Co-op Board Approval Process: Stages, Fair Housing Limits and What If You Are Turned Down

Co-op board approval is the step where the cooperative corporation's board decides whether to accept you as a shareholder and resident before a sale of shares closes. The stages usually run from an application package, through a financial review and often an interview, to a decision. The building's own documents set the criteria, and fair housing law sets limits on what a board may base a decision on.

This guide explains how the process normally runs, which laws limit a board's discretion (quoting the statutes directly), and what the law says about challenging a refusal. It is general information and not legal advice. No guide can predict how a particular board will decide. Every board follows its own documents, so the building's proprietary lease, bylaws and house rules are the first things to read. For the wider picture of owning in a co-op, see pros and cons of co-op living.

Why co-ops have a board approval step

In a co-op you buy shares in the corporation that owns the building, and the corporation's board manages that corporation. Because every shareholder shares in the building's costs and obligations, many co-ops reserve the right to approve who joins. A condominium buyer usually does not need that approval, because a condo owner holds title to a unit. The difference comes from the structure: see housing cooperative vs condo and what is a co-op apartment.

Not every co-op works the same way. Many market-rate buildings use a board interview. Affordable and regulated co-ops, such as HDFC co-ops and Mitchell-Lama co-ops, add program rules and agency oversight. Senior co-ops add age rules. See senior housing cooperatives.

The usual stages

The names and order differ by building. The stages below are common, not universal, and the building's documents and managing agent control what applies to you.

Stage	What usually happens	Who handles it
1. Offer accepted	Buyer and seller agree on a price, subject to approval	Buyer, seller, brokers
2. Application package	Buyer submits the building's required application and supporting documents	Buyer, managing agent
3. Review	The managing agent or board reviews the package, including finances	Managing agent, board
4. Interview	Some boards meet applicants, in person or remotely	Board or a committee
5. Decision	The board approves, refuses or asks for more information	Board
6. Closing	If approved, shares and lease transfer at closing	Parties, lawyers, lender

Stage 2: the application package

The application is the building's own form and checklist. Applications usually ask for income and asset information, and the building may require documents that support it. The building may also charge an application fee or require other items. Ask the managing agent or seller's broker for the building's current requirements, and read them in full before you assemble the package.

Two cautions apply to any package. First, give accurate and complete information. The board relies on what you provide, and an inaccurate statement can create problems for you later. Second, the purchase contract may make closing subject to board approval, so read what happens to your deposit if approval is refused, and have a lawyer who knows co-ops explain it before you sign.

Stage 3: financial review

Boards usually look at whether a buyer can carry the monthly charge and the cost of ownership. If you are borrowing, the lender also reviews you and, because the loan is secured by shares and a lease, the cooperative itself. See co-op share loans and co-op mortgages. Some co-ops set limits on how much a member may borrow, and the building's documents say whether that applies.

Stage 4: the interview

Some boards interview applicants and others decide on the paperwork. Where there is an interview, it is usually a conversation with the board or a committee about the applicant and the home. The legal limits below apply to the interview as much as to the paperwork.

Stage 5: the decision and timing

The board approves, refuses or asks for more. Some buildings give reasons for a refusal and some do not, and the building's documents and state law govern. Timelines vary by building, so ask the managing agent how long the process usually takes, and ask the seller's broker what happened in recent sales in the same building. Do not assume a deadline carries over from another building.

Stage 6: closing

After approval, the transfer of shares and the assignment of the lease are completed at closing. Check whether any flip tax, transfer fee or move-in deposit applies and who pays it under the contract and the building's rules.

What the law limits: fair housing

A board has discretion, and that discretion has legal limits. Two bodies of law are most relevant: the federal Fair Housing Act and, for buildings in New York, the New York State Human Rights Law. Other states and cities have their own laws, so check where the building is.

Federal law

Section 804 of the Fair Housing Act, 42 U.S.C. 3604, says that, as made applicable by section 3603 and except as exempted by sections 3603(b) and 3607, it is unlawful:

"To refuse to sell or rent after the making of a bona fide offer, or to refuse to negotiate for the sale or rental of, or otherwise make unavailable or deny, a dwelling to any person because of race, color, religion, sex, familial status, or national origin." (3604(a))
"To discriminate against any person in the terms, conditions, or privileges of sale or rental of a dwelling, or in the provision of services or facilities in connection therewith, because of race, color, religion, sex, familial status, or national origin." (3604(b))
To make, print or publish any notice, statement or advertisement with respect to the sale or rental of a dwelling that indicates any preference, limitation or discrimination based on race, color, religion, sex, handicap, familial status or national origin, or an intention to make any such preference, limitation or discrimination. (3604(c))

Subsection (f) adds protections based on handicap. It makes it unlawful to discriminate in the sale or rental of a dwelling, or otherwise make it unavailable, because of a handicap of the buyer, of a person residing or intending to reside in the dwelling, or of any person associated with the buyer. It defines discrimination to include a refusal to permit, at the handicapped person's expense, reasonable modifications of existing premises that may be necessary for full enjoyment, and a refusal to make reasonable accommodations in rules, policies, practices or services when they may be necessary to afford equal opportunity to use and enjoy a dwelling. (3604(f)(1)-(3))

Does it reach co-ops? The Act defines "dwelling" in section 3602(b) as "any building, structure, or portion thereof which is occupied as, or designed or intended for occupancy as, a residence by one or more families." On its face, that text describes a co-op apartment, which is a portion of a building occupied as a residence. The Act also contains exemptions, found in 42 U.S.C. 3603(b), for certain single-family houses sold or rented by a private individual owner and for rooms or units in dwellings with no more than four families where the owner occupies one. Read the text of section 3603(b) for the exact conditions. HUD's regulations on housing for older persons, 24 CFR 100.304(b), list "a cooperative" among examples of a housing facility or community. A fair housing agency or a lawyer can tell you how the Act applies to a specific building and situation.

Familial status. The Act defines it in section 3602(k) as one or more individuals under 18 domiciled with a parent or another person having legal custody, or the designee of that person. It also applies to a person who is pregnant or is in the process of securing legal custody of a minor. Qualifying housing for older persons is exempt from the familial status provisions under 42 U.S.C. 3607(b).

Retaliation. Section 3617 makes it unlawful to coerce, intimidate, threaten or interfere with any person in the exercise or enjoyment of a right protected by sections 3603 to 3606, or on account of having exercised it or having aided or encouraged any other person in doing so.

New York State law

Executive Law section 296(5)(a) applies to "the owner, lessee, sub-lessee, assignee, or managing agent of, or other person having the right to sell, rent or lease a housing accommodation," and to any agent or employee. It makes it unlawful:

to refuse to sell, rent, lease or otherwise deny or withhold a housing accommodation because of the race, creed, color, national origin, citizenship or immigration status, sexual orientation, gender identity or expression, military status, sex, age, disability, marital status, status as a victim of domestic violence, lawful source of income or familial status of the person (296(5)(a)(1));
to discriminate in the terms, conditions or privileges of the sale, rental or lease, or in the furnishing of facilities or services, on those grounds (296(5)(a)(2)); and
"to print or circulate or cause to be printed or circulated any statement, advertisement or publication, or to use any form of application for the purchase, rental or lease of such housing accommodation or to make any record or inquiry in connection with the prospective purchase, rental or lease of such a housing accommodation which expresses, directly or indirectly, any limitation, specification or discrimination" on those grounds (296(5)(a)(3)).

That list is longer than the federal list. It includes age, marital status, sexual orientation, lawful source of income and others the federal Act does not name. The statute carves out some situations, including certain rentals in small owner-occupied buildings and age and familial status restrictions for qualifying older-persons housing. Read section 296(5) for the full text. New York City has its own human rights law as well, so check the city's human rights agency for the current text.

What this means for a board's discretion

The statutes name what a board may not use as a basis for refusing to sell, or for different terms. They do not list every criterion a board may apply. Financial strength and the building's own lawful rules are matters for the documents and state law. A board that treats a protected characteristic as a reason, or uses an application or inquiry that expresses a limitation based on one, is acting outside what these statutes allow. Whether a particular refusal crossed that line is a question of facts, and a fair housing agency or a lawyer is the place to take it.

If you are turned down

A refusal does not always mean discrimination. A board may have a lawful reason connected to the building's financial rules. Start by understanding what happened, and then, if you believe a protected characteristic played a part, know your options and the deadlines.

Get the facts in writing. Ask the managing agent or board whether the decision can be confirmed in writing, and keep copies of your application, the building's requirements, and all messages. Check the building's documents for any re-application or review provision. Contact the seller's broker and your own lawyer, since the purchase contract may say what happens to your deposit.

Know the filing deadlines. The statutes set them:

Route	Deadline stated in the statute	Where it comes from
Complaint to HUD	Not later than one year after the alleged discriminatory housing practice occurred or terminated	42 U.S.C. 3610(a)(1)(A)(i)
Federal or state court civil action	Not later than 2 years after the occurrence or termination of the practice	42 U.S.C. 3613(a)(1)(A)
New York State Division of Human Rights complaint	Within three years after the alleged unlawful discriminatory practice	Executive Law 297(5)

Further details from the federal text: the two-year period does not include time during which an administrative proceeding on a complaint was pending (3613(a)(1)(B)), and a person may start a civil action whether or not a complaint was filed with HUD (3613(a)(2)). Once a HUD complaint is filed, the statute directs the Secretary to investigate and to complete the investigation within 100 days unless it is impracticable (3610(a)(1)(B)(iv)). If conciliation produces an agreement the person agreed to, the statute limits later court action on that practice except to enforce the agreement (3613(a)(2)).

Take it to someone who handles these matters. A fair housing organization, a government fair housing agency or a lawyer who handles housing discrimination can review what happened. The deadlines run from the date of the act, so do not wait.

Retaliation is separate. If you are treated worse for raising a concern, section 3617 prohibits interference with a person exercising a protected right.

A few things that apply to every application

Accuracy. Every document and statement you give should be true and complete.
Disability. A person with a disability may ask for a reasonable accommodation in rules, policies, practices or services under 3604(f)(3)(B). That can apply to an application process as well as to the home.
Language in notices. Statute 3604(c) covers statements and advertisements about a sale. A published listing or notice about a sale falls within its text.
Financial documents. Boards look at them to judge ability to carry the home. Ask the building which documents it requires and whether it has a privacy policy for how it handles them.
Regulated co-ops. If the building is an HDFC or Mitchell-Lama co-op, an agency's rules and a regulatory agreement may govern the approval, so ask which applies.

Frequently Asked Questions

What is a co-op board package?

It is the application and supporting documents a buyer submits to the co-op board or its managing agent. The building sets what it contains. Ask the managing agent for the building's current requirements.

How long does co-op board approval take?

It varies by building. Ask the managing agent how long the process usually takes, and ask the seller's broker about recent sales in the same building.

Can a co-op board reject me without giving a reason?

Whether a board gives a reason depends on the building's documents and state law. Federal law prohibits refusing to sell a dwelling because of race, color, religion, sex, familial status or national origin, and handicap, whether or not a reason is given.

Does the Fair Housing Act apply to co-ops?

The Act applies to the sale or rental of a dwelling, which it defines as any building, structure or portion of one occupied as, or designed or intended for occupancy as, a residence by one or more families. A fair housing agency or lawyer can tell you how it applies to a particular building.

What can a co-op board not consider?

Under the federal Act, race, color, religion, sex, familial status, national origin and handicap. New York's Executive Law adds creed, citizenship or immigration status, sexual orientation, gender identity or expression, military status, age, marital status, status as a victim of domestic violence and lawful source of income, among others listed in the statute.

What can I do if the board turns me down?

Get the decision and your documents in hand, and review the building's documents and your contract. If you believe a protected characteristic played a part, a complaint to HUD is available within one year, a civil action within two years, and in New York a complaint to the Division of Human Rights within three years, each under the cited statute. Speak to a fair housing organization or a lawyer promptly.

Is a co-op board interview required?

Not in every building. Some boards interview applicants and others decide on the paperwork. The building's process tells you.

Does a board approval guarantee a loan, or a loan guarantee approval?

No. They are separate decisions made by separate parties. See co-op share loans.

Do regulated co-ops use a board approval process?

Many do, with agency or program rules added. See HDFC co-ops and Mitchell-Lama co-ops.