Admissions Alert: Can Co-ops Legally Ask If Children Will Live in Apartment?

In one case, a building I represent as an attorney interviewed a young couple who wanted to purchase a studio apartment for themselves and their baby. On the face of it, that was an unusual purchase, since usually couples already living in a studio apartment, as this couple did, sell their studio apartment to move up to a one-bedroom when they have a baby. Here, a young family of three wanted to move into a studio apartment.

Baby Talk

During the couple's co-op admissions interview, board asked who would be watching the baby during the day and where they planned to have the child go to school. When the board ultimately turned down the application, the couple immediately assumed it was because the building was discriminating against people with children, and they sued the board.

I defended the case through the board's insurance carrier. What was interesting is that when I interviewed the board members, none of them said their decision had anything to do with the couple having children. Their focus had been on whether the couple could afford the apartment. The husband worked in the restaurant industry and his base salary was low. It was augmented with a bonus.

Bonus Baby

Most boards are cautious about applicants whose incomes depend on a bonus, since bonuses are not a certainty. When discovery took place, we had to disclose how many units in the building had children in them and how many of those units were studio apartments. There were no studio apartments with children in them.

Even though the board members felt they had done nothing wrong, at the end of the day, the board did not want to risk litigating the case to a conclusion and preferred to settle. I worked out a settlement where all the court records reflected that the case had been settled. They did not indicate the amount of the very small settlement payment, made off-the-record between the parties.

COMMENT There are several lessons to be learned from this experience. First, in looking back, the board members felt the package never should have made it to the board meeting for a review. Not all applications result in interviews. If the couple's income did not meet the board's criteria, the couple never should have gotten to the interview stage. The questions asked about the child were intended to be purely “friendly,” but the board members needed some sensitivity training about these issues to be aware of what they could and could not discuss. Boards should review this process with legal counsel.

What was relevant was how long the husband had worked at his job and his future financial prospects. Similar issues arise when co-ops allow purchasers to buy apartments as a pied-à-terre and try to restrict the use. One building asked a potential shareholder to agree that the children could never stay in the apartment without the shareholder being there. In a sense, that is not unlike the occupancy rules in the proprietary lease, but the board asked the shareholder to sign a document acknowledging that before the closing could be scheduled.

Boards have to be aware of how these policies may be perceived by others. Many boards do not review these things with outside legal counsel. Some review them with other members who are attorneys but are not specialists in co-op law. It is a very important area, and it is worth spending some time to refine the policies.

C. Jaye Berger is an attorney in private practice, and a writer and lecturer on real-estate issues.

From the November 2011 issue of Habitat magazine. For print-magazine articles back to 2002, join our Archive >>