Standard co-op purchase contracts used in NYC typically include an unconditional board approval contingency. This means that your deposit is protected in the event of an outright board rejection or if the board approves you subject to conditions.
In either scenario, you are permitted to cancel the transaction and recoup the entirety of your contract deposit.
Click on the sections below to learn more.
Table of Contents:
Is my deposit refundable in the case of a NYC co-op board rejection?
What is the typical co-op board approval contingency contract language?
What is conditional co-op board approval in NYC?
What is unconditional co-op board approval?
What are typical board approval conditions imposed by NYC co-op boards?
Am I obligated to agree to board approval conditions imposed by a co-op?
If you’re buying a co-op in NYC, you are typically entitled to a full refund of your contract deposit in the event the co-op board does not grant unconditional approval.
Co-op contracts in NYC typically include the following contingency in Section 6. Required Approval and References:
Note however that there is a blanket exclusion in event of bad faith conduct by the purchaser, as outlined below:
Examples of bad faith contact which risk default may include any of the following:
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Declining to submit all required items outlined in the purchase application.
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Not paying the application fees.
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Refusing to attend the co-op board interview.
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Withholding additional documentation reasonably requested by the co-op.
Moreover, co-op contracts typically specify a deadline for submission of the board package, as shown below:
This language gives an all-cash buyer 10 business days to submit the board package from the date of the fully executed contract. Alternatively, a buyer who is financing must submit the board package within 3 business days of receipt of the loan commitment letter.
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The typical co-op contract used in NYC stipulates that the sale is subject to the unconditional consent of the co-op corporation.
Most NYC real estate attorneys start with a standard co-op contract which is published by Blumberg and developed by the Committee of Condominiums and Cooperatives of the Real Property Section of the New York Bar Association.
Co-op board approval language is contained in Section 6. Required Approval and References:
Purchase contracts are negotiable and vary by transaction, so do not assume that your contract contains this exact language by default. Be sure to discuss all contingencies and specific contract language with your attorney prior to signing.
What is conditional co-op board approval in NYC?
Conditional co-op board approval means that the prospective purchaser must agree to satisfy certain requests made by the co-op board to receive approval.
Assuming the contract being used has a standard unconditional board approval contingency, the purchaser may elect not proceed with the transaction if they choose not to satisfy the condition(s) outlined by the co-op board.
The buyer can simply elect to terminate the deal and receive a refund of her or his deposit.
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Typical conditions imposed by a co-op board may include an ask for the buyer to put 1 or 2 years of co-op maintenance fees in escrow or compelling the buyer to obtain a guarantor.
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Board approval conditions are typically imposed when a buyer’s financials are borderline relative to the building’s financial requirements.
However, we have seen co-op boards impose these types of requirements on highly qualified purchasers as well.
Am I obligated to agree to board approval conditions imposed by a co-op?
Unless otherwise negotiated, you are typically not required to agree to any conditions imposed by a co-op in conjunction with board approval.
Such conditions often include a requirement to put money in escrow for a period or to obtain a guarantor.
If you don’t like the conditions, put forth by the co-op board, you can simply cancel the contract and receive a refund of your deposit.
While conditional board approval is never great news, it’s especially bad news for the seller. This is because the seller will have to restart the marketing process from scratch, having lost valuable months on the market.
As such, a highly motivated seller may try to entice the buyer to remain in the deal by agreeing to put up some or all of the escrow monies requested by the co-op board and/or facilitating other conditions.
