New York's Cooperative and Condominium Community

Habitat Magazine Business of Management 2021

HABITAT

CO-OP/CONDO BUYERS

WHAT CO-OP/CONDO BUYERS NEED TO KNOW

Is a Cherished Co-op Board Power in Peril?

New York City

Co-op Rejection Reasons
April 6, 2021

Many co-op advocates are terrified that an idea that has been circulating in Albany for more than a decade may finally have a shot at becoming law. S2874, a bill sponsored by Sen. Brian Kavanagh, would change the landscape of New York co-ops by requiring boards to give a reason why they rejected a buyer, Brick Underground reports. The bill would also set a time frame in which boards must reach a decision on purchase applications.

As the law stands now, a co-op board can reject a potential buyer, even one who is financially qualified, “for any or no reason” as long as there’s no discrimination. This power is zealously guarded by co-op boards, and their decisions on purchase applications and other issues are almost always shielded from judicial review by the Business Judgment Rule.

S2874 seeks to chip away at that power. "This comes out of a general interest in making the process fairer and more transparent for all parties,” says Kavanagh, a New York City Democrat. “It has also become of very significant interest to fair-housing organizations who believe this basic information is helpful in their efforts to enforce the Fair Housing laws, which already apply to co-ops.”

Marc Luxemburg, an attorney and the president of the Council of New York Cooperatives & Condominiums, says a new law directing co-op boards to give a reason every time a buyer is rejected could open co-ops up to more litigation for which they are not prepared. "The Court of Appeals has held for 60 years that co-op residents have a right to decide who will share their homes, and that courts should not tell boards how to manage their co-op," Luxemburg says.

Kavanagh says the way a co-op board gets to choose whether a buyer and seller can close on an apartment "creates a huge opportunity for discrimination," and he hopes his bill will address that. "I'm neither looking to go back 60 years or looking to impose new obligations on co-ops,” he says. “What I am looking to do is provide a reasonable standard of fairness in the process for the buyer and the seller.” 

Typically, a rejection by a co-op board is "subjective," Luxemburg says. It might be based on a determination that the buyer won't be a good neighbor or won't follow the rules of the building. "Who judges if the reason is a good reason?” he asks. “There’s no standard in (S2874) as to what is a good reason.”

Unlike in years past, some observers believe the bill has an improved chance of passage now that a Democratic majority controls the state Legislature.

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