Q&A: Can the Board Set a Minimum Sales Price?

Q I recently received a memo from the board of directors of my co-op in Queens Village, stating that the building will not allow cooperators to sell their apartments below a sales price that they determine. Is this legal?

—Suspicious in Queens

A “The issue of a board’s setting minimum sale prices was also addressed in the 1996 decision in Levine v. Yokell. The Levine case was brought by a prospective purchaser and was based on a claim of tortious interference with contractual relations; it was dismissed.

“Notwithstanding the forgoing, many commentators believe that the Oakley case is a deviation in the legal history of cooperative housing case law. Unfortunately, the Oakley case was not appealed to the Appellate Division.

“The writer’s question is one that is not easily answered, as many commentators on this issue believe that the Oakley case would not have withstood reversal by the Appellate Division. Hence, many think that the practice of setting minimum sales prices by a board of directors would be upheld by an appellate court under the Business Judgment Rule.

“Boards are not required to disclose the rationale for rejecting a potential purchaser, thus, a purchaser who is declined by the board would not know that they were rejected due to the fact that the sale price of the subject apartment was below what the board determined was the minimum sale price.

“The more important issue is whether this practice of creating minimum sales prices is a good policy. Many boards may think the practice to be wise in an effort to maintain the value of the apartments within their building; however, it is probably not the best policy choice. The policy assumes that a seller would be willing to accept a price below what it deems to be fair. A seller who is willing to accept a low sales price is probably in some type of distress—foreclosure or some other troubling circumstances. In the face of the economic situation the city is presently facing, forcing a seller to hold out for a price which is satisfactory to a board of directors may exacerbate the economic distress for both the seller and the cooperative, as the seller may be unable to avoid foreclosure by selling, and may be unable to pay his maintenance charges causing cash flow problems for the cooperative.

“A minimum sales price in principal may sound like an effective way to maintain the equity of the cooperators, however, in practice it may create problems for those who are looking to quickly sell their home and prevent a bad situation from becoming worse.”

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Comments

  • I am having the same issue, if you come in even under a dollar you will be denied, we have been on the market for over a year.... The price is set way to high for this economy,we are held hostage in our own apt due to the board.... How will we ever be able to sell????