SURPRISE FORECLOSURES, P.2

 

 

Before a co-op board initiates foreclosure for back maintenance, it must have some type of court judgment, either from landlord-tenant court or the state supreme court, says Cholst. That's because state courts have ruled that the relationship between a shareholder and a co-op board is similar to that of a landlord-tenant. Withholding maintenance can be seen as a way to protest shoddy conditions, the way tenants are allowed to withhold rent.

Most times, initiating foreclosure is enough to convince the shareholder to pay up or to sell to an approved buyer who can cover back maintenance. When a co-op sets the auction price, it is often lower than a bank's foreclosure figure because the co-op is looking to get maintenance paid back, not an entire home loan, Mannion says. The shareholder gets whatever money from the sale is left after all debts are paid.

If a foreclosure happens in your building, it's often very awkward. Someone's losing his or her home and probably has other financial difficulties. If a successful bidder is approved and can make the financial demands, he or she is also responsible for evicting a shareholder, if the person has not already left.

At the Manhattan co-op discussed earlier, the board president doesn't even want her name or the building's address used. Her board decided not to try to purchase the apartment because of both the expense and because the board members felt bad for a neighbor they'd all known for years.

"A co-op is a state business corporation and that should be a primary concern," she says. "But you can't eliminate the fact that these are your neighbors and we all live together."

 

Adapted from Habitat September 2008. For the complete article and more, join our Archive >>