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BLOG / 09.08.21 /Eric P. BlahaandMichael Coppa

Cooperative Disclosure Law Now In Effect In Westchester County. Will Other Counties Follow?

The Westchester County Board of Legislators recently amended Local Law 2018-11 to impose new timetables and guidelines on Co-op Boards when developing application forms for potential purchasers, reviewing completed purchase applications, and accepting or denying applicants. The law became effective August 1, 2021, and implementation became mandatory August 16, 2021. Although this law applies only to Westchester, similar laws have been introduced in New York City and New York State for years. Given current trends, the Westchester law may foreshadow what ultimately may be approved in other forums.

NEW REQUIREMENTS FOR PURCHASE APPLICATION FORMS

The Cooperative Disclosure Law now requires that all co-op purchase application forms contain a cover sheet including the following language:

“Article II of Chapter 700 of the Laws of Westchester County, known as the Westchester County Fair Housing Law, prohibits discrimination in housing accommodations on the basis of a person or persons’ actual or perceived race, color, religion, age, national origin, alienage or citizenship status, ethnicity, familial status, creed, gender, sexual orientation, marital status, disability, source of income, or status as a victim of domestic violence, sexual abuse, or stalking.

“Section 700.21-a of the Westchester County Fair Housing Law governs applications to purchase shares of stock in cooperative housing corporations, and applies to this application. Under this section, the cooperative housing corporation is required to comply with the following deadlines:

  1. “Within fifteen days of the receipt of this application, the cooperative housing corporation must either acknowledge that it has received a complete application, or shall notify you of any defect in the application.
  2. “If you are notified of any defect in the application, within fifteen days of the receipt of the corrected application the cooperative housing corporation must either acknowledge that is has received a complete application, or shall notify you any defect in the application.
  3. “Within sixty days of receipt of a complete application, the cooperative housing corporation must approve or deny your application, and provide written notice thereof.
  4. “If your application is denied, the cooperative housing corporation is required to provide notice to the Westchester County Human Rights Commission, including your contact information.”

In addition, the application forms must list the “minimum financial qualifications that a prospective purchaser must meet to qualify to purchase the shares,” including the corporation’s preferred minimum income, total assets, and credit score of the purchaser, as well as the preferred maximum debt to income ratio and percentage of purchase price being financed.

Boards must set a minimum (or maximum, as applicable) for these criteria, but they have full discretion as to what the criteria may be so long as they are listed in the application.

REVIEW OF APPLICATIONS; NOTICE OF REJECTION TO HRC

Upon receipt of each co-op purchase application, the Board of Directors must inform the purchaser whether the application is “complete” within 15 days after receipt. If the application is incomplete, the Board must inform the purchaser of each “defect” in the application. Upon receipt of any revised application the Board then must within another 15 days either acknowledge receipt of a complete application or inform purchaser of “any uncured defect”.

Once a “properly completed application” is submitted by the purchaser, the Board has 60 days to send the purchaser a notice of rejection or approve the application. If the purchaser’s application is rejected, the Board of Directors must provide a “notice of rejection” to the Westchester Human Rights Commission (the “HRC”) within 15 days from the date purchaser was notified of the denial of their application.

The Notice of Rejection sent to the HRC must include the following:

  1. the full legal name and address of the Cooperative Housing Corporation;
  2. the full address and unit number of the unit that had been applied for;
  3. the full names, addresses, telephone numbers, and e-mail addresses (if available) for the denied applicant(s) and seller(s);
  4. the full names, addresses, telephone numbers and e-mail addresses (if available) for all legal counsel and real estate brokers involved in the rejected transaction;
  5. the date of receipt of the initial application;
  6. the date of receipt of the completed application;
  7. the date(s) of any interview;
  8. the date of rejection; and
  9. the reason for rejection.

Click HERE to view the “model” Notice of Rejection created by the HRC.

Note: It does not appear from the statute that the prospective purchaser must be notified of their denial using the HRC’s form of Notice of Rejection. The purchaser can be advised of acceptance or denial using the Cooperative’s customary form. Of course, if a purchaser raises an issue with a denial, we expect that the HRC will make the form available to the complainant.

FAIR HOUSING LAW TRAINING

The new law now requires existing Directors to complete two (2) hours of fair housing training every two years. Further, each new Director must complete a minimum of two hours of training within 60 days after joining the Board. The Cooperative must maintain records of every member’s training and must make the records available to the HRC upon request. The HRC is responsible for publishing an outline of minimum standards for the training and these standards were to be available by August 16th . (As of the date of this publication, they were not available.)

PENALTIES FOR NON-COMPLIANCE

If the Cooperative does not comply with the new housing law, the noncompliance could result in a fine of $1,000 for the first offense, $1,500 for a second offense and $2,000 for a third offense. The HRC has 1 year from the date of the violation to bring these charges.

The new law has given the Westchester Human Rights Commission greater power to scrutinize purchaser rejections by Boards of Directors. Boards must now be more transparent with their purchase requirements, timely with their decisions and correspondence with prospective purchasers, and (after a decision is made), ready to justify their reasons for the rejection of a buyer. Co-op Boards that do not comply with the new law are at risk of incurring monetary penalties and facing possible legal action from the HRC.