What Are Co-Ops Allowed To Reject Applicants For?
Go Back To Previous PageCo-ops are notoriously picky with their clients and renters. To a point, getting accepted into a co-op in New York City is a significant status symbol. Even celebrities have been turned away from membership in these exclusive elite circles. Also, it’s almost a trope at this point.
Everyone knows that they’re discerning, but are co-ops allowed to discriminate? Co-ops can reject applicants for any reason not protected by the Fair Housing Act. Co-op board rejection is a tricky subject.
This means anything aside from creed, sex, romantic orientation, race, religion, and disability status is protected. They are also not allowed to self-deal. Trying to figure out why the Board members rejected you remains complex and intimidating to bring up a potential case of discrimination. Here’s
what you need to know about your rights when dealing with co-op board rejection.
That’s mostly because co-op boards have the legal right to be arbitrary.
The 1990 Court of Appeals decision in Levandusky v. One Fifth Ave. Apt. Corp. allows co-op boards to use “business judgment” when accepting or denying applicants [source: Kaye].
As long as decisions aren’t discriminatory, the board can deny you for any reason it sees fit — in New York City and most other places — without explaining the basis for this judgment.
Before You Begin: Try Not To Take It Personally
It’s always painful to be told that the co-op you wanted to join has no interest in having you be a member. Rejection hurts; however, there is not much you can do in most cases.
Generally speaking, co-ops get a lot of applications, and very few spots open up. Is there a co-op for you out there?
Why Would A Co-Op Reject Your Application?
Mostly, it’s highly unusual to hear about co-op boards rejecting people for issues like race or political affiliation, and it’s usually a lot more mundane. These issues, in particular, are cited by co-ops as reasons for rejection:
- Financials. Co-ops generally cap mortgage payments at 25 percent of the applicant’s income. If you pay more than that, then it’s not a match. Similarly, some co-ops will ask you to have a certain amount of liquid assets in your account. Having bad credit or requiring a guarantor can also be grounds for rejection.
- Job Stability. A Board likes a buyer with a stable job and high job security. Lots of “fires n’ hire” are not allowed by co-ops. A suitable applicant stayed at least three years at the same job.
- Arrests. People out of jail generally have a rough time with co-op applications and aren’t a good fit for Co-ops.
- Lifestyle/Noise Issues. If you are a DJ, you will probably get rejected by co-ops simply because your job will become a nuisance for everyone else. Similarly, the Board may dismiss people notorious for partying or doing weird art shows because their lifestyle (or career) could be problematic for others.
- Bad Interviews. First impressions are everything. If you have a bad interview, it’s a done deal, and it won’t work out.
- Pets. The Board of directors may reject you if you have pets due to a no-pet policy.
- Bad Application. The Board will automatically reject your application if you only did half of the application’s requirements.
- Falsifications. People caught lying on their applications are immediately banned from co-ops, which is common sense.
The purchase price is too low.
The Board does not want a “low print” in the building and can oblige you to renovate. An effort to sell a coop apartment at a below-market price is viewed unfavorably by the board since such transactions harm the value of all the units in the building.
I have witnessed a desperate seller accept an offer for 20% below market value on his flat. Of course, the board rejected the request due to a lower price per share impacting all the shareholders’ equity. Beware the lowball bid. Even if it’s accepted, you might not be.
How Can You Tell If You Were Discriminated Against?
More often than not, you will feel that something isn’t right. You might notice that the co-op board gives you a detailed look or addresses you with a specific feature. It’s a gut feeling, but the truth is that it’s tough to ascertain unless you hear comments fully.
Can You Sue For Discrimination?
Legally speaking, you have every right to sue for discrimination. However, it probably won’t work unless you have solid proof and testimony that the co-op actively discriminated against you.
A biracial woman caucasian man listen to vacancy candidate sitting together at a table at a job interview. Diverse couple communicating with real estate agent, successful meeting ready to sign contract concept
It’s doubtful to happen. Even so, you can always talk with a lawyer about it.
Are You Allowed To Ask Why You Were Rejected?
You always have the right to ask why tBoardard rejected you. However, in New York City, no laws state that co-ops must tell you why. However, this is starting to change. Several proposed bills would require co-ops to explain the rejection in writing.
In Westchester, co-ops are legally obligated to give you a reason in writing. Depending on the legislation, this may become a statewide mandate within a year or two.
That said, realizing that it’s rarely a personal issue is essential. Buying into a coop is much more like joining a club than buying real estate. The club’s stock price changes in reaction to your occupancy, not your flat’s wall and door ownership.
When you live in this building, will you help foster the club atmosphere and contribute to the community’s overall well-being, or will you rip out the same hull of the ship, killing everyone in the building? The coop board has to make the decision.
Make an offer to one group of potential tenants and await their response before alerting the rest of the applicants that the property is no longer available. This is to safeguard you should your first tenants refuse the property. This is why you must finish this step swiftly. If you hold out, tenants will become less available.
