Co-op buyer turned down by board

Why are streeteasy posters mentioning all these turndowns lately? What are on earth are people doing with their applications?

The short answer is, if there is a board rejection, the real estate agent should discreetly ask a board member if there's any sense in reapplying, and be guided by that.

ali r.
DG Neary Realty

Actually, The "short" answer is:
No.

The fact that anyone would have to "discreetly ask a board member" anything is insane. And the fact that a real estate pro is making such a suggestion is evidence of an unjust if not corrupt system. ( No offense front_porch, I usually admire your contributions to the forum)

If we had the same level of transparency that other types of home owners are afforded you would simply be able to require the "board of directors" to explain their rejection.
But in a NY Coop they presently do not have to explain anything to anyone. Not even the courts.
And if you view Coop ownership through the prism of being a "shareholder" you'll find yourself just as disenfranchised. A coop might be the only type of stock purchase which affords shareholders virtually no transparency or protection.

Although there have been some newly proposed legislation in the past few years Coop leaseholders essentially have no government or private agency who will enforce their rights. Ergo, No rights.

If Intro 119 had passed you would not be here posting this thread.

There needs to be be more legislation proposed that protects the rights of shareholders and their investments. Until Coop apartments are given the same protection as other forms of home ownership (or corporate investment) you will see more and more crisis situations arise as the Coop boom of the 80s matures and conflicts between shareholder and Coop end in disaster for the shareholder.

Coops need to be reformed so they are legislated and governed for what they are: "HOUSING"! A persons most personal and valuable asset.

Contact your elected officials and insist on legislation that protects the rights of Coop shareholders!

Good luck

If the price is appreciably below prior transactions, coop boards have been known to reject, regardless of the overall market.

I believe that from a legal standpoint, the board may reject for any reason and they do not have to disclose it unless there is suspicion of the reason being an illegal type of discrimination (race, religion, gender et al.). In fact, I remember a story about an ex-president (I want to say Nixon, but not sure) applying to a coop board and getting rejected because the building didn't want to deal with the security/publicity issues, and that was ok per NY state courts.

The main reason the board usually will NOT answer any request as to why the prospective buyer was rejected, is to not incriminate themselves to anti-discrimination and fair housing laws. You can try, but they will almost certainly say, NO RESPONSE.

It is what it is. I agree, if price is too low that could be a reason. Or a board member's friend or family may want the unit, or there is some hatred between seller and board, the list can go on. As andwin says, there are few rights when it comes to these situations by existing shareholders hurt by the decision.

mjh1962, did it get as far as an interview?

Sure the board MAY reject for any reason, but the point is, they've usually got one. It's the agent's job to find out what that reason is and to try to work around it.

There are still cases of illegal discrimination in NYC, but it's also possible that there's a financial factor that could be worked around, perhaps with an offer to escrow maintenance, perhaps with a price adjustment.

I am sorry that the process offends andwin by its lack of transparent, but just because a system isn't transparent doesn't mean it lacks levers, and the agent's job is to push them.

ali r.
DG Neary Realty

i had a buyer that claimed the board would never approve her and wanted out...
i was told (by my lawyer) that i would never know what transpired in the interview so i would have no recourse if she was not approved. it would be impossible for me to know if she acted in good faith or not.
so to su it up i was advised what happens in the board interview stays in the board interview.
can't get my head around the whole concept... in a condo now

the prospective buyer doesn't, but the seller might if they want to go nuclear. Coops are weird, and some are weirder than others. A knowledgeable agent will do some triage before it gets to that. Do you have an agent?

"The short answer is, if there is a board rejection, the real estate agent should discreetly ask a board member if there's any sense in reapplying, and be guided by that."

And any board member with half a brain would respond "no comment."

No interview yet, its a very solid deal, good price, all cash. You just never know, it should be a slam dunk, but....--next purchase for me--Condo!

"If a co-op board turns down a qualified buyer (definitley qualified--not marginal in any way) Do you have any recourse?"

Also, no one but the board can determine whether a buyer is "qualified".

Clearly, if the applicant is rejected, he or she was NOT "qualified".

Sometimes...
They don't like you. You remind them of (fill in the blank).
They don't like the seller and here is a chance to turn the screws.
Board members can be crazy nut jobs coordinating their insanity. Some forget to take their meds.
Boards can be dominated by one personality that rules the roost.
You might be unlikeable. (did you see the tie he was wearing! did you see her shoes...not our kind of people)
One CRAZY town!
Sorry for the needless pain and hardship!
Crazy Pinkos and their socialist housing block

okay, so now we know more, an all-cash buyer turned down without an interview, so this is a buyer that looks bad on paper.

Either 1) price too low to be acceptable to the board (which is fixable) or more likely 2) provenance of the cash not properly established (which is fixable, although it may be hard to do this late in the game).

ali r.
DG Neary Realty

Or the board was afraid he was an investor, or wanted to use as a pied-a-terre, or had kids entering NYU, or ... it's infinite. They might hate the seller, or just be slightly imbalanced and made an irrational decision. Without an experienced broker knowledgeable about the deal and this particular board, making a bid on a coop is a crap shoot.

"1) price too low to be acceptable to the board (which is fixable)"

Oh you mean like a under the table kickback? AWESOME!!!! WHOOT... tagline "comps, you can count ON!"

It's got to be the price that the board doesn't like. OP: how does your price compare to the last sale of the apartment e.g., 10% less than 2006 sale price? How about recent comps in same / similar line?

im waiting to get a date for my board interview...and i agree that the process should be regulated...shocking that it isnt....and board members should be licensed in some way......who is to say that they arent all insane lol......my landlord who is also a big time real estate investor in nyc told me today that normally they reject you prior to the interview so that the discrimination issues are lessened....usually if you make it to the interview and you are a normal, decent person.....you get in.....but i agree...coops can seem creepy.....but they are cheaper then condos and make up the majority of nyc real estate....at least i just found out today that i locked in at 4.875% 30 yr fixed.....

So you haven't been rejected? You just got NYCmatt all turgid for nothing?
Shame on you for toying with our emotions.

the majority of the people who think board members are "insane" or discriminatory have never even attended a shareholder meeting. if you want some say about how your building is run, attend your sharholder meeting and vote, +/or run for a seat on the board yourself. boards aren't perfect but if you aren't going to be involved and prefer to stick your head in the sand...deal with the consequences

Don't forget, getting turned down if you are truly qualified is a blessing in disguise. Run, don't reapply, and say thank you. Remember, if you had been approved these, idiots, racists, midgets, martians, whatever they are,,,,,,would have been your neighbors!...Good riddance. Remember, at a Board interview, you are interviewing them every bit as much as they are interviewing you.

Because you are a buyer, not a shareholder, the board has no fiduciary duty to you. It does, however, owe such a duty to the selling shareholder. As others already have said, the board can reject you for no reason or any reason so long as the real reason isn’t discrimination. Yes, that sounds good, but often gives buyers little recourse because even if you are the victim of discrimination it’s expensive and difficult to prove, unless you happen to be a lawyer and your firm takes on the case pro bono as happened in the Biondi case in which Skadden Arps took on the cause – and won.

Just as beauty is in the eye of the beholder, so are qualifications at the discretion of the board, which under the Business Judgment Rule can determine what the financial requirements are for iis building. As I’m sure you know, these requirements can vary substantially from building to building.

But the time to ferret them out is before not after the application has been submitted. If there is any potential question you can agree to a guaranty or specified sum of escrow in the agreement with the seller. It’s much easier to deal with this upfront rather than after the fact when the board already has rejected you.

As to the suggestion by some that you can avoid this whole hassle by buying in a condo, the simple reality is that condos are becoming more and more like co-ops, and many have applications almost as demanding.

A few have suggested that the real reason may be that the price is too low and can be “fixed.” The market, not the board, sets prices. As least one court has made clear that boards cannot set floor prices. See Oakley v. Longview Owners, Inc. 165 Misc. 2d 192 (Sup. Ct. Westchester Co. 1995) And any board that engages in the kind of loose practices I’ve read about and I’m sure you have too, is looking for trouble.

For more on the whole buying and admissions process, I invite you to have a look at my book, The NY Co-op Bible and related site, www.coopbible.com

Your recourse is the same as it was before your board rejection. Condo, townhouse or rental. Coop = PITA in and out.