Three years ago, a member of the New York Giants football team was looking to move into Manhattan and applied to buy a co-op at one of the more luxurious buildings in town. Although the player made millions each year, he was denied entrance by the building's board. At that point, he got fed up with the whole New York co-op market—and a few months later, he was living in a million-dollar co-op in Fort Lee, New Jersey. In Fort Lee, he never had to undergo what he thought was an unfair interview process like he underwent in New York.
New York co-op boards are notorious for turning down prospective buyers—even celebrities such as Madonna, Barbra Streisand, newsman Mike Wallace and former president Richard Nixon have been cold-shouldered at one time or another. When explaining their rejection of financially well-qualified applicants, co-op boards often cite their fear that the presence of a celebrity will draw too many fans and other celebrities to the building.
In New York, co-op boards typically reserve the right to approve or reject prospective purchasers. They ask for extensive financial background data such as tax returns and bank statements, as well as personal, professional, and prior landlord references. Generally a prospective purchaser will also have to attend an in-person interview with the board, who will then determine whether the building will allow the sale to the candidate. Interestingly, while co-ops are not allowed to discriminate against an applicant illegally, the law does not require them to give the reason for their rejection if they opt to throw out an application.
Too Much Power?
The board of directors of a co-op or condo plays an instrumental role when it comes to the buying and selling of a unit. The board can sometimes act as a dictatorial fiefdom—and sometimes as diplomatic protectorate. When it comes to admission policies, New Jersey boards may not have the same power that their Manhattan counterparts have, but they still have a vital say in who lives within the association.
Since a co-op is a corporation, a co-op board can control who lives in the building by controlling who is allowed to become a corporation shareholder and proprietary leaseholder. And as long as the co-op does not violate federal, state or local laws against discrimination, it is typically free to grant or withhold its consent to a transfer of shares in the lease for any reason—or no reason at all.