Some of our clients have recently inquired as to whether their cooperative board may have been declined their proposed sale because the proposed purchase price is too low. As we have indicated in previous posts , cooperative boards can decline a purchase for any or no reason so long as such reason does not discriminate against protected classes. Once a seller hears that their well-qualified purchaser has been declined, sometimes they suspect that it is because they accepted a price that was too low. Should a cooperative board be willing to disclose this possibility, there are steps that the seller can take to keep the deal alive.
Let’s explore the rationale for a cooperative board declining a sale because the price is too low. The board is likely concerned that a sale price significantly lower than others in the building may adversely affect valuations of other apartments, so that all units for sale in the future may be potentially valued at a lower price as a result. The board, as a fiduciary for all shareholders, wishes to maintain elevated apartment prices for the benefit of all shareholders. As such, declining a purchase because the price is too low is perfectly legal.
However, the seller may be willing to accept what appears to be a low price for the following reasons. Perhaps he is in financial distress, owes maintenance arrears and cannot cover the past due charges without selling the unit. In this case, it is better for the cooperative as a whole if this person sells so that a financially secure buyer owns the unit instead and is current in her maintenance payments. Also, the shareholder may be getting divorced or has been relocated in his job, making it necessary to sell.