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A co-op turns down a married couple. Is it discrimination? Is it smart?
The case of Latoni vs. Sherman Square Realty stands for the proposition that potential buyers must be treated as an economic unit, regardless of their marital status or relationship. If upheld, this decision could lead to an even broader interpretation. In this issue: a cross-section of co-op owners and professionals weigh in.
The Facts of the Matter
A cry of discrimination has been heard once again in the world of co-op admissions – and, this time, it may have merit.
This past September, in Latoni v. Sherman Square Realty Corp., Justice Emily Jane Goodman of the New York State Supreme Court, refused to dismiss a complaint brought by Andrew Jorgensen. Jorgenson was rejected by the board of directors of Sherman Square Realty Corp. in his bid to purchase an apartment, although Lisa Latoni, his female co-applicant, was approved. Jorgensen claimed that the board discriminated against him by treating him differently than the board would treat a married man whose wife earned as much as his female companion. It is an interesting decision and, if upheld on appeal, could have a broader interpretation.
Latoni and Jorgensen, who are heterosexual, cohabiting, and unmarried, brought the lawsuit. They had jointly applied to purchase an apartment at 201 West 70th Street, the building owned by the corporation, and received a mortgage commitment from their bank. The board approved Latoni, but rejected Jorgensen, ostensibly because of his different financial condition. The board did not prevent Jorgensen from continuing to reside with Latoni, but would not allow his name to be placed on the stock or proprietary lease. The board’s stated policy was to treat married people as a single economic unit; unmarried ones were treated separately.
The judge, in refusing to dismiss the complaint, noted that Jorgensen was the victim of discrimination not because of the denial of a benefit to Latoni, but because he was treated differently because of his marital status. If he and Latoni were married, he would have been permitted to be a shareholder even though his income would not be any higher.
Both the New York City Human Rights Law (Administrative Code 8-101) and the New York State Human Rights Law (Executive Law 290) bar discrimination on the basis of marital status in the sale, rental, or lease of housing accommodations. Moreover, the city’s human rights law specifically prohibits neutral policies that have a disparate impact. The corporation’s board claimed that Jorgensen was not rejected because he was single, but as a result of his being financially unqualified.
The decision, although a preliminary one, raises a number of interesting questions. It is preliminary because it was only a procedural motion to dismiss the complaint and, as such, the case may still be dismissed at a later date. However, the court’s position merits further examination. Initially, we must consider why the board acted the way that it did. The board may have been concerned that Jorgensen posed a financial risk to the corporation if he and Latoni parted ways and he was left as the sole owner or occupant of the apartment. However, Latoni would still be on the lease and would be jointly responsible with Jorgensen regardless of what happened in their relationship. Conversely, if the board was concerned about Jorgensen’s ability to pay for the apartment after a future breakup, they could have had Latoni guarantee payment of the maintenance although, with her signature on the lease, a guarantee would not have been necessary.
Furthermore, one must ask what additional financial protection the corporation would have had if Jorgensen and Latoni had been married. Since statistically half of all marriages end in divorce – and the board would not have been a party to either their divorce or separation agreement – the co-op could still have wound up having a divorced Jorgensen as the sole occupant of the apartment. Would the board have attempted to evict Jorgensen were he to obtain the apartment in a divorce? Obviously not. Put another way, when a married couple consists of one spouse who earns a great deal of money and one who does not and the spouse with the larger earnings dies, would the board have required the surviving spouse to sell the apartment? Again, obviously not.
It would appear that the court’s position is that, regardless of how this situation is examined, the fact remains that there does not at all appear to be an economic basis for treating married couples differently than unmarried couples. The implication in the court’s decision seems to be that if there was no economic basis for the different treatment, then the board must have intended to discriminate against unmarried purchasers. In order for the corporation to have succeeded, it would have had to present a rational basis for the policy, although it is difficult to see what that could have been.
However, there is more to this decision than the idea that cooperative corporations must treat married and unmarried applicants alike. It also means that (1) applicants of the same sex will also have to be treated the same as married applicants; and (2) a corporation cannot attempt to reject one applicant because his or her income is insufficient when his or her partner’s income qualifies for admission. This decision seems to stand for the proposition that applicants must be treated as an economic unit, regardless of their marital status or relationship. As long as both applicants are signing the proprietary lease and jointly meet the corporation’s financial requirements, the fact that one co-applicant, alone, could not meet that test is irrelevant.
Finances Not Rings
The board’s action seems silly. If two unmarried people, no matter what sex they are, want to buy an apartment – and together their combined income is sufficient to meet the building’s requirements – why shouldn’t they be allowed to put both of their names on the lease and stock certificate?
What the board should be interested in is their financial solvency (obviously two incomes are better than one) and if they are nice people. The same rules that apply to married couples should apply to any two people who buy an apartment. In my experience, it would seem that this board was way out of line in its refusal. I can’t think of a building I manage that would take this type of action.
—Gerard J. Picaso
I find this decision very troubling. As I see it, it is not relevant that Mr. Jorgensen did not feel discriminated against; the act spoke for itself. Even the appearance of discrimination is unacceptable.
If one makes a distinction between heterosexual married couples and cohabiting couples, then how do you apply it to gay and lesbian couples? Can you say that single-sex couples, who have had commitment ceremonies in Vermont or been married in Massachusetts, are different from cohabiting same-sex couples?
Granted, a board of directors has a wide range of powers and is entitled to set financial requirements for their corporation, but if both people in a cohabiting relationship are noted on the stock and lease, then their financial position is really no different from a married couple’s. They are jointly and severally responsible for the maintenance.
There is no way I can peek into the board’s collective mind, but if I were in this position, I would want to know if the board is really couching its aversion to cohabitation in its rejection of Jorgensen’s and Latoni’s application. I would caution any board that the appearance of discrimination could be as dangerous as actual discrimination. That being said, my board is too hip to even consider cohabiting as a reason for rejection.
I am in agreement with Justice Goodman that the discrimination suit should proceed. I look forward to learning how it is resolved and what explanations will be offered.
In today’s world, with various and diverse family structures, to deal differently with married and unmarried couples is discriminatory. As long as both individuals are responsible for the mortgage and maintenance and have “signed on the dotted line,” I don’t understand the board’s decision not to treat them as a single unit. What could have been going on in their minds? I am not convinced that the decision was made solely on financial grounds.
There are some interesting points that are suggested by this suit. Perhaps the word “marriage” got in the way, and maybe living together does not appear as moral as being married. “Living in sin” is a phrase that comes to mind. Would the board have felt more comfortable if the cohabiting couple had a civil union or domestic partnership agreement? I doubt it.
I am amused by the idea that, if the roles were reversed so that the male partner was financially stable while the female was not, perhaps this issue would not have arisen. And how would the board have responded to a gay couple who have been married in either Massachusetts or Canada and/or possess a civil union or domestic partnership agreement? I can only think that it is very difficult for some people to accept change.
Although I cannot officially speak on behalf of my own board of directors, and I have been a member for more than eight years, I can say that we have never discriminated against unmarried individuals. All partners who signed a lease and mortgage documents were treated as a single unit. The board checks to see if the occupants together can successfully afford an apartment, not whether each can. We are well aware of the divorce statistics and a marriage document does not guarantee a long life together, nor financial security. We don’t get involved with the marital arrangements of our residents. I do not see how unmarried, cohabitating individuals – whether straight or gay – expose the corporation to a negative financial situation.
Essentially, the cooperative board of directors at Sherman Square treated an application to purchase from an unmarried couple differently than if they had been a married couple.
We have broached this issue many times with our cooperative clients. Our advice is clear and unequivocal: all prospective shareholders must be treated exactly the same. The fact that a couple is married is immaterial for purposes of the application. When calculating income, reviewing credit, and examining job histories, the prospective shareholders must be treated exactly the same, married or not.
We point out that local, state, and federal laws clearly prohibit discrimination in housing based upon “marital status,” and any potential claim could be costly. To make any distinction based on marital status is treading in dangerous waters and should be avoided.
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