BY JOHN KIRITSIS, ESQ., CPA, MBA, MS, JD, LL.M
In New York City (NYC), co-op sale restriction laws refer to regulations and policies that govern the sale of co-op units. Unlike condominiums, co-op buyers purchase shares in a cooperative corporation that owns the building, rather than owning the unit itself. This unique ownership structure often leads to co-op boards having the authority to approve or reject potential buyers based on various criteria. Here’s an overview of NYC co-op sale restriction laws:
- Co-op Board Approval:
Co-op boards in NYC generally have the authority to approve or reject potential buyers. This approval process allows co-op boards to consider factors such as financial stability, background checks, references, and other criteria.
- Proprietary Lease and Bylaws:
Co-op proprietary leases and bylaws outline the co-op’s policies and procedures for the sale of shares. These documents may include restrictions on the sale process, requirements for board approval, and provisions for resale fees.
- Right of First Refusal:
Some co-ops have a “right of first refusal” clause that allows the co-op board to match the terms of a purchase offer and purchase the shares on behalf of the co-op before the sale is completed.
- Financial Requirements:
Co-op boards often evaluate the financial stability of potential buyers to ensure they can meet the financial obligations of co-op ownership, including maintenance fees and assessments.
- Background Checks:
Co-op boards may conduct background checks to ensure potential buyers have no history of financial instability, criminal activity, or other disqualifying factors.
- Restrictive Covenants:
Co-op buildings may have restrictive covenants that limit the sale or sublease of units. These covenants can place restrictions on who can purchase the shares and the terms under which they can be sold.
- Diversity and Fair Housing:
While co-op boards have the authority to approve or reject buyers, they must adhere to fair housing laws and regulations to avoid discrimination based on protected characteristics such as race, gender, religion, and more.
- Shareholder Approval:
In some cases, major changes to the co-op’s policies related to the sale of shares may require a shareholder vote or approval through an amendment to the co-op’s governing documents.
- Resale Fees:
Co-op boards may impose resale fees on sellers to cover administrative costs associated with processing the sale and approving the new shareholder.
- Transparency and Consistency:
Co-op boards must ensure that their approval process is transparent and consistent to avoid claims of discrimination or unfair treatment.
It’s important to note that co-op sale restriction laws can vary from one co-op to another, depending on the specific proprietary lease, bylaws, and policies of each building. If you’re buying or selling a co-op unit in NYC, it’s recommended to consult with legal professionals who specialize in co-op transactions to understand the specific sale restriction laws that apply to your situation.