Must a Co-op Board Provide a Reason for a Rejection?
Must a co-op board provide a reason for rejecting an applicant?
It depends on the location of the property. In New York City, co-op boards are not required to provide a reason for rejecting an applicant. This is because co-op boards are provided the protection of the “business judgment rule” in making the decision to reject an applicant. The business judgment rule bars judicial inquiry into a co-op board’s actions where such actions are “taken in good faith and in the exercise of honest judgment in the lawful and legitimate furtherance of corporate purposes.” Therefore, if the board’s rejection does not violate federal, state, or local fair housing laws, the applicant most likely cannot successfully challenge the board’s decision and the board does not need to provide an explanation.
On the other hand, co-op boards outside of New York City may be subject to different or additional rules. For example, despite also being subject to the business judgment rule, both Suffolk County and the Village of Hempstead explicitly require that co-op boards provide a written explanation of their reason for rejecting an applicant.
|Neil B. Garfinkel,
REBNY Broker Counsel
Partner-in-charge of real estate and banking practices at Abrams Garfinkel Margolis Bergson, LLP