Offer Accepted In Coop Apt But Due Diligence Shows Problems

I mean litigation by one of the current tenants against the coop and board.

Wow those rules look familiar.
My very first manhattan rental was subletting a friends apartment at the courtney house on 14th street.
Im pretty sure those were her exact requirements for subletting.
Some coops don't let you sublet at all, so, it's a personal judgement call for wat you'll be able to live with.

As to the lawsuit,not my expertise,though initial lawsuit amaounts are daunting, what someone actually gets is a different story. I doubt it would go to trial and and worst case settle for less than 200K.
But I would wait for some lawyers to chime in on this one.

"(not great deal)"
"major litigation against the building for racial discrimination "

=> walk

you have to ask your self some questions:

1 - do you want to live in a building where the board pissed someone off enough to file a racial discrimination lawsuit.
2 - does the building have enough insurance coverage.

as far as the rental rules, usually, the house rules are changed by the board without a vote requirement. the offering plan change requires a vote of the shareholders. in this case, it depends what the board wants to enforce, though, i've never heard of rules for the same thing in these kind of documents.

1) Imagine insurance will cover this claim less deductible in the event it is succesful. Definitely get some details on the coop's policy. For a pretty small cost you can also get coop insurance that covers you in the event a lawsuit succeeds with the coop in excess of their policy.

Keep in mind people allege all kinds of things these days in suits. We live in a very litigous society and the mere allegation does not make it a fact.

2) Sublet rules are becoming more and more restrictive these days. The minimum two year residence prior to subletting exists in many coops. Keep in mind the coop benefits when its residents are also shareholders. Owner occupied is a good thing for the stability of the building.

Things to think about but not huge in my opinion.

If this was a phenomenal deal, you might to do some research re: the lawsuit. But you didn't get a great deal so is it worth the headache? I bought into a coop that was undergoing a lawsuit with the contractor. I researched it and found the building had a good case. But even still the resolution which was to only take a matter of months dragged into years -- all the while we were paying lawyers bills, extra meetings, arguments among shareholders, etc It was worth it to me because I got a fantastic deal -- two previous buyers had backed out because of the suit and the seller was desperate to sell. Lawsuits are nasty and you can never know the outcome or what the costs will be. I say walk.

Thanks all for your advice and comments, definitely helpful in weighing my options. I am going to go over this in more detail with my attorney since I only just found out this information.

apt23 I think you have a good point + insight. Especially in the current market where there's so much comparable inventory and not as many qualified buyers.

Weigh your attorney's advice seriously. I strongly disagree with one poster that simply because someone sued it means the board must have done something to aggravate that person. Sometimes people are whacky and difficult and bring frivolous suits. In one building I know, one shareholder seems to be sliding deeper into a personality disorder and is behaving increasingly erratically. If she were to sue for some perceived slight or grievance, it would not mean anything about the board or building.

I'd ask my attorney what the suit is actually asserting, if it appears to have any merit, and most importantly if insurance would cover it under the worst case scenario of wrongdoing by the building/board.

Regardless of what the attorney says, I would definitely NOT move forward with no concessions. Even if the lawsuit is frivolous, IMO you're justified in asking for a price reduction since the existence of this major litigation was not previously disclosed to you.

The lack of good faith on the part of the sellers would probably be enough to convince me to walk, but if I loved the apartment and the risk of large damages were low, I'd maybe offer an extreme lowball (e.g., reduce the offer by $100k) and see just how desperate they are.

As you'll probably see from this thread, 9-in-10 buyers are likely to run screaming from this place. If you're among the 1-in-10 who wouldn't, make sure you're rewarded accordingly.

"For a pretty small cost you can also get coop insurance that covers you in the event a lawsuit succeeds with the coop in excess of their policy."....wouldn't the policy exclude umbrella coverage for an already existing claim????

At the risk of being politically incorrect, this suit sounds like a stretch (is a board, which is a group of people, not just one person, in Manhattan, really going to discriminate in any material provable way against an existing building tenant because of race....; unlikely and hard to prove). Assuming you confirm that it is a bogus caseo, the real risk is lawyer fees, for which you should get a commensurate reduction in price after figuring out what the cost impact could be....or walk.

Lad - What do you mean lack of good faith on the part of the sellers? The seller has no obligation to disclose. The burden is on the buyer to perform due diligence and make the informed decision as to whether or not to walk. And I agree with you in that the buyer could use this information as a bargaining chip if still interested.

walk. who the hell wants to live in a building like that...

nyc:

Is there any way you could read plaintiff's complaint? This could give insight as to whether it's frivolous. Has case been filed in court? Google the name of the coop bd or go to 60 Centre St (Supreme Ct) & look it up.

Most likely, coop's insurance co represents the coop, so there shouldn't be legal bills.

Litigation drags on & who's to say whether or not the coop may have a prob (or just have to pay higher premium) due to the litigation when they renew their insurance.

Investigate further if you like, but, listen to your gut.

Re: 60 Centre St: that's if the bld's in Manhattan. For other boroughs, check the clerk's office of the Supreme Ct (that's the trial ct in NYS)

I recently faced a similar situation -- had accepted offer, price was good, loved the apartment, and then found out 3 of the tenants were suing the building for damage to their apartments caused by building construction. I'm a lawyer (albeit not this type of lawyer), so I got a copy of the complaint, reviewed it with my lawyer, and talked to a board member who was also a lawyer. I think the suit is mostly meritless, but I also think the building is either going to have to settle for a decent amount (several hundred thousand) or spend a lot of time and money on litigation. I know the building has an insurance policy to cover the litigation costs and any possible judgment, but I still was nervous that any settlement might make maintenance go up. I ended up going back to the seller and negotiating for a slight break on price. What I ended up getting was really marginal in terms of amount, but it was significant to me as a representation of the risk I was taking.

"What I ended up getting was really marginal in terms of amount, but it was significant to me as a representation of the risk I was taking. "

What does that mean?

lol...good question inonada

They gave just enough price reduction for her to continue with the closing. One dollar less and she would have walked.

At least, that's how I read it.

Are you telling that NYC coops discriminate?

as for subletting - if you want that option, buy a condo.