We have been working with the boards and owners of several co-op and condo buildings about selling apartments at a premium to a developer. The developer is interested in either demolishing the buildings and constructing new ones with more amenities so he can sell condominiums at current higher prices or doing gut renovations of the buildings and selling new apartments. In some instances, an investor wants to own the ground floor retail space, but does not want to deal with the co-op structure. In other situations, retail space may not be permitted in a building because of zoning laws. Negotiating the price becomes the easy part; the more difficult aspects are the tax consequences and the manner in which the funds will be divided among the owners. Co-op and condo documents usually require funds to be divided by the number of shares or percentage interest that each owner has — although that may not (and frequently does not) reflect the fair-market value of the apartments.
Such deals require a certain degree of finesse to address the tax and allocations issues. But there is also the matter of greed among some residents. We have seen situations where owners who are getting more than the value of their apartments say that, because they just bought a new refrigerator, they want a premium over other similar apartments. And, of course, there are residents who think that if they say no, they can make a better deal. Sometimes they can, but usually, they make the deal unaffordable for the purchaser so it falls through. Fortunately, there are ways to deal with unique issues that result in a win-win for both the shareholders/unit-owners and the purchaser.