putting maintenance in escrow

It came up a few months ago: http://www.streeteasy.com/nyc/talk/discussion/12060-maintenance-in-escrow-in-a-co-op and somewhere else.

I've always thought this was a terrible idea (for buildings) because almost no one defaults in the first year or two. So they end up giving the money back before you would have defaulted, and you default anyway. So what did they gain? If you're that worried about someone's financials, reject them.

Sometimes it is a compromise within a Board ... a (possibly prophylactic) escrow allows the Hawks to agree with the Doves and let a (lovely) new shareholder in.

Nonetheless, LeeLaura, I suspect this is non-negotiable. Chances are the Board thinks it is being accommodating with this proposal (condition). If you say "yes, but [a lower escrow]" they may well say "no thanks". Your agent / seller's agent should have a better idea about the specific dynamics, but if you are OK with an escrow of (only) 8 months, why quibble over $20k?? Board may well figure your finances are too tight if $20k (or $40k) causes that much pain.

If you can afford it and you love the place, give them the $$$. We just bought a place and the board made us put 20k in escrow until we both secured life insurance policies. What will they think of next? Btw, we got the policies within weeks, before Management company even cashed our check.

Asked to do the same thing, but escrow return was subject to good financial standing and escrow agent could unconditionally deny return of escrow until sale of unit at East 57th Street. Walked away from the unit-if the Board is this hard up for money-makes you wonder what else they may ask for going forward.

Make sure your Seller's Broker tells you this is a requirement up-front-if not listed in Sales Contract or Coop Application, I would ask for my application fee and deposit back asap.If not, you have valid reason to go to court and cite the seller's broker for violation(especially if they live in the building).

jm2010, I think you miss the issue here. It isn't a building requirement for everyone. It came up with this particular buyer. The building likely accepts many people with no escrow. Here, however ill-conceived as 30yrs points out, the board sees the buyer as otherwise just outside the "acceptable financials" threshold and is offering a compromise of sorts to the buyer--that the Board will not reject the borderline buyer so long as the buyer provides a measure of "insurance" if you will to the building. There is no way the seller's broker could have known this would be a requirement up front nor would the parties have put it in a contract. Your suggestion about getting fees back is not how this plays out in the real world of NYC RE. You would be laughed at. No one deceived anyone here--the buyer would simply have been found financially unqualified.

If the buyer refuses to put up escrow, the sale falls through because of board rejection and the "good faith" escrow of 10% is returned to the buyer. The board's request for maintenance to be held in escrow for years is not a request the buyer is obligated to accept under a standard contract and the buyer can walk away, in tact. It would in essence be the same as a board refusal. You don't get your application fee back when a board rejects you.

I don't think it's negotiable. I don't know if your financials were poor or just poorly presented, but the board thinks you're on the edge, and you can't talk them into think you're less on the edge now. I think it's a reasonable time to buy, so if you feel secure in your employment, I would comply.

I'm not sure how large an apartment you are buying, but the easiest way to take the money out of the renovation is to trim a little, and also to skip an entire bathroom.

ali r.
DG Neary Realty

kylewest, turns out this is a standard requirement of the building and was slipped in at the last minute after conntract was signed and application was submitted.

jm, you are talking about your experience? what do you mean "slipped in" to the contract? That's fraud and quite illegal in a very serious way. what happened in your case to resolve this? this is the kind of thing that could get the seller's lawyer disbarred. Seriously. Am I understanding you correctly?

"kylewest, turns out this is a standard requirement of the building"

Are you saying there is a Coop which requires EVERY purchaser to put some large sum of money in escrow indefinitely? PLEASE tell me what building that is?

Also, what you are saying doesn't make sense here:"if the Board is this hard up for money-makes you wonder what else they may ask for going forward."

Do you know what "Escrow" is?