Featuring real estate articles and information to help real estate buyers and sellers. The Nest features writings from Georges Benoliel and other real estate professionals. Georges is the Co-Founder of NestApple and has been working as an active real estate investor for over a decade.
Co-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.
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?
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:
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.
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.
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.
It’s doubtful to happen. Even so, you can always talk with a lawyer about it.
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.