events and penalized.

Fees Payable to the Monitor or Related to Monitoring

1. Monitoring Requirements

HDFC must:

  • Enter into and fund a Monitoring Contract with a Monitor approved by HPD.
  • Not change or terminate the Monitor without HPD’s written consent.
  • Promptly replace the Monitor if the contract ends or is breached.
  • Pay the full cost of monitoring services.

2. Prohibited Event Fees

If an HDFC or shareholder violates the agreement (a “Prohibited Event”), a monthly fee is charged until cured.

Examples include:

  • Illegal sublets, overcharging rent, non-primary residence use, selling shares to ineligible buyers, or taking out oversized loans.

Fee amounts vary:

  • E.g., $200 plus overcharged rent for illegal sublets.
  • Full sale profit if shares are sold over the allowed price.

Other Notable Provisions

  • Mandatory 2% annual maintenance fee increase, unless waived by HPD.
  • Flip Taxes and other proceeds must be used for:
    • Reserves (Operating and Replacement).
    • Repayment of HPD or HDC loans (if outstanding).
  • HPD has authority to override or enforce the Regulatory Agreement if the HDFC or Monitor fails to act.