Fear of Rejection Protect Your Board From Discrimination Suits

More than 100 board members, residents, and guests recently gathered to hear a workshop seminar on how boards can avoid discriminatory practices when approving applications from prospective purchasers. The seminar panels were held in conjunction with The Cooperator’s 15th Annual Co-op and Condo Expo February 25 at the New York Hilton.

"Denied! Avoid Discrimination Against Prospective Purchasers" featuring expert panelists, Eric P. Gonchar and David Rothfeld of Kane Kessler, P.C.; Steven Birbach of Carlton Management; Mary Lesnewski of The Whitmore Group, and Peter B. Marra of William B. May; examined the legal rights that boards have in reviewing a prospective applicant and what the current federal, state, and local law requires when those decisions are made.

"One thing that you should know is that there is more and more case law regarding discrimination in co-op transactions becoming available each day," Gonchar stated. "The courts in New York are becoming much more lenient to hear these cases and they will review and hold co-op boards accountable for improperly made decisions. As board members I urge you to take heed." Any board action must be made in good faith, he added, but the burden of proving discrimination falls squarely on the shoulders of the applicant or shareholder. Discrimination claims, Gonchar said, most often affect co-ops because applicants must go through an approval process. "A co-op can use the scrutiny of reviewing co-op board applications as a way to protect a shareholder from those that do not fit the financial and the social profile of the building."

The Legal Pitfalls

Before you make up your mind about a prospective resident however, it’s important to know upon what you can and cannot lawfully base your decision. According to Rothfeld, federal, state, and city laws all prohibit discrimination, and violators may face hefty fines. If found liable, compensatory and punitive damages might be awarded by a court in an amount that could easily exceed $100,000, he said.

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