New York's Cooperative and Condominium Community

Habitat Magazine Insider Guide




A Bronx Co-op Gets the Worst Possible News

Bill Morris in Legal/Financial on October 9, 2015

The Bronx

190-unit co-op on Wallace Avenue in the Bronx. Photo by Jennifer Wu.
190-unit co-op on Wallace Avenue in The Bronx
Oct. 9, 2015

After bruising negotiations with officers from Marine Midland, a solution was reached and disaster avoided. The term of the mortgage was extended; the sponsor agreed to auction off his apartments, and any that failed to sell would become the property of the co-op; the sponsor gave up his seats on the board and his role as managing agent; the sponsor paid the mortgage arrears and agreed to contribute $300,000 to the co-op's reserve fund. A new management company was brought in and new board elections were held. Some of the sponsor's apartments sold. Shareholders were hopeful that a new day had dawned.

Then, some time later, Williams got "the call" — again. It was a vice president from Marine Midland and what he told Williams this time was tantamount to a sentence of death for the troubled co-op. Many of the former sponsor-held units had gone into serious arrears, forcing the board to foreclose on a large number of apartments with unpaid maintenance. That had swelled the corporation's holdings to 63 mostly unsalable units. A co-op has the right to rent foreclosed apartments — which generates much-needed income — but that doesn't advance the campaign to become a building with a majority of owner-occupied apartments.

The bank, claiming the building had too much debt and too few resident-shareholders to pay it off, had decided to sell the co-op's underlying mortgage to a new "sponsor" — actually an investor — who was buying it with the intention of eventually turning the property into rental apartments. That was a nightmare on a par with foreclosure — the end for any co-op.

How the building got into this fix — and how it got out — is an object lesson in what happens when a board becomes complacent, a sponsor has too much power, and circumstances work against you. How do you find your way out? Is it even possible? 

Photo by Jennifer Wu

Ask the Experts

learn more

Learn all the basics of NYC co-op and condo management, with straight talk from heavy hitters in the field of co-op or condo apartments

Professionals in some of the key fields of co-op and condo board governance and building management answer common questions in their areas of expertise

Source Guide

see the guide

Looking for a vendor?