SENATE AMENDED PRIOR PRINTER'S NOS. 1637, 4031 PRINTER'S NO. 4774
No. 1330 Session of 2003
INTRODUCED BY T. STEVENSON, THOMAS, CAPPELLI, HENNESSEY, LEWIS, MARSICO, McNAUGHTON, R. MILLER, SCAVELLO, TIGUE, WATSON, YOUNGBLOOD AND TURZAI, MAY 5, 2003
AS AMENDED ON SECOND CONSIDERATION, IN SENATE, NOVEMBER 18, 2004
AN ACT 1 Amending Title 68 (Real and Personal Property) of the 2 Pennsylvania Consolidated Statutes, further providing for 3 real estate cooperatives. 4 The General Assembly of the Commonwealth of Pennsylvania 5 hereby enacts as follows: 6 Section 1. Section 4102(b) of Title 68 of the Pennsylvania <-- 7 Consolidated Statutes is amended and the section is amended by 8 adding a subsection to read: 9 SECTION 1. SECTION 4102 OF TITLE 68 OF THE PENNSYLVANIA <-- 10 CONSOLIDATED STATUTES IS AMENDED BY ADDING A SUBSECTION TO READ: 11 § 4102. Applicability of subpart. 12 * * * 13 (b) Existing cooperatives.--Except as provided in subsection <-- 14 (c), sections 4106, 4107, 4203 (relating to construction and 15 validity of declaration and bylaws), 4219 (relating to master 16 associations), 4220 (relating to merger or consolidation of 17 cooperatives), 4302(a)(1) through (6) and (11) through (17)
1 (relating to powers of association), 4311 (relating to tort and 2 contract liability), 4315 (relating to lien for assessments), 3 4317 (relating to association records), 4319 (relating to 4 termination of cooperative interest), 4409 (relating to resales 5 of cooperative interests) and 4415 (relating to effect of 6 violations on rights of action), and section 4103 (relating to 7 definitions) to the extent necessary in construing any of those 8 sections, apply to all cooperatives created in this Commonwealth 9 before the effective date of this subpart, but those sections 10 apply only with respect to events and circumstances occurring 11 after the effective date of this subpart and do not invalidate 12 existing provisions of the cooperative documents of those 13 cooperatives. By compliance with the requirements of section 14 4201 (relating to creation of cooperative ownership), a 15 cooperative created in this Commonwealth before the effective 16 date of this subpart may be made subject to all of the 17 provisions of this subpart, effective as of the date of 18 recordation of the document or documents specified in section 19 4201, without in any way terminating the cooperative status of 20 the property or in any way affecting any lien or encumbrance on 21 the property, if the terms of such document or documents have 22 been approved by all the persons whose actions would have been 23 required to effect the termination of the cooperative pursuant 24 to [its governing documents in effect at the time such approval 25 is given] section 4217 (relating to termination of cooperative 26 ownership), provided, however, that such action shall not 27 increase the obligations or responsibilities of a declarant, as 28 such and not as a proprietary lessee, without the joinder of the 29 declarant in the document or documents required by section 4201. 30 (b.1) Retroactivity.--Except as provided in subsections (b) 20030H1330B4774 - 2 -
1 and (c), sections 4108 (relating to supplemental general 2 (B.1) RETROACTIVITY.-- <-- 3 (1) SECTIONS 4103, 4108 (RELATING TO SUPPLEMENTAL 4 GENERAL principles of law applicable), 4112 (relating to 5 obligation of good faith), 4202 (relating to unit <-- 6 boundaries), 4204 (relating to description of units), 4216 7 (relating to amendment of declaration), 4217 4217(G) <-- 8 (relating to termination of cooperative ownership), 9 4302(a)(8) 4302(A)(8)(I) and (9) (relating to powers of <-- 10 association), 4303 4303(A), (B) AND (C) (relating to <-- 11 executive board members and officers), 4307 (relating to 12 upkeep of cooperative), 4313 (relating to insurance) and 4314 <-- 13 (relating to assessments for common expenses) AND 4316 <-- 14 (RELATING TO OTHER LIENS AFFECTING COOPERATIVE) to the extent 15 necessary in construing any of those sections, apply to all 16 cooperatives created in this Commonwealth before the 17 effective date of this subsection SUBPART; but those sections <-- 18 apply only with respect to events and circumstances occurring 19 after the effective date of this subsection and do not 20 invalidate existing provisions of the cooperative documents 21 of those cooperatives. 22 (2) SECTION 4303(D), TO THE EXTENT NECESSARY IN <-- 23 CONSTRUING THAT SUBSECTION APPLIES TO ALL PLANNED COMMUNITIES <-- 24 COOPERATIVES CREATED IN THIS COMMONWEALTH BEFORE THE <-- 25 EFFECTIVE DATE OF THIS SUBPART; BUT THE SUBSECTION APPLIES 26 ONLY WITH RESPECT TO EVENTS AND CIRCUMSTANCES OCCURRING 180 27 DAYS AFTER THE EFFECTIVE DATE OF THIS SUBSECTION AND DOES NOT 28 INVALIDATE SPECIFIC PROVISIONS CONTAINED IN EXISTING 29 PROVISIONS OF THE DECLARATION, BYLAWS OR PLATS AND PLANS OF 30 THOSE PLANNED COMMUNITIES COOPERATIVES. <-- 20030H1330B4774 - 3 -
1 * * * 2 Section 2. Section 4203 of Title 68 is amended by adding a <-- 3 subsection to read: 4 § 4203. Construction and validity of declaration and bylaws. 5 * * * 6 (e) Interpretation and application of declaration.--The 7 executive board shall have the powers to interpret and apply the 8 declaration and bylaws and to resolve all conflicts or disputes 9 requiring the interpretation and application of the declaration. 10 As between unit owners, the decision of the board shall be final 11 and shall be enforceable at law as a decision of an arbitrator. 12 The executive board and its members shall have no liability for 13 exercising these powers, provided they are exercised in good 14 faith and in the best interest of the association in the manner 15 set forth in section 4303 (relating to executive board members 16 and officers). 17 Section 3. Sections 4216(a) and (f), 4217(a), 4218, 18 4302(a)(4), (6), (8), (12) and (14), and 4303(a) of Title 68 are 19 amended to read: 20 SECTION 2. SECTION 4216(A) AND (F) OF TITLE 68 ARE AMENDED <-- 21 TO READ: 22 § 4216. Amendment of declaration. 23 (a) Number of votes required.--Except in cases of amendments 24 that may be executed by a declarant under section 4209 (relating 25 to exercise of development rights), the association under 26 section 4107 (relating to eminent domain), 4206(c) (relating to 27 leasehold cooperatives), 4208(c) (relating to limited common 28 elements), 4211(a) (relating to relocation of boundaries between 29 adjoining units) or 4212 (relating to subdivision of units), the 30 executive board of the association under subsection (f) or 20030H1330B4774 - 4 -
1 certain proprietary lessees under section 4208(b), 4211(a), 2 4212(b) or 4217(b) (relating to termination of cooperative 3 ownership), and except as limited by subsection (d) and section 4 4218 (relating to rights of secured lenders and secured 5 creditors), the declaration, including the plats and plans, may <-- 6 be amended only by vote or written agreement of proprietary <-- 7 lessees of cooperative interests to which at least 67% of the 8 votes in the association are allocated [or any larger majority <-- 9 the declaration specifies.], without regard for any larger <-- 10 majority the declaration may specify or the absence of any 11 amendment provisions in the declaration. The declaration may 12 specify a smaller number only if all of the units are restricted 13 exclusively to nonresidential use. 14 * * * 15 (f) Corrective amendments.--Except as otherwise provided in 16 the declaration, if any amendment to the declaration is 17 necessary in the judgment of the executive board to cure any 18 ambiguity or to correct or supplement any provision of the 19 declaration that is defective, missing or inconsistent with any 20 other provision thereof or with this subpart or if an amendment 21 is necessary in the judgment of the executive board to conform 22 to the requirements of any agency or entity that has established 23 national or regional standards with respect to loans secured by 24 mortgages or deeds of trust on units in [condominium] <-- 25 COOPERATIVE projects (such as the Federal National Mortgage <-- 26 Association and the Federal Home Loan Mortgage Corporation), to 27 comply with any statute, regulation, code or ordinance 28 applicable to the cooperative or association, or to make a 29 reasonable accommodation or permit a reasonable modification in 30 favor of handicapped, as may be defined by prevailing Federal or 20030H1330B4774 - 5 -
1 State laws or regulations applicable to the association, unit 2 owners, residents or employees, then, at any time and from time 3 to time, the executive board may at its discretion effect an 4 appropriate corrective amendment without the approval of the 5 proprietary lessees or the holders of any liens on all or any 6 part of the cooperative, upon receipt by the executive board of 7 an opinion from independent legal counsel to the effect that the 8 proposed amendment is permitted by the terms of this subsection. 9 § 4217. Termination of cooperative ownership. <-- 10 (a) Number of votes required.--[Except:] Without regard for 11 the provisions of any declaration purporting to establish any 12 self-executing deadline or termination date for any cooperative 13 existing under this subpart, except: 14 (1) in the case of the taking of all of the units by 15 eminent domain (section 4107); 16 (2) in the case of foreclosure of a security interest 17 against the entire cooperative which has priority over the 18 declaration or which is subordinate to a declaration that 19 expressly provides that the holder of the security interest 20 has the right to terminate the cooperative when the 21 foreclosure of the security interest has been consummated; or 22 (3) in the case of the expiration or termination of a 23 lease which has priority over the declaration (unless a 24 contrary intent is expressly stated in the lease); 25 no cooperative ownership may be terminated [only at a meeting of 26 the association and] except by the vote, in person or by proxy, 27 or by the written agreement of proprietary lessees of 28 cooperative interests to which at least 80% of the votes in the 29 association are allocated or any larger percentage the 30 declaration specifies. The declaration may specify a smaller 20030H1330B4774 - 6 -
1 percentage only if all of the units in the cooperative are 2 restricted exclusively to nonresidential uses. 3 * * * 4 SECTION 3. SECTION 4217 OF TITLE 68 IS AMENDED BY ADDING A <-- 5 SUBSECTION TO READ: 6 § 4217. TERMINATION OF COOPERATIVE OWNERSHIP. 7 * * * 8 (G) INEFFECTIVENESS OF TERMINATION PROVISION.--IN THE CASE 9 OF A DECLARATION THAT CONTAINS NO PROVISION EXPRESSLY PROVIDING 10 FOR A MEANS OF TERMINATING THE COOPERATIVE OTHER THAN A 11 PROVISION PROVIDING FOR A SELF-EXECUTING TERMINATION UPON A 12 SPECIFIC DATE OR UPON THE EXPIRATION OF A SPECIFIC TIME PERIOD, 13 SUCH TERMINATION PROVISION SHALL BE DEEMED INEFFECTIVE IF NO 14 EARLIER THAN FIVE YEARS BEFORE THE DATE THE COOPERATIVE WOULD 15 OTHERWISE BE TERMINATED, THE OWNERS OF AT LEAST 80% OF THE UNITS 16 IN THE COOPERATIVE VOTE THAT THE SELF-EXECUTING TERMINATION 17 PROVISION SHALL BE ANNULLED IN WHICH EVENT THE SELF-EXECUTING 18 TERMINATION PROVISION SHALL HAVE NO FORCE OR EFFECT. 19 SECTION 4. SECTIONS 4218, 4302(A)(4), (6), (8), (12) AND 20 (14) AND 4303(A) OF TITLE 68 ARE AMENDED TO READ: 21 § 4218. Rights of secured lenders and secured creditors. 22 (a) Secured lender approval.--The declaration may provide 23 that all or a specified number or percentage of secured 24 creditors of the association or lenders holding security 25 interests encumbering the cooperative interests approve 26 specified actions of the proprietary lessees of the association 27 as a condition to the effectiveness of those actions, and the 28 declaration may provide for procedures that will enable such 29 lenders to have their approval rights recognized by the 30 executive board, but no requirement for approval may operate to: 20030H1330B4774 - 7 -
1 (1) Deny or delegate control over the general 2 administrative affairs of the association by the proprietary 3 lessees or the executive board. 4 (2) Prevent the association or the executive board from 5 commencing, intervening in or settling any litigation or 6 proceeding. 7 (3) Receive and distribute any insurance proceeds except 8 pursuant to section 4313 (relating to insurance). 9 (b) Secured lender approval procedures.--If the declaration 10 requires mortgagees or beneficiaries of deeds of trust 11 encumbering the units to approve specified actions of the 12 proprietary lessees or the association as a condition to the 13 effectiveness of those actions, then the executive board will 14 provide the lender with written notice of the specified action 15 proposed to be taken, together with a request for the secured 16 lender to approve or disapprove the actions specified. If the 17 notice to the secured lender, issued in accordance with the 18 procedures set forth in this subsection, states that the secured 19 lender will be deemed to have approved the actions specified in 20 the written notice if it does not respond to the request within 21 45 days, and the secured lender does not respond in writing 22 within 45 days, then the secured lender will be deemed for all 23 purposes to have approved the action specified in the notice. 24 Written notice to the secured lender shall be given by 25 CERTIFIED, REGISTERED OR first-class mail, EVIDENCED BY A UNITED <-- 26 STATES POSTAL SERVICE CERTIFICATE OF MAILING, postage prepaid, 27 at the address provided by the secured lender, or in the absence 28 thereof, at the address of the secured lender endorsed on any 29 mortgage or deed of trust of record and at the address to which 30 the unit owner mails any periodic payment paid to the secured 20030H1330B4774 - 8 -
1 lender. The notice to the secured lender shall include a 2 statement of the specified action, a copy of the full text of 3 any proposed amendment, and a form prepared by the association 4 upon which the secured lender may indicate its approval or 5 rejection of the specified action or amendment. 6 § 4302. Powers of association. 7 (a) General rule.--Except as provided in subsection (b) and 8 subject to the provisions of the declaration, the association 9 may: 10 * * * 11 (4) Institute, defend or intervene in litigation or 12 administrative proceedings, or engage in arbitrations or 13 mediations, in its own name on behalf of itself or two or 14 more proprietary lessees on matters affecting the 15 cooperative. 16 * * * 17 (6) Regulate the use, maintenance, repair, replacement 18 and modification of common elements[.] and make reasonable 19 accommodation, or permit reasonable modifications to be made 20 to units or the common elements, to accommodate handicapped 21 as defined by prevailing Federal, State or local statute, 22 regulation, code or ordinance, proprietary lessees, 23 residents, tenants or employees. 24 * * * 25 (8) Acquire, hold, encumber and convey in its own name <-- 26 any right, title or interest to real or personal property, 27 and pledge or assign assessment income necessary to create 28 amortization reserves to retire debts, but part of the 29 cooperative may be conveyed or all or part of the cooperative 30 may be subjected to a security interest only pursuant to 20030H1330B4774 - 9 -
1 section 4312 (relating to conveyance or encumbrance of 2 cooperative). Reserve funds held for future major repairs and 3 replacements of the common elements may not be assigned or 4 pledged. 5 (8) (I) ACQUIRE, HOLD, ENCUMBER AND CONVEY IN ITS OWN <-- 6 NAME ANY RIGHT, TITLE OR INTEREST TO REAL OR PERSONAL 7 PROPERTY[, BUT PART OF THE COOPERATIVE MAY BE CONVEYED OR 8 ALL OR PART OF THE COOPERATIVE MAY BE SUBJECTED] OTHER 9 THAN COMMON FACILITIES; AND 10 (II) CONVEY OR SUBJECT ALL OR PART OF THE 11 COOPERATIVE TO A SECURITY INTEREST ONLY PURSUANT TO 12 SECTION 4312 (RELATING TO CONVEYANCE OR ENCUMBRANCE OF 13 COOPERATIVE). 14 * * * 15 (12) Impose reasonable charges for the preparation and 16 recordation of amendments to the declaration, resale 17 certificates required by section 4409 (relating to resales of 18 cooperative interests) or statements of unpaid assessments. 19 In addition, an association may impose a capital improvement 20 fee on the resale or transfer the leasehold interest in units 21 in accordance with the following: 22 (i) The capital improvement fee for any unit may not 23 exceed the annual assessments for general common expense 24 charged to such unit during the most recently completed 25 fiscal year of the association, provided that: 26 (A) in the case of resale or transfer of the 27 leasehold interest in a unit consisting of unimproved 28 real estate, the capital improvement fee may not 29 exceed one-half of the annual assessments for general 30 common expenses charged to such unit during the most 20030H1330B4774 - 10 -
1 recently completed fiscal year of the association; 2 (B) in the case of resale or transfer of the 3 leasehold interest in a unit which was created or 4 added to the cooperative in accordance with section 5 4209 (relating to exercise of development rights) at 6 some time during the most recently completed fiscal 7 year of the association but was not in existence for 8 the entire fiscal year, the capital improvement fee 9 may not exceed one-half of the annual assessments for 10 general common expenses charged to a unit comparable 11 to such unit during the most recently completed 12 fiscal year of the association; and 13 (C) capital improvement fees are not refundable 14 upon any sale, conveyance or other transfer of the 15 proprietary lease to a unit. 16 (ii) Capital improvement fees allocated by an 17 association must be maintained in a separate capital 18 account, may be expended only for new capital 19 improvements or replacement of existing common elements 20 and improvements on the common elements and may not be 21 expended for operation, maintenance or other purposes. 22 (iii) No capital improvement fee may be imposed on 23 any gratuitous transfer of a proprietary interest in a 24 unit between any of the following family members: 25 spouses, parent and child, siblings, grandparent and 26 grandchild; nor on any transfer of a unit by foreclosure 27 sale or deed in lieu of foreclosure to a secured lending 28 institution as defined by the act of December 3, 1959 29 (P.L.1688, No.621), known as the Housing Finance Agency 30 Law. 20030H1330B4774 - 11 -
1 (iv) No fees may be imposed upon any person who: 2 (A) acquires a proprietary interest in a unit 3 consisting of unimproved real estate and signs and 4 delivers to the association at the time of such 5 person's acquisition a sworn affidavit declaring the 6 person's intention to reconvey such unit within 18 7 months of its acquisition; and 8 (B) completes such reconveyance within 18 9 months. 10 * * * 11 (14) Assign its right to future income, including the 12 right to receive the payments made on account of common 13 expense assessments[, but only to the extent the declaration 14 expressly so provides]. RESERVE FUNDS HELD FOR FUTURE MAJOR <-- 15 REPAIRS AND REPLACEMENTS OF THE COMMON ELEMENTS MAY NOT BE 16 ASSIGNED OR PLEDGED. 17 * * * 18 § 4303. Executive board members and officers. 19 (a) Fiduciary status and exercise of duties.--Except as 20 provided in the declaration, the bylaws in subsection (b) or in 21 other provisions of this subpart, the executive board may act in 22 all instances on behalf of the association. In the performance 23 of their duties, the officers and members of the executive board 24 shall stand in a fiduciary relation to the association and shall 25 perform their duties, including duties as members of any 26 committee of the board upon which they may serve, in good faith, 27 in a manner they reasonably believe to be in the best interests 28 of the association and with such care, including reasonable 29 inquiry, skill and diligence, as a person of ordinary prudence 30 would use under similar circumstances. In managing the 20030H1330B4774 - 12 -
1 association's reserve funds, the officers and members of the 2 executive board shall have the power to invest the association's 3 reserve funds in investments permissible by law for the 4 investment of trust funds and shall be governed in the 5 management of the association's reserve funds by 20 Pa.C.S. § 6 7203 (relating to prudent investor rule). In performing his 7 duties, an officer or executive board member shall be entitled 8 to rely in good faith on information, opinions, reports or 9 statements, including financial statements and other financial 10 data, in each case prepared or presented by any of the 11 following: 12 (1) One or more other officers or employees of the 13 association whom the officer or executive board member 14 reasonably believes to be reliable and competent in the 15 matters presented. 16 (2) Counsel, public accountants or other persons as to 17 matters which the officer or executive board member 18 reasonably believes to be within the professional or expert 19 competence of such person. 20 (3) A committee of the executive board upon which he 21 does not serve, duly designated in accordance with law, as to 22 matters within its designated authority, which committee the 23 officer or executive board member reasonably believes to 24 merit confidence. 25 An officer or executive board member shall not be considered to 26 be acting in good faith if he has knowledge concerning the 27 matter in question that would cause his reliance to be 28 unwarranted. OFFICERS AND MEMBERS OF THE EXECUTIVE BOARD SHALL <-- 29 HAVE NO LIABILITY FOR THE EXERCISE OF THEIR DUTIES IN ACCORDANCE 30 WITH THIS SECTION. THE EXECUTIVE BOARD AND ITS MEMBERS SHALL <-- 20030H1330B4774 - 13 -
1 HAVE NO LIABILITY FOR EXERCISING THESE POWERS PROVIDED THEY ARE 2 EXERCISED IN GOOD FAITH, IN THE BEST INTEREST OF THE ASSOCIATION 3 AND WITH SUCH CARE IN THE MANNER SET FORTH IN THIS SECTION. 4 * * * 5 Section 4. Sections 4313(a), (b), (e) and (g), 4315(b)(2) <-- 6 and 4409(c) of Title 68 are amended and the sections are amended 7 by adding subsections to read: 8 SECTION 5. SECTIONS 4313(A), (B), (E) AND (G), 4315(B)(1) <-- 9 AND (2) AND 4409(C) OF TITLE 68 ARE AMENDED AND THE SECTIONS ARE 10 AMENDED BY ADDING SUBSECTIONS TO READ: 11 § 4313. Insurance. 12 (a) Insurance to be carried by association.--Commencing not 13 later than the time of the first conveyance of a cooperative 14 interest to a person other than a declarant, the association 15 shall maintain, to the extent reasonably available: 16 (1) Property insurance on the common elements and units 17 insuring against all risks of direct physical loss commonly 18 insured against or, in the case of a conversion building, 19 against fire and extended coverage perils. The total amount 20 of insurance after application of any deductibles shall be 21 not less than 80% of the actual cash value of the insured 22 property at the time the insurance is purchased and at each 23 renewal date, exclusive of land, excavations, foundations and 24 other items normally excluded from property policies. 25 (2) Liability insurance, including medical payments 26 insurance, in an amount determined by the executive board but 27 not less than any amount specified in the declaration, 28 covering all occurrences commonly insured against for death, 29 bodily injury and property damage arising out of or in 30 connection with the use, ownership or maintenance of the 20030H1330B4774 - 14 -
1 common elements and units. 2 (3) Any property or comprehensive general liability 3 insurance carried by the association may contain a deductible 4 provision. 5 (b) Other insurance carried by association.--If the 6 insurance described in subsection (a) is not reasonably 7 available, the association promptly shall cause notice of that 8 fact to be hand delivered or sent prepaid by the United States 9 mail to all proprietary lessees. The declaration may require the 10 association to carry any other insurance, and the association in 11 any event may carry any other insurance [it deems] in such 12 reasonable amounts and with such reasonable deductibles as it <-- 13 THE EXECUTIVE BOARD may deem appropriate to protect the <-- 14 association or the proprietary lessees. 15 * * * 16 (e) Unit owner may obtain insurance.--A proprietary lessee 17 may insure the lessee's unit for all losses to his unit, 18 including losses not covered by the insurance maintained by the 19 association, due to a deductible provision or otherwise. An 20 insurance policy issued to the association [does] shall not 21 prevent a proprietary lessee from obtaining insurance for his 22 own benefit[.], including insurance to cover any deductibles or 23 losses not covered by the association's property or 24 comprehensive general liability insurance. 25 * * * 26 (g) Disposition of insurance proceeds.-- 27 (1) Any portion of the cooperative for which insurance 28 is required under this section which is damaged or destroyed 29 shall be repaired or replaced promptly by the association 30 unless: 20030H1330B4774 - 15 -
1 (i) the cooperative is terminated; 2 (ii) repair or replacement would be illegal under 3 any State or local health or safety statute or ordinance; 4 or 5 (iii) 80% of the proprietary lessees, including 6 every proprietary lessee of a unit or assigned limited 7 common element which will not be rebuilt, vote not to 8 rebuild. 9 [The [THE] EXCEPT FOR THE COSTS OF REPAIR OR REPLACEMENT <-- 10 WHICH ARE NOT COVERED DUE TO DEDUCTIBLES, THE cost of repair or 11 replacement in excess of insurance proceeds and reserves is a <-- 12 common expense.] WHICH HAVE NOT BEEN IDENTIFIED BY THE EXECUTIVE <-- 13 BOARD TO FUND COSTS OF CAPITAL EXPENDITURES FOR THE CURRENT 14 FISCAL YEAR OF THE ASSOCIATION IS A COMMON EXPENSE. 15 (2) If the entire cooperative is not repaired or 16 replaced: 17 (i) the insurance proceeds attributed to the damaged 18 common elements must be used to restore the damaged area 19 to a condition compatible with the remainder of the 20 cooperative; and 21 (ii) except to the extent that other persons will be 22 distributees and except as is otherwise provided in 23 section 4321(i) (relating to limited equity 24 cooperatives): 25 (A) the insurance proceeds attributable to units 26 and limited common elements which are not rebuilt 27 must be distributed to the proprietary lessees of 28 those units and the proprietary lessees of the units 29 to which those limited common elements were located 30 or to lienholders, as their interests may appear; and 20030H1330B4774 - 16 -
1 (B) the remainder of the proceeds must be 2 distributed to all the proprietary lessees or 3 lienholders, as their interests may appear, in 4 proportion to the common expense liabilities of all 5 the cooperative interests. 6 If the proprietary lessees vote not to rebuild any unit, the 7 allocated interests of the cooperative interest of which that 8 unit is a part are automatically reallocated upon the vote as 9 if the unit had been condemned under section 4107(a) 10 (relating to eminent domain), and the association promptly 11 shall prepare, execute and record an amendment to the 12 declaration reflecting the reallocations. 13 (3) Notwithstanding the provisions of this subsection, 14 section 4217 (relating to termination of cooperative 15 ownership) governs the distribution of insurance proceeds if 16 the cooperative is terminated. 17 * * * 18 (i) Recovery of deductibles.--If an insurance policy 19 maintained by the association contains a deductible, then that 20 portion of any loss or claim which is not covered by insurance 21 due to the application of a deductible, as well as any claim or 22 loss for which the association is self-insured, shall be levied 23 by the executive board in accordance with section 4314(c) 24 (relating to assessments for common expenses). to the extent <-- 25 applicable or, in the absence of the application of section 26 4314(c), as a common expense assessment against all of the 27 units. 28 § 4315. Lien for assessments. 29 * * * 30 (b) Priority of lien.-- 20030H1330B4774 - 17 -
1 * * * <-- 2 (1) A LIEN UNDER THIS SECTION IS PRIOR TO ALL OTHER <-- 3 LIENS AND ENCUMBRANCES ON A COOPERATIVE INTEREST EXCEPT: 4 (I) LIENS AND ENCUMBRANCES ON THE COOPERATIVE WHICH 5 THE ASSOCIATION CREATES, ASSUMES OR TAKES SUBJECT TO. 6 (II) (A) THE FIRST SECURITY INTEREST ENCUMBERING 7 ONLY THE COOPERATIVE INTEREST AND PERFECTED BEFORE 8 THE DATE ON WHICH THE ASSESSMENT OR THE FIRST 9 INSTALLMENT PAYABLE ON THE ASSESSMENT, IF THE 10 ASSESSMENT IS PAYABLE IN INSTALLMENTS, SOUGHT TO BE 11 ENFORCED BECAME DELINQUENT. 12 (B) JUDGMENTS OBTAINED FOR OBLIGATIONS SECURED 13 BY A SECURITY INTEREST UNDER CLAUSE (A). 14 (III) LIENS FOR REAL ESTATE TAXES AND OTHER 15 GOVERNMENTAL ASSESSMENTS OR CHARGES AGAINST THE 16 COOPERATIVE OR THE COOPERATIVE INTEREST. 17 (2) The association's lien for [common expenses] 18 assessments shall be divested by a judicial sale of the 19 cooperative interest: 20 (i) [As to unpaid common expense assessments made <-- 21 under section 4314(b)] Except as to unpaid assessments <-- 22 for which the association has a lien under this section 23 that come due during the six months immediately preceding 24 [institution of] THE DATE OF a judicial sale of a <-- 25 cooperative interest in an action to enforce collection 26 of a lien against a cooperative interest [by a judicial <-- 27 sale, only to the extent that the six months unpaid 28 assessments are paid out of the proceeds of the sale]. <-- 29 (ii) [As to unpaid common expense assessments made <-- 30 under section 4314(b) other than the six months 20030H1330B4774 - 18 -
1 assessment referred to in subparagraph (i), in the full 2 amount of these unpaid assessments, whether or not the 3 proceeds of the judicial sale are adequate to pay these 4 assessments.] To the extent the proceeds of the sale are <-- 5 sufficient to pay some or all of [these] the additional <-- 6 unpaid THESE ADDITIONAL assessments, after satisfaction <-- 7 in full of the costs of the judicial sale, and the liens 8 and encumbrances of the types described in paragraph (1) 9 and the unpaid common expense assessments that come due 10 during the six-month period described in subparagraph 11 (i), they shall be paid before any remaining proceeds may 12 be paid to any other claimant, including the prior owner 13 of the cooperative interest. 14 * * * 15 (i) Application of payments.-- 16 (1) Unless the declaration otherwise provides, any 17 payment received by an association in connection with the 18 lien under this section shall be applied: 19 (i) First to any interest accrued by the 20 association. 21 (ii) Second to any late fee. 22 (iii) Third to any costs and reasonable attorney 23 fees incurred by the association in collection or 24 enforcement. 25 (iv) Last to the delinquent assessment. 26 (2) Paragraph (1) shall apply notwithstanding any 27 restrictive endorsement, designation or instructions placed 28 on or accompanying a payment. 29 § 4409. Resales of cooperative interests. 30 * * * 20030H1330B4774 - 19 -
1 (c) Liability for error or inaction by association.--A 2 purchaser is not liable for any unpaid assessment or fee greater 3 than the amount set forth in the certificate prepared by the 4 association. A proprietary lessee is not liable to a purchaser 5 for the failure or delay of the association to provide the 6 certificate in a timely manner[, but the purchase contract is 7 voidable by the purchaser until the certificate has been 8 provided and for five days thereafter or until conveyance, 9 whichever first occurs]. 10 (d) Purchase contract voidable.--The purchase contract is 11 voidable by the purchaser until the certificate has been 12 provided and for five days thereafter or until conveyance, 13 whichever first occurs. 14 SECTION 6. SECTION 4412(H)(1) OF TITLE 68 IS AMENDED TO <-- 15 READ: 16 § 4412. COOPERATIVES CONTAINING CONVERSION BUILDINGS. 17 * * * 18 (H) WAIVER OF RIGHT TO PURCHASE.--NOTWITHSTANDING ANY 19 PROVISIONS OF THIS SUBPART PROHIBITING WAIVER OF RIGHTS, ANY 20 TENANT OR SUBTENANT MAY WAIVE HIS RIGHT TO PURCHASE A 21 COOPERATIVE INTEREST PURSUANT TO SUBSECTION (B) IF THE WAIVER IS 22 IN WRITING, IS ACKNOWLEDGED AND IS GIVEN IN CONSIDERATION OF: 23 (1) A WRITTEN EXTENSION OF THE TERM OF THAT TENANT'S 24 TENANCY AND RIGHT OF OCCUPANCY UNDER THIS SUBPART BEYOND THE 25 TIME PERIOD REQUIRED BY [SUBSECTION (A)] SUBSECTION (A) OR 26 (F) AS APPLICABLE; 27 * * * 28 Section 5 7. This act shall take effect in 60 days. <-- C20L68JS/20030H1330B4774 - 20 -