Warning Signs

You are interviewing a potential purchaser of an apartment in your co-op. One of your fellow board members, making small talk, says: “You have an interesting accent. Are you Irish?” Later, another member asks: “You look awfully fit for your age. Do you jog?” Near the end of the interview, yet another board member remarks quite casually, “We don’t allow move-ins on Saturdays, but I wouldn’t think that would bother you, as it’s the Sabbath.”

At this point, your warning signs should be flashing code red. These three board members, quite innocently, have each planted a ticking time bomb that could very easily explode into a discrimination suit if this applicant is turned down.

More discrimination claims arise out of what is said or done at the admissions screening interview. It is important to create a comfortable atmosphere, but saying the wrong thing before, during, or after the interview is just as problematic as asking the purchaser about his or her race or religious beliefs.

Boards should adhere to the following four admission rules:

1. Do not interview anyone until the purchasers have submitted a complete admissions package and answered all the board’s questions.

2. Do not discriminate or say anything that can be interpreted as discrimination.

3. Do not reject anyone until you have spoken to the corporation’s counsel, because sometimes the board members can be found to have discriminated without realizing it.

4. Other than the interview, do not communicate with the purchaser, except through the manager.

No one should be permitted to buy before completing a purchase application and submitting it to the managing agent for the board. The managing agent should review the application before submitting it to the board, or return it to the would-be buyer or broker handling the deal if it is incomplete, contains a photograph of the potential purchaser, or includes any information that could be used as the basis of a discrimination claim (i.e., age, race, religion, sexual orientation, national origin, disability).

The board, in turn, should review the potential buyer’s finances and not grant an interview if the application is incomplete or is otherwise unacceptable. If the board needs additional information, there is no reason not to ask for it.

However, be careful.

In New York, cooperatives are subject to both state and city human rights laws. New York State law makes it illegal to refuse to sell an apartment to a potential buyer because of race, creed, color, national origin, sex, age, disability, or marital or familial status. The New York City administrative code also makes it unlawful to refuse to sell based on race, creed, color, national origin, gender, age, disability, sexual orientation, marital status, occupation, lack of citizenship, or because children may be living there.

Board members should also be aware of the burdens of proof that each party to a discrimination action must meet. To prove a prima facie case of housing discrimination, the plaintiffs must establish that:

1. They are members of a protected class

2. They are qualified to purchase/sublease the unit

3. Their application was denied

It is, therefore, relatively simple for the rejected purchaser to satisfy the requirements, which shifts the burden of proof to the cooperative’s board.

The board must rebut any inference of housing discrimination by proffering a legitimate, nondiscriminatory reason for their decision to turn down a potential buyer. After that, the burden shifts back to the plaintiff to prove that the reason proffered by the board is not the actual reason. If the cooperative is unable to prove its claims, it will lose. That means that the board must demonstrate that it did not discriminate, which is not easy.

The risk to the members of the board should not be taken lightly because, if found guilty of discrimination, neither the corporation’s directors’ and officers’ insurance nor the indemnification provisions of the bylaws will provide protection to the board or will assist the members of the board in paying their legal fees or any damages assessed against them. Indemnification usually exists unless the act is willful or intentional. Acts of discrimination, unlike criminal acts, are not inherently intentional or willful.

The board should also make certain there is adequate access for disabled purchasers. The interview should be held in either an apartment or in the managing agent’s office. It should not take place in the lobby or the superintendent’s office. The board should also avoid unnecessary questions. It should use the interview as an opportunity to speak to the applicant about the cooperative and answer any questions.

Two areas you can discuss are family status and citizenship. Family status is defined as “one or more individuals (who have not attained the age of 18 years) being domiciled with (1) a parent or another person having legal custody of such individual or individuals; or (2) the designee of such parent or other person having such custody. Questions concerning occupancy of the unit are permitted. As for citizenship, requiring a diplomat to waive his diplomatic immunity with respect to a summary proceeding or other actions to terminate the lease is not illegal discrimination. Board members should not discuss any admissions interview with anyone other than themselves.

Remember: boards should always proceed carefully during the admissions process to minimize the risk of even unintentional discrimination.