Legislation that would require co-ops to provide rejected applicants with a written explanation as to why they were rejected is making its way – slowly – through the New York City Counsel.  Historically, cooperative boards in New York City have not been required to provide any reason or explanation to applicants as to why their applications for co-ops are rejected.  However, if this proposal is enacted, the application and rejection process may become much more transparent.

 

Unlike a fee simple condo or homeowners association, in a cooperative, legal title to the property is vested in a cooperative entity and individuals purchase shares of stock in the corporation, which carry the right to occupy a unit within the cooperative pursuant to a proprietary lease.  In New York, it has long been the law that, absent discrimination or bad faith, a board can reject an applicant for any reason or no reason at all.  See Weisner v. 791 Park Avenue Corp., 6 N.Y.2d 426 (1959).  Similarly, in New Jersey, the Cooperative Recording Act, N.J.S.A. 46:8D-6(l), acknowledges and authorizes a similar approval process so long as the consent to transfer is not unreasonably withheld or would constitute discrimination under federal or state law.

 

The proposed legislation, which was introduced by City Councilman Hiram Monserrate (D – Queens) in February of 2006, but which has languished in committee for over a year, has been gaining support and momentum lately.  Known as Intro 119, “The Fair and Prompt Co-op Disclosure Law”, or more commonly the “Written Rejection Bill”, would require that co-op boards provide rejected applicants with a written explanation – signed by an officer of the co-op – detailing each individual reason as to why such applicant was rejected.  The statement must also include the number of applications received and the number of applications rejected in the previous three years prior to this decision.  If a co-op board fails to provide such a written explanation, it can be held liable to the applicant for fines, punitive damages and attorneys’ fees.  The full text of this proposed legislation can be found here

 

While opponents of the legislation argue that it is unfair, intrusive and too far-reaching, its supporters argue that it will force co-op boards to openly cite legitimate reasons for any rejection and will help root out discrimination, ultimately shining a brighter light onto the inner workings of New York City’s most powerful co-op boards, which were only required to begin disclosing sale prices in 2006.  The legislation is expected to move forward for a vote before the counsel in the coming months.