Can Co-Op Boards reject buyers without giving a reason? Does this apply if there is discrimination?

Question

I'm in New York State. One of my potential buyers has been rejected from buying a Co-Op. He was financially qualified, 807 credit score, $180,000 Gross Annual Income, with his mother and his daughter. The board accepted his application, reviewed it, and then invited him in for the interview. At the interview, they asked told him "we don't prefer people with young children, they disturb the older couples in the building" and, "the floor you are buying your apartment on is prodominantly Jewish, so I hope you don't cause any trouble with any of the other shareholders" (He is Indian, they passed him off to be Middle-Eastern).

They sent him a rejection after the interview in the mail, not giving a reason why they rejected him. I checked with my lawyer already, and he said that because it is a private corporation, they have the right to reject buyers for any reason without having to state why. That sounds wrong though, it's such a blatant act of discrimination!

Answer 1

Your lawyer is correct! A private corporation may reject potential buyers from purchasing shares of the corporation for any reason, without having to give the reason. However, your lawyer is wrong if he told you that there is nothing you can do. It's understandable, most lawyers don't like to deal with Real-Estate matters.

Though a Co-Op is structured as a private corporation and enjoys the same luxuries; it provides something outside its private domain, and into the public domain, namely; housing.
Housing discrimination raises constitutional issues under equal protection.

Two parties may bring suit against the Co-Op Board for discrimination, none of which include you; only the owner of the shares (Seller) and the Indian male who was rejected.
The question then is to find a statute under which to bring a case before the court. To cut to the chase, "The Fair Housing Act". To save you some more time, under previous Fair Housing Act cases, if a potential buyer is financially qualified, and his application has been accepted, and he is rejected after and interview has been arranged (not necessarily materialized), the court will consider this as prima face evidence of discrimination on behalf of the Board; because if a buyer is financially able to afford the purchase of property, financially able to pay the maintenance fee (under current mortgages, banks will pay the maintenance fee themselves in the event of a default which means the Board takes zero risk), and otherwise accepted by the board prior to an interview, the only reason for rejection, is discrimination.

You have a solid case, which is sadly not yours to win. You have to contact wither your potential buyer or seller and talk to them about starting a suit against the Board. In previous cases on housing discrimination, the courts have awarded damages to be paid by the Board in the following manner:

On a unit which cost $300,000; $325,000 were awarded in consequential damages, and $975,000 were awarded in punitive damages ($325,000 of which were paid to the seller and $650,000 to the buyer).

If the two parties want the money, I would advice you to let them start a suit against the Board. If they want the transaction to proceed however, you should tell them to hire a Real-Estate Attorney who will gather and present prior case history to the Board's Attorney, and the Board should rationally accept the purchaser.

Answer 2

Technically a co-op is not real property. You are purchasing shares of the company and they can do what they want. I feel that is the main reason why co-ops exists; to control the types of people who live live in the building. As a fellow New Yorker I have seen this type of thing happen all the time. My fiancee's aunt in uncle were trying to sell their co-op for 2 years because the board did not approve the potential buyers. Some co-op boards are better than others though.

Answer 3

The lawyer is correct to say that Co-ops are private organisations and they do have their own set of rules & conditions. Given what you've indicated, it seems that the Board has valid reason/s to reject the application. You can try and appeal based on the fact that the potential buyer is Indian and not Middle-Eastern. The potential buyer may consider giving an undertaking that there wouldn't be any social ills becos of him.

Answer 4

The lawyer is correct. They don't owe an explanation.

I see three big issues in getting anywhere with a complaint.

1) The buyer isn't in a protected class.

2) He will have to show that he was held to a different standard than other applicants.

3) You have no proof that that he was rejected solely on the basis of race, color, sex, sexual orientation, national origin, etc. In fact, you have quite the opposite. They flat-out made an issue of the children.

If other non-Jewish applicants and applicants with children were denied, good luck proving any real discrimination.

Co-ops give owners an opportunity to avoid living in the same place with people they feel they would not get along with or with people whom they feel would be a disturbance to their shared environment. They are able to pick and choose who shares that environment with them.

Plus, your buyer was admittedly lying about what or who he was. You said he was "passing himself off". Maybe they caught on and don't want to live with people they feel are dishonest.

Or maybe they just plain didn't like him.

If I were in his shoes, I would only bother to file a complaint if another non-Jewish applicant with children is approved for that same unit.

"solid case" my foot. Thats absurd.