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Why would you sue your co-op board?

Make sure you have grounds for a lawsuit before you sue your co-op board, or you may end up wasting time and money.
Make sure you have grounds for a lawsuit before you sue your co-op board, or you may end up wasting time and money.
Hemera/Thinkstock

It's reasonable to feel slighted when a co-op board rejects your application -- there's no clearer way of saying that, for some reason, you're just not good enough. But only if that reason is discriminatory do you have grounds for a lawsuit.

Unfortunately for prospective buyers, discrimination can be tricky to prove. Co-op boards in New York City and many other places aren't required to provide candidates with reasons for rejection, and in the eyes of the law, they're allowed to use "business judgment" when making their decisions [source: Kaye]. Specifically, the law states the following: "The board's actions must be (i) in furtherance of the purpose of the co-op; (ii) within the scope of its authority; and (iii) in good faith" [source: Frost]. What this means is that something as simple as the shade of lipstick you wear to the interview can provide a legal reason for rejection.

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However, once in court, co-op boards are required to furnish these reasons for rejection in order to prove that they're not discriminatory. In fact, one of the major deterrents to lawsuits related to co-op rejections is the potential embarrassment of entering into public record the subjective reasons why an applicant was rejected. Who wants to pay hefty legal fees to be publicly admonished for their shade of lipstick?

That said, housing discrimination occurs, and applicants do sue and win. Specifically, decisions may not be based on race, color, creed, age, national origin, citizenship status, gender, sexual orientation, disability, marital and family status, lawful source of income and occupation [source: Taylor]. And some of these are tricky -- turning down an applicant just because they have kids is a no-no.

Most cases that are brought to court and won are based on rejection before the interview stage. Without introducing the subjectivity born of an interview (oh, that darn lipstick!), it's easier to prove that a board may be consistently rejecting financially qualified buyers with the last names Katz or Hernandez.

Also, note that co-op boards aren't the only link in the real estate chain governed by antidiscrimination laws. Brokers who steer potential buyers to neighborhoods and buildings that they deem "more appropriate" for their race, profession or family status are acting illegally.

Next, we'll look at some reasons why you might want to sue your co-op board once you're in.

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Once you're in the club, you're entitled (and beholden) to a whole new set of rules. And just as there are about a zillion and six ways to run afoul of these rules, there are an equal number of ways the board may overstep these rules when requiring -- or disallowing -- things that are beyond the scope of the written rules. (Let's assume the building rules themselves are lawful -- a whole other ball of wax.) Additionally, the board has a fiduciary duty to be responsible with shareholder's money, and to keep the building and premises safe and in good repair.

Simply, if the board oversteps the bounds of the written rules or if it fails in any part of its fiduciary duty, you may have a legal case against it. First, exhaust all available options for settling the complaint peaceably (keep all documentation), and then contact an attorney who specializes in co-op complaints.

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Common sources of legal cases include unfair rejections of attempts to sell, renovations proposed by the occupant, renovations requested by the board and all aspects of living in close proximity to others. (Really, there are so many rules and such Byzantine regulations that you'll need an attorney's expert help to navigate your specific grievance.)

But before you decide to take on your co-op board in a legal battle, ask yourself if it's really worth it. Litigation is expensive, time-consuming and divisive. Are you willing to pay all three prices? Know the answer before you head to court.

For more information on co-ops and lawsuits, check out the links on the next page.

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Sources

  • Arak, Joey. "Dakota Co-op Board Accused of Being a Bunch of Racists." Curbed. Feb. 2, 2011. (Feb. 6, 2011) http://ny.curbed.com/archives/2011/02/02/dakota_coop_board_accused_of_being_a_bunch_of_racists.php
  • Bellman, Richard F. and Susan Ritz. "Co-op Rejection." The New York Times. Nov. 30, 1986. (Feb. 7, 2011) http://www.nytimes.com/1986/11/30/realestate/l-co-op-rejection-609586.html
  • Frost, Diane. "Fear of Rejection." The Cooperator. March 2002. (Feb. 7, 2011)http://www.cooperator.com/articles/707/1/Fear-of-Rejection/Page1.html
  • Hedderman, Domini. "Protection from Lawsuits." The Cooperator. June 2008. (Feb. 7, 2011) http://cooperator.com/articles/1635/1/Protection-from-Lawsuits/Page1.html
  • Hinds, Michael deCourcy. "When a Co-op Board Rejects a Buyer." The New York Times. Nov. 2, 1986. (Feb. 6, 2011) http://www.nytimes.com/1986/11/02/realestate/when-a-co-op-board-rejects-a-buyer.html
  • Kaye, J. "Matter of Levandusky v One Fifth Ave. Apt. Corp." Court of Appeals of New York. April 5, 1990. (Feb. 6, 2011)http://www.courts.state.ny.us/reporter/archives/levandusky_one.htm
  • Taylor, Candace. "Breaking the co-op barrier." The Real Deal. Sept. 1, 2009. (Feb. 7, 2011) http://therealdeal.com/newyork/articles/breaking-the-co-op-barrier

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