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Think That Condo Can’t Reject You?

Think again. Maybe it can’t nix you outright, but there are ways it can get you to walk away. That’s the message that came across loud and clear from real estate agents and lawyers alike. 

It used to be that getting into a condo was a relative snap.  That’s why people chose them over co-ops.  They didn’t want to show their hand, or their finances.  But now in lots of buildings they have to – or else risk losing the apartment.

Most condos have what’s called a right of refusal. Their boards can’t turn their noses up and their thumbs down. If they don’t like the person in their midst, all they can do is buy the apartment, which in most cases they really can’t because the building doesn’t have the money.

But where there’s a will, there’s a way, and increasingly condos are demanding almost as much financial data as co-ops.

“The days of submitting a contract and a few scraps of paper are over,” admitted Robert Doernberg, Senior Vice President at Warburg, “Even if it’s an all cash deal, if the buyer is a foreigner without reachable assets, some condo boards insist on a notarized guarantee from the consulate or embassy, plus an escrow of a years’ worth of maintenance. And often they won’t release the money till the person moves out.”

Stacey Max, Executive Vice President at Bellmarc, agreed that “condos are asking for more and more information.”

So which are the most demanding condos?

The Oxford, at 422 East 72nd Street on the Upper East Side is one of the toughest,” Mr. Doernberg said. “They pretty much demand everything that would be in a co-op package, including full financial backup documentation.”

According to him, other condos whose application packages rival those of co-ops include The Belgravia, another Upper East Sider, and Metropolitan Tower located in Midtown West.

845 U. N. Plaza, the Midtown Trump World Tower, was cited by Catherine Holmes of Halstead as, “a condo with an application as daunting as any co-op.”

The whole situation is complicated by the fact that lots of condo boards ask for items not listed in the package.

“You’ll have an all cash $7 million dealt for an apartment, and all of a sudden, the board says, now we want this,” Mr. Doernberg explained. “Europeans hate giving information so getting to the contract only to find out that they have to make financial disclosures can be a problem, which is why I tell my clients in advance so they’ll know what to expect.”

So what happens if a condo board doesn’t like what it sees?  How can it keep the buyer out if it can’t reject him?

“Most condo bylaws give boards the right to ask for additional information,” explained Phyllis Weisberg, a lawyer who represents numerous buildings throughout the City.  “If a unit is being bought by an offshore entity, for example, you can’t get a credit check so boards may request escrow and/or guarantee instead.”

Under this analysis the application isn’t complete until the would-be buyer provides the requested information, which means the board’s time to make a decision hasn’t even begun to run.  It’s a game of chicken that leaves the buyer with two options – give the board what it wants or jump ship. Essentially, the buyer may reject the building, rather than the building rejecting the buyer.

Ms. Max said she hadn’t dealt with sales in condos where boards demanded escrow or guarantees, but had seen buyers walk from deals after the contract closing date had past and the board still wanted more information. As she explained, boards usually have 30 days in which to act, and on day 29 they can ask for more documentation.  That process may be repeated several times over till the buyer gets the message and goes away.

In addition to what’s going on in the market place the courts have provided some support for condo boards, including a decision a while back which upheld a condo’s right to condition approval of a diplomat’s application to rent on his waiver of immunity. (See, Diplomats Go Free).

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