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My purchase of a cooperative apartment in NYC was rejected

by the broad of the...
My purchase of a cooperative apartment in NYC was rejected by the broad of the cooperative and I believe that there is an unfair business practices by one of the member of the broad of the cooperative. Should I consult a business law lawyer or a real estate law lawyer?
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Answered in 5 minutes by:
5/13/2013
BizIPEsq.
BizIPEsq., Attorney
Category: Business Law
Satisfied Customers: 996
Experience: I am a business attorney. I represent individuals and companies with all business related matters.
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BizIPEsq. :

Hello, I will be assisting you

BizIPEsq. :

can you elaborate about the unfair business practices you suspect the member was/is engaged in?

Customer:

I tried to purchase a cooperative apartment in NYC. The contract was signed about 1 month ago. It is a cash purchase without mortgage. The seller called my lawyer the next day after the contract was signed and express his regret of signing the contract and requested for the cancellation of the contract. I disagreed and the proceeded with the application for the approval from the broad of the cooperative. After submitting all the requested financial documents, the broad requested for a security deposit with the amount equals to 4 years of common charges and we agreed. Therefore, we had an interview with the broad. ... to be continue.

Customer:

During the interview, all of the questions were about our financial situation. About a week after the interview, our application was declined. The reason I believe one of the broad members has committed unfair business practices because of the followings:

Customer:

1. Based on the financial documents that we submitted, not only our real estate agent and our lawyer, but the seller lawyer agreed that our financial status should be strong enough that they don't see the rejection could be financially related.

Customer:

2. We also agreed to put down security deposit with amount equals to 4 years of common charges. According to the agents, this is very rare, most of the time when the broad worry about financial status of the applicant, they will require 2 years of common charges.

Customer:

3. The seller wants to get out of the contract.

Customer:

4. One of the members of the broad has an office on the same floor as the seller for more than 6 years and we believe that the member is doing a favor to the seller to get him out of the contract.

Customer:

Is it true that if we bring the broad to the court we should at least getting to know the reason for the rejection? Thanks!

Customer:

If it turns out that the reason for the rejection is financially related, will we be able to get the contract executed if the court is convinced that we are financially strong enough to own that apartment?

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Irwin Law
Irwin Law, Attorney
Category: Business Law
Satisfied Customers: 7,446
Experience: 30+ yrs. representing small business, real estate, probate
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Hello: Another expert here and I'll try to assist. The Coop is a private corporation and a purchaser of a unit is actually buying a share of stock in the corporation. As a private corporation, its Board of Directors may limit and restrict who may buy its shares. They can reject for just about any reason that does not violate federal or NY state law. Such restriction and screening would not be considered a 'business practice' - fair or unfair. A suit based upon your financial qualifications would not be likely to succeed in court.

I know this is not the Answer you wanted to hear. Hopefully the Board will change its decision and approve the sale. If it does, and the seller backs out on it, then you will have grounds to take the matter to court.

I hope this information is helpful and that you will enter a positive rating. I thank you for submitting your question to Pearl-Just Answer. We appreciate your business. If you need clarification or additional information, please send me a Reply and I will be happy to explain further. Please consult a local attorney to verify the accuracy of this information according to your state's laws.

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Thank you for the information.

Realistically speaking it is very difficult to impossible to sue boards of coops unless you can patently demonstrate that you were discriminated based on sex, sexual orientation, race, national origin or religion. The law (especially in NY where there are a lot of coops) gives boards a VERY wide latitude in making their business decisions.

Also keep in mind that a law suite, in addition to being very expensive, would potentially hinge on one board member admitting to acting on the request of his/her floor neighbor. It would be virtually impossible to compel the board member to testify truthfully. And to top it all, whether they genuinely were concerned with your financial situation or not, the fact that they created a paper trail where they express concern about your financial ability (again regardless of whether this is justifiable or not) in effect immunizes them as they will be able to point to this as being the basis for the rejection.

Here's what you can do:
1) From what you have described this looks like the work of an experienced board that knew how to properly lay the foundation for the rejection, so before commencing a law suit I would hire a private investigator to and find out if there were prior similar instances with this seller or other board shenanigans in the building.

2) I would have the PI investigate whether the seller tipped off the board and requested to reject you. In my mind this would be a much stronger claim that you may have against the seller as the seller has a contractual duty to deal fairly with you whereas the board does not have such contractual duty because they are not in privily with you. So if you can discover that the seller actively worked to sabotage the deal then you would have a cause of action against the seller and would then be able to sue for damages.

 

Thank you for your patrongae

 

Please rate my answer. Without your rating I do not get compensated for my work.

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Customer reply replied 4 years ago

Do the broad have to disclose their reason for a rejection in a law suite?


If the coop broad is not required to provide the reason for a rejection in a law suite, I don't see how a coop broad will be found guilty under any circumstances no matter what they had done. This is kind of against my common sense. On the other hand, if the reason for the rejection can be proven to be invalid in the court, why can the court enforce the execution of a contract?


 

If you sue the board and allege that the decision making was legally improper then the board would have to disclose the reason for the rejection.However, based on the actions the board took and the documents the board requested it is absolutely likely that the board will cite the concerns they had about your finances as the reason for the rejection and no other reason.

Generally speaking, the board would not need to prove that their concerns about your finances were justified, just that they had concerns, if at all. So they will likely present the same facts that led them to request you to deposit 4 years of maintenance as a valid reason for concern and the court will generally not dispute that. Even if you demonstrate to the court that you could have complied with their request to deposit 4 years worth of maintenance, the court would still likely not question the board's actions because legally they can reject you for any reason as long as it is not based on discriminatory reasons.

As noted, this board seems to be sophisticated and whether they had a legitimate concern or not, the paper trail would show that they had a concern about your financial ability which lead them to reject you.

You mentioned that this case goes against your common sense and I completely understand that, so let me explain that from a logical perspective a coop is a private association of people, a club if you will, and such people have the absolute reason, right and power to admit only those people whom they want and can reject others for whatever reason. From a legal perspective, a coop is a corporation and the owners are shareholders. You as an outsider do not have a right to demand to buy shares and become a shareholder. Imagine if you did have that right then you could approach any private company and demand to become a shareholder in that company. Obviously this would not be acceptable. This is why even if it is found that the board somehow acted fraudulently, the court is more likely to award damages than to order the coop to sell shares to you (courts generally do not force people to be together if one party does not want to).

In conclusion, if you do file a law suit you would need to allege discrimination and/or some fraud for the law suit have some likelihood to proceed to trial as without it, under the business judgment rule that gives boards a very wide latitude in decision making over their private corporations, your law suit stands a good chance of being rejected in summary judgment or earlier (meaning before it even goes to trial).

You are free to initiate a law suit and see where it takes you but I must note that the costs to you, even if you only go as far as summary judgment, would be fairly high.

Thank you again and please rate my service.
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Customer reply replied 4 years ago
I do understand the situation with a private company. I believe a private company even has the right to reject any outsider to be its share holders because of their race, which is not allowed in the situation for a cooperative.

I did some research for the particular cooperative and found that for the past 9 years, there were 180 transactions which involved 360 parties, among which only 3 are Chinese or with Asian origin. This percentage is far below the percentage of Asian origin in the population of NYC. With this statistics, do I have a case to go to court and have the cooperative released the percentage of applicants in the past 9 years who are with Asian origin. By doing so, we can see whether the rejection rate for applicants with Asian origin is much higher than the others.
Excellent research work!

Since there aren't any obligations for a coop to maintain a certain shareholder composition, that reflects the population of the city, I'm afraid that this avenue of legal thinking will lead you nowhere. If you are alleging discrimination then you bring specific instances how you personally were discriminated against (for example a racial slur that was uttered against you) if you can establish that then you would be able to explore what else the coop has done. There are plenty of coops that are just while, or just black or just Asian and they routinely reject other races and that's ok if the reason for rejection was not race.
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