The Real Deal New York

REBNY flips on co-op bill

After years of balking, the real estate trade group backs controversial legislation on board accountability

March 31, 2011
By David Jones

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From left: Steven Spinola and Alphonse Fletcher

The Real Estate Board of New York has thrown its weight — at least some of its weight — behind a controversial City Council bill that would require co-op boards to approve or reject new buyers within 45 days.

REBNY recently sent out an e-mail urging members to support the bill, sponsored by City Council Member Lewis Fidler, a Brooklyn Democrat, amid rising concerns that buyers are beginning to sour on co-op deals because of the lack of transparency and long wait times for board approval. (Under current law, co-op boards are not required to notify a potential buyer about the status of their application, even if a decision is never made.) The move by REBNY to support the bill marks an unusual step for the trade group, which has historically opposed restrictions on co-op boards’ decision-making power.

“We favor the portion of the bill that would require the boards to respond within a certain time period,” said John Doyle, attorney for REBNY, adding that “certain provisions of the bill need to be amended.”

In addition to requiring boards to respond to applicants within 45 days, Fidler’s bill, which is called the Fair Cooperative Procedure Law, mandates that each board member certify that they did not discriminate and calls for violations to be brought before the city’s Commission on Human Rights or in civil court. Boards that fail to respond in time would face fines ranging from $2,000 to $15,000. A similar Suffolk County bill requiring such disclosure became law more than a year ago.

Alleged discrimination by co-op boards has long been an issue in New York, but the debate has picked up steam lately. In February, a Hispanic couple filed lawsuits against Trafalgar House at 120 East 90th Street after the wife, Evelyn Bruni, was removed from the co-op board after speaking with a local television station about alleged bias in the building. And at the famed Dakota on the Upper West Side, apartment owner and former board president Alphonse Fletcher Jr. recently filed suit, claiming that he was not allowed to buy a neighboring apartment because he is black.

REBNY vehemently opposed a 2006 version of the bill sponsored by former Council Member Hiram Monserrate. But that version of the bill called for co-op boards to disclose the reason an applicant was rejected — a provision that REBNY was and is still very much against. At the time, REBNY officials said the bill would have exposed boards to lawsuits and dissuaded shareholders from serving on boards.

This time, however, REBNY is supporting the bill in order to “promote a sound housing market for buyers and sellers,” according to the group’s website, which continues: “Slow cooperative apartment sales applications processing impedes normal market activity as buyers stop looking and sellers stop soliciting offers for the property.”

Doyle, however, denied that the organization is changing its tune, saying that REBNY still opposes requiring board members to certify that they did not discriminate. That provision would lengthen the application process, and is unnecessary because existing laws already prohibit discrimination, he said.

“All of the groups that are mentioned in the law are currently protected under the [city’s] human rights law,” said Doyle.

He added that the bill might not actually prevent discrimination. “If [a board member] is discriminating, what would prevent them from signing the form anyway?” Doyle said.

Attorney Lawrence DiGiovanna, who represents about 30 co-op boards in Brooklyn, said he does not believe discrimination happens often enough to warrant this legislation.

“All of the boards that I represent take purchasers’ applications very seriously,” he told The Real Deal. “Most are concerned with the applicant’s financial ability, and ability to be a good neighbor.”

Many in the brokerage community support the bill, saying it would create a more professional atmosphere in the application process, and lift the veil of mystery at many co-op boards, which critics allege take a painstakingly slow and byzantine approach to decision-making.

“It upholds all the tenets of fair housing,” said Donna Olshan, president of Olshan Realty, a boutique residential brokerage in Manhattan. “For the consumer, it’s about making sure that cooperative buildings operate in a business-like fashion, and [aren’t] run like some shadow government or dictatorship.”

But some in the industry worry that if passed, the legislation would make co-op shareholders reluctant to sit on boards, for fear of being held personally liable for board decisions.

“Co-op boards work very hard and they get a lot of aggravation and they get paid nothing,” said City Council Member Mark Weprin, founder of the newly formed Caucus on Cooperative and Condominium Housing. “Aspects of this [bill] would create even less incentive.”

Weprin said the caucus is split on the issue. While many members are concerned about fair housing issues and speeding up the application process, others feel that existing discrimination laws are suitable.

The Council of New York Cooperatives & Condominiums e-mailed members last month opposing the bill on the grounds that it could dissuade shareholders from serving on boards.

“Unfortunately, there seems to be an attitude that people get on a co-op board and they become the enemy,” said attorney Marc Luxemburg, president of CNYC. “It’s the wrong view of things.”

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