When buying without board approval, do board rules matter?

The Sponsor can do WETF he wants.
You'll be subject to all the "rules" that go along with buying into a Coop.
If the apartment already has the washer & dryer but you're sure the "House Rules" don't allow them - I'd insist on getting something in writing to protect yourself from future harassment.
Here are a few questions that I would be interested in if I were you:

Who will be paying the Real Estate & Transfer Taxes if you buy a sponsor unit?

Are the Sponsor units priced higher than other comps in the neighborhood?

What percentage of apartments does the sponsor still hold?

Good luck,

WELL.

I was in contract for a $450K studio but then Board declined my application. They didn't give a reason but I was told by the seller it was my proposed renovations (ventless washer/dryer combo unit, jacuzzi, ventless fireplace).

The sponsor is selling 2 similar studio units for $565K and $575K, without Board approval. I've spoken with the sales agent for the sponsor's units. So yes, they're more expensive. And I would be paying the transfer taxes. But let's assume money is no object for this.

My only concern is, whether the sponsor can sell a unit with a washer/dryer, which the Board forbids, and whether I can keep those appliances no matter what the Board thinks after I purchase from the sponsor. (There's no rule forbidding a jacuzzi but the Board supposedly objected to that too.) Moreover, I want the right to have those appliances TRANSFERABLE, meaning that if I sell, the Board can't force the next owner to remove them.

This is more of a legal question. I know some people think paying that much extra for luxuries is crazy, but oh well, it's what I want. Assuming there's no safety hazard or state/city code about having those items in an apartment building, can the sponsor guarantee a new buyer that the Board can't overturn a deal made without Board approval?

Writing as a board member -- once you make your purchase and you're a shareholder and resident, you're subject to the rules (proprietary lease and house rules) of the coop. If the sponsor inserts something into your contract that lets you have a washer/dryer or anything else that is in violation of the coop's rules, you may have to litigate against the coop and the board to get a resolution. And given the body of NY coop law and court decisions, I'd put my money on the side of the coop and the board.

There are usually very reasonable reasons why washer/dryers and jacuzzis are not permitted, such as taxing a building's plumbing system. To let one shareholder have such appliances can create a jeopardy for all shareholders and thus the prohibition is deemed reasonable. The best you could hope for is to have these appliances grandfathered but if they ever have to be replaced you'd be out of luck (and if you try to replace them without the coop's knowledge, you could be evicted). I, too, love my washer/dryer so we just chose to live in a building where they're legal. Much less hassle.

Everything you are hoping to do sounds very risky within the context of your previous rejection for the same reasons. Find another building (legal issues galore).

The board dictates. You will be in big trouble.

OK, so I've been emailing the sponsor's sales agent. She told me that they sponsor should be able to guarantee the jacuzzi & ventless washer/dryer but is hesitant about the ventless fireplace. That's fine by me, I can live without a fireplace, it just would have been nice.

What isn't fine is a lawsuit directed against me. But against the sponsor, eh I don't care.

Does anyone have any specific examples in their own life, or something they've read about ... maybe not with these specific appliances in mind (although the washer/dryer must be the most common) about pitting the Board versus the sponsor?

I don't want to be a jerk and risk damaging other people's apartments, but we're talking about a jacuzzi (the apartment already has a normal tub) and an eco-friendly ventless washer/dryer ... not a nuclear bomb. The building was built in the late 70s, back when they had jacuzzis & washing machines.

Good luck - you heard everyone's opinions now. You sound very stubborn.

Violate the proprietary lease and house rules and the law suit won't be against the sponsor, it will be against you because once you're a shareholder, the coop's rules will trump the sponsor's.

You know, you won't be invisible in all this. The Board has already seen your plans and turned them (you) down and they won't appreciate something that seems like an end run. Boards and buildings have rules for good reasons. For example, jacuzzis are a disaster waiting to happen; I'd never live in a building that permitted them -- they leak like crazy, make noise (in a building built in the 70's your tub's vibrations will be heard in all the adjacent apartments), cause pipe damage from the vibrations, etc. If you installed a jacuzzi in violation of the coop's rules (with or without a sponsor blessing) and the person living in the unit below yours experienced either noise disturbances or a leak from your jacuzzi, your liabilities would be gigantic.

People who think they know better than everyone else and want to make all the rules should buy a house.

Haha. I see this discussion isn't winning me any friends.

But, in point of fact, the unit that the sponsor is selling is GROUND FLOOR. There is no other unit below to suffer leaks.

And while the House Rules do forbid washer/dryers, they make no mention of jacuzzis. Likewise the Board gave no reason for their decision to decline my application.

While washer/dryers & fireplaces are only common in newer luxury buildings, I have seen a jacuzzi in a co-op on East 12th street just off Broadway, in a building from the 60s.

I have dealt extensively with the nuances of what rights transfer to buyers who purchase directly from sponsors (having been in that boat many a time myself) but I must admit, your question has me stumped.

Here's what I do know: the notion that once you purchase the apartment you become a shareholder like anyone else is only partially true. Once you buy from the sponsor, you retain the rights of the sponsor (and your future buyer retains those same rights as well) and you are not subject to board rules with regard to sublets, resales, downpayments etc. HOWEVER, ONCE YOU MOVE IN TO THE APARTMENT AND ESTABLISH IT AS A PRIMARY RESIDENCE, YOU LOSE ALL OF THOSE RIGHTS. You become, as others have said, a shareholder like any other, subject to all of its rules, once you establish primary residence in the apartment. But operate the apartment as an investment property, and no one can stop you from renting to whomever you want and charging whatever you want, irrespective of what the board's rules are for sublet consideration, and even if the board prohibits subletting altogether. You'll also be able to sell the apartment to whomever you want without board approval or any downpayment requirements. However, again, ONCE YOU LIVE IN THE PROPERTY AS A PRIMARY RESIDENCE, you are just a regular shareholder and subject to all board rules.

One other important point: assuming there is no language in the proprietary lease that establishes rules one way or the other, there is as-yet not definitively determined controversy as to whether the sponsor has to specifically designate you as a 'holder of unsold shares' via an amendment filed with the Attorney General in order for you to enjoy those rights. A recently decided case turned prior case law on its head and the highest appeals court in NYState upheld that decision; the question is whether the specific details of that case can be extrapolated to all similar cases. To be safe, if you intend on operating the apartment as a rental and want to ensure that you are exempt from silly board rules, make sure the sponsor designates you specifically as a holder. But again, even designation won't stop you from losing all of your special rights once you occupy the apartment as a primary residence. You will then be subject to all board rules, including the requirement to get board approval for your future buyer.

Where I'm stumped is whether having sponsor's rights will allow you to circumvent rules about washer/dryers. I know for certain that if you operate the apartment as an investment property and get designated, you can sublet and sell the apartment at will without interference from silly boards. But whether other house rules apply is an interesting question. Can you allow your tenants to move in or out at any time of day they want? Can you harbor a pet even if the board prohibits it? Can you install a jacuzzi if the board says no? My hunch is that you can, in fact, do all of these things irrespective of what the board has to say about it, but I'm not sure. I would guess that unless whatever it is you want to do objectively affects other shareholders deleteriously (i.e., if the installation of your jacuzzi necessarily will mean lower water pressure for your neighbors) then you might be prevented. Otherwise, the whims of the board don't apply to you.

But again, all of the above is irrelevant if you're planning to move in. Once you do so, you're a shareholder like anyone else. Install a jacuzzi at your peril.

Wow, great answer! I never realized that treating the co-op as an investment property gives you those rights.

But I am hoping to use this co-op as my residence ... that's why I want these creature comforts installed in the first place.

What defines one's "primary residence" ? Like, at what point does NY law say you're using a property as your residence? I can have all my bills sent to my present address forever, I live with a sibling in Midtown in a condo owned by our family's trust. Are there set time periods for which an investor may use his investment property as a "pied-a-terre," say a few months out of the year?

The law is not an ass. Students learn that in the first week of law school. If what you are doing sounds like it isn't allowed, it probably isn't allowed. And regardless of the technical merits of your argument, are you prepared to litigate your point, because you will likely be sued. 99% of NY apartments do not have jacuzzis for a reason. W/D are disallowed because plumbing generally can't handle it. What are you going to do if the board starts assessing you extra fees for added insurance or plumbing maintenance? Sue them? Not pay and risk them attempting to take your shares? Live in a building where everyone comes to hate you within a month?

Want to play with what is a "residence?" Again, the law isn't stupid. Where do you vote, pay income taxes, go to work, get your mail, sleep and live over 50% of the time? Somewhere else? Fine, then maybe the NYC place isn't your primary residence, but you still live there. It isn't an investment property. You don't rent it out and report that rent as income. Now in your little law suit maybe the building can get the revenue services to start looking closely at your taxes for possible fraud.

Why are you doing this? Walking into this situation and sticking your thumb in everyone's eye is not a recipe for peaceful enjoyment of a new place or staying out of court or holding onto your money. Size generally does matter, and the building is bigger and would likely win.

To me you sound like a pain in the ass. Why not go for a condo, at least instead of a more restrictive and problematic coop?

Gee, such polite people on this forum!

I picked this co-op because it's a great location (Chelsea/Meatpacking) and nice price ($450K whereas the exact same unit one floor above is $575K without Board approval). I'd like to think I'm a nice person who doesn't call people names in online forums, but yes I would like the luxury of a home spa & washer/dryer. I guess that makes me evil.

To you, kylewest ... in my board interview I offered to have an actuary calculate the cost of water, loss of coin laundry income, insurance etc and even pay a premium on top of all that, for the right to install the appliances. I was originally looking at condos up to $900K, but the location of this studio was perfect & I'd still have plenty of cash left over to a marvelous renovation. The studio also has a large walk-in closet located in such a way that would allow me to double the size of the existing bedroom ... even some 2 million dollar condos can't fit a jacuzzi next to or inside the existing bathroom. And who else besides a Russian gazillionaire buys a whole house in Manhattan below 96th street?

I've rented in Manhattan for the past 8 years, at the same building. If I'm going to buy then I want to renovate to my liking, as long as everything is safe & legal.

Consider this anecdote: I have an older relative who has lived in a Midtown co-op for the past 15 years. He sublet his apartment (which is forbidden in the building's House Rules) but technically resided there just enough time for it to be considered a "roommate" situation, not a sublet. Someone must have noticed his frequent absences and reported it to the board, who threatened to sue him. But apparently they couldn't do anything ... he resided there long enough, paid taxes there & had his mail sent there ... so the Board gave up. Sure they hate him ... but he gets what he wants & nobody in the building suffers. So sometimes the contumacious resident does prevail over the Big Bad Board.

Anyways. Can we keep this discussion more focused on personal experience or verifiable legal knowledge, instead of subjective judgments of where I choose to soak my butt?

Sticky - Another question I'm not sure of the answer of. My guess is that a 'primary residence' is established by virtue of your sleeping there at least 183 nights per year. That is the definition of primary residence when it comes to questions of rent-stabilized or controlled tenants being allowed to maintain their cheap Manhattan apartments whilst maintaining other domiciles elsewhere. If I had to venture a guess, I'd say the same definition probably applies to the question of what rights a buyer maintains when he buys directly from the sponsor, but I'm not sure.

Your attorney will likely know the answer.

The most important document to examine is the co-op's proprietary lease. Although many of them parrot the same language as every other proprietary lease, there may be unique language in there specific to your building. Read it. There is always language in there that refers to the rights of a holder of unsold shares - i.e., the sponsor and his 'assigns' (you).

If you do go through with the purchase, and want to have the best shot and ensuring you have any special rights at all, insist as a condition of the purchase that the sponsor designate you as a holder of unsold shares via an amendment to the offering plan. Again, the necessity of doing so absent any language in the proprietary lease to that effect is a controversial issue in the courts right now. To avoid any unpleasant surprises, make sure you insist that the sponsor designate you formally.

Despite Someonewhoknows' very informed advice, once this person, who has already gone before the coop board in an attempt to buy, takes occupancy, s/he should expect to be treated by the board as a fully-obligated shareholder (regardless where one's mail goes). Install things like washer/dryers that are against the rules and you can be responsible not only for fees and penalties but also the cost of removing them after you do your renovation. As for Sticky's enthusiasm for skirting the rules without any regard for neighbors and fellow shareholders, the world -- and court rooms -- are full of people who think they know better than everyone else. You say want everything to be "safe and legal" but the coop's board has already told you that what you want to do will not be so. You have your answer.

Kyle, Next, It seems this Sticky person is a bit of a pain in the ass. I'd be very unhappy if someone like that, obviously a spoiled troublemaker, were to move into my building.

Next - nothing you said goes 'despite [my] very informed advice.' You and I said exactly the same thing on the point of the rights of a shareholder who purchases from the sponsor and uses the property as a primary residence (or as you wrote, 'takes occupancy'): the new shareholder has the exact same rights and obligations as any other shareholder in the building, irrespective of the identity of the seller.

I would also not put much faith in the sponsor's sales agent. The same way that you don't care about the sponsor if there the board comes down on you, the sponsor knows that you would have physical possession of the apartment and all of the headaches would be yours. The agent will tell you anything to make a deal, especially if it's for an extra $125k on the sales price.

This sounds not worth it to me, but it is your call. Just remember, when you buy a coop you are also buying into the community. If you treat people like crap (not caring if your own neighbors have to sue you becasue you are trying to screw them over), then they will probably treat you like crap right back. In that scenario, my money is on the coop to win. Just my 2 cents.

I'm not looking to actively annoy anyone. If someone with any technical knowledge like an architect or plumber were to inspect the particular building/unit/water lines in question, and tell me it would be a noisy or potentially destructive problem, I would drop it.

Most people here either seem risk-averse, or think that wanting a home spa makes me a spoiled pain in the ass. But how many of you have first-hand knowledge of those appliances causing noise or leakage problems?

I've been subletting in a condo building for the past 8 years. I have no idea who my immediate neighbors are. I know the doormen and a few people on other floors of a 40-floor building. And GAWD, the condo Board meetings here always degenerate into yelling matches. (I remain on the sidelines.)

I have a relative in a co-op building who likewise is unfamiliar with his neighbors. He's fought---and won---against his co-op Board and lived to tell the tale without being evicted. I don't personally know a single person in Manhattan who cares what their neighbors or Board think of them.

I think your view of coop living is naive and the experience you discuss above is atypical.

How about this - why not ask someone on the board exactly WHY you got rejected, and if it's because of your proposed rennovations, ask then how you could work around them. This would allow them to give you your answer.

I think, out of legal concerns, co-op boards never give "official" explanations as to why they reject an applicant ... a legacy of a few decades back, when white Boards would reject black applicants to keep them out of the building.

The seller told me informally, and in tense language, that the renovations were what killed it.