New York, NY. Nixon Peabody advised West Village Houses in New York City’s first-ever Housing Development Fund Corporation cooperative dissolution and reconstitution to free-market status—the first in the history of housing.
“West Village Houses was borne out of urbanist Jane Jacobs’ dream to preserve NYC neighborhoods in the 1960s and 1970s. I grew up in the complex with fellow tenants who I have come to regard as family and now, as president of the board, I can attest firsthand to how special this community is,” said Maggie Piscane. “I’m proud to have worked with so many others to make this new dream a reality.”
West Village Houses is a 42-building housing complex with 418 apartments located in the West Village neighborhood of Manhattan. Originally built in the 1970s as a Mitchell-Lama rental, the complex was eligible to go market-rate in the early 2000s, when the tenants banded together to negotiate the purchase of their homes. In exchange for agreeing to operate the complex as affordable housing for an additional 12 years, the tenants were able to convert the former Mitchell-Lama rental to another form of affordable housing known as a Housing Development Fund Corporation (HDFC).
As of the date of conversion to cooperative, the complex received 12 years of reduced property taxes as well as a forbearance on paying back the full balance of the original landlord’s mortgage to the city. After years of hard work and organizing, the tenants completed the HDFC coop conversion in April 2006. As a part of the original conversion, a majority of the original tenants were able to buy their homes in the price range of $125,000 to $350,000. The tenants also agreed to limit the purchase prices on resale for a period of 12 years while they continued to receive a partial tax exemption.
In 2018, the tax exemption ended as well as the resale restrictions. As originally contemplated as a part of the tenant-sponsored coop conversion, shareholders were eligible to cease operating as an HDFC coop due to the loss of any form of government benefit. At this point, the board of directors decided to engage Nixon Peabody to assist with preparing a reconstitution plan to assist shareholders in deciding whether to become a free-market coop.
In October 2019, the board of directors presented the reconstitution plan to the shareholders, the vast majority of whom voted in favor of becoming a free-market coop. The conversion to a free-market coop was a carefully negotiated term that the tenants crafted as a part of extending affordability, so it was a long time coming for the community.
“We’re excited to be at the center of this transaction, the first of its kind in the history of housing. We’re grateful for partnering with Nixon Peabody and the work that we’ve accomplished together,” said Julia Rosner, secretary of the board of West Village Houses.
Unique legal hurdles
Although converting to a free-market coop was a part of the tenant-sponsored conversion from 2006, it was still a long and detailed process to get to where the shareholders could decide to do so. Nixon Peabody advised the coop on the various approvals needed from the city and the New York Attorney General’s Office. After getting all of the city and state approvals, Nixon Peabody and the board of directors held more than a dozen workshops with the shareholder community before they undertook to vote to reconstitute. At the end of the day, more than 90% of the shareholders voted in favor of going market.
Nixon Peabody’s team that advised West Village Houses was led by Erica F. Buckley, leader of the firm’s Cooperatives & Condominiums practice team, and Ruben Ravago, counsel in Affordable Housing & Real Estate. Further, every member of the firm’s Cooperatives & Condominiums team played a role in one way or another on the transaction.
“This is one of the most unique deals I have encountered during my career. Because this was the first HDFC coop reconstitution in history, we faced unprecedented questions. To top it off, we finalized major aspects of the transaction during the pandemic,” said Erica F. Buckley. “Before the quarantine, we were meeting with shareholders in person eight hours a day. When the quarantine took effect, we rolled up our sleeves, adapted, and went virtual. At one point, we had to have over 900 shareholder documents notarized, socially distanced, of course—all—in—one—day.”