Co-op boards can get into serious trouble when reviewing purchase applications. In the case of Axelrod v. 400 Owners Corp., the board had received several purchase applications from a shareholder who was trying to sell her apartment. The board kept denying the applications because the potential purchasers were of child-bearing age. One board member in particular was concerned that if “those people” moved in and had children, his quiet floor would become noisy.
This case is particularly thorny because it presents two situations. First, the basis for the rejections is discriminatory. Under city law, children are in a protected class. Second, the board breached its fiduciary duty to the shareholder who was selling by denying the applications because of the personal interests of one board member. He lived on the same floor as the for-sale apartment, and he allegedly exerted influence on the other members to deny the applications.
Read more (view video): Rejecting Purchase Applications