Rejection is never fun. For potential buyers who get turned down by a co-op board these days, the sting is often more than merely psychological. Increasingly, the New York Times reports, some financial salt is being added to the sting of rejection by aggressive co-op boards and sellers. (And as we reported last week, a growing number of condo boards are getting into the act.)
Consider the sad story of Rowann Gilman, a semi-retired food writer who described how it felt to get rejected by a Sutton Place South co-op board: “I can feel the burn on my cheek from the slap on the face.” As things turned out, Gilman also felt the burn in her wallet.
After her offer of $922,000 was accepted and the contract was signed last year, Gilman delivered a 10 percent deposit to the seller’s lawyer and left for vacation, alerting all parties that she would be unreachable for a few weeks. A week later, Gilman’s attorney was told that the board wanted her to put two years of maintenance payments, around $46,000, in an escrow account indefinitely. Gilman’s lawyer told the seller’s attorney that she would respond upon her return.
It is not uncommon for a board to make such a demand, according to attorney Marc Luxemburg, a partner at Gallet Dreyer & Berkey. If a board is on the fence about a prospective buyer, it could make such an unpalatable demand to encourage the prospect to walk away.
“That’s a lot of money,” said Gilman, who never had a chance to turn down the offer. The board rejected her application before she returned from vacation, saying she did not respond in a timely manner. Then – here comes the salt – the seller refused to return the $92,200 deposit, claiming damages. According to Luxemburg, sellers are increasingly holding on to deposits when deals fall apart, forcing the buyer to sue to get the money back, or settle. “It’s a more aggressive approach,” he said. “But it’s becoming more common.”
To avoid litigation, Gilman agreed to let the seller withhold about $4,000, and she received the balance of her deposit. “These people,” she said, “have treated me abysmally.”
It’s safe to assume she was speaking not only about the aggressive seller, but also about the aggressive co-op board.
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