Q. I am a new resident of a co-op building in New Jersey and unaware of the rules, regulations, and state laws pertaining to applicants. I now find myself on the co-op interview committee, and have been told that it is no longer legal to interview applicants. I actually have several questions: Is it true that co-op applicants cannot be interviewed in person? Is it legal to inquire or investigate if an applicant has a criminal record? If they do, is it legal to reject them because of that? Further, does the answer to the previous question change at all if an applicant is a registered sex offender?
—Needing Answers I Cannot Find Online
A. “The exact answer to your question depends on the provisions of your cooperative’s governing documents, and you should seek guidance from your attorneys,” states attorney Matthew Z. Earle, partner in the Hackensack law firm Kates, Nussman, Ellis, Farhi & Earle, LLP. “However, as a general proposition, nearly all cooperative proprietary leases require the consent of the board of directors for the transfer of shares and assignment of lease, usually after a recommendation by the ‘admissions committee.’ In addition, virtually all proprietary leases state that, ‘The board may not withhold consent except for the failure of the proposed assignee to meet the financial requirements established by the board of directors.’ This language is in most proprietary leases because it was required by the Department of Community Affairs (DCA) as a condition to approve the developer’s offering plan.
“What this means is that a board should establish, by written resolution adopted at a meeting open to attendance by shareholders, financial standards for admission. As per the express terms of most proprietary leases, an applicant cannot be rejected due to a criminal record, or because he or she is a registered sex offender. Instead, applicants can only be rejected for failing to meet the financial standards.
“In the event that your cooperative’s proprietary lease does not limit rejections to financial criteria, you should seek the advice of counsel with regard to rejecting applicants for non-financial reasons, and make sure that any such rejection does not run afoul of the New Jersey Law Against Discrimination or other statutory protections.
“With respect to inquiring about a criminal record and/or sex offender registration, there is no reason to make such inquiries, since you probably cannot act on the information obtained. However, many cooperatives do run a landlord-style ‘consumer report’ check that may reveal criminal records. Note that if you reject an application due in whole or in part to information contained in a ‘consumer report,’ such as a background check or credit check, you must comply with the Fair Credit Reporting Act, including provisions relative to adverse action notices.
“Finally, it is not illegal to interview applicants. However, some cooperatives have stopped interviewing applicants because: (1) the only criteria for admissions are the financial records submitted by the applicant; and, (2) the interview process may theoretically increase the cooperative’s exposure to a discrimination claim because it may make the committee aware of the applicant’s status as a member of a protected class (e.g., race, national origin, religion, etc.). Many cooperatives, however, still conduct interviews to ask for clarifications regarding financial issues or to introduce the potential new shareholder to the various facets of cooperative living.”