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Lawsuit peeks into world of New York City co-ops

By Basil Katz

NEW YORK (Reuters) - Money might talk, but to people hoping to buy an apartment in New York City, it's the powerful co-op board that has the final say.

A lawsuit filed this week offers a revealing look into the feuds and power plays behind the tony facades of some of New York's fanciest addresses, in this case The Dakota apartment building.

The Renaissance-style castle on Central Park is where John Lennon was shot and his wife, Yoko Ono, still lives with famous neighbors such as Lauren Bacall.

Some 75 percent of New York City apartments are co-operatives, which are run by boards that represent the interests of the residents, set the rules of the building and vet potential buyers.

The plaintiff in the lawsuit, Alphonse Fletcher -- named as one of Forbes magazine's wealthiest black Americans in 2009 -- already lives in The Dakota. In case he claims the co-op board discriminated against him by refusing to allow him to buy the apartment next door for $5.7 million and combine it with his.

The Dakota co-op board strongly denied Fletcher's claims.

"His outrageous accusations of discrimination are untrue and at odds with the facts that the board has previously approved his purchase of several apartments, he has been repeatedly elected to the board, and his mother currently serves on the board," the board said in a statement.

The lawsuit, made publicly available on Wednesday, asks for $15 million in damages and for a judge to make possible the sale of the adjacent apartment, which he says was promised to him by its previous occupant.

The Dakota did not disclose its reasons for blocking Fletcher's purchase and its actions show the sweeping unilateral power that such boards have.

"Certainly nowhere is there a co-op culture like the one in Manhattan luxury buildings," said Michael Gross, an author who has written about New York's most famous co-op building, 740 Park Avenue.

Fletcher's 60-page lawsuit described a building rife with "internal power struggles" and "racially motivated hostility."

The suit said the board unfairly targeted another black resident, identified by local media as singer Roberta Flack, by forcing her to use the freight elevator when moving her pet dog but allowing white pet owners to use the main elevator.

"Despite Fletcher's great wealth, longstanding responsible behavior as a Dakota shareholder and his ownership of a highly profitable investment management firm, the defendants rejected Fletcher's application," the suit said.

Some 85 percent of the nation's co-op apartments are in New York City, said Jonathan Miller, CEO of real estate appraisal firm Miller Samuel.

They are generally cheaper than condominiums but come at the price of surrendering "your bundle of rights as a property owner to another body, the co-op board," Miller said.

The co-op board, not a bank or good credit, determines whether to admit a new resident and lends each building a particular flavor. So, even for buyers with cash in hand, a bad reputation can kill prospects.

"Co-ops at their best are clubs for the like-minded and threatening or pursuing lawsuits against your neighbor-partners is not a good way to position yourself as the likable sort," Gross said.

(Reporting by Basil Katz; Editing by Daniel Trotta and Cynthia Osterman)

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