On January 1, 2025, two important laws will become effective, and co-op and condo boards must be aware of what is required.
A New York City law, the Fair Chance for Housing Act, impacts the use of criminal background checks of potential purchasers, a very common practice.
A federal law, the Corporate Transparency Act, requires disclosure of information of those persons who control a business entity (by ownership or position on the board), which includes co-ops and condos.
Below is a summary of the substance of these laws.
NYC Fair Chance for Housing Act
Overview
- Enacted as part of the of the Administrative Code relating to housing discrimination.
- Significantly, if there is a lawsuit based on a violation of the new law, insurance may defend, but will likely not cover the directors for any damages awarded.
What the law says: It is an unlawful discriminatory practice for the owner, lessor, lessee, sublessee, assignee or managing agent of (or other person having the right to sell, rent or lease, approve the sale, rent or lease) a housing accommodation (or any interest therein) or any agent or employee or broker to:
- Refuse to sell, rent, approve the sale or rent a housing accommodation (or to provide them with services in connection with housing) because of such individual’s criminal history other than the individual’s “reviewable criminal history” (see definition below).
- Conduct a criminal background check except as permitted by this law.
Reviewable Criminal History definition:
- A conviction registered on the NY (or other state) sex offense registry.
- A misdemeanor conviction (in NY or other state) where less than 3 years have passed since the end of the prison sentence, or the since the date of sentencing, if there was no incarceration.
- A felony conviction (in NY or other state) where less than 5 years have passed since prison sentence.
- NOTE: A conviction for reproductive or gender-affirming care in another state is not included in the definition if the conduct is legal in New York.
Key Provisions:
- A covered entity may conduct and consider a criminal record but only after (in a co-op) the co-op “commits” to the applicant (i.e., consent to the transfer).
- Co-ops must provide the individual with a notice and copy of the Fair Chance for Housing Act.
- Once done, a copy of the background check must be provided to the individual. The individual is entitled to submit information in regard to errors in the information and supplemental or mitigating information.
- A copy of any information about the criminal history, other than the reviewable criminal history, that was obtained even if it was not considered in making the determination, must be sent to individual.
- If the entity CONSIDERS taking adverse action due to the criminal history, it must first:
- conduct an individualized assessment of the reviewable criminal history and info submitted by the individual; and
- provide the individual IN WRITING the reason for the action.
- The reason must include how the reviewable criminal history is relevant to the “legitimate business interest of the property owner.”
- Note: The law states that this does not mean the entity cannot consider physical violence, or other acts that would adversely affect the health, safety of welfare of other residents.
The Corporate Transparency Act (CTA)
Overview
Congress stated that its purpose in passing the CTA was to combat money laundering and corruption by requiring most businesses to identify and provide information about their beneficial owners.
The law targets:
- Criminal money in the United States.
- Terrorist money in the United States.
- The U.S. government now requires the previously undisclosed information to be made available to the Financial Crimes Enforcement Network (FinCEN) of the U.S. Department of Treasury. The information is NOT public.
The law applies to:
- Any corporation, LLC or similar entity that is created by filing of a document with the secretary of state or similar office under the law of the state.
- Currently, the law applies to both co-ops and condos.
- Exempted from the law are “large operating companies,” defined as those that satisfy all three of these criteria:
- directly employs more than 20 full-time employees
- has more than $5 million in gross receipts or sales
- has an operating presence at an office in the United States
Mandatory Disclosures
The CTA requires disclosure of information concerning the entity itself and information about concerning its “beneficial owners.”
Beneficial Owner is defined as:
- any individual who either directly or indirectly exercises “substantial control” over a company.
(Note: Anyone who is an officer or a director of a co-op or condo is considered an important decision maker.)
- Anyone who owns more than 25% of a company.
The company must disclose:
- name, address, jurisdiction of formation, EID
- identity of the beneficial owners, including:
- name, date of birth and address
- unique identifying number from an acceptable ID
- passport, driver’s license or FinCEN ID number
- a copy of the document with the ID number
Note: Reporting companies are required to update their filings whenever a beneficial owner changes (or their info changes). This means there must be a filing every time there’s a new board member.
Penalties for noncompliance:
- Civil penalties of up to $500 per day.
- Criminal penalties of up to two years in prison and fines up to $10,000.
Additional information can be found on the FINCEN website: https://fincen.gov/boi
[View source.]
