getting approved

Overshareholders! Co-op Boards May Have to Disclose Why They’re Rejecting People

In 2011, a Black hedge-fund manager sued the co-op board at The Dakota, accusing it of racial discrimination against him and other prospective buyers. The suit was dismissed. Photo: Rob Kim/Getty Images

No one is exempt from a co-op board rejection in New York City: Everyone from Calvin Klein to Rush Limbaugh to billionaire Ronald Perelman has been shut out (with Limbaugh, who wouldn’t say no?). But because the boards aren’t required to offer an explanation, they rarely do. After decades of complaints about the lack of transparency in the process, a new state law would lift the veil of secrecy and force co-op and condo boards to give a written explanation for a rejection. This isn’t the first time a version of this bill has been floated, but now that the State Legislature is solidly progressive, there’s actually a chance it’ll happen. And so now the boards are freaking out.

Even if the bill becomes law, as long as co-op boards don’t reject a prospective resident for a reason that’s protected under local and federal anti-discrimination laws — like race, sexual orientation, or religion — boards can still deny whomever they want. But real-estate attorneys and co-op members say the written rejections would lead to a flood of lawsuits from disgruntled applicants. Stuart Saft, a real-estate lawyer and the board chair of the Council of New York Cooperatives and Condominiums, says it’s common for a board to go with one applicant over another based on finances alone. “That’s not discrimination, it’s trying to protect all the residents of our building,” said Saft. “But this law would create a feeding frenzy of lawyers who are able to sue boards because they disagree.”

For Saft, the legislation is trying to solve a problem he believes doesn’t exist, and instead, will create its own set of issues. By providing attorneys with more fodder to litigate applicants’ rejections, it could also scare off residents from serving on co-op boards. It’s already a tough sell to get them to volunteer their time for the labor-intensive board positions.

So how bad is the problem, anyway? Complaints of co-op board discrimination make up a small portion of the annual housing discrimination claims filed with the city’s Commission on Human Rights, which totaled more than 500 between June 2019 and June 2020, according to the city. But the Commission generally doesn’t track complaints by housing type, so it’s hard to get an accurate look at how pervasive it is. Assemblyman N. Nick Perry, the bill’s sponsor in the State Assembly, told The Wall Street Journal that regardless of how common it is, more transparency is needed for co-op admissions. “It’s not always intentional,” he said. “The intent is to prevent discriminatory decisions.”

It certainly seems reasonable enough: If a board is going to reject an applicant, the least it can do is tell you why. But whether or not this law would improve the byzantine process of getting a New York City co-op is unclear. If anything, it’ll give aggrieved applicants an opportunity to sic their lawyers on co-op boards, so if anyone is coming out ahead here, it’s the lawyers.

Co-op Boards May Have to Say Why They’re Rejecting People