Source: https://www.nysenate.gov/legislation/bills/2017/S6543
Timestamp: 2019-07-20 15:48:46
Document Index: 93930947

Matched Legal Cases: ['§573', '§572', '§ 573', '§ 2', '§  3', '§ 4', '§  5']

NY State Senate Bill S6543
senate Bill S6543
Relates to the assets and supervision of housing development fund corporations
Get Status Alerts for S6543
Jun 01, 2017 referred to housing, construction and community development
S6543 (ACTIVE) - Details
Add §573-a, amd §§572, 573 & 577, Priv Hous Fin L
S6543 (ACTIVE) - Summary
Relates to the assets and supervision of housing development fund corporations and redefines supervising agency for the purposes of housing and development companies.
S6543 (ACTIVE) - Sponsor Memo
BILL NUMBER:  S6543
relation to the assets and supervision of housing development fund
Section 1 of the bill would add a new section 573-a to Article XI of
the Private Housing Finance Law ("PHFL"). This new section would
impose restrictions on Housing Development Fund Corporations ("HDFCs")
to ensure that the original intent of Article XI is carried out. For
example, subdivision 1 would prohibit an HDFC from leasing, or
allowing the occupancy of, a dwelling unit to a family that is not
low-income. Subdivision 2 would require an HDFC to obtain supervisory
agency approval prior to any transfer of all or substantially all of
its assets. Subdivisions 3 and 4 would also require an HDFC to obtain
supervisory agency approval before an HDFC leases its real property or
seeks to amend its certificate of incorporation. Subdivision 5 would
authorize the supervising agency to appoint a number of new directors
to the board of any HDFC that had violated Article XI or its
certificate of incorporation so that the new directors constitute a
majority of the board. It would also authorize the supervising agency
to revoke or suspend all or part of any tax exemption of such an HDFC.
Subdivision 5 would require that, prior to exercising these powers,
the supervising agency provide notice and an opportunity to cure to
the HDFC. Subdivision 6 would require supervisory agency approval for
an HDFC to acquire real property not specifically identified in its
certificate of incorporation. Subdivision 7 would provide that an HDFC
incorporated pursuant to Article XI and the Not-for-Profit Corporation
Law ("NPCL") are deemed to be charitable corporations. Subdivision 8
would apply certain sections of the NPCL to HDFCs incorporated
pursuant to Article XI and the Business Corporation Law ("BCL").
Subdivision 10 would allow an HDFC to vary charges or requirements to
account for instances in which, for example, units have different
income requirements or flip taxes are reduced based on duration of
Section 2 would amend the definition of "supervising agency" in
section 572 of the Private Housing Finance Law to mean the agency in a
municipality that has jurisdiction over the development of affordable
Section 3 would amend section 573 of the Private Housing Finance Law
to require that an HDFC's certificate of incorporation specify that
the HDFC has been organized both to develop and to operate a housing
project for persons of low income.
Section 4 would add a new subdivision 4 to section 577 of the Private
Housing Finance Law that would authorize an HDFC to terminate its
existing real property tax exemption or abatement upon the
commencement of an exemption pursuant to Article XI of the PHFL.
Section 5 would provide a severability clause.6
Section 6 would provide that the bill take effect immediately.
Article XI was enacted in 1966 to facilitate the rehabilitation and
construction of low income housing through two types of non-profit
corporations: 1) HDFCs formed pursuant to Article XI and the NPCL for
the purpose of operating rental housing ("Rental HDFCs"); and 2) HDFCs
formed pursuant to Article XI and Section 402 of the BCL for the
purpose of operating cooperative housing ("Cooperative HDFCs").
Both Rental HDFCs and Cooperative HDFCs have the sole corporate
purpose of providing housing on a nonprofit basis to persons and
families of low income and both are eligible to receive tax
exemptions, below market financing, below market property
dispositions, as well as other forms of government assistance.
This bill adds a new section 573-a to Article XI of the PHFL to
clarify and implement the original intention of the statute to require
that all HDFCs operate as non-profit corporations. In keeping with
that intent, the bill subjects all HDFCs to the provisions of the NPCL
regarding dissolutions, mergers, and the sale of substantially all
corporate assets. In order to ensure that HDFCs provide rental or
cooperative housing for persons and families of low income as required
by Article XI, the bill codifies requirements related to the sale of
shares of stock in cooperative HDFCS, clarifies when approval of an
HDFC's supervising agency is required for certain acts (including
acquiring property and entering into long-term leases), and enhances
the supervising agency's enforcement powers (including the right to
appoint board members or revoke tax exemptions when an HDFC violates
This amendment seeks to clarify and implement the original intent of
Article XI that all HDFCs, both rental and cooperative, must operate
on a non-profit basis to provide affordable housing to persons or
families of low income, and that their corporate assets are
safeguarded, by explicitly requiring that certain provisions of the
NPCL regarding dissolution, mergers, and the sale of all or
substantially all of the assets apply to Cooperative and Rental HDFCs.
The amendment also ensures that the supervising agency and the New
York. State Office of the Attorney General are required to approve
certain transactions involving dissolution, mergers and the sale of
all or substantially all of the assets of Cooperative and Rental
HDFCs.
Article XI was drafted in contemplation that HDFCs receiving tax
exemptions or below-market financing would operate pursuant to the
terms of agreements with their supervising agencies. Such agreements
provide the supervising agencies with the enforcement tools necessary
to care for the public investment in these properties, clear
guidelines for HDFCs to follow in governing themselves, and
restrictions on the subsequent sale or rental of units. Even in the
absence of such agreements, every HDFC is subject to substantial
statutory restrictions requiring it to provide housing for persons and
families of low income and to ensure that none of its assets inure to
the benefit of private individuals. Currently, many HDFCs do not have
agreements with their supervising agencies. Certain real estate
speculators are misrepresenting to HDFCs and to potential purchasers
of shares in Cooperative HDFCs that the lack of such an agreement
changes the sole corporate purpose of an HDFC -a representation that
is contrary to the legislative intent of Article XI and not supported
by the plain reading of the statute.
Many HDFCs currently operate with little oversight due to the lack of
agreements with their supervising agencies. Some HDFCs have attempted
to sell their real property for use as market rate housing, or have
allowed their shareholders to sell shares of stock for prices that are
not affordable to persons and families of low income. Such actions are
in direct contravention of the intent of Article XI.
To date, there are more than 1,000 Cooperative HDFCs that provide over
25,000 units of low income housing to shareholders, the majority in
Bronx, Kings and New York Counties. Because of often self-serving
misinterpretation of Article XI, such housing may be at risk of loss.
Although legislative history is clear that both Rental and Cooperative
HDFCs must operate on a non-profit basis and must maintain the sole
corporate purpose of providing low income housing, there is a great
need for an amendment to clarify that the corporate purpose of an HDFC
- to provide affordable housing to persons and families of low income
- is perpetual in duration. Absent the checks and balances provided by
the NPCL, there may be a great loss of affordable housing. New section
573-a serves to plainly state the intent of the original drafters of
Article XI by making clear that all HDFCs must be operated exclusively
on a non-profit basis, and that controlling provisions of the NPCL
govern the dissolution, merger, or sale of all or substantially all of
the assets of an HDFC.
S6543 (ACTIVE) - Bill Text download pdf
assets and supervision of housing development fund corporations
section 573-a to read as follows:
§ 573-A. ASSETS AND SUPERVISION OF  HOUSING  DEVELOPMENT  FUND  CORPO-
RATIONS.  1.  EXCEPT AS MAY BE SPECIFICALLY AUTHORIZED IN WRITING BY THE
COMMISSIONER OR THE SUPERVISING AGENCY, AS THE CASE MAY BE, (A) A  HOUS-
ING  DEVELOPMENT  FUND  CORPORATION SHALL NOT CAUSE OR PERMIT ANY VACANT
DWELLING UNIT TO BE LEASED TO, OR OCCUPIED BY, ANYONE OTHER  THAN  FAMI-
LIES  AND  PERSONS  OF LOW INCOME, (B) A HOUSING DEVELOPMENT FUND CORPO-
RATION ORGANIZED PURSUANT TO THE NOT-FOR-PROFIT  CORPORATION  LAW  SHALL
NOT CAUSE OR PERMIT ANY DWELLING UNIT TO BE LEASED OR OCCUPIED AT A RENT
THAT  IS NOT AFFORDABLE TO FAMILIES AND PERSONS OF LOW INCOME, AS DETER-
MINED IN ACCORDANCE WITH STANDARDS ESTABLISHED BY  THE  COMMISSIONER  OR
THE SUPERVISING AGENCY, AS THE CASE MAY BE AND (C) A HOUSING DEVELOPMENT
FUND  CORPORATION  ORGANIZED  PURSUANT  TO  THE BUSINESS CORPORATION LAW
SHALL NOT CAUSE OR PERMIT THE SALE, TRANSFER, ASSIGNMENT OR ISSUANCE  OF
ANY  SHARES ALLOCATED TO ANY DWELLING UNIT TO ANYONE OTHER THAN FAMILIES
AND PERSONS OF LOW INCOME,  OR  CAUSE  OR  PERMIT  THE  SALE,  TRANSFER,
ASSIGNMENT  OR ISSUANCE OF ANY SHARES ALLOCATED TO ANY DWELLING UNIT FOR
A PRICE THAT IS NOT AFFORDABLE TO FAMILIES AND PERSONS OF LOW INCOME, AS
DETERMINED IN ACCORDANCE WITH STANDARDS ESTABLISHED BY THE  COMMISSIONER
OR  THE  SUPERVISING  AGENCY. WHERE THE OWNERSHIP OF SHARES ALLOCATED TO
ANY DWELLING UNIT IS  TRANSFERRED  BY  OPERATION  OF  LAW,  WITHOUT  THE
CONSENT  OF THE HOUSING DEVELOPMENT FUND CORPORATION, TO PARTIES WHO ARE
NOT FAMILIES AND PERSONS OF LOW INCOME, THE CORPORATION SHALL NOT  CAUSE
LBD11881-01-7
S. 6543                             2
OR  PERMIT  THE  OCCUPANCY OF THE DWELLING UNIT TO WHICH SUCH SHARES ARE
ALLOCATED UNTIL THE SHARES HAVE BEEN SOLD OR OTHERWISE TRANSFERRED TO  A
FAMILY  OR  PERSON  OF  LOW  INCOME THAT WILL OCCUPY SUCH DWELLING UNIT;
PROVIDED,  HOWEVER, THAT THE CORPORATION SHALL NOT BE REQUIRED TO REMOVE
ANY MEMBER OF THE PRIOR SHAREHOLDER'S  HOUSEHOLD  WHO  HAS  CONTINUOUSLY
OCCUPIED  THE DWELLING UNIT TO WHICH SUCH SHARES ARE ALLOCATED AS HIS OR
HER SOLE RESIDENCE FOR A PERIOD COMMENCING NOT LESS THAN TWO YEARS PRIOR
TO THE EVENT WHICH RESULTED IN SUCH TRANSFER, EVEN IF THE ACTUAL  TRANS-
FER OCCURRED AT A LATER DATE.
2.  A HOUSING DEVELOPMENT FUND CORPORATION SHALL NOT SELL, TRANSFER OR
ASSIGN ALL OR SUBSTANTIALLY ALL OF ITS ASSETS, OR ANY OF ITS REAL  PROP-
ERTY,  WITHOUT  THE  PRIOR  WRITTEN  APPROVAL OF THE COMMISSIONER OR THE
SUPERVISING AGENCY. A HOUSING DEVELOPMENT FUND CORPORATION SHALL  EITHER
DEPOSIT  THE  PROCEEDS IF ANY SUCH SALE, TRANSFER OR ASSIGNMENT WITH THE
COMMISSIONER OR THE SUPERVISING AGENCY, OR DEVOTE  SUCH  PROCEEDS  TO  A
HOUSING  PROJECT  FOR FAMILIES AND PERSONS OF LOW INCOME, OR FOR RELATED
AFFORDABLE HOUSING ACTIVITIES, IN A MANNER APPROVED IN  WRITING  BY  THE
COMMISSIONER OR THE SUPERVISING AGENCY.
3.  A  HOUSING DEVELOPMENT FUND CORPORATION SHALL NOT LEASE ANY OF ITS
REAL PROPERTY, OTHER THAN A LEASE OF A SINGLE DWELLING UNIT OR A COMMER-
CIAL UNIT FOR A TERM NOT EXCEEDING TWO YEARS, WITHOUT THE PRIOR  WRITTEN
APPROVAL OF THE COMMISSIONER OR THE SUPERVISING AGENCY.
4.  THE  CERTIFICATE  OF  INCORPORATION  OF A HOUSING DEVELOPMENT FUND
CORPORATION SHALL NOT BE ALTERED OR AMENDED, AND THE  CORPORATION  SHALL
NOT  BE DISSOLVED, WITHOUT (A) THE PRIOR WRITTEN APPROVAL OF THE COMMIS-
SIONER OR THE SUPERVISING AGENCY AND (B) THE PRIOR WRITTEN  APPROVAL  OF
ANY  GOVERNMENTAL  ENTITY  WHICH  HOLDS  A MORTGAGE OR OTHER LIEN ON ANY
ASSETS OF THE CORPORATION OR TO WHICH ANY  INDEBTEDNESS  OF  THE  CORPO-
RATION IS OUTSTANDING.
5.  VIOLATIONS  BY  A HOUSING DEVELOPMENT FUND CORPORATION. (A) IF THE
COMMISSIONER OR THE  SUPERVISING  AGENCY  DETERMINES  THAT  THE  HOUSING
DEVELOPMENT  FUND CORPORATION HAS VIOLATED ANY OF THE PROVISIONS OF THIS
ARTICLE OR ITS CERTIFICATE OF INCORPORATION OR HAS VIOLATED OR FAILED TO
FULFILL ANY AGREEMENT WITH OR OBLIGATION TO A GOVERNMENTAL  ENTITY,  THE
COMMISSIONER  OR  THE SUPERVISING AGENCY MAY (I) APPOINT TO THE BOARD OF
DIRECTORS OF THE CORPORATION A NUMBER OF  NEW  DIRECTORS  SUFFICIENT  TO
CONSTITUTE A MAJORITY OF SUCH BOARD, NOTWITHSTANDING ANY OTHER PROVISION
OF  THE  CERTIFICATE,  THE  BY-LAWS  OF THE CORPORATION OR ANY AGREEMENT
ENTERED INTO BY THE CORPORATION, (II) REVOKE OR SUSPEND ALL OR  PART  OF
ANY EXEMPTION FROM LOCAL REAL PROPERTY TAXATION PURSUANT TO SECTION FIVE
HUNDRED  SEVENTY-SEVEN OF THIS ARTICLE OR (III) EXERCISE ANY OTHER REME-
DIES AVAILABLE UNDER APPLICABLE LAW OR PURSUANT TO  ANY  AGREEMENT  WITH
(B)  UNLESS THE COMMISSIONER OR THE SUPERVISING AGENCY DETERMINES THAT
A CURE OF ANY SUCH VIOLATION OR FAILURE IS IMPOSSIBLE, PRIOR TO EXERCIS-
ING ANY OF THE POWERS PROVIDED IN SUBDIVISION (A) OF THIS  SECTION,  THE
COMMISSIONER  OR  THE  SUPERVISING  AGENCY  SHALL EITHER (I) PROVIDE THE
CORPORATION WITH  THIRTY  DAYS  NOTICE  AND  OPPORTUNITY  TO  CURE  SUCH
VIOLATION, (II) PROVIDE THE CORPORATION WITH SUCH NOTICE AND OPPORTUNITY
TO  CURE  SUCH  VIOLATION  AS MAY BE PROVIDED IN ANY AGREEMENT BETWEEN A
GOVERNMENTAL ENTITY AND THE CORPORATION OR (III) ONLY  WITH  RESPECT  TO
THE  REVOCATION  OF  A  TAX  EXEMPTION  PURSUANT TO SECTION FIVE HUNDRED
SEVENTY-SEVEN OF THIS ARTICLE, PROVIDE THE CORPORATION WITH SUCH  NOTICE
AND  OPPORTUNITY  TO  CURE SUCH VIOLATION AS MAY BE PROVIDED IN A RESOL-
UTION OF THE LOCAL LEGISLATIVE BODY.
S. 6543                             3
6. A HOUSING DEVELOPMENT FUND CORPORATION SHALL NOT ACQUIRE  ANY  REAL
PROPERTY  NOT  SPECIFICALLY  IDENTIFIED  BY ADDRESS OR TAX PARCEL IN ITS
CERTIFICATE OF INCORPORATION WITHOUT THE PRIOR WRITTEN APPROVAL  OF  THE
7.  ANY  HOUSING DEVELOPMENT FUND CORPORATION INCORPORATED PURSUANT TO
THE PROVISIONS OF THIS ARTICLE AND THE  NOT-FOR-PROFIT  CORPORATION  LAW
SHALL  BE  DEEMED TO BE A CHARITABLE CORPORATION, AS DEFINED IN SUBPARA-
GRAPH THREE-A OF PARAGRAPH (A) OF SECTION ONE HUNDRED TWO  OF  THE  NOT-
FOR-PROFIT CORPORATION LAW.
8.  THE  FOLLOWING  PROVISIONS  OF  THE NOT-FOR-PROFIT CORPORATION LAW
SHALL APPLY TO ANY HOUSING  DEVELOPMENT  FUND  CORPORATION  INCORPORATED
PURSUANT  TO THE PROVISIONS OF THIS ARTICLE AND THE BUSINESS CORPORATION
LAW: SECTION ONE HUNDRED TWELVE, SECTION  FIVE  HUNDRED  EIGHT,  SECTION
FIVE  HUNDRED  TEN,  SECTION  FIVE  HUNDRED ELEVEN, SECTION FIVE HUNDRED
ELEVEN-A, SECTION FIVE HUNDRED FIFTEEN, PARAGRAPH (D) OF  SECTION  SEVEN
HUNDRED  SIX,  PARAGRAPH  (C) OF SECTION SEVEN HUNDRED FOURTEEN, SECTION
SEVEN HUNDRED FIFTEEN, SECTION  SEVEN  HUNDRED  SIXTEEN,  SECTION  SEVEN
HUNDRED  TWENTY,  SECTION  NINE  HUNDRED  SEVEN,  SECTION  NINE  HUNDRED
SEVEN-A, SECTION NINE HUNDRED SEVEN-B,  PARAGRAPH  (D)  OF  SECTION  ONE
THOUSAND TWO, PARAGRAPH (A) OF SECTION ONE THOUSAND TWO-A, PARAGRAPH (C)
OF  SECTION  ONE  THOUSAND  TWO-A, PARAGRAPH (B) OF SECTION ONE THOUSAND
THREE, PARAGRAPH (C) OF  SECTION  ONE  THOUSAND  THREE,  SECTION  ELEVEN
HUNDRED  ONE  AND  SECTION ELEVEN HUNDRED TWO. WHERE ANY CONFLICT EXISTS
BETWEEN THE PROVISIONS OF THE NOT-FOR-PROFIT CORPORATION LAW  LISTED  IN
THIS SUBDIVISION AND THE BUSINESS CORPORATION LAW, THE PROVISIONS OF THE
NOT-FOR-PROFIT CORPORATION LAW SHALL CONTROL.
9.  A  HOUSING  DEVELOPMENT  FUND CORPORATION INCORPORATED PURSUANT TO
THIS ARTICLE AND THE BUSINESS CORPORATION LAW SHALL NOT:
(A) CAUSE OR PERMIT ANY SHAREHOLDER TO OWN SHARES  ALLOCATED  TO  MORE
THAN ONE DWELLING UNIT WITHOUT THE PRIOR WRITTEN APPROVAL OF THE COMMIS-
SIONER OR THE SUPERVISING AGENCY; OR
(B)  CAUSE  OR PERMIT ANY DWELLING UNIT TO BE COMBINED, ELIMINATED, OR
DEVOTED TO ANY USE OTHER THAN OCCUPANCY BY FAMILIES OR  PERSONS  OF  LOW
INCOME  WITHOUT  THE  PRIOR  WRITTEN APPROVAL OF THE COMMISSIONER OR THE
10. NOTWITHSTANDING ANY PROVISION OF PARAGRAPH  (C)  OF  SECTION  FIVE
HUNDRED  ONE  OF THE BUSINESS CORPORATION LAW TO THE CONTRARY, A HOUSING
DEVELOPMENT FUND CORPORATION INCORPORATED PURSUANT TO THIS  ARTICLE  AND
THE  BUSINESS CORPORATION LAW MAY, WITH THE APPROVAL OF THE COMMISSIONER
OR THE SUPERVISING AGENCY IMPOSE DIFFERENT  CHARGES,  FEES,  ASSESSMENTS
AND REQUIREMENTS WITH RESPECT TO DIFFERENT DWELLING UNITS AND THE SHARES
ALLOCATED  TO SUCH DWELLING UNITS. THE REASONS FOR SUCH DIFFERENT CHARG-
ES, FEES, ASSESSMENTS AND REQUIREMENTS MAY INCLUDE,  BUT  SHALL  NOT  BE
LIMITED TO, DIFFERENCES IN (A) THE INCOME REQUIREMENTS FOR OCCUPANCY OF,
OR  ACTUAL INCOMES OF THE HOUSEHOLDS OCCUPYING, SPECIFIC DWELLING UNITS,
(B) THE DURATION OF OWNERSHIP OF SHARES OR THE DATE OR CIRCUMSTANCES  OF
THE  PURCHASE  OF  SUCH SHARES AND (C) THE DEGREE OF COMPLIANCE WITH THE
PROPRIETARY LEASE OR WITH ANY AGREEMENT BETWEEN THE  CORPORATION  AND  A
§ 2. Subdivision 14 of section 572 of the private housing finance law,
as  amended  by  chapter  655 of the laws of 1978, is amended to read as
14. "Supervising Agency." [The comptroller in a municipality having  a
comptroller;  in  a municipality having no comptroller, the chief fiscal
officer of such municipality; except that] THE AGENCY IN A  MUNICIPALITY
HAVING  JURISDICTION  OVER  THE  DEVELOPMENT AND OPERATION OF AFFORDABLE
S. 6543                             4
HOUSING, REGARDLESS OF ANY AGENCY SPECIFIED IN THE CERTIFICATE OF INCOR-
PORATION OF A HOUSING DEVELOPMENT FUND CORPORATION, OR, in the  city  of
New  York  [it  shall  be],  the  department of housing preservation and
§  3. Paragraph a of subdivision 3 of section 573 of the private hous-
ing finance law, as amended by chapter 758  of  the  laws  of  1967,  is
a.  that  the  company  has  been organized exclusively to develop AND
OPERATE a housing project for persons of low income;
§ 4. Section 577 of the private housing  finance  law  is  amended  by
4.  NOTWITHSTANDING  THE  PROVISIONS  OF ANY GENERAL, SPECIAL OR LOCAL
LAW, UPON THE COMMENCEMENT OF AN EXEMPTION PURSUANT TO THIS SECTION WITH
RESPECT TO ANY REAL PROPERTY IN A PROJECT OF A HOUSING DEVELOPMENT  FUND
CORPORATION,  SUCH CORPORATION MAY, WITH THE CONSENT OF THE COMMISSIONER
OR THE SUPERVISING AGENCY, TERMINATE ANY OTHER TAX EXEMPTION  OR  ABATE-
MENT APPLICABLE TO SUCH PROPERTY.
§  5. Severability. If any clause, sentence, paragraph, subdivision or
section of this act shall be adjudged by any court of  competent  juris-
diction to be invalid, such judgment shall not affect, impair, or inval-
idate  the  remainder thereof, but shall be confined in its operation to
the clause, sentence, paragraph, subdivision or section thereof directly