There's renewed interest in getting rid of some of the secrecy surrounding how New York City co-op boards operate. New legislation sponsored by NYC's Public Advocate Jumaane Williams would require co-op boards to tell rejected buyers in writing why they are being turned down.

Anyone who’s considered a co-op purchase will know the final stage of the process involves an interview with the board to seal the deal. At any point from offer to interview, not only can your application be rejected, but the board doesn’t need to give you an explanation. If passed, NYC would put an end to this.

The new bill is one of three targeting co-op transparency and would require co-op boards to provide this information within five business days after the board makes a decision. The statement would also have to provide enough information for you to make changes to any future application.

Two other bills before the City Council address the timeline for buying in a co-op and a requirement to provide timely financial information about the co-op to buyers. 

No one likes being rejected

If you've ever faced rejection, you can probably remember the sting of it. The whole point of these proposals is to "discourage co-op boards from turning people down," says Marc Luxemberg, president of the Council of New York Cooperatives and Condominiums. The board’s signed, sworn statement about the rejection would also have to provide a three-year history of the number of applications rejected by the co-op. 

Luxemberg calls the suggested changes an "outrageous intrusion into the functioning of boards." Co-op board members are, after all, unpaid volunteers and to make them provide signed statements, sworn under penalty of perjury, raises the stakes for their involvement.

"The legislators are treating the co-op volunteers as if they were paid landlords," he says. Under the proposed changes, there would be financial penalties imposed on co-ops that don’t comply with the law from $1,000 to $25,000. Geoffrey Mazel, founding partner at the law firm Hankin & Mazel, calls this "punitive" and "outrageous." 

Opening up co-ops to being sued

One of the other bills proposes a change to the way co-op applications are made to ensure the buying process isn't drawn out for months. This bill would regulate the application process so potential buyers would be told about the success or failure of their application within 45 days, with provisions for a 14-day extension if necessary.

This would prevent a buyer feeling strung along or worse, losing a low mortgage rate, due to delays by a co-op board in their decision making. However, under the proposed changes, the co-op would also face penalties for not following the new timeline and risk having to pay legal fees if someone successfully sues a co-op for not meeting these requirements. 

Penalties and legal fee provisions are also incorporated into the bill addressing co-op board rejections. Mazel says, this makes the proposals a money-maker for people who want to sue co-ops. "Whenever you have legal fee provisions, you get attorneys that will make a cottage industry out of suing co-ops—they are putting a target on the back of co-op boards," he says. 

All this could add to the financially vulnerability of co-ops, Luxemberg says. "Plus, who knows what it might do to insurance rates?" he says. 

Urgent progressive measure or manufactured crisis?

Attempts to change the law around co-op applications aren’t new and have been periodically raised in the past. The most recent attempt was in the New York State Senate in 2021 but the bill went nowhere. 

Those happy with the status quo point out New Yorkers are already protected by anti-discrimination laws at the federal, state, and city level with agencies and commissions to enforce the rules. What that means is co-op boards can't be discriminatory, so if you think you've been discriminated against, you have recourse through NYC's Commission on Human Rights (CCHR). 

The latest annual data shows 778 inquiries were made to the CCHR about discrimination in housing, although there's no indication they relate to co-op board rejections. Luxemberg says more than 95 percent of co-op applications are successful and the few that are rejected are largely for financial reasons. He calls these efforts to change the law a "manufactured" crisis—designed to look like a fight against discrimination when "there's no great crisis" in the first place.

There's a lot of momentum in the City Council for progressive causes, Mazel says, although he questions whether this is a progressive move. "The people they'll be hurting—the co-op owners of NYC—for the most part, are working- and middle-class people," he says. 

Of course, not all co-ops in NYC are affordable but they do tend to be less expensive than condos. Mazel says, these amendments will end up "hurting a solid housing stock." 

How to avoid co-op board rejection 

For any buyer interested in avoiding co-op rejection, the first step is to meet the building's financial requirements.

Co-ops often have strict rules about the finances of buyers. Most co-op boards require you to provide at least 20-25 percent of the purchase price as the down payment and some particularly restrictive co-ops may require up to 50 percent of the asking price as a down payment. Then there's the issue of post-closing liquidity, or money left over to pay your maintenance fees. Some co-ops want to see two years of maintenance in your bank account. If you're looking to buy a co-op, meeting the specific building's financial requirements is the first hurdle to clear and your broker should be able to guide you towards co-ops where you have a high chance of being accepted.

Most board packages are prepared digitally but they still require a lot of documents, including financial information, and a disclosure statement, tax returns, and letters of recommendation. Omissions or updates need to be explained. For example, if you're recently divorced, be prepared to give detailed information about alimony payments, whether you give or receive. 

Your next consideration is your motivation for buying the co-op. Many co-ops require that you use the place as your primary residence and prohibit pied-à-terre buyers. If you don't plan to live in the apartment full time, pick a co-op that has flexible pied-à-terre or sublet policies. 

Brokers typically say the interview is a meet-and-greet and your chances of approval are very high once you reach this point. Even so, you might get some curveball questions. Renovations can be an awkward one, especially if you plan on pulling out the kitchen. Be honest but emphasize how you intend to be considerate to your neighbors as you move forward with apartment improvements. 

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