Carol Ott: Welcome to Legal Talk, a conversation about governance issues that New York's co-op and condo boards are tackling today. I'm Carol Ott with Habitat, the New York City magazine for co-op and condo board directors. My guest today is Daniel Finger, a partner at the law firm and Finger. Purchasing a co-op apartment isn't like buying a house or a condo.
You're actually buying shares in a corporation, and the board of that corporation has to make sure you can afford to be there. This happens in an admission process. Daniel, for our listeners who are unfamiliar with the co-op admission process, can you briefly tell us what the three major steps are?
Daniel Finger: Sure. So once the contract of sale is signed the three steps are you fill out your application and submit it. The board then reviews it and make sure that the, that you meet all their financial requirements and that there's nothing that stands out. And then you go through an interview process as the final step after which you are-- if you pass that, then you're approved to purchase.
Carol Ott: Okay, so it's the interview process that actually seems to be fraught. And once a board meets with a prospective purchaser, you open up a box where you can, particularly, if you turn down the purchaser, you can be accused of discrimination of some sort.
My question is, what are the questions that a board can very safely ask in this initial conversation?
Daniel Finger: Usually, and just to back up a second, they, there can be complaints of discrimination really at any stage, even at the application stage a lot of times, and in fact most of the complaints come before the interview stage. A lot of boards will really use the interview as a way of just going through their house rules, making sure the people are, understand them, can abide by them. So it's mostly that sort of thing. You can ask for any clarification of anything on the application. The no-nos, things you can't ask, are things that have to do with protected classes.
So if you, if there's any question or anything comes up that has to do with a protected class, whether it's race, age, ethnicity, gender, et cetera, that's stuff to stay away from in the interview. You can ask general questions about the person's interests, things they do in the community, their job.
Any clarification of any financial aspects of the application, aside from, presuming they already satisfied your metrics, but things that, maybe if there was just something that was unclear, you could ask about that. So those are all things that you can go into detail on and as long as you don't ask anything about a protected class, like I said, then you're usually you're okay.
Carol Ott: So you represent a lot of co-ops in Westchester County, and there are rules governing the admission process in Westchester that don't exist yet in New York City. Can you tell us what they are?
Daniel Finger: Sure. So Westchester has some guidelines. First that, you have to, having to do with accepting of an application, confirming that it's complete.
And then once it's complete, how much time the board has to review the application. And that includes not just your review to make sure it's complete, but also the board's review to make sure that they accept it and then their interview. So they've put a 60 day limit on really the start to finish. And the way they work it is once an applicant submits an application, you have 15 days, whoever's processing the application, the board, if they have somebody doing it for them, they have 15 days to let the applicant know if there's anything wrong with the application, and if so, what those things are. So it could be that they're missing documents, it could be they skipped an answer to a question, could you know anything like that.
Anything that makes the application not complete. So any of those things, they have 15 days to let the person know. Once they let the person know, then they, then the clock stops and the person now has to fix whatever it is and resubmit the application. Once they have made the corrections fixed, whatever the errors are, a new clock starts, and again, you, so you start over and again, you say, okay, is it complete? Is everything now complete? If it's complete, then from the date they submitted that completed application, you have 60 days, including that review period that you had. You have 60 days to determine that the application is complete.
If it is, and not, sorry, 60 days to determine whether to approve or reject the application, including your time period of determining that it's complete and your time period of interviewing the person and any other reviews that you're doing. So that becomes that start to finish of 60 days. If for whatever reason, at any time the board decides to reject the application, they then have to notify the person in writing using a form that the Human Rights Commission has created to let the person know that they've been rejected and what the reason is for the rejection. And it's this standard form that has check boxes on it for the reasons. There's a couple of categories in four categories where if your reason is under one of those categories, you have to give more information and give your details.
So basically they have, I think 10 or I think 11 check boxes for your basic financial reasons why they might be rejected. And then a couple of, like I said, four check boxes where, that are other categories and then you have to give more detail. So those, that includes not just the financial reasons for rejecting, but also if for some reason somebody comes to the interview and you don't like them for whatever reason at the interview, and you decide to reject them after that, then you'd have to give more detail. And that could be a reason also. And then the second page, you have to list all of the information of the attorney, the buyer's attorney, the seller's attorney, the buyer's broker, the seller's broker if there was one, and then the managing agent of the cooperative. You have to list all their information. So that's that last part. That was an addendum to the law. And then built into all this in the law is that you have to actually give a reason. If you reject somebody, you have to give a reason why you're rejecting them.
That was really the biggest part of the law. But some of these other things have taken on very significant roles in terms of the application of the law.
Carol Ott: So let's say I wanted to buy an apartment and I submitted my application and the board rejected it and I felt, I felt they were incorrect. You know, that I should be accepted and I go to the Human Rights Commission, I guess in Westchester, and I file a complaint.
Or I say, I think I've been discriminated against, or whatever it is that I do. What happens?
Daniel Finger: So this is one of the things that, that I think a lot of people didn't understand is that you could do that even before this law was created. You could do that, you could go to the Human Rights Commission if you felt you were discriminated against.
But the process for the Human Rights Commission is that first of all, they will help you do a complaint. So you do your formal written complaint. That gets then served on the cooperative, or it could be whoever the person that you're alleging discriminated against. It doesn't have to be the cooperative, but for my purposes, based on my clients, it is the cooperative, and so that gets served on the cooperative.
The cooperative then give, has an opportunity to answer the complaint and provide a position statement detail, and giving more detail about their view of events and presumably why they don't feel they discriminate against or explaining the, the confusion or whatever it is. So that's the first step of the process.
And then the Human Rights Commission will go through a formal investigation to determine in their mind whether there is probable cause to believe that discrimination has occurred or not.
Carol Ott: Are there fines?
Daniel Finger: There, there could be, but the first step, if they determine that there is probable cause, they don't necessarily issue fines at that point.
And actually, I'll break this up in a second, but the second step, if they determine that there's probable cause is there's then a full hearing either before a human rights commission judicial hearing officer, or in it, it's the option to remove it to Supreme Court and have the Supreme Court determine whether to uphold that finding, and if so, the recommended fines and penalties that the human rights com, the Human Rights Commission's recommended fines and penalties. Now, the backup to that is there is certain aspects where, if you don't give a reason, if you, when you send that rejection letter, if you either don't send a rejection letter, if you do it in some way other than using their form or if you use their form, but you don't give the reason or you don't include all the information you're supposed to include, which would be the attorney's information, the broker's information, buyer seller's information if you miss something outta the form, they can issue a fine for that. So in that instance, if it has to do with you missing one of those deadlines or not correctly using the form, then the fine would be a thousand dollars for the first violation, $1,500 for the second violation, and $2,000 for every violation after that.
Carol Ott: And we're not violating for discrimination yet.
Daniel Finger: That doesn't have to do with anything to do with discrimination. The discrimination fines, there's not really a limit. And it would be whatever the, the, what they call the compensatory damages, the actual damages of the person if they, if for whatever reason, a lot of people allege that they have emotional distress or they could have had other damages.
Then, potentially damages from not being able to purchase the apartment, so whatever their actual damages are. There could also be punitive damages; that typically would go to the Human Rights Commission. There could be other relief such as requiring you to accept the person or whatever the discrimination.
We're just talking about applications, but it could be, you could go to the Human Rights Commission for discrimination for a variety of reasons, having to do with co-ops. If, for example, if a co-op denies a reasonable accommodation, which is getting a little bit of field of what we're talking about, but, so they could, they, there could be a finding and there could be relief that requires you to do something.
In, in that sense. So.
Carol Ott: In regards to the admissions, since this law passed, have there been many, does the Human Rights Commission publish what their efforts have adjudicated? How many cases they've gotten?
Daniel Finger: So they publish, they do publish an annual report and there is there, there are some numbers about that.
And so far the numbers, so in terms of the complaints the complaints have gone up, but the numbers of findings of probable cause have actually gone down, if you look at as a percentage of the number of complaints versus prior to the law. There are more complaints now, which is bad because there's more time spent investigating.
There's more, and it's hurtful to the co-op because now you know, every time there's a complaint, they have to report it to their insurance company to hopefully get some help defending it. 'Cause the defense costs can be a lot. So a lot of, a lot of the time you'll report to the insurance company and the insurance company will, even though they won't pay damages, they'll at least pay for the cost of the defense.
But in doing so, you're also, now you have a hit on your insurance and then that makes your insurance premiums go up.
Carol Ott: Do you think there's more complaints being filed 'cause people are learning that they can file? Or?
Daniel Finger: I think there's a number of reasons. I think most people, if they felt that they were really being discriminated against, were filing anyway.
So I don't think it's the cases where, which I think is borne out by the fact that there's fewer findings of probable cause. I think it's coming from, people advising that, they're getting, they're now getting more advice from people about, this possibility. There was, there was a time where the, there's more interaction with them, with some of these people because of the com, because of the rejection form and that Human Rights is getting a copy of the rejection form. There's, some of that is leading to more complaints there. There's a variety of reasons, but I think the important figure is that there's fewer probable cause findings.
So even though there's more complaints, that doesn't mean that the instances of actual discrimination have gone up. In fact, the numbers would say they haven't.
Carol Ott: I, that's good. What would your takeaway be for boards both, in Westchester and also in New York City who don't yet have this process?
What would be your major piece of advice regarding the admissions process for boards?
Daniel Finger: There's a couple of things. The first is when you're going through the application, you can't abrogate your responsibility to the managing agent and just let, and just say it's on the managing agent to decide if they meet our financial metrics or anything like that.
The board, the ultimate responsibility for an application is on the board and they're the ones that have to go through it. So the managing agent's role or the attorney's role, or whoever it is that's processing the applications, their responsibility should strictly to be made to be, to make sure that the application is complete, which is to say that the form is filled out, the information is all there, and that all the documents that you require are there.
Everything's attached in the proper form, in the proper order. Everything's there. And once that happens, that should be turned over to the board. So I, it bothers, I dunno if bothers is the right word, but it's difficult when I hear boards say that they don't want the managing agent, they don't want the, whoever's processing it to forward them an application if it doesn't meet the credit score or if it doesn't meet the debt to income ratio.
It's the board's responsibility to make sure that, to look at the credit report and make sure that's the credit risk score. And for it's their responsibility to calculate the debt to income ratio and make sure that it's, that it was calculated correctly and that either passes their requirement or it doesn't pass their requirement.
So that's the kind of the first thing. The second thing is, like the old adage, do UN to others as you'd have them do unto you. So apply that to discrimination. Don't treat anybody differently if they're in a protected class. Treat everybody the same, so don't make exceptions for, the debt to income ratio or the credit score or anything like that.
If you have your metrics and the person meets your metrics. Fine. Then you can look at other factors and there might be other reasons why you reject them or there might be other reasons, and then you go to the interview and maybe at the interview there's something that stands out. Don't-- and conversely, if they don't meet your financial requirements, then don't interview them. There, there's no reason to interview somebody that doesn't meet your financial requirements if you know you're gonna reject them. And it seems like something that should go without saying, but. I see it all too often. If you know you're not gonna accept them, if you know they don't meet your financial requirements, then don't go to the next step.
Just reject them right then. Otherwise, if you're going to the interview, then they have an assumption that they met your financial requirements and they don't understand why then all of a sudden, that you go through an interview and then you're saying, oh, your debt to income ratio doesn't meet, or, doesn't pass or whatever.
So I would say those are the two main things. I could really talk for a while on a lot of things that I could tell boards and stories that I could tell them. And I think the last thing that I would say though is most importantly, if you have any question about whether or not a, whether it's to do with a financial requirement or anything else to do with an application, if you have any question, if you're not sure whether it meets your requirements or you're not sure if there's, you know something, if there's an issue that you're not sure about, if there's a question you're not sure you should ask, then talk to your attorney first and get their advice.
If you have a question that you wanna ask the person, but you're not sure if you should ask it, you're not sure if it's discrimination or not, then ask your attorney before you ask it before you get into trouble.
Carol Ott: Okay. And that is good advice. Thank you very much for joining us today.
Daniel Finger: My pleasure.