EARNING A LOT FROM PARKING

One of my clients, a 360-unit, city-supervised Mitchell-Lama cooperative, consists of two high-rise buildings on one tax lot plus a 60-space parking area on an adjacent tax lot. The building was saddled with two mortgages, the collateral for which was, of course, all the co-op’s real estate. Open space existed between the two buildings.

When I first heard the board-president's idea of selling off the co-op's parking lot, I didn’t think that either the mortgagee or the Department of Housing, Preservation, and Development (HPD), the supervising city agency, was going to think too much of it. After all, as a budgetary planning mechanism, one-shot infusions of cash are traditionally not to be relied upon for long-term relief. But that parking-lot property was worth over $3 million. That’s a pretty good cash infusion.

What did the governing documents say about the co-op’s authority to sell off its land? The certificate of incorporation, while not specifically giving the corporation the authority to sell real estate, did empower it “to do all other things necessary or convenient to carry out its powers.” That was sufficient. It specifically required the consent of the supervisory agency (HPD) to any sale of its real property. There was no provision for the shareholders to have to approve such a sale. The bylaws also had no relevant restriction and, in fact, specifically put the board in charge of the corporation’s property. There was nothing in the New York State Business Corporation Law that hindered such a decision.

The Mayor Has to Get Involved?

We did, however, need permission from the first mortgagee and from HPD, which had granted the second mortgage. It appeared that neither had ever received a similar request to sell off a good chunk of the lender’s collateral, but they agreed to review the matter. Eventually, the first mortgagee said it would agree to the sale if HPD would.

HPD asked for many things. It wanted a statement by an architect that the floor-to-area ratio of the remaining lot would not be affected, and thus ensure that the high-rises on the property that remained after the sale would not then violate zoning restrictions, since the property on which they stood would be smaller. HPD lawyers subsequently decided that the case had to go through a uniform land use review procedure (ULURP), which would take months and involve a public review — and, since the property was originally granted to the corporation by the city, they wanted to get the consent of the city council and the mayor! Following much discussion, we were able to convince the city that ULURP was unnecessary, and after many more months we obtained consent.

Meanwhile, I was negotiating a contract with the purchaser selected by the board. There had been discussion about using real-estate brokers, but the corporation eventually found its purchaser without one, helped by the fact that one of the directors was a broker — who did not receive , nor was entitled to, any commission on the sale, although she had acted as liaison for the board during negotiations with the purchasers and their attorney.