The Admissions Process Can Be a Minefield

Many discrimination claims arise out of what is said or done at the admissions screening interview. It is important to create a comfortable atmosphere, but saying the wrong thing before, during, or after the interview is just as problematic as asking the purchaser about his or her race or religious beliefs.

"The co-op board approval (or disapproval) process has always been a dreaded undertaking for buyers and sellers and their attorneys," acknowledges Siim Hanja, a licensed associate real estate broker at Brown Harris Stevens. "Everyone's perception of fair and even-handed treatment is important when dealing with many units, and the board needs to be able to point to guidelines that they are enforcing with each and every transfer."

Boards should adhere to the following four admissions rules:

1. Do not interview anyone until the purchasers have submitted a complete admissions package and answered all the board's questions.
2. Do not discriminate or say anything that can be interpreted as discrimination.
3. Do not reject anyone until you have spoken to the corporation's counsel, because sometimes the board members can be found to have discriminated without realizing it.
4. Other than the interview, do not communicate with the purchaser, except through the manager.

"No one should be permitted to buy before completing a purchase application and submitting it to the managing agent for the board," observes Saft. The managing agent should review the application before submitting it to the board, or return it to the would-be buyer or broker handling the deal if it is incomplete, contains a photograph of the potential purchaser, or includes any information that could be used as the basis of a discrimination claim (i.e., age, race, religion, sexual orientation, national origin, disability).

The board, in turn, should review the potential buyer's finances and not grant an interview if the application is incomplete or is otherwise unacceptable. If the board needs additional information, there is no reason not to ask for it.

However, be careful.

In New York, cooperatives are subject to both state and city human rights laws. New York State law makes it illegal to refuse to sell an apartment to a potential buyer because of race, creed, color, national origin, sex, age, disability, or marital or familial status. The New York City administrative code also makes it unlawful to refuse to sell based on race, creed, color, national origin, gender, age, disability, sexual orientation, marital status, occupation, lack of citizenship, or because children may be living there. 

Board members should also be aware of the burdens of proof that each party to a discrimination action must meet. To prove a prima facie case of housing discrimination, the plaintiffs must establish that:

• They are members of a protected class
• They are qualified to purchase/sublease the unit
• Their application was denied

It is, therefore, relatively simple for the rejected purchaser to satisfy the requirements, which shifts the burden of proof to the cooperative's board.

"The board must rebut any inference of housing discrimination by proffering a legitimate, nondiscriminatory reason for their decision to turn down a potential buyer," concludes attorney Stuart Saft, a partner at Holland & Knight. "After that, the burden shifts back to the plaintiff to prove that the reason proffered by the board is not the actual reason. If the cooperative is unable to prove its claims, it will lose. That means that the board must demonstrate that it did not discriminate, which is not easy."