Will NYC Co-ops Have to Disclose “Why?”

I’m thinking probably NOT.  Janny Scott of The New York Times reveals that the City Council is co-sponsoring a measure to Push Co-ops to Explain Why You can’t Buy.  This legislation has been discussed for years and in front of the Council members for almost 16 months with no vote yet.

Under the bill, a co-op board would have to describe its reasons in detail and reveal the source of any negative information it had used. It would also have to say how many applications it received and rejected in the previous three years. If it failed to turn over the information, or do it on time, it could be fined thousands of dollars.

It’s no secret that I have had some issues in the past with some co-op boards and their antics and just recently had the misfortune of a buyer being granted approval only to have it then rescinded.  I want to state that on the whole I think that most Co-op Boards do a fine job of managing the affairs that arise in the course of running a building.  Having said that, I and many of my colleagues have been increasingly puzzled by recent Board rejections and having a reason for the rejection would not only serve to prove that no illegal discrimination occurred but it would also help a buyer in determining how to improve their chances of Board approval in the future.

Currently, co-ops — apartment houses whose residents purchase shares in the cooperative corporations that own the buildings — are free to decide who can move into their buildings and are not required to give reasons. Co-op groups say most rejections are based on applicants’ finances. Like any homeowner or landlord, boards cannot legally discriminate on the basis of race, religion, family status and 11 other protected categories; people who suspect that they have been discriminated against can complain to the city’s Commission on Human Rights

Although two thirds of the City Council is said to be supporting this legislation, others who appreciate the need for some sort of accountability by Co-op Boards aren’t convinced that this bill is the answer.

The bill’s opponents, who include Council Speaker Christine C. Quinn, say federal, state and city laws already prohibit discrimination and offer redress. They say the bill, the Fair and Prompt Co-op Disclosure Law, would let loose a flood of lawsuits, delay co-op sales, discourage residents from serving on co-op boards for fear of liability and impose an administrative burden, especially on smaller co-ops.

“The only one who is going to come out feeling good is the lawyers,” said Marc Luxemburg, president of the co-op and condominium council, which, with the real estate board, recently issued a guide on how to do co-op admissions fairly in response to the threat of legislation. “Anytime you try to give a reason, you’re going to get sued. You say the guy was obnoxious at the meeting, he comes in and says ‘I’m going to sue you.’ Every time you turn somebody down, you’ve got a lawsuit on your hands.”

No doubt that we live in an incredibly litigious society but can someone actually sue if a Board thinks a buyer was "obnoxious" in an interview?  I’m not an attorney but that seems a bit frivolous, no?

I don’t have an answer on how to solve the issue of accountability for Co-op Boards, but I do believe that some form of transparency in the process would be helpful.  For starters, if a co-op board could provide buyers with a specific and LEGAL list of requirements that would have to be met for approval, greater efficiency would benefit all involved.  The current system is terribly flawed and often costs buyers and sellers wasted time and thousands of dollars only to be left out in the cold with no explanation of why perhaps their biggest financial asset is being held hostage by a Co-op Board. 

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