ARTHUR WEINSTEIN ON ADMISSION POLICIES, PART 2, P.2

 

 

That's not to say finances are unimportant?

Of course not. In these economically troubled times, the financial status of an applicant is more important than ever. We've all heard of people who on a Thursday were worth $15 million and on Friday of the same week were worth nothing because they were investors with someone running a Ponzi scheme. The finances have to be looked at with care. It's very hard to do the kind of full backup survey that an accountant would do on a certified financial statement. One thing that professionals should consistently emphasize is the value of non-liquid assets, such as paintings or wholly owned businesses. The co-op should obtain appraisals if a certain percentage of the assets are non-liquid.

Some co-ops use an application form that says if non-liquid assets or wholly owned businesses constitute 10 percent or more of the total assets of the applicant, they require backup documentation. I tell my clients, "If 10 percent or more of the buyer's total assets are in non-liquid form or questionable investments — if a person owns the ABC Steam and Boiler Company and says it's worth $2 million — the board should get an accountant's statement of the net worth of the company." Whenever the true value of something is not apparent on its face, the co-op is entitled to ask for backup.

Why is diplomatic status important?

It is illegal to discriminate against somebody because he or she is not a citizen. People who are here with proper visas — work visas, student visas — are legal aliens who may not be discriminated against. The applicant may be asked about the lawfulness of their status in the United States but the questions must be asked carefully. For instance, the applicant should not be further asked the country of which he is a citizen. The applicant may be asked if he or she has diplomatic immunity. The reason? That's the one case in which the co-op may never get its maintenance if the shareholder falls in arrears. Usually, people with diplomatic immunity can't be sued in the United States. So, as a theoretical matter, if a shareholder with diplomatic immunity doesn't pay his or her maintenance, the co-op may have an awful time evicting them or suing them for money damages.

What about the question, "Do you smoke any tobacco?" Isn't that a bit controversial?

Smoking is a controversial topic in New York right now. There are many buildings that are trying to deal with a recent court case that held that the presence in an apartment of secondhand smoke from another apartment could be deemed to be a denial of the warranty of habitability guaranteed to all rental tenants, including co-op owners. Several co-ops have tried to ban smoking within apartments and they've all been essentially unsuccessful. But I represent two buildings that ask the question on their application "Do you smoke any tobacco products?" And they will not accept any person who smokes into the building.

Is smoking a handicap or an addiction? I have advised these clients that the co-op is making an accommodation for people now in the building who have asthma or other lung-related illnesses. This policy has been vigorously enforced by these buildings. I do not think they are discriminating against a smoker because he or she is "handicapped."

What about this question about whether they have filed for bankruptcy?

Bankruptcy is one of the areas of concern for a co-op because bankruptcy can tie up getting the money for years since there's a freeze placed on creditors of a bankrupt person. The co-op could be waiting for years to get its money and it is a question of relevancy to see, has this person used bankruptcy proceedings in the past? Are they a potential bankruptcy abuser?

They can be bankrupt and stay in the apartment while they…

Exactly, while they work out the bankruptcy, while the process goes forward, they may remain in the apartment. And the co-op may incur significant legal expenses that it may not get reimbursed for. So a history of bankruptcies is relevant.

All these things we've been talking about are just suggestions, of course.

Of course. Each building's package should be shaped by the needs of that building. There has been a move in the City Council to standardize applications, with all kinds of dumb legislation being introduced. Such legislation makes no sense. A co-op building should be entitled to put its particular issues of importance into its application form. There are buildings that don't care a bit about smoking, there are buildings that don't care about pets, so let the boards focus on the areas of particular concern to them.

If they discriminate, there are powerful laws in place and agencies in place to vigorously enforce those laws. But, short of real discrimination, buildings should be entitled to ask the questions that are important to the shareholders and to their view of what co-op living is about.

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Adapted from Habitat March 2009. For the complete article and more, join our Archive >>

 

Illustration by Jane Sanders