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My co-op board is preventing me from selling my apartment. What can I do?

It might be time to have your lawyer pursue a claim against the board member who is preventing you from selling. 

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Question:

I own a co-op in a 10-unit building. I've tried to sell my apartment several times, but the board (which mainly consists of one person who is the majority shareholder) will not provide the tax returns or the board package. I have had three sales fall through. I did get an attorney who is holding my maintenance in escrow to write to the board, but they did not reply. What can I do?

Answer:

If your board is refusing to cooperate with you, it may be time to have your attorney take further action, our experts say.

Co-op boards do have the right to reject potential buyers, but the fact that your board is refusing to share important financial documents suggests that members may not be operating the corporation properly, or filing its annual tax returns. 

"Certainly, the apartment corporation should be filing annual tax returns and for exemptions from filing," says Jeffrey Reich, a partner at Schwartz Sladkus Reich Greenberg Atlas. "Additionally, the board should be having an annual financial statement prepared. Whether or not such statements need to be audited statements would be governed by the terms of the apartment corporation’s by-laws." 

However, he cautions, withholding your maintenance is not the best course of action here, even if your board is in the wrong.

"This can lead to the apartment corporation commencing a nonpayment action against the shareholder and seeking to hold the shareholder responsible for any legal fees incurred by the apartment corporation in that action," Reich explains. "Most New York cooperative proprietary leases provide that the shareholders have no right of set off, which means that a shareholder does not have the right to withhold the payment of maintenance (or to place in into an escrow account) in the event that there is a dispute between the shareholder and the apartment corporation." 

Fortunately, there are other options. If you prefer to avoid taking further legal action, consult your co-op's bylaws to find out how to call a special meeting of all shareholders, at which point you can demand clarity on the corporation's financial and tax status—or possibly remove the board member who has been giving you trouble. 

You could also have your lawyer take more substantial steps. 

"The writer can have his or her lawyer consider and pursue a claim against the sole board member in connection with the board member’s possible breach of his or her fiduciary obligations to the corporation and its shareholders," Reich says. 

Ideally, with an effective attorney, you won't end up in a protracted battle over this.

"A good litigator would be helpful to make sure that the board is complying and be there just in case the board chooses to continue not to be reasonable," says Deanna Kory, a broker with Corcoran. "But the truth is that a good litigator will want to do what’s necessary and reasonable to avoid any kind of a lawsuit and just make certain that whatever is necessary to sell the apartment is provided." 


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