Cooperative cannot prevent a sale based upon inadequate price

By: Jay Hollander
Date: 1998

Jay Hollander, Esq. is the principal of Hollander and Company LLC, www.hollanderco.com, a New York City law firm concentrating its efforts in the protection and development of property interests relating to real property, intellectual property and commercial interests, as well as related litigation.

The content of this article is intended to provide general information relating to its subject matter. Providing it does not establish any attorney-client relationship and does not constitute legal advice. Personal advice in the context of a mutually agreed attorney-client relationship should be sought about your specific circumstances.

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Historically, it has usually been thought that a coop had the right to reject a proposed sale of one of its units for any reason or no reason, provided the Board did not discriminate on the basis of such things as race or religion and further provided that the decision was made in good faith.

However, in a case of apparent first impression, the Supreme Court, sitting in Westchester County, narrowed a coop's rights by rejecting the efforts of a cooperative corporation to deny a sale of one of its units on the ground that the Board considered the price too low.

In Oakley v. Longview Owners, Inc., a coop board had commissioned an appraisal of certain types of units in the building during the recent real estate recession of the early '90's and passed a resolution prohibiting sales at prices more than ten percent below the appraised value.

The Board rejected the Plaintiff's purchase offer, which violated the resolution, but the Court ruled in favor of the Purchasers, holding that the Board lacked the power to enact a "minimum price" rule and, further, that the coop's by-laws did not give the board authority to impose such a rule.

This case is one of a growing number whittling away at the broad freedoms which boards have long taken for granted on questions of sales and reminds boards that the playing field is changing beneath their feet on these matters.

The time for legal consultation is before the rejection, not after the suit. A few dollars spent on prevention will more than outweigh the dollars spent trying to cure an unauthorized decision.

Copyright © Jay Hollander, 1998. All Rights Reserved.