Q&A: Board Resistance to Selling a Unit

Q I am trying to sell my co-op, and the board has expressed they will not approve a purchase under $145,000.The market comps are $140,000 (high end) $120,000 (low end), and I sold mine for $136,000. We have a viable purchaser who has already been approved for a mortgage. What are my rights, if the board is being unreasonable and reject this sale because it does not meet their desired $145,000 price tag?

—Concerned Cooperator in Queens

A "Under New York State law,” says attorney Aaron Shmulewitz of New York law firm of Belkin Burden Wenig & Goldman, LLP, “a co-op board can decline consent to a proposed purchaser for any reason or for no reason, as long as it's not a discriminatory reason prohibited by law. Several recent court decisions have held that a co-op board CAN decline consent to a proposed purchaser based solely on the purchase price being too low, since: (I) such a reason is not discriminatory under law, (ii) under the "business judgment rule," the board has discretion to make decisions as the directors deem appropriate, as long as they are acting within the bounds of the law, and (iii) most importantly, board members have a legitimate interest in protecting the price levels for sales in their co-op, and allowing the establishment of a "comp" that the board feels is too low would hurt all other shareholders who will be seeking to sell their apartments in the future. So a board certainly has the right to decline consent to a proposed purchaser if the board members feel that the price is inadequate.

“Having said that, and while apparently in compliance with the law, it is probably not the best practice for the board to announce in advance a minimum price for any particular apartment, since doing so would mean that: (i) the board MUST decline consent to an otherwise-qualified purchaser if the price is below that figure, and (ii) the implication is that if the price is above that figure, the board would approve the purchaser. Either situation would unfairly bind the board's hands and deprive it of the discretion it needs in dealing with applications as they come in, especially in light of changing market conditions. In short, while there would be no legal prohibition against a board announcing a minimum price for any particular apartment, the board would gain nothing, and could be hurt, by doing so."

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