The Westchester County Board of Legislators is currently reviewing legislation that would dramatically impact the way co-ops are sold in Westchester County. The Fairness in Cooperative Home Ownership Law would require co-op boards to provide a written reason when rejecting an applicant and would establish a timeline that the co-op board would follow in the processing of applications.
This legislation is currently in various county legislative committees and will likely be subject to a full public hearing in mid-October. If approved by the board of legislators the bill would be subject to the county executive signing the legislation into law. Compliance with the law would be subject to proceedings of the County Human Rights Commission or review by the County Fair Housing Board.
Co-ops represent an important segment of the Westchester County housing market and are about 20 percent of all properties sold. They are vital to the housing market, as they are the property of choice for first-time homebuyers and empty nesters leaving larger homes in our area.
With a median selling price of a single-family home in Westchester reaching a record $710,000 this year, an average price of co-ops at $170,000 makes them an affordable option. Condos, the most similar type of property to co-ops, have a median price of over $417,000. Realtors believe that this legislation could help improve the value of co-ops since the purchasing process would become more transparent.
Many buyers shun the idea of buying a co-op. One reason is that buyers are intimidated by the vast information required to complete these applications. Tax returns, W-2s, references, assets and history of employment are just the beginning. Buyers are also asked about their financial history, current liabilities and credit history. Despite all this information, co-op applications often take months to process and a buyer can be rejected by the co-op board with no reason given. Co-op buyers often pay hundreds of dollars in application fees and receive no refund if they are rejected by the board. They have also invested significant time in the process, with no guarantee of acceptance.
The Hudson Gateway Association of Realtors is supporting legislation that would bring transparency to the co-op buying process. Requiring that co-op boards give a reason for a rejection and set a time line is consumer-friendly legislation that has no cost to the state. Suffolk County and the village of Hempstead on Long Island have passed this legislation without any negative impact. While there was a prediction of endless litigation and lawsuits, neither actually happened. Instead, buyers can purchase a co-op in an improved and open process.
Some opponents claim this proposed legislation threatens the very nature of co-op living and denies shareholders the right to choose their neighbors. They claim that some individuals may not be the best match for co-op living. They”™ve advocated a policy that new shareholders must share a common goal, strategy and philosophy to ensure the success of their community. However, Realtors feel that any denial be based solely on an applicant”™s financial ability to live in the co-op.
Opponents claim that this legislation would kill co-ops and that it”™s “a solution in search of a problem.” To the contrary, Realtors feel this legislation offers a solution to a problem that has kept the value of co-ops low and has been detrimental to the co-op buying process.
Realtors feel that there is no reason why a co-op board cannot give a reason for a rejection. In many cases, if the buyer recognizes a problem with their application they may even be able to improve or change something to respond to the board”™s objection. Proponents of the legislation feel that the secretive nature of the review process has given co-op boards a license to deny housing to persons deemed undesirable. By law, co-op boards cannot discriminate, so most rejections should be based solely on financial qualifications.
In addition to supporting legislation that would require that the co-op board give a reason, Realtors are also urging passage of legislation that would mandate a time frame in the co-op transaction. Similar legislation passed the Rockland County Board of Legislators earlier this year and is now law there.
Upon receipt of an application, co-op boards would have 10 days to deem the application complete or notify the purchaser of any defects. After the receipt of a properly completed application, the board would have 45 days to approve or reject the application. This mandated time frame would streamline the process and avoid instances where co-op boards fail to process applications in a timely manner. Requiring a decision in 45 days or less is beneficial to both buyers, sellers and everyone participating in the transaction.
Realtors feel that the Fairness in Cooperative Home Ownership Law is consumer-friendly legislation with no financial impact to the county. It is legislation that offers transparency and improves the co-op buying process.
Barry Kramer is the principal broker/owner of Westchester Choice Realty in Scarsdale. In addition he is president of the board of the Hudson Gateway Association of Realtors. He can be reached at barry@westchesterchoice.com or 914-725-4020.
