What Happens When a Co-op Board Wrongfully Rejects a Buyer in NYC?

What is Cooperative Housing in New York City?

Cooperative housing, also known as a co-op, is a unique type of home ownership that differs from the old model of owning real estate property in New York City. With cooperative housing, instead of owning your real estate unit outright, you will buy a certain number of shares in a corporation that owns the building. The number of shares you purchase shall correlate with the size and value of the apartment you decide to live in. As shareholders, you do not own your unit the same way you would own other real estate properties, such as a condominium or a family home; instead, you have a proprietary lease that gives you the right to occupy the apartment within a building complex.

In New York, co-op buildings are often regulated by strict rules established by boards of directors. The governing body is responsible for approving and denying any prospective buyers, enforcing the rules and regulations, and managing necessary building maintenance. While this form of property ownership has many benefits, it presents unique legal challenges that can be difficult to comprehend without legal representation to assist you in navigating and understanding complex cooperative housing laws in NYC.

Our New York City law firm has extensive experience in real estate law. To learn more about the benefits of our legal services and how we may assist you during this complex process, please get in touch with our law office to schedule your initial consultation today.

What Sort of Rules and Regulations Can Be Imposed by a Co-op?

Among the defining features of co-ops in New York is the governing board’s ability to impose specific rules and regulations on the residents. These rules can be strict and cover anything from permissible noise to the right to sublet an apartment, decorations, and more. The board of directors has significant oversight of how their building operates, and their rules are legally binding. Violating co-op rules can result in severe fines, potential legal action, and, in extreme cases, possibly eviction from the premises.

There may be rules and regulations over maintenance, disputes with neighbors, the right to perform renovations, and more. For many, these rules can be a source of tension between the board and the co-op residents. An experienced real estate attorney can review the regulations to help determine whether they are being adequately enforced and are, in fact, in any way legal.

Those facing legal action from the board of directors must seek professional legal counsel to protect their rights and establish a winning defense strategy.

Why Do Co-op Boards Reject Buyers?

When the board of directors rejects a buyer application, they are not required to provide any reason for the rejection. They do not usually provide an answer as to why.

Most denied applications are due to financial concerns. The board of directors may view a potential buyer as too risky to take on and accept into the cooperative housing residence.

The boards of directors also wish to see promising letters of reference from personal and professional references. If a reference letter does not meet the board’s standards, they may hesitate to accept the buyer’s application. Again, the reasons could be something very small or something significant, and the board does not need to provide any explanation to a buyer or seller.

In some cases, the board may even reject an applicant if it believes the applicant is getting too good a deal.

Another reason why a board may reject a potential buyer is, frankly, due to discrimination. If a buyer is rejected because they are a protected class member, they may be able to make a legal claim of discrimination.

Other potential reasons that a co-op board may reject a buyer include the following:

• The buyer is a student
• The buyer is a musician or is expected to play loud music in their residence
• The buyer has a previous legal history of suing others
• The owners in the housing downstairs, above, or to the sides of the prospective buyer are particularly sensitive to noise
• The buyer will not use the property as their primary residence
• The board of directors has something against the seller
• The ratio of gross debts to gross income is too high for the applicant
• The buyer’s credit score is too low

What Can You Do if a Co-op Board Repeatedly and Wrongfully Rejects Prospective Buyers?

Even highly qualified buyers can be frequently turned down by Co-op boards. Is there any recourse for such buyers? Unfortunately, the short answer is ‘no’ in most cases.

A board may reject prospective buyers for legitimate and non-discriminatory reasons. In such instances, taking legal action against the board may be extremely difficult, and the burden of proof may rest on your shoulders. If, after taking legal action, the board can establish a permissible reason for rejection, the burden of proof shifts onto the buyer or seller.

Sometimes, a seller puts their co-op on the market at a price the board is unwilling to accept. In such cases, it may be impossible to reason with the board without raising the price.

Suppose the board improperly rejects a buyer based on discrimination or discrimination by association. In that case, you may have the legal right to file a lawsuit against the board for fair compensation. Even in cases where the board does not reject a buyer outright, they may still impose discriminatory practices such as higher maintenance charges, more extreme loan fees, and more. Discrimination is against the law, and if you can establish that discriminatory practices are taking place, you should speak with a lawyer about your case immediately.

Contact Our New York City Law Offices to Request a Free Consultation

Legal issues related to co-ops can be incredibly stressful and challenging to resolve, regardless of whether you’re dealing with a dispute with a neighbor, questioning your rights as a shareholder, or simply applying for housing. Many applicants and co-op owners may find themselves between a rock and a hard place as the strict regulations of the building come into conflict with personal interests, and others may have difficulty even getting through the door.

Whatever the legal matter you are contending with, it is highly recommended that you seek assistance from an experienced real estate attorney. Our firm has years of experience representing clients in complex real estate matters, and we would be proud to represent your case in pursuit of the most optimal outcome possible.

Those who have been denied by a cooperative housing board of directors have very few options for resolving matters in a way that achieves home ownership. Still, there may be cases where applicants have cause to take legal action and file lawsuits against the board. We will examine your case and determine your options for moving forward.

To speak with the attorney, please get in touch with our Middletown law office at 845-668-4774.