The potential buyer’s reported income is spiky, uneven. The board members have been told by the co-op’s attorney to make choices based on the money he puts on the table, not on the charm he exudes with his Scottish accent. So what should they do?
My suggestion: think like a broker. You should try to make a deal – not squelch one.
For example, the board members can try to make the above-mentioned deal work by looking at the liquid assets to see if there are sufficient resources to cover a revenue shortfall for that prospective shareholder. Or, maybe they will find there is a spouse who, for whatever reason, does not show up on the ownership papers but clearly has the resources to make everyone comfortable. Maybe the adjusted gross income is relatively small, but the buyer clearly has an established business with a healthy cash flow that is his fallback position. Investigate further.
There are always possibilities if you want to make something work. I’m not talking about somebody who’s totally inappropriate for the property, of course. As I said: think like a broker. A good broker knows how to make a match. He or she wants to make the deal and that won’t happen if there isn’t the proper “fit.”
The co-op board approval (or disapproval) process has always been a dreaded undertaking for buyers and sellers, their attorneys, and especially their brokers. Buyers and sellers may be very rarely exposed to the sturm und drang of the process, but the broker has to come back to the same well week after week, month after month – and this water never gets sweet. Yes, if all goes well, there is a payday. While that never makes the process any easier, it does make it endurable.
To make the system work, boards should make a fellow shareholder’s sale the priority that it is. The purchase application should be processed within a reasonable period of time through management (no more than a week!) and distributed to all board members promptly. An interview date should be set within ten days of submission. Delays at some buildings and management companies are legendary. It is totally unbusinesslike, unprofessional, and unnecessary to have this process take a month or more, as often happens. It’s not good for the reputation of the management company or of the building.
We all know that compensation for board duties is below minimum wage, but do not let that be the reason matters do not get promptly addressed. Co-ops are multimillion-dollar businesses, with shareholders coming and going. A business should be prepared for predictable, regularly occurring events, and have a procedure in place to make it go smoothly.
Ultimately, in each co-op it is a matter of leadership establishing a positive approach to something that all shareholders experience (sooner or later). If you are a small co-op without a good deal of financial sophistication, especially when it comes to analyzing someone’s complicated tax returns, consider giving that task to the co-op accountant or some outside CPA with a good reputation. Two birds with one stone. You get an experienced financial person evaluating someone else’s financial wherewithal, and that person’s financial info can still remain private (that idea came from an old established and very well run Soho artist’s co-op).
Given the many millions of dollars that can be involved in many of today’s sales, the state of affairs I’m discussing is extraordinary. I can’t think of another business involving this much money that is run with this level of benign neglect. Don’t you think it’s time we changed it?