Hirschmann vs. Hassapoyannes

This co-op board appears to be in trouble and without a good basis to justify its withdrawal of its approval of the purchase applications. This is a case where sound legal counsel before the board withdrew its approval might have led to a different result and less liability exposure for the board members involved.

The court in Hirschmann vs. Hassapoyannes expressed little sympathy for a co-op board that had withdrawn its approval of a purchaser after he had disclosed a disability before closing.

In this case, defendant/third-party plaintiff Constantine Hassapoyannes moved for summary judgment on his third-party complaint and counterclaims against third-party defendants 20166 Tenants Corp., Roberta E. Tarshis, Jon Schechter, S. Barry Winet, Ellen Herman, and Rujeanne Bleemer, individually and as members of the board of directors of 20166 Tenants Corp. and seller Merle Hirschmann. Hassapoyannes also sought a hearing to determine the amount of damages and legal fees owed him. Finally, Hassapoyannes moved to dismiss Hirschmann’s complaint against him.

The background of this matter was described in “Disability Discrimination” (“Case Notes,” Habitat, April 2006), where, among other matters, the court denied Hassapoyannes’ motion for a preliminary injunction directing the sale of the apartment to him and granted Hirschmann’s cross-motion to dismiss the first, second, third, fourth, sixth, and seventh causes of action in the third-party complaints against her. Only Hassapoyannes’ fifth cause of action, for breach of contract, remained against Hirschmann.

Initially, the board of directors of 20166 Tenants Corp. approved the sale of apartment 18J to Hassapoyannes. On the day of the closing, Hassapoyannes asked third-party defendant Jon Schechter, the managing agent for the building, if he could install a washer/dryer in the apartment, as a reasonable accommodation for a serious malady resulting from cancer surgery that necessitated frequent laundering of bed linens and personal undergarments. Schechter contacted one of the members of the co-op board to discuss the matter, and the closing was delayed. Ultimately, the co-op board decided to withdraw its approval of Hassapoyannes request to purchase the apartment.

Hassapoyannes contended that the co-op board’s decision to rescind its approval was unlawful, because it was based upon his revelation of the disability and his need for a reasonable accommodation. The co-op did not dispute that Hassapoyannes had made out a prima facie case of discrimination under the Fair Housing Act, or under the New York State or New York City Human Rights Laws. Accordingly, this issue was conceded, and in any event, Hassapoyannes met his burden to demonstrate a prima facie case.

The co-op contended that summary judgment must be denied because there were questions of fact regarding its defense that the co-op had a legitimate non-discriminatory reason for withdrawing its approval of the sale – i.e., that Hassapoyannes was untruthful at his interview when he said that he understood and had no problem with the co-op’s rules, which included a prohibition on the installation of washing machines in individual apartments.

Further, to bolster the argument that issues of fact existed for a jury to weigh, the co-op pointed to other examples of Hassapoyannes’s purported lack of veracity, which occurred either after the co-op’s decision to withdraw its approval or were statements not known to, or considered by, the co-op when it made its decision.

The Fair Housing Act prohibits the refusal to sell or to negotiate for the sale or rental of or otherwise make unavailable or deny a dwelling to any person because of a handicap. As the court had already noted in its prior decision, the Fair Housing Act applies to co-op apartments. Discrimination under the act includes the failure or refusal “to make reasonable accommodations in rules, policies, practices, or services, when such accommodations may be necessary to afford such person equal opportunity to use and enjoy a dwelling.” The court said that reasonable accommodations might, in some cases, excuse actions that would otherwise constitute a violation of a lease or cooperative rules.

Hassapoyannes’s claims under the New York State and New York City human rights laws were analyzed in the same manner as claims under the Fair Housing Act. Further, the court noted that New York human rights laws expressly prohibit an owner of a housing accommodation from making “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 as to … disability.”

The co-op contended that it did not withdraw its approval of the sale because of Hassapoyannes’s disability or because he had requested a reasonable accommodation. Rather, the co-op contended that it acted based upon what it perceived as Hassapoyannes’s lack of veracity at his interview.

The co-op claimed that, when it realized that Hassapoyannes had withheld the information that he would need a washer/dryer because of incontinence, it pondered whether he had also been dishonest about other issues, such as whether he intended to use the apartment as a pied-a-terre.

Further, the co-op contended that, in light of its rule prohibiting washing machines in individual apartments (although some apartments had them), it was Hassapoyannes’s responsibility to raise the issue with the co-op at the interview.

The court said that, in general, the fair housing regulations prohibit making an inquiry regarding whether a person has a disability or inquiring as to the nature or severity of that disability. If the co-op board may not inquire about a disability, the court concluded that it should not be permitted to penalize a prospective purchaser for failing to volunteer information about that disability, as that would defeat the purpose and policy of the law,

The co-op also argued that inquiries were permitted where the information was necessary for a legitimate purpose, and that, in light of the potential plumbing problems associated with the installation of washing machines (notwithstanding those apartments that had them), it was necessary for the co-op board to know that Hassapoyannes would request a reasonable accommodation of a washer/dryer in his apartment.

The issue at hand, said the court, however, was whether the approval of Hassapoyannes’s application to purchase an apartment may be rescinded because he asked for such a reasonable accommodation after his interview, but before the closing. Hassapoyannes was not questioning the validity of the co-op’s rule. He also had not questioned the rule that before permission to install a washer/dryer was granted, plans for the installation of the equipment would have to be reviewed by appropriate experts.

In the court’s view, the flaw in the co-op’s reasoning was its conclusion that Hassapoyannes was untruthful based only upon his failure to disclose his disability until after his interview, even though the law protected him from being compelled to do so. The co-op’s speculation – that Hassapoyannes would install an illegal washing machine – was undercut by his seeking an accommodation to install a washer/dryer before closing.

The co-op failed to raise an issue that could go to trial concerning whether it had a legitimate business reason to know about the request for the accommodation prior to its decision about approval. In fact, if a co-op were permitted to question an applicant concerning disabilities before approving an application or was permitted to punish an applicant for not divulging a disability at that time, many obstacles would be created to determining whether a rejection resulted from unlawful discrimination.

The court concluded that Hassapoyannes’s failure to come forward with information concerning his need for a reasonable accommodation at the interview did not constitute a valid basis for withdrawing approval of his purchase application.

Accordingly, the co-op’s decision to withdraw its approval of the application to purchase Apartment 18J violated fair housing guarantees. The court granted summary judgment on Hassapoyannes’s second cause of action for wrongful refusal to permit the sale of Apartment 18J to him, and on his sixth cause of action for a permanent injunction, directing the co-op board to reinstate their approval of his application to purchase Apartment 18J and to permit the sale to go forward.