Proposed conversion law changes.

A package of eight bills is being proposed by Queens Borough President Claire Shulman to address cooperative, condominium and homeowner association issues. With an active group of cooperators inhabiting her borough, Shulman took an active lead in the cooperative housing movement.

She created a Cooperative Task Force consisting of lawyers, managers, board members and trade groups who discussed issues for most of the last decade.

Many of these proposals were originated by the Task Force and have been sought each year in the legislature, often passed by the Assembly and never touched in the State Senate. This year, the possibility of more conversions could prompt the passage of several.

Since a non-eviction plan can still be effectuated with merely 15 percent of the units, the sponsor can obtain the benefit of higher, unregulated market rents for any units that don't sell and then become vacant. This has been essential to keep positive cash-flows covering maintenance charges as many sponsors went bankrupt supporting rent regulated tenants.

But critics say the legislature went too far when it created the ability to convert to a cooperative or a condominium using a non-eviction plan to protect these very same rent regulated tenants.

Instead of providing an incentive to create a cooperative community by creating a high purchase threshold, the 15 percent number was so low it created disunity and many opposing factions with diverse fiduciary interests in the building that still exist today.

These include: sponsors, bulk buyers, underlying mortgage holders, wrap mortgage holders, unit and/or share lenders, owner occupied shareholder/unit owners, rent regulated tenants, and shareholder/unit owners that sublease; and can include retail condo owners, professional/medical unit owners, and garage unit owners, among others.

The 15 percent number is therefore a target of the cooperative community, which backs Shulman's desire to have it raised to 35 percent. This is incorporated into a minimum sale requirement bill she is proposing as part of her legislative agenda, and also provides for an exclusive purchase period of 90 days for tenants.

In the past, converters have begun the process by warehousing units and not re-renting upon vacancy, particularly where the apartment is larger, or where the new rent would not be attainable in that market.

A co-op warehousing bill addresses issues that are created when sponsors stop selling the apartments. This became a complaint and the subject of lawsuits when both the co-op sales and rental markets picked up and sponsors opted to rent rather than sell.

Those shareholders who had purchased found they could not sell to others, since lenders would not provide loans for the new purchasers if the sponsors owned more than 50 percent of the shares.

While the potential conversion buildings may already have been upgraded through the use of major capital improvement programs, and the new cooperators may not be facing huge repairs like they did in the 1980's, another Shulman bill requires sponsors to eliminate dangerous conditions and to correct serious building code violations.

Trade groups and publications have helped cooperative management companies to become more sophisticated and knowledgeable, while city district attorney arrests and probes have tried to keep them honest.

Shulman is proposing bills that would establish minimum qualifications for managers and mandates their certification. Similar legislation is backed by some real estate industry groups.

These same trade groups and publications have also made efforts to train client boards. But a Brooklyn case where members of the cooperative board - including the original sponsor - were being prosecuted for violations of the window guard law, brought the fear of criminal liability into the minds of potential volunteers.

Since politicians didn't want the Lobby Decorating Committee chairwoman to face similar charges, Shulman is proposing a bill to exempt from criminal liability those volunteer cooperative and condominium board members who have no knowledge of building violations.

This bill is under scrutiny and is expected to be opposed by real estate industry organizations, whose members face these same penalties every day. These owners believe that when tenants operate multi-family buildings by virtue of buying into the building and becoming a shareholder or unit owner, they should be just as accountable for such life safety violations as other property owners.

Other bills would give purchasers the private right to sue sponsors who use false information to sell apartments; allow boards to collect rent from sub-tenants where an absentee owner has defaulted in the payment of maintenance and other common charges and extend the parking sales tax exemption to these co-op, condo and homeowner association owners.