A Breakdown of the Co-op Admissions Package
March 23, 2015 — When it comes to potential buyers, co-op boards have not only a fiduciary duty to vet prospective shareholders' financial viability, but also a leadership duty to try to ensure that new neighbors are neighborly. One of the tools boards use to help them determine whether a candidate is viable is the admissions package, which offers them a snapshot of the applicant. Here, we break down the admission package into its most basic parts so that boards can streamline their processes and avoid discriminating against anybody, even unintentionally, and so potential buyers know what to expect when navigating the complex world of New York City real estate.
Getting Personal
The first section of an admission package (and related forms) is a potential breeding ground for lawsuits. The reason is that financial data, credit reports, and transfer (i.e., sale and purchase) documents are all cut-and-dried numbers, and criminal background checks involve public records. But on personal questionnaires, it's easy to ask the wrong thing and open your board up to a discrimination suit.
The Council of New York Cooperatives and Condominiums offers a Co-op Board Admissions Guide that lists the 16 categories "protected" under city, state, and federal discrimination laws, including prohibitions against discrimination based on race, creed, color, age, disability, sexual orientation, or marital status, among others.
What you should avoid asking about under this list sometimes seems odd. Some attorneys advise boards to not as for a photo, since it may reveal an applicant is part of a protected class.
To limit liability in case of identity theft, don't ask for Social Security numbers. While the co-op will ask for that and birth dates, it will do so only in the financial questionnaire, which the applicant returns with the packet directly to the managing agent. When the board eventually does see the financial questionnaire and accompanying financial statements, birth dates and Social Security numbers should have been redacted. (Over the years, some managers have neglected to remove the vital information, leading to identity thefts and lawsuits.)
Finally, the personal questionnaire includes acknowledgment forms that speak to house rules — including those regarding pets, alterations, homeowners insurance, and move-in/out policy — and the city-mandated lead-paint and window-guard notifications.
Getting Financial
The financial questionnaire asks how much cash on hand the buyer will have after making the down payment, and whether he or she is subject to salary garnishment and support or alimony. Here the managing agent asks for date of birth and a Social Security number — it's the only way to get credit reports.
This portion of the application package also asks for two to three years' worth of tax returns, and a statement of assets, liabilities, and income, to be accompanied by such proof as copies of bank, brokerage, and education-loan statements; pay stubs; and canceled checks or other evidence of mortgage/rental payments.
Self-employed individuals generally need to supply an accountant's statement of earnings for the past three years. To avoid liability in case of credit-data theft, co-ops generally do not get copies of credit-card statements (besides, that information will be covered in the credit check).
Getting Vetted
The applicant must sign a form allowing the managing agent to pull a consumer credit report. The agent must also run a criminal background check. Unlike credit checks, which involve virtually identical data from any of the three largest credit-reporting services, a criminal-background check can be as basic as having the managing agent view the New York State sex-offender registry or as time-consuming and expensive as having the board attorney's office do a public-records search in multiple states.
Getting Referenced
If your board does want reference letters, it's good to narrow the focus. Reference letters that carry the most weight with boards tend to be from a prior landlord or board.
Getting Transfers
The last part of the package includes the contract of sale, with all riders; the loan application; the loan commitment letter; and three copies of a recognition agreement. That last is a contract among the lender, the borrower and the co-op. The standard form is often called an Aztech Recognition Agreement, referring to the popular form produced by the now-defunct, 1971-1997 company Aztech Document Systems. Its provisions include one that the co-op notify the lender if the shareholder falls into arrears and that there are no liens against the co-op corporation and other such mutual assurances.
Adapted from "The Package" by Frank Lovece (Habitat, March 2015).
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