They Want to Regulate You

Devicka Doobay figured she had a great shot at a $170,000 Queens co-op when she applied in 2010. Her credit score was well over 700, her income more than $66,000, and her only debt a car loan for $15,000. However, when she got turned down without even an interview, she had the nagging feeling that it might have had something to do with her name.

“Everything was good, I had all the documents, and they wouldn’t even give me a meeting,” says Doobay, 50. Friends in real estate said it sounded fishy and suggested she file a complaint, but she never did. “I was busy looking for a home, bogged down and overwhelmed,” she says. “It made me feel bad, like I wasn’t welcome there.”

Just three months later, she submitted the same application to another Queens co-op and was admitted almost immediately for that apartment, which was priced at $180,000.

Bills are pending before the city council and the state legislature that would institute timelines for when boards have to reach a decision and also require boards to either give a reason why they rejected a potential buyer or to swear that the reasons for rejection were not based on discrimination. If those standards had been in place, Doobay thinks she might have been accepted after all. “Maybe there would have been a reason, or maybe they would have accepted me,” she says. “I had all the requirements they needed.”

Doobay is not alone in her complaints. For years, would-be purchasers and sellers have complained of delays and disappointments, of turning over tons of paperwork to boards and then waiting for months, only to get rejected. “People have the right to know why they are denied,” argues Barbara Ford, director of the New York State Association of Realtors. “You can’t correct a problem if no one will tell you why you were rejected.”

But co-op boards and their spokesmen argue that there is no problem to correct, that most cooperatives move with deliberate speed, and that the examples frequently cited are extraordinary exceptions. Given the low number of complaints about co-op discrimination (see box, page 15), Bob Friedrich, president of Glen Oaks Village, a 3,000-unit co-op in Queens, argues that the issue is manufactured by realtors, who are losing out on commissions when deals fall through. “A broker’s interest is just to close the deal as quickly as possible,” he says. “They don’t care about the mess they leave behind.”

Turning Ugly

Bills that would fundamentally change the way co-ops handle admissions have been bandied about for almost a decade. Two bills were introduced before the city council in 2010, and the one from Councilman Lewis Fidler, which is widely thought to have the best chance at passage, was subject to a contentious hearing before the housing committee in April. Co-op admissions bills were introduced in Albany in early 2013 and await transfer to committee.

All of the bills contain time clocks that would require boards to acknowledge receipt of a completed application after 10 days and accept or reject an applicant within 45 days of receiving a completed application. What’s the punishment for not meeting the clock? The bills proffered by Fidler and by State Assemblyman N. Nick Perry would automatically grant acceptance to a shareholder if the board doesn’t meet the deadline (with a 10-day grace period). Fidler’s bill would also allow the prospective shareholder to pursue civil action against the co-op corporation, the board of directors, and the managing agent.

Fidler’s version of the bill would require boards to sign statements swearing that they were not rejecting based on a protected class such as age, race, or religion. City Councilman Brad Lander’s bill, which has not progressed as far, takes the more controversial step of requiring boards to state reasons for rejection.

Fidler notes that agencies routinely investigate discrimination in rental housing by sending in people of different races with identical applications to see who is rejected. That doesn’t work for co-ops because buyers don’t go before a board until a deal is reached with the seller.

As for the argument by opponents that no other form of housing requires this type of scrutiny, Fidler responds that’s because no other form of housing has a third party deciding whether the buyer gets the home. “No one likes to give up their little perch of power, and we have given co-op boards virtually absolute power over people,” he says. Arguing that discrimination doesn’t exist is “ridiculous. They’re not living in the same world I am.”

Success Story

Although similar bills have failed at the council and state levels in 2004 and 2005, one bill with both time clocks and required reasons for rejection was enacted in Suffolk County in 2009. At The Commons at North Babylon, in Suffolk County, Board President Linda Bacchi says there has been no negative fallout.

“The time frames are not a problem, and if we need to, we have a special interview meeting,” she says. “I feel that if you are rejecting someone, they deserve a reason. You have to put yourself on the other side – we were all there in the other seat at some point. Wouldn’t you want to know why you were rejected?”

Alvin Wasserman, director of asset management at Fairfield Properties, says the law is working very well. “I can’t think of a single instance where this has prompted litigation,” says Wasserman, whose company manages about 2,000 co-op units on Long Island. “All of the [ambiguous] reasons why a board might reject someone are gone now. Now, it’s only about the financials.”

He also argues the time clocks are fair. “If people don’t get an answer in a reasonable time, they can lose their loan commitment, and that can take months to get again,” he says.

Different in NYC

Suffolk County’s experiences, however, don’t apply to New York City, says Friedrich, the board president in Queens. “We have so many more co-ops, you’re far more likely to have increases in litigation just because of the sheer numbers,” he says.

He also argues that co-ops have plenty of occasions when they might need to reject an applicant without stating a reason, recalling the example of a prospective shareholder who arrived for an interview obviously intoxicated. The board rejected him, but had they been forced to list that as a reason, an attorney would have had a field day. “He would have argued, ‘How did you know he was drinking? This is arbitrary and capricious.’ Then you’d have a lawsuit and a year down the road, we might have won, but we’d spend thousands to win.”

Still, argues Barbara Ford, the concept of giving a reason for rejection is not totally foreign in housing: federal law requires that mortgage lenders give customers a reason if they reject them for a loan.

“Housing is such an important part of our culture,” says Ford, who is also an attorney and the director of the Long Island Board of Realtors. She notes that before the Suffolk law was passed, she received monthly calls from people suspecting they had been discriminated against. “After that bill passed, I haven’t gotten a single call,” or heard of any litigation.

And while it’s not illegal discrimination, the bills would also address a problem with co-ops and the housing market, says Richard Haggerty, chief executive officer of Hudson Gateway Association of Realtors, which includes Westchester County, where similar bills have been proposed.

“In a difficult market, we hear from our members that applicants are being rejected because of price,” says Haggerty. “The board doesn’t want to see sales go through at a certain price and you can have sellers who are trying to sell and see three, four, five sales fall through. That’s not fair to anyone.”

Got a Beef? Go to Court

Eva Talel, a co-op attorney and partner at Stroock & Stroock & Lavan, argues that the proposed law is unnecessary since there are plenty of other civil remedies to discrimination.

Some argue that using the threat of fines or admission if a board doesn’t meet a timeline will be counterproductive. “If you put in that kind of presumption, any rational board is just going to simply reject a property transfer if they don’t feel like they have enough time to consider the factors they should weigh,” she says.

At the Byron Apartments, a 132-unit co-op in Murray Hill, Board President Silvana Vlacich asserts that the timelines are unreasonable. “Some boards just don’t meet as often,” she says. Besides, it is already in a board’s best interests to act quickly. “From a business standpoint, it’s a good thing to act within a reasonable time frame.” If boards need more time, she asserts, there are probably good reasons for it. “We pride ourselves on being prompt and doing what is right for a prospective shareholder. I’d hate the idea that we have to accept someone automatically because the paperwork is not correct.”

“It’s totally unfair to impose this burden on a volunteer board,” Talel says. “We think it will have a chilling effect on who would sit on a board, and boards are crucial to the successful running of a co-op.”

Concludes Friedrich: “There is simply no evidence that this is a problem. It’s only based on whims and hunches, and legislation should be based on facts and real statistics.”

Political Chances

There is admittedly “less resistance” to Fidler’s bill compared to Lander’s, which is the bill that demands reasons for rejection, says co-op attorney Geoffrey Mazel, a partner in Hankin & Mazel. “But the co-op community is vigorously opposed to both bills.”

Politicians have spoken softly, with variously sized sticks. In a statement at the hearing on Fidler’s bill, Mayor Michael Bloomberg opposed the measure because it creates burdensome record-keeping for co-ops and the automatic acceptance clause is “draconian.” Mayoral candidate Christine Quinn, the city council speaker, said through a spokesman that she is “reviewing the [Fidler] bill and testimony from the hearing.” She is flatly opposed to Lander’s bill, calling it “overbroad,” adding: “It may have the unintended impact of making home ownership less attainable and more expensive because complying with this law will be costly.”

The Real Estate Board of New York backs the part of Fidler’s bill with the time clocks but not the portion that would require boards to swear they are not discriminating, which Frederick Peters, co-chair of the board of directors of the group’s residential division, calls “unrealistic.” He adds: “I would say that the chances of this bill getting passed in its current form are not so great. What I am hoping is that it’s the jumping-off point for a conversation about a bill that would be passable and would bring about some urgency to the way the process of co-op admissions is managed.”

Matters will get more complicated because term limits are forcing Fidler out of office in January 2014. He says he’s not sure whether another council member will pick up the cause.

As for the state bills, Stuart Saft, chairman of the Council of New York Cooperatives & Condominiums, says he doesn’t think they have a chance as long as Republicans control the Senate. “The [Assembly] has passed versions of these bills for decades and they don’t go anywhere because there is no support in the Senate.”

So, if the bills die, does Saft think we will see more versions of them resurfacing? “Oh, absolutely,” he says. “I expect we’ll see this regularly until elected officials understand how complex a job it is for a volunteer board to handle all the issues that arise. It’s not as simple as some people would make it out to be.”

==HABITAT SIDEBAR==

THE CASES AGAINST CO-OPS

It’s an oft-cited statistic in the debate over bills that would fundamentally change the way co-ops handle admissions: only 22 cases have been filed by the city’s Human Rights Commission for discrimination by co-ops since 2000.

The stat comes from a statement by Mayor Michael Bloomberg when he opposed Councilman Lewis Fidler’s bill, which would institute deadlines for when boards would have to decide on admissions, and require them to swear they were not acting with prejudice.

The mayor’s office did not return calls seeking an elaboration on how they arrived at the figure. The commission’s annual reports list numbers of complaints and the protected class – age, race, etc. – but don’t specify whether it was made against a rental or resident-owned property. The individual complaint might contain that data, but since many accusations are made against a corporation – and co-ops are usually corporations – that would be difficult to uncover.

Clifford Mulqueen, deputy commissioner and general counsel for the city’s Human Rights Commission, says he’s not sure how the mayor’s office came to the figure, but says that “there are not a lot of complaints about co-ops. It’s mostly [concerning] rentals.”

If that figure of 22 cases is correct, it would indeed be a tiny fraction of overall complaints. According to the annual reports, from 2009 to 2012 there have been 6,039 inquiries from residents about possible discrimination in housing. In that four-year time span, the commission filed 481 cases of housing discrimination. During that time, 28 percent of cases were filed on behalf of people who believed they were discriminated against because of their disability, the most commonly cited protected class. In 2012, there were 109 cases filed by the commission for housing discrimination, compared with 342 cases for employment discrimination. – JVH