Proposed Law Would Require Co-ops to Give Reasons for Denials More Transparency for Buyers, Possible Liability for Boards

Refusal to provide housing. Bank refuse to give a mortgage loan. Low credit score. Confiscation of pledged property. Building commissioning. Building codes. Cancellation of deal buying real estate

Co-ops evolved as a housing form in New York City primarily on the basis of exclusivity. Not long after workers’ unions and other professional and mutual interest groups made moves to establish cooperative housing expressly for their members, the model was adopted by wealthier New Yorkers of various classes and ethnicities who wished to control who their immediate neighbors were. 

No amount of excuses can justify the illiberal and downright discriminatory history of NYC co-ops - but over the years, laws mandating transparency and equity have curbed many of the discriminatory practices many co-ops used to maintain their exclusivity. New York City has enacted many ordinances and rules governing who can and cannot be denied the right to live in a specific building. These rules created protected groups based on everything from race to prior incarceration to marital status.

A New Law on the Books

A new proposal to promote even more transparency in co-op share transfers currently sits before the City Council. According to Hal Coopersmith, an attorney and principal of Manhattan-based firm Coopersmith & Coopersmith, a new law co-sponsored by several council members and public advocate Jumaane Williams seeks to provide even more transparency in co-op sales. It mirrors the requirements of a proposed state law which never got to a vote last year. 

The bill under consideration requires that co-ops provide a timeline for their consent or denial for the purchase and transfer of shares. The bill further requires that co-op boards with 10 or more apartments maintain a standardized application for purchase. That means that nearly all co-ops would be required to have a standard application to be issued to any and all prospective buyers looking to purchase shares and call the building home. Coopersmith notes that the City is not proposing a single citywide application form; individual buildings can draft their own application form, but once adopted, that standard form must be used for any and all purchases within that building. 

Furthermore, co-ops would be required to confirm the receipt of requested and required application materials within 10 days of receiving those materials. The co-op must also confirm whether an application is accepted (either conditionally or unconditionally) or rejected within 45 days of receipt - though boards may request one additional 14-day extension.

Given that the City's current antidiscrimination statutes make it illegal to deny someone housing based on prejudice, why do we need this new law?  “Under current law,” says Coopersmith, “a co-op board can decline a purchaser for any or no reason at all, and they don’t have to provide a reason. But it’s hard to prove why someone was declined without this [new transparency] requirement.” 

For example, Coopersmith continues, musicians are not a protected class. A board may believe a professional trumpet player will create too much noise in the building, and might legally reject his or her application for that reason. “Yet, how do we know if that excuse is merely cover for the co-op corporation if the purchaser is both a musician and a person of color? We don’t under current laws.  This new law would provide more transparency.”

The most controversial aspect of the bill is that it mandates that the co-op provide a statement of what exactly was found deficient in the purchase application.  The corporation must also provide the number of times consent to purchase was withheld over the past three years.  

“This new law will lead to litigation,” says Coopersmith. “There’s also a question of what it means for board members. While some aspects of additional transparency might be welcome in the application process, more transparency can lead to concerns and litigation for individual board members. While co-ops carry directors and officers (D&O) insurance to protect board members in such cases, too many suits may lead to an increase in those premiums.” Overall, Coopersmith does not see this proposed law as a positive development for most co-op corporations.

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  • Maybe they should be forced to give written reasons for not giving enough heat to the mortgage/maintenance paying residents and for not repairing what the HOA is responsible for- over 3 years. I really miss my single family residences My advise is to NEVER buy a co-op or condo if you have the option.