When a Web site rejects you because it doesn’t recognize your password, that’s one thing.
When a book publisher snubs your manuscript, that’s pretty bad.
And when a lover dumps you, that’s much worse, almost as depressing as a lender’s disapproval or your mortgage application.
Arguably, however, little else compares with a co-op board’s rejection of an application to become a resident of the building, and rejection has been said to be happening with rising frequency.
Not only can such a rejection be demoralizing. It also can be a devastating setback that costs time, energy and money.
For the buyer, rejection likely will mean starting the search anew. It could mean upsetting plans to sell or give notice to a landlord, move, arrange insurance and utilities, postpone renovations.
As well, it can delay or complicate a transfer to new schools for offspring. It can result in having to assemble financial and other paperwork all over again with the passage of time, not to say putting together a wholly different and updated board application package. Money spent to obtain financing may well have to be spent again.
Even sellers (who have been counting on the transaction for any number of financial and logistical reasons) are going to face delays that could be critically important. Perhaps even worse, board rejection of a desirable buyer is going to mean more troublesome open houses and potentially the lost chance to sell the property in a favorable market for a fair price.
The only silver lining for buyers is that a board rejection does not cause them to lose their 10 percent deposit. Even if the board conditionally accepts a buyer — say, by requiring the deposit of a year or two years’ of monthly maintenance fees — the deposit must be returned if the buyer does not agree to the provision.
Aside from escrowing maintenance, boards are not above asking the buyer to finance a smaller amount of money than stipulated in the sale contract or to ask for a third-party guarantee of the maintenance.
A buyer may seek to renegotiate the contract to include a lower price, better terms or both. In the event that buyer and seller cannot come to agreement, the buyer still can walk away with the deposit.
Both the federal and New York City governments have enacted anti-discrimination laws to protect homebuyers, but the “business judgment rule” for co-ops gives board members enormous latitude if they act within the bounds of authority of the building’s by-laws and proprietary lease so long as their decisions are not discriminatory.
Just try to prove that a board rejection is discriminatory: There is no requirement for boards to disclose their reasoning. They aren’t even required to interview applicants.
Although the City Council sporadically seeks to require boards to disclose why they turn down an applicant, you are not going to see such legislation pass any time soon.
Tomorrow: Weekly Roundup
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Malcolm Carter
Licensed Associate Real Estate Broker
Senior Vice President
Charles Rutenberg Realty
127 E. 56th Street
New York, NY 10022
M: 347-886-0248
F: 347-438-3201
Malcolm@ServiceYouCanTrust.com
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