The Suffolk County Legislature recently passed a new Local Law entitled “A Local Law Requiring Fairness in Cooperative Home Ownership” that took effect on September 15, 2009 and was later amended, which amendment became effective on November 10, 2009.
A more appropriate name for the law would have been “Fairness in Purchasing a Cooperative Home” since the law deals with the application process. Most significantly, in the event a co-op Board of Directors denies an application to purchase a unit, the law requires the Board to notify the applicant, in writing, of the specific reason for the denial.
Typically, a Proprietary Lease provides the cooperative Board of Directors with the authority to grant or withhold consent to a proposed assignment of the lease “for any reason or for no reason.”
Based on this provision, Boards that have denied applications of prospective purchasers in the past have usually done so without providing any specific reason for the denial.
The new Suffolk County Local Law 36-2009 states that the co-op corporation must have and use a standard application form. The form must include a notice advising an applicant how to access information on fair housing and anti-discrimination laws.
Next, within ten days of receiving an application, the co-op must provide written acknowledgement of receipt. At that time, the co-op must also inform the applicant of any missing or incorrect items and provide a time within which the application is to be corrected.
The Board, within 45 days of receipt of a completed application, must provide written notice to the applicant that either the application has been approved or rejected. In the event that the applicant is rejected, the notice must provide “grounds for such rejection.”
No mention is made in the Law about an interview of the applicant(s).
Most co-op Boards require that prospective shareholders attend an interview with the Board or an admissions committee. Any interview would need to take place within the 45 day period between receipt of a completed application and the required notice date.
Local Law 36-2009 applies only to residential cooperatives, but cannot otherwise be avoided. The Law states that any agreement or other provision between the co-op and the applicant which purports to circumvent or supercede this law shall be void and unenforceable.
The Law is primarily designed to eliminate discrimination in the co-op application process.
Similar legislation has been proposed in New York City and New YorkState but has not yet been passed. The New York State Human Rights Law and the Federal Fair Housing Act already prohibit housing discrimination based on race, creed, color, sex, ethnicity, religion, national origin, gender, age, disability, military status, alien/citizenship status, sexual orientation, partnership status, marital status or children. Chapter 89, Section 89-12 of the Suffolk County Code also prohibits discriminatory practices in the sale, lease or rental of real property, including residential cooperatives. The new Suffolk County Law is designed to supplement these laws at cooperatives by promoting “transparency in the application process.”
In conclusion, attorneys representing Suffolk County co-op Boards should review their clients’ application procedures to ensure that the following steps are being taken in order to comply with Local Law 36-2009:
- A standardized form application is provided to all prospective purchasers and it includes a notice advising how the applicant may access information on fair housing and anti-discrimination laws.
- Within 10 days of receipt of an application, the applicant is notified in writing of receipt of the application and whether the application is incomplete or completed incorrectly. If the application is incomplete or incorrect, the applicant is to be instructed as to how the defect(s) can be corrected and a time is provided within which the corrections should be made.
- Within 45 days of receipt of a completed application, the applicant is to be provided with a written notice of approval or rejection. If the application is denied, the notice must state the reason for the denial.
Co-op attorneys may also take this opportunity to review with their clients the procedure for evaluating applicants. For example:
- Does the Board have an objective formula for evaluating an applicant’s financial information?
- Is that formula applied evenly and fairly to all applicants?
- Does the Board obtain credit reports for applicants? Perform background checks?
- Does the Board require personal/professional/landlord recommendation letters?
- Does the Board interview only those applicants deemed financially qualified?
- Does the Board retain a copy of all application materials and correspondence as well as minutes of the interview and the Board’s admission decisions?
- If the co-op has an admissions committee, does the Board provide proper supervision, guidance and direction to the committee? Is the committee acting in compliance with the provisions of Local Law 36-2009?
