Frank: Would love some feedback about the following: we have a board sales package for review. In the contract of sale the owner and purchaser made an agreement which allows the seller to stay in the cooperative up to three months after the sale. Our building has a sublet policy and sublet fees. The seller states in the agreement with the purchaser [that] the seller would simply continue paying maintenance.
As a board member, my strong thoughts are that this sounds like a sublet and would first need board approval and fees would apply. The contract of sale agreement must follow building rules and this agreement should be reviewed by the co-op’s attorney. Furthermore, once the transfer is done maintenance must be paid by the new owners. The building simply cannot accept seller checks after sale.
While boards need to have some flexibility and fairness, a sale is a sale and our proprietary lease and building rules trump all else. Thoughts?
Steve-Inwood: While I agree with you, maybe the clause is facilitating the sale. I would inquire further as to the reasons. I wouldn’t necessarily hang your hat on a three-month deal. Maybe just collect the three months of sublet fees as a condition of the sale; and have the seller pay three months of maintenance at the time of sale for the buyer. My suggestion is to facilitate the sale without causing unnecessary roadblocks.
Chris: We had a similar circumstance and voted not to allow it based on the fact that our proprietary lease does not allow a new purchaser to sublet an apartment until one year after purchasing it.
Norm: It is quite normal in a residential real estate transaction for a party to stay for a period of time in a sold residence to allow for the necessary sale and purchase closings. The co-op is dealing with a known entity, the seller, and a vetted entity, the buyer. Callous limited interpretations of arbitrary rules should not be allowed to interfere with helping neighbors at no cost to the co-op with the transaction and the transition of their place of residence.
Chris: When does interpretation of the rules, out of fairness to all shareholders, become callous? This is not a house sale where it is a common situation to allow the seller to stay. We have to live by a different set of rules that do not exist in other types of real estate transactions. All this was debated and the board agreed not to allow the situation per our rules. The seller found another buyer and everyone is happy.
Norm: When neither the interpretation nor the rules further the common interests. Whether a single-family home owned as real property or a cooperative apartment unit “owned” effectively by shares in the corporation, the financial “closing” transaction and occupancy of a place to live is the same. In fact, co-ops have argued that the same set of laws need to apply to them, that the transactions of shares be treated for legal/tax purposes as residential property sales and the corporation be taxed as residential real estate.
Fortunately, the current robust market in New York and elsewhere provided the seller with a successful outcome now and the corporation can feel comfortable in sitting back. But really, we now know that such markets are not always the case; not even now as many areas of the country have yet to recover from the downturn.
Now’s the time to look at the rules to update them to better serve all those to whom they apply. What did your rule really protect in this case; what might have been the cost?
Want to participate? http://www.habitatmag.com/Board-Talk