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Jan 22, 2025

NYC Fair Chance for Housing Act

New York City recently enacted The Fair Chance in Housing Act (the “Act”) which prohibits asking or gathering any records about a housing applicant’s criminal history prior to approving the application. It applies to all owners, lessors, boards and their managers and investigators, including cooperative boards reviewing purchase applications, cooperative or condominium boards leasing or selling apartments and, perhaps, condominium boards exercising rights of first refusal or other reviews of proposed sales in which background checks of prospective purchasers are utilized. A criminal history check can be performed only after written approval of the applicant and must conform to substantive and procedural limitations.  Final approval can be conditioned on a satisfactory criminal background check. As with any new legislation, its application and impact may evolve with issuance of agency rules or court decisions.

The Act became effective January 1, 2025. It contains substantive and procedural limits on investigations of prospective lessee or purchaser criminal history that may limit the utility of such investigations. The application form may not contain any question concerning the applicant’s criminal history (or lack thereof), and no questions or research into criminal history of the applicant may be undertaken prior to approval of the applicant, either in a formal background check by the board, management or an investigative agency or informally by any board member or management personnel, e.g. no surfing on Google or just “asking around” concerning criminal history. Directors should not think they can just search the internet for non-criminal history type information and ignore what might happen to show up concerning criminal history.  Also, deleting search history in the hope of burying one’s tracks does not suffice, as investigative tools easily recover the information flow.

If an applicant is approved in writing, the approval can be conditioned on a satisfactory post-approval criminal background check of specific limited scope. The criminal history that may then be considered, however, is limited to (i) felony convictions, or completion of a sentence, that have occurred in the prior five years, (ii) misdemeanor convictions, or completion of a sentence, that have occurred in the last three years, and (iii) convictions registered on a sex offense registry. Pending cases cannot be considered, and certain other cases or convictions are likewise not to be considered. Background checks specifically required or permitted by any other federal, state or local laws are allowed. (There is no list or specification of the superseding laws.)

Notice must be given to the applicant of the background check, and a published agency description of the applicant’s rights must be provided.

If conditional approval of an application is to be withdrawn based on the post-approval criminal background check, the owner/lessor must give the applicant notice and a procedure is then specified for explanation/challenge and an “individualized” explanation by the board to justify the withdrawal, including how or why the criminal background information is relevant to the board’s legitimate interests. The explanation of the reasons for rejection should be reviewed with counsel, though the novelty of this law means there will necessarily be uncertainty in defining what constitutes an acceptable explanation.

The board is responsible for compliance, or any failure of compliance, by any third-party vendor who carries out a criminal background check for the owner/lessor.

Boards who choose not to conduct a criminal background check are immunized from claims, in a subsequent action arising out of acts of the applicant, that the board should have performed a criminal background check or should not have sold/leased to the applicant. If the board admits a resident with a criminal history who then commits crimes in the building, the directors will not be liable. This, of course, is also new and subject to interpretation through regulation or litigation.

Violations may result in administrative charges and proceedings before the City Human Rights Commission, court injunctive proceedings, and civil penalties of up to $250,000.00.

Changes Required

Compliance requires revision of both the Real Estate Board of New York form and the exclusion from a cooperative’s application form of all references to criminal background checks (except only for notice that such a check may be conducted as permitted by applicable law and only after conditional acceptance). Similarly, if a cooperative or condominium board is leasing an apartment, its application form must comply, and the other procedures and limits of the Act must be adhered to. If a condominium board utilizes a background check of a prospective purchaser in deciding whether to approve, or to exercise a right of first refusal with respect to, the transaction, its investigation should comply with the Act. The timing and scope of investigations by third party investigators must also comply. All persons – board members, management personnel and any investigative agency – should be made aware of the requirements of the Act and the need to comply.

The options going forward are either (i)  to have a two-step process for background checks, with the investigation (by a third party investigation firm who has formally committed to comply with applicable law) of issues other than criminal background taking place prior to any decision as to the application and the investigation of criminal background taking place after interview and approval of an application or (ii) to issue conditional approvals and have a single background investigation post-approval.  In either case, the scope of the criminal background check would need to be limited as required by the Act. Thought should be given, in consultation with management and the investigative firm, as to which of these options both provides the needed information and is administratively feasible and consistent with a reasonably acceptable purchaser review process. Third party investigative services should be consulted as they may already be adapting their offerings to account for these changes.

Please confer with one of the attorneys in our Cooperative and Condominium Practice Group if you have questions.


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