How Co-op / Condo Background Checks Can Keep Out Criminals

Before the hour was out, the co-op's managing agent had checked the registry herself, called her direct supervisor and had the co-op board president in her office contacting the building's attorney.

It was a nightmare scenario with a happy ending. The board's attorney contacted the co-op's sponsor, who in turn spoke with the sublessor, who agreed to move out. A potential crisis of epic proportions was averted.

But this the co-op board simply got lucky: Sponsors are under no legal obligation to let boards review applications from potential purchasers or sublessors. In the case of this Bayside co-op, however, the sponsor has agreed to institute criminal background checks on all future tenants immediately, and provide proof to the board that he was doing so. While the $125 cost, paid by applicant, is hardly minimal, and while some applicants with squeaky-clean records might balk, most everyone agreed it was worth the hassle, says Errol Brett, the attorney for the co-op. Simply put, who wants a criminal living next door?

Is Failure to Act Actionable?

It can be a very gray area for boards and for sponsors. What is a co-op board's or a condo association's liability if a shareholder or a tenant commits a crime in the building? Can the board's failure to act — i.e., stop someone with a criminal record from moving into a building — be construed as a negligent act if a crime is committed?

"Generally speaking, criminal acts are not a basis of liability [for a board]," says attorney Steve Wagner, a partner in Wagner Davis. "There has to be some finding of additional negligence on the part of the building or the management company." Meanwhile, "proprietary leases make co-op owners responsible for their acts or negligence on the part of their guests or invitees."

The failure to check — in certain

instances — may be negligent.

However, should a problem arise from a shareholder or tenant and it comes to light that the board could have foreseen it by implementing a background check, "the failure to check — in certain instances — may be negligent."

John Auletta, executive director of the background screening division of Summit Security Services, says that for a $100 to $150 fee per application, his company will put an applicant through a multi-tiered process, reviewing credit reports and driving history and performing a search of criminal records, sex offender registries and Social Security numbers.

What's not there is just as relevant as what is, says Auletta. "If someone omits an address that they had in North Carolina that could be a clue that this person has a criminal record in North Carolina. You pick that up doing a Social Security address check."

Potential red flags can be plentiful even in an application that might otherwise appear innocuous, agrees Robert Grant, director of Midboro Management. Doing a background check gives board members information they might otherwise miss. Grant says his management company routinely runs business credit reports on applicants who are the sole proprietor of their companies. It makes sense to find out if their businesses are as sound as they appear on paper.

Glen Kotowski, a retired police officer and managing agent of the 1,844-unit North Shore Towers co-op in Glen Oaks, Queens, calls criminal background checks "preventive maintenance." Five years ago, Kotowski says, the co-op — a 110-acre complex with an 18-hole golf course, indoor and outdoor pools and a shopping center — went with his recommendation of doing checks.

Those checks so far have turned up nothing overly dramatic but useful nonetheless. One prospective applicant, for example, had warrants out for his arrest for failing to pay his parking tickets. While hardly earth-shattering, the information helped the co-op the board in reviewing the application. After all, asks Kotowski: "If he can't pay his parking tickets on time, what makes you think he would pay his maintenance on time?"

That might be overreaching a bit — unlike parking tickets and overdue library books, people tend to pay mortgages and maintenance fees in order not to lose their homes. But it's a good illustration that boards should use background checks as a tool, and not as an end-all and be-all.

Adapted from Habitat October 2010. For more, join our Archive >>