Co-op Boards' Broad Powers Do Not Include the Right to Discriminate

Q: A shareholder in a co-op in Jackson Heights, Queens, is trying to sell her apartment — but the co-op board has used its considerable powers to reject a series of potential buyers. One sale was blocked because the board said the co-op's financial information was unavailable while the co-op was undergoing an audit. Another buyer was rejected when the board deemed his income was too low. A third all-cash buyer was also turned down. The seller fears the board is discriminating against prospective buyers on the basis of race — or possibly in retaliation for the seller's complaints to the city's 311 line. What can a co-op shareholder do in such a situation?

A: Federal, state, and local laws prohibit discrimination in housing, replies the Ask Real Estate column in The New York Times. Co-op boards have broad protection under the business judgment rule to carry out their duties in the best interest of shareholders, But they cannot hide behind that discretion to illegally discriminate against numerous protected classes, including race, religion, sexual orientation, career history and much more.

The New York City Commission on Human Rights investigates allegations of discrimination in housing opportunities, which is prohibited. If you believe you have witnessed or experienced discrimination, you can contact the commission using an online form or by calling (212) 416-0197.

You could file a complaint with the city or seek out a fair-housing lawyer. The lawyer can file a lawsuit in state or federal court. In discrimination cases, a respondent who has violated the law must pay the victim’s legal fees.

“Always contact a discrimination attorney if you believe you were discriminated against,” advises Andrew Lieb, a New York lawyer who handles housing discrimination cases.

A lawyer can investigate the questions that the board asked your neighbors during their buying process, which may help clarify whether prospective buyers are treated equally, says Ali Frick, a lawyer at Kaufman Lieb Lebowitz & Frick. Are all buyers asked about pets, or the number of people who would live in the unit? Are members of certain protected groups consistently turned away?

“Racial discrimination in housing in New York City is alive and rampant to a degree that would shock New Yorkers,” Frick says.

If you believe that you are being treated unfairly by the board because you made complaints to 311, or for some other reason, try to negotiate with the board and persuade them that they have acted illegally. (You can ask neighbors whether they have faced similar interference.) Failing that, you could file a lawsuit, but it will be an expensive, lengthy process. And remember, while co-op boards' powers are not unlimited, they are formidable. In disputes between shareholders and boards, the courts have historically tended to rule in favor of the latter.