Co-op Board Antics-Redux
The catalyst for the piece was a board rejection of a buyer who wanted to purchase my client's property. The buyers were a sophisticated, financially qualified couple who were Russian immigrants. Absolutely lovely people. The contract price at the time was $1,080,000. The Board rejected these buyers and everyone was confused as to why.
It is imperative that I also state that in my 15 years in the industry, until this incident, I had only two previous board rejections. One of those came at the hands of this same building’s board about three-and-a-half years ago. At that time, everyone was equally puzzled. We heard through a reliable source that the Board was unhappy with the applicant’s age… can you say discrimination?
Wait, that’s not all! After the rejection of the buyers paying $1,080,000, we decided to lower the price of the property as the market had cooled a bit and began the process of procuring a buyer once again. We finally found another purchaser. Another perfect couple for the building (I know they were perfect because I have sold 20 or so apartments in this particular building and therefore have spent a lot of time there, and know a lot of people who live there), this time paying $975,000.
My seller had already lost $105,000. This 30-something couple were expectant parents, she in the medical field, and he an accomplished musician. They were not as financially qualified as the previous clients but they were mature, responsible individuals who were definitely not over-extending themselves and could easily afford the apartment and would be a positive addition to the building’s community.
Last Thursday, we received the call from the managing agent that the Board had rejected these applicants as well and would not entertain an interview. We were stunned for the second time. The managing agent then shared with us that the Board probably didn’t consider the wife’s income “because she is pregnant and won’t go back to work.” Can you say presumptuous?
Immediately upon receiving this news, the buyers prepared a letter from the wife as well as her employer stating not only her intention of immediately returning to work after her maternity leave, but that her projected income would likely be double her current income. Rejected again. Now this lovely couple with a one-week-old baby is scrambling to find a place to live. Fortunately they are working with a stellar broker who I know well and will do her very best to make this terrible situation as painless as possible. They will move on. My seller however, is still stuck with this empty apartment and after two board rejections and a significant financial loss he has filed a lawsuit against the board and the building.
What truly amazes me here is that the board doesn’t see how it is doing an absolute disservice to the building and its shareholders by hyper-scrutinizing applicants. By the way, this is not a Park Avenue or Fifth Avenue building either (for those who assume that those areas have the more “difficult” boards). Often times, they may have more stringent requirements but they also have more sophisticated Board members making decisions about prospective purchasers.
Now I could speculate as to what is going on in the building but truth be told, I have NO IDEA. Of seven members on the board, three seem to carry most of the weight in the decision-making process when it comes to applicants. I would be curious to see if any of these three would pass their own requirements, whatever they may be.
It’s all very puzzling and is a very unfortunate aspect of the co-op market. I do know however that the board has rejected five applications in the past six months. Of the few that were actually approved, two were purchasers for apartments owned by board members. I guess that makes sense since they know their own requirements better than anyone, but the guessing game that I and many of my colleagues are playing in trying to determine what they are seeking, is directly affecting the value of apartments in the building. Just last week I was having a conversation with a top agent (top 10 in the country!) who shared with me that she advises all of her clients to stay away from the building because “the board is insane and unpredictable.” Indeed a VIRAL reputation to have that is going to harm only those who are shareholders in the building.
I am going through the exact same thing as your seller! I have lost tons of money in this process trying to sell my apartment in a building in Queens. Please give us an update on how the seller did in court? I am scared to go to court becaue if I lose the case, I will be out even more money!
TC,
I just got off the phone with the seller and he has informed my that he and his attorney have filed a complaint (a better way to get a response according to his attorney) and are awaiting the Board's response to the complaint. Now that the dust has settled and his anger has somewhat dissipated, he admits that he and his attorney don't feel like they will "win" anything. He and his attorney do however feel like the complaint will make the Board less likely to behave in the same manner in the future. Only time will tell but it's no secret that lawsuits against co-op Boards are difficult to say the least and it's not often that you hear of someone doing it successfully.
Hi,
I was wondering how things panned out with your unfortunate seller?? I am currently still awaiting news from the board on my next buyer. I am terrified of another rejection as it could potentially lead to bankruptcy for me, although I have a fully qualified buyer!
Also, have you heard about the law going through the city council right now requiring co-op boards to provide reasons for rejections? It is Intro 119, and I would encourage everyone you know to write their representative in support of the bill!
http://www.dfnyc.org/cms/node/87485
My unfortunate seller took his place off the market, got married (that's the fortunate part...or is it?), and will likely be selling it again in the coming months. As far as his lawsuit goes, it seems his outrage has dissipated and is no longer controlling his purse strings so I believe the lawsuit was dropped. Just another circumstance where the almighty co-op board remains untouchable.
I was recently declined at a co-op board. Finacially I was able to afford the place and I believe I was turned down because I was honest. I told them my fiance was going to live with me and he was not on the contract. My application was declined and no reason was given. Because we were not married, it seems that I was turned down. Horrible. I have to lie in order to live there.
There's no telling why you would have been turned down and it's terribly unfortunate. As a recent seller of mine has learned, the burden of proof that they discriminated lies on you and it's virtually impossible to prove. Hopefully legislation will pass soon to force Boards to provide reasons for rejections. I'm sorry for you!
I'm a buyer who is well qualified for a coop in queens, NYC. I gave the offer and seller accepted it. Seller is a member in COOP board, so he checked my financial information such as annual income, credit check, he said there is no problem to pass coop interview.
but after I sent in my paperworks for coop interview, a few days later, management told me I got rejected and gave no reasons at all. I kept calling management office and finally someone said "GO ask seller about this problem".
---I recorded the converasation---
A few days later, I found out someone used all cashs to buy the coop, although I don't know how much.
But obviously, seller rejected my offer because he got a better offer from someone else. I believe this is not fair, and I want to file a complaint against this coop board. I want to file a lawsuit but I don't know in such a situation, what are the winning percentage? is it worth to suit?
Make peace, not war!
sued a coop board and won. i feel victory take them on well worth it!
Are members entitled to know the names of co-operatives that have settled or pending litigations against their co-op as well as settlement amounts of settled litigations?
Thank you,
It would be best to ask an attorney but I think you may be privy to reading the minutes of the Board which would likely disclose things like this. Certainly if you're buying in a co-op your attorney can ask about any litigation over the past 10 years.
Doug,
Thank you for your quick response. We were self managed until 1 year ago,
when the Board of Directors brought in a management Co. The members
Were very up set but told by the board to give them a chance and if things didn't work
Out they would let them go. As it turned out, the board loved the manager but not the
Management Co. The Mgmt. Co. was dismissed; the Manger left the Management Co.
He supposedly is not managing our co-op. His wife is, however the form Manager is
On our premises giving orders to our maintenance staff and so fourth. The members
Heard rumors that the V.P. of our B.O.D. went into business with the former manager
and running our co-op from behind the scenes'. We asked many questions, which could
not be answered. They are calling another meeting to address our questions. Is there any
way an official such as yourself or someone from the BCL can attend the meeting. We
Truly are concerned that there is fowl play.
Thank you,
I would be of no help whatsoever at your Board meeting but it sounds like you and the shareholders should consider hiring an attorney and maybe even a private investigator?
I was just rejected by a coop board in Jackson Heights (Roosevelt Terrace Coops )I believe I was rejected due to the fact that I am separated. I was asked my marital status in the interview and then I was asked to supply my separation agreement. I was rejected the following week. I was putting down 50 percent of the purchase price and I have no debt.
Here's my story
I have owned a 4 level co-op on 38th between park and Madison
I was president of the co-op from the time I made the purchase about 4 years ago.At the time I moved it, the co-op was in trouble financially ,losing about 25K a year and had a few thousand dollars in reserve. During my term as president I made numerous changes and basically took the building from the brink of bankruptcy to having more than 400K in the reserve fund. A few changes included, writing a rules and regs book for building procedures. Selling a rent controlled apartment (with tenants in place) that only pay a fraction of the going rental rate, for 375K. everyone said it could not be done. I instituted an increased flip tax from 1 to 4%,plus raised maintenance to levels that made us slightly profitable every year
It gets better, One of the board members spent a week with us in our home in Utah for the Christmas holidays last year,at the end of their stay, we offerered the maintenance check, she said, no, thats ok, just mail it. 5 days later we get a note from the "board" that out check was late, and we owe a $50 late fee ????
12 months ago I was forced to sell my business and move to Utah for employment. we we fortunate enough to sell out apartment to a very well qualified buyer, and we turned down by the board. she had all the qualifications, excellent income,good assets, wanted to participate on the board(self managed building wants that), even willing to put up 1-2 years maintenance in escrow. vs me, who is close to stopping payments on the mortgage plus the apartment has been vacant most of the time for a year.
I wrote a letter to all the shareholders explaining that this was a bad business decision,aside from the fact that I saved the building from ruin. "only one reply, from a new shareholder, nothing from all of my "friends" who thought nothing of knocking on my door ,day or night for anything, personal or otherwise.
It gets better. At that I thought I would rent the apartment .The board had told me in Dec thst they were considering instituting a rent fe of 15% (that would mean $1800 a month to them for my apt,if it rents for suggested $12,000 month, all of a sudden, I have new partners. They told me before the new rule went into effect, they would never try to collect that from me, only new shareholders. You guessed it, seems that they have short term memory loss on that subject.
I thought about splitting up the apartment into 2 or 3 units (as it was one 3 separate units) but that would change out tax status and cost the building money (I was the one that got ou taxes reduced in the first place)
One of the existing owners offered to buy one floor of the apt and combine with hers, that would not change the total units or the tax status,plus we had an offer for the other 2 floors. the only condition was that the existing owner wanted to rent out that apt until she was ready to move in. You guessed it, board said no to the rental, and the deal was dead. they would rather have my 4 floors vacant.
I own 26% of the building,If I go under, the entire building becomes insolvent and nobody can sell their apartment or get financing
I need help
Thanks for listening
Mark,
I'm so sorry that you're having this horrendous experience. I think your best bet is to sell the whole lot and sever all ties with these people. Price it aggressively for a sale and get it done.
I just found out the buyer of our Co-op in Queens was denied. this is the 4th buyer in 2 years. The management company asked for and received all necessary documents in a timely fashion. This was a cash sale and the buyer even had a co-signer which the management company asked for.
after confronting the president of the board as to why, we still have not received an answer.
We have lowered the price of our co-op four times in the last 2 years and I can only imagine what this is doing for the value of other units for sale in this building.
One of the board members flat out told my wife we should find other "non ethnic" buyers.
Last year, I inherited my late parents apartment in the Upper East Side. I put it on the market following a short rental, allowed by the coop board, prior to my Mother's death. Because the board would not allow the apartment to be placed in a family trust, there is also a $25,000 probate fee on the sale in addition to the 3% fee for a sale. The unit immediately sold, but the buyers were declined by the board without an interview. No reason was given, although they were well qualified and had excellent liquid assets. I was sent a bill for the board's attorney to review the docs for the deal that they turned down! Now, 10 months later, the apartment remains empty as I am not allowed to rent it and the price has dropped over $150,000 from the accepted offer. I can not even occupy it. No skin off their backs as I continue to pay the monthly fee.Now I am trying to get the board to repair the terrace, but have been unsuccessful. These 7 Olympian Gods sit on high without a thought to the financial and emotional havoc that they bring to innocent parties caught in their web of a building. There is no recourse, no relief, nothing..and they all sleep well at night I am sure. From your blog it appears that I am not alone in this kind of situation. I am glad I live in California where we have fee simple properties and are far more civilized than New York!
Re. "Co op board-antix redux" Nov 2006 Doug Hedding.
I will bet anyone London to a brick, I know the board about whom you are referring. I would like to know who it is. How can I find out? Are they managed by Lamb Mgmt?
Re."Winner" Jan 26, 2008
I would also DESPERATELY like to know the name of your attorney???I been looking for the exact right person for manuy months to commence litigation against board who have done so many uncontionable things to me and others in the building (along with the complete assistant of the managment company. Some illegal most just disgustingly unethical and its clear the entire building is completely intimidated by them as its like living under marshall law in there. We also have the luxery of paying a fortune for that privilige. Its out of control and that board (or at least most of them - including and especially the president and vice president). Because not just I but all the shareholders deserve to have hapiness and feel secure in their own homes and if necessary I am willing to do something about it despite warnings about how difficult it will be. It will be worth a try if nothing else so they will they will at least be forced to modify their actions.
Because they have gone unchallenged for so long they are increasingly arrogant and cocky, resulting in increasingly more sloppy explanations (if any) they give for their antics. This nearly drove me to an early grave but now I just record it and save it as more fodder for a suit as soon as I can find the right lawyer. BUT IT MUST BE THE EXACT RIGHT PERSON. PLEASE "WINNER" can you helP me? Please anyone can you help? Every real estate law firm Ive researched either specialises in litigating AGAINST sharehonders, or DEFENDING shareholders, I have found some who litigate against LANDLORDS but not one who has any literature about any shareholder litigation cases. Is this because its so rare?
Re. "Anonymous by Choice" Feb 20, 2008
Are shareholders entitled to be privvy to any pending or PAST litigation attempts/successes against boards or managing companies?
Hi Doug,
Great work!
I am currently taking a 22.5 credit course to renew my license and one of the things I reviewed were the ethics laws regarding real estate, esp. fair housing. It specifically states that judgements based on sex or inference on ability to pay are illegal. Since the coop in your first example specifically stated the board's concern on the wife's job's prospects because of her pregnancy, the issue is more than presumptious. It is downright illegal and if it can be proven that that is the reason for the board rejection, then the coop can be successfully sued. As they can be sued for age discrimitnation, also in one of your examples. I remember many years ago that a coop on Sutton Place was successfully sued for racial discrimination. So it is possible. I'm glad I found your site, even though its a bit late.
All the best
Victor
Hi there, I have had a 1 bedroom with river view in Yonkers on the market for over 3 years. ALL my buyers have been rejected and the board will not allow me to sublet. Board prez told me I couldn't because of the underlying mortgage and I asked her to explain this and she slammed her door on me. Tomorrow night they will be having their annual coop board meeting in the laundry room. I went to the building on Sat. and door knocked and canvassed the entire building to get support to allow me and otehrs to sublet. The market just is awful and trying to find a buyer is impossible right now. I also went on white pages.com and did an address search and called all tenant share holders and told them of my tale of woooo. Any suggestions? I am going to the board meeting and willing to cause a fillibuster to get my point across. On another note, the attorney for the building has had a unit on the market longer than me and they have rejected ALL her buyers and she was a board member. She will be at the meeting representing her firm. I tried to get her on board with my plea...Any suggestions?
A Disasterous Board can really hurt a building!
My coop nightmare has been going on for 16 months. In Sept my third buyer was rejected. For years I have had a problem with my downstairs neighbor who happened to be the president of the board when this started; he is vice-president now. I asked that he recuse himself from any decisions regarding my sale back when this started. Not only did he refuse to do so he had the coop attorney send me a letter forbidding me to communicate with any board member. The coop attorney (Mort Rosen) later said an associate had sent this letter under the coops instruction.
After the most recent rejection I engaged the whole coop and was close to gaining the 51% of the shares necessary to overturn a board’s unreasonable withholding of consent (according to our Prop. Lease) when the board reversed their decision. In the meantime I (and my attorney) served the board with notice that we were going to seek damages from each one personally if necessary. They then reversed their decision.
In their reversal they demanded some that the buyers (a couple with a two year old child) comply with the floor covering requirements prior to closing. The buyers were insulted, disgusted, and put off. They terminated their contract. The board then sent me and the whole coop a letter saying they meant to say prior to occupancy. It was too little too late. I'm now left with trying to sell in the worst market in history. I moved out a year ago.
Our building is angry at the board for several reasons including this one. It's a mess. What rights do I have as a shareholder? I have kept all documents relating to the dispute, the rejections, the reversal, and both of our respective attorneys emails acknowledging that this "looked and smelled" bad.
That said, my attorney still says I have no recourse but to wait until i sell and then sue for damages. I would appreciate some other input. One attorney I spoke to said he would be more interested if this was a million dollar apartment (it's in the $400,000 range).
I have a buyer that met every aspect of the co-ops demands with flying colors. When they had the board meeting, they denied him. We both know that he was denied because his name (Khan). Is there anyway to demand a reason from the board?
So unfortunate but nothing has been passed yet to require boards to disclose a reason for turn down.
I am having the same problem in Queens. Six buyers have been rejected, most great candidates. The last one was asked to submit a waiver for the IRS so that they could get records directly from the IRS even though the bank had already approved. After 7 months of being bullied by the board, the burye finally backed out. We now have another buyer and I would like to protect myself, but don't know what to do. The buyer is a successful black woman, and I am afraid what the board will do. The board is composed of all white members. Any suggestions?
Hi! I have a question about co-ops... Who makes up their rules? Is is the board or the management company? In particular, a provision about "no renting". Whose decision is it? Or does it vary from building to building?..
The Board creates the rules and they would be responsible for a no sublet policy.
We wanted to buy a coop in Brooklyn. We were going to pay cash. The management company, ??? Property Management made us wait for months. They couldn't put the paperwork together and give to our lawyer for ages.The resale administrator, ??? was so rude and disrespectful. We couldn't walk out since seller had our deposit. We decided to swallow it. Our application was prepaired very carefully. However, after several months they sent us a letter and said our application is denied. No reason no explanation. It is so unfair.
The ??? building in forest hills is one to stay far away from. The address is ??? road, They have had my application for 11 weeks and still no response to it. They have no regard for all the money of mine they have tied up and all the fees I am paying or have already paid attempting to make a purchase. The obama first time incentive is slowing fading away. They cashed my 750.00 application fee months ago.
I am reporting them to the attormey general and taking them to court seeking damages. I may name the management company and the board members personally, also.
I am in the process of selling my coop in Forest Hills & my qualified buyer was denied. No even an interview. My buyer & I are both suing. It seems a good idea for all those who posted here to get together an file a class action lawsuit. Anyone interested in fighting this on a larger scale, feel free to contact me ASAP. This is a financial drain that the board could care less about and does not affect their pockets. Long Island has already had the NO Tell Rejection to change. vzearchitect@gmail.com