I never want to hear you say: "I want it that way"

Recently, I read an article in the Ask Real Estate section of The New York Times titled: “Rejected by a Co-op Board. Do They Have to Tell You Why?”

It came on the heels of having listened to an episode of the Closed! Podcast, The Truth About Co-Op Board Approvals in New York City, which delved into this very topic. It also happened in parallel to several months of waiting on a response to my application to join Community Board 3 — no response received — so the themes of Rejection and Not Knowing are top of mind for me.

On Rejection, I got to thinking: We say we want feedback, but do we? Really?

With rejection on a job application, there’s a constructive element to learning where and how you fell short. If a prospective employer is willing to share insight, you can improve or safeguard or deflect and lessen the chance of the same outcome. That is, of course, if they give you the real reason — not just a plausible and legally defensible one.

Dating is no different, although in this realm it’s totally fine (or, rephrase, legal) to reject someone based on how they look, or talk, or dress, or eat, or… Sorry, I’m getting carried away. In dating, though, people aren’t obligated to tell you, unless they’re either compassionate or cruel. (It’s in the delivery.)

But, back to co-op boards: Do they have to tell you?

No, they really do not.

Co-op boards in particular are notoriously opaque, but that opacity exists as much for their protection and the protection of their shareholders as it does to frustrate buyers and sellers on the other side of the table. In many cases, the more a board says, the more it potentially opens itself up to litigation, scrutiny, or allegations of impropriety.

Boards are tasked with making decisions for the benefit of all shareholders. The majority of the time, those concerns tend to center around finances: whether an applicant will be able to meet their monthly obligations, maintain liquidity after closing, and contribute to the long-term financial health of the property.

While boards are tasked with acting in the best interests of the corporation, their choices and concerns are not always voiced or articulated publicly. What happens within the confines of a board meeting is generally known only to board members themselves. (Herein lies the suggestion to the Alexander Hamiltons among us to run for their boards if they wish to be “in the room where it happens.”)

Let it be said, though: Without a doubt, people do get rejected for reasons other than finance alone.

Many may recall our prior More For LES article regarding Livvy Dunne. (She was rejected by an Upper West Side co-op board, but it’s doubtful that it was because of her finances.) Beyond Ms. Dunne, there are examples of famous individuals reportedly denied by co-op boards over the years, including Madonna, Richard Nixon, Barbra Streisand, Mariah Carey, Cher, Billy Joel, Diane Keaton, and Greta Garbo. These rejections were generally not understood to be financial in nature, but rather tied to concerns surrounding publicity, paparazzi, disruption, security, media attention, lifestyle compatibility, or their perceived impact on the quality of life within the building.

Honestly, if Madonna lived in my building, I might feel compelled to “strike a pose” in the lobby or elevator, and then tell my neighbors “there’s nothing to it.”

This isn’t an Upper West or Upper East Side thing. The Lower East Side confronts these issues, too. Readers may recall our recent piece, “Concessions are better at the movies,” which covered rejected transactions, concessions, and pricing disputes at a Lower East Side co-op. Whatever the validity of those claims, boards can reject potential deals if the seller accepts an offer that is unjustifiably below market rate — such that it will impact future valuations of prospective sales within the building. (This rejection falls under the “It’s not good for the shareholders” category.) Just the same, this type of situation costs all stakeholders time, money, and emotional capital.

Ultimately, the composition of a board, along with its devotion to the mission of the building and its commitment to fellow shareholders, often determines whether a building embraces more transparent practices, more engaged communication, or a more rigid and insulated governance structure.

Whatever the status quo, the process itself is changing…at least, a little.

Earlier this year, the New York City Council overrode Mayor Adams’ veto and enacted Intro 1120-B, a new law establishing timelines and procedural requirements for co-op boards reviewing transfer applications.

Beginning in late July, qualifying co-op boards in New York City will be required to maintain standardized application packages and transfer procedures, acknowledge submissions within 15 days, and issue decisions within specified timelines. (That, or they will risk financial penalties, although in practice some may view the penalties as “costs of doing business.”)

Importantly, the law does not require boards to disclose why an applicant was rejected. Boards will still retain broad discretion in deciding who is approved. But, the legislation does seek to reduce delays, standardize communication, and impose procedural accountability on a process that many buyers, sellers, and brokers have long viewed as inconsistent and opaque.

For many buildings, particularly smaller or more informally operated co-ops, this may represent a meaningful operational shift. For buyers and sellers, it may at least provide more predictability regarding timelines and process, even if the reasoning behind decisions remains private.

It’s unlikely, though, that this will provide more granularity to rejections, which is unsatisfying to many humans living on Earth.

Judging by the volume and tenor of the comments in the NY Times article, people seem to want to know. And, in Westchester County, people also seem to get what they want.

Our friends to the north have enacted a co-op disclosure law requiring boards to provide written reasons for rejection, disclose financial requirements, complete fair housing training, acknowledge applications within 15 days, and issue decisions within 60 days. Rejections must also be reported to the Westchester Human Rights Commission. Unlike the New York City law, up north of the George Washington Bridge — aka, “Canada” — applicants have greater visibility into both process and rationale.

The Westchester County law and Intro 1120-B are kissing cousins. Some see Intro 1120-B as a gateway to greater transparency. Still, it’s unlikely that New York City will move rapidly toward significantly more transparency in its process because it’s risky and because people can be litigious — which is actually another reason why people tend to get rejected from buildings.

For co-ops, lawsuits are bad (and costly). They do not want to get sued by shareholders, and it happens. For this reason, co-op boards know that they can mitigate the risk of being sued by keeping people who tend to sue out.

If you haven’t read the article, it’s worth it; but, so are the comments. Commenters referred to co-op boards as “power-hungry people,” “petty tyrants,” and “swaggering dictators with delusions of Godhood”. There are also more sympathetic sentiments, particularly by people who recognize that these are also unpaid volunteers.

Here’s the best guidance for avoiding rejection…at least, from co-ops.

Work with a licensed real estate professional who looks out for your interests. If you’re a buyer, they should advise you on the feasibility of your prospective offer before you enter the mix. This means understanding your financial position, how you will be evaluated by the co-op, and whether your debt-to-income ratio, i.e., how much you owe v. how much you make, will meet the acceptable threshold. They should also know what comparable units in the building are transacting for in order to help guide you — both for you to be competitive, and also to be approved by the board.

This latter part is really important if you are a seller. Even if you are willing to accept a lesser price, it’s possible that a board will reject a transaction if it does not meet a certain pricing standard or offer floor. Again, knowing what other sold units went for is an indicator — one that will keep you from taking on risk, cost, and time by going to contract only to later face a rejection.

Your real estate advisor can counsel you, while also working cooperatively with their counterpart, to improve the chances that all parties reach the closing table.

How would you feel about getting rejected? Would you want to know why?